Sunday, December 19, 2010

Global Hunter on Lihua International

Interesting comments on Lihua International (LIWA) by Global Hunter on theStreet.com especially considering the negative story posted all over the internet claiming fraud. So far the fraud claims seem far fetched, but you never know. Also interesting that the fraud claim wasn't addressed especially since it appears this analyst has visited their sites in China.

Global Hunter isn't a big name on Wall Street so I don't know whether this video will have a huge impact on Monday, but it will help to offset the negative story put out last Thursday. Though that story was just a rehash of previous reports from earlier this and last year it will help that it doesn't gather steam.

The analyst from Global Hunter made some interesting comments about LIWA trading at sub 4x 2011 earnings. Thats nearly $3 in expected earnings next year. The street has been much closer to $2 all year so I'm leaning towards the analyst mis-stating the number then any real research suggesting that the upside potential has changed. That would be huge, but none of the research we've done suggests that potential. Now the 2012 number might get closer to $3.

The obtaining of a license to import scrap metal will be a huge earnings catalyst starting in 2011. The estimate is that LIWA will save $150 to $200 a mt or nearly $17.5M if they import all of the 100K mt.

Again check out the video. Nice to see some real facts about a small cap Chinese stock instead of the normal 'fraud' claims around every corner.






Disclosure: Long LIWA

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