Out Fox The $treet

Early this morning, Lihua International (LIWA) officially reported Q4 earnings. The results were not much of a surprise after having preannounced on the 6th. The company reported sales growth of 164% for the quarter and 129% for the year. The company reported a whopping $.45 in earnings yet the stock trades sub $12. The company currently forecasts $53M in net income for 2011 or roughly $1.8 per share. The key though is that the company tends to underestimate earnings on a routine basis and they clearly point out a couple of drivers to higher earnings. First, the projections only forecast one quarter of sales from its new copper recycling facility. Second, the company is not assuming any reduction in costs of goods sold if they receive the importers' license. Both items will contribute to significant growth in 2012 earnings so the question really remains a mute point on whether 2011 garners more benefits. The importers' license will allow them to source scrap copper from int...

At first glance, it might not appear that a small Chinese manufacturer of copper wire for various industries would be that crucial to the Chinese small cap sector as a whole. The key is that the Co-CEO has made an offer to take the company  private for $11.50 , or roughly 20% above current prices. It could open the door to higher valuations in the sector as a whole, or maybe similar transactions across the sector as management grows increasingly tired of dealing with US investors that think every Chinese company is a scam. Read the whole article at Seeking Alpha .  Some of the comments on this article lead me to that a couple of other going private deals have been proposed. The more interesting is China Security and Surveillance (CSR). Something else worth following to see if the completion of these deals drives more investors into these stocks that offer extreme valuation. Hard to see these companies as fraud if somebody is willing to pony up $400M.  Disclosure: Lon...