Wednesday, January 26, 2011

Lihua International Announces Big $15M Share Repurchase Program

After the markets closed today, Lihua International (LIWA) announced the approval of a $15M share repurchase program. This program equals roughly 5% of the outstanding shares. at current prices around $10.

While not a big fan of small growth companies engaging in such uses of cash when they could potentially use the cash for further expansion, it might be prudent in this case to at least implement the program. Especially considering the numerous fraud allegations lodged at LIWA. One way to take advantage of such claims that have pushed the stock down from $12 to $10 is to buy the shares on the cheap.

The company only has a forward PE of 5.7 so its definitely an accretive time to purchase shares. Once the stock gets back into the $14-15 range I'd hope that they just conserve cash for the next fraud allegation.

If the company is a fraud, they wouldn't have the cash for such a transaction.

Remember that $15M is relatively small for them. They expect to earn $40M in 2010 and end 2011 with at least $75M in cash after a big expansion. This highlights the problem of attacking a company with nice earnings and a strong balance sheet. They have the capital to fight back!

With expectations for copper deficits over the next 2 years the recycled and copper alternatives that LIWA produces should stay in strong demand for a long time to come.


Via LIWA PR:

  • today announced that its Board of Directors has authorized the repurchase by the Company of up to $15 million of its common shares over the next 12 months.
  • "During 2010, we achieved our primary strategic and operational objectives of expanding capacity and growing our top and bottom-line results, and entered 2011 poised for continued strong growth as copper demand in China remains robust," said Jianhua Zhu, Chairman and CEO of Lihua. "With our new refined copper production facility scheduled to come on line in the second half of the year, we believe that our shares represent a compelling investment opportunity at current levels. It is unfortunate that there have been a number of false allegations regarding our company. We work extremely hard at Lihua and have a proven track record of growth, as well as sound business and financial reporting practices that are in compliance with U.S. SEC regulations as well as PRC tax regulations. We believe these attacks are an attempt to undermine the significance of our accomplishments for the benefit of a group of short sellers. We stand by the legitimacy and validity of our financial results and internal controls that are further overseen by a top-10 auditing firm.

Disclosure: Long LIWA



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