IB Net Payout Yields Model

Lihua International Investor Day

Last night Lihua International (LIWA) held an investor day at their HQ and manufacturing facilities. Ok, so it was really 10am local time in China, but it was at 9pm my time. The presentation portion included a video link for those that couldn't make the trip to be there in person.

Since LIWA has been caught up in the Chinese RTO conspiracy ring, it was at least symbolically important for them to host an investor day for analysts and the media to get to meet the company management and tour facilities.

The stock only bounced 2% on a very low volume of 102K shares showing how these events just don't resonate with investors that can easily discount anything they see as staged. What it will really take is analyst coverage from some major Wall Street firms or just time to elapse as the Chinese companies still standing will eventually be seen as legit.

The presentation was mostly a rehash of the data from the Q1 call or in the Piper Jaffray China Growth conference from last week. A few data points though possibly reported previously were interesting to highlight as below:

  • Most significantly was the news that the CEO bought 40K shares on Monday with a hint that it was just the beginning. 
  • Company has bought 70K more shares since the last announcement
  • the scrap license should get final approval soon. Limited imports should begin in June. Remember this should reduce costs by $150/ton. 
  • Potential additions of a new smelter and a wire drawing line would only take 3-4 months of construction since the new facility has available space. 

It will be interesting to see what if any analysts say about the trip and the investor day. Since they didn't announce the attendees or provide the names of people asking questions, it's unknown at this point if any major players attended. Naturally in a fast moving world, it would see apparent that investors would jump on any knowledge gleaned from the visit in todays trading, but all we saw was one of the least volatile days in a while. Of course, anybody located in Hong Kong or the US would've likely spent today traveling so possibly tomorrow will see some reports released. 

The story remains very bullish with LIWA as earnings will continue ramping through at least 2012. My only concern is that shorts came out of hiding right after the Puda Coal (PUDA) investor day. If LIWA makes it through this week, then I'll be a lot more certain of limited scam risk. After all, the CEO is buying shares and that should reduce the risk that a material fraud exists.

Disclosure: Long LIWA in client and personal accounts. Please review the disclaimer page as this information is provided for informational purposes and not a investment recommendation. 


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