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China Infrastructure Construction Corp. (CHNC)
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Wednesday, February 17, 2009 – After Market Close Green Baron New “Stock Pick”
China Infrastructure Construction Corp. (BB: CHNC - $5.60 per share) Common Shares Outstanding / 11,528,429 Current Market Cap / $64.56 million 2010 High / $7.50 per share 2010 Low / $4.70 per share
Shareholder Equity / Book Value = $2.96 per share 2010 Earnings (Est. Yr. End May) = $1.21 per share* Estimated P/E = 4.63* (*) – Excluding one-time non-cash charge Low P/E, High Growth China Cement Company Goes Public in U.S. with Support from Institutional Private Placement – Book Value Nearly $3/share Growth Alert: CHNC enters into 10-year Strategic Agreement with China Railway Construction Group; New Manufacturing Facility Already Built and Set to Open in February to Meet Demand China generates half of all new building activity in the world and rapid expansion is expected to continue to 2030 as up to 400 million citizens are projected to move into urban areas The Green Baron Report believes a P/E of 12.5 is attainable and in line with peers; Using 2010 Estimates, CHNC should now trade at $15.12 per share, and much higher using more aggressive forecasted growth rate Over the past several years, The Green Baron Report has admittedly remained cautious about China-based companies that trade here in the United States. However, relationships that have been forged over the past year with trusted parties have revealed some fantastic investment opportunities, and we confidently want to turn this information over to you our members. Remember, just a few months ago in late November 2009, we initiated coverage of Worldwide Energy and Manufacturing (BB: WEMU) at $4.70 per share. WEMU is a Company that predominantly owns its facilities and manufactures its products in China. Some members questioned that we could deliver big percentage results in the near-term from a stock trading at nearly $5 per share. In less than 45 days, WEMU hit at high of $7.22 and our members could have booked gains of as much as 53.6% from our profile price. Today, we introduce a stock that ought to blow that gain out of the water and in much less time. The Green Baron Report is proud to announce that China Infrastructure Construction Corporation (OTCBB: CHNC) is officially our 84th fully profiled Green Baron “Stock Pick” and will be added to our storied list of previously profiled “Stock Picks” on our home page. Results compiled from the most recent trade possible prior to dissemination of this report to the subsequent high will be monitored at www.thegreenbaron.com. Although we have very aggressive short and long term expectations for this stock, we still suggest our members try to accumulate as close to the profile price as possible to maximize chances of high return. TRADING NOTES: CHNC is a fully reporting company traded on The OTC Bulletin Board. In October 2009, China Infrastructure successfully raised $10 million pursuant to a Subscription Agreement with a number of institutional investors at an aggregate purchase price of approximately $3.90 per share. The Company must execute on certain action items and covenants, all of which provide us further assurance of strong performance going forward. Essentially, CHNC just began to trade as China Infrastructure Construction beginning January 1, 2010. In its short trading history, CHNC rallied from about $5.00 per share to hit a high of $7.50 per share on January 11. Volume was moderate in the beginning of January, but has dropped off since then. We anticipate an increase in volume and price over the near term. CHNC has a small float and less than 12 million total shares outstanding. The rise in price on this low P/E, high book value stock could be substantial. China Infrastructure Construction (BB: CHNC) is the #1 non-state-owned enterprise (SOE) ready-mix concrete manufacturer in Beijing. Its products are environment-friendly and CHNC is among the few providers in China of "green" concrete. Both the Company's revenue and net profit have shown significant growth in the last few years. CHNC was established in 2002 and in 2010 will now have three production facilities with eight production lines. It has 353 employees, of which 35 hold technical titles. The Green Baron Report has identified dozens of reasons why our members should own CHNC near our profile price. Our favorite 10 reasons are listed below:
Let us ask our members; what do you think a stock like this ought to trade for based on its previous and future earnings power? The Green Baron Report consulted Value Line’s database of 7036 firms found in data from January 2010 and found that out of 53 firms in Building Materials, the average P/E was 15.31; out off 14 firms in Heavy Construction, the average P/E was 12.73; and out of 20 firms in General Steel, the average P/E was 9.51. Since projected growth of as much as 30% is forecasted per year over the next few years, we could calculate a 30 P/E but that would give us a crazy number. Therefore, The Green Baron Report will use a very conservative P/E of just 12.5 times 2010 forecasted earnings of $14 million to come up with three to six month target for CHNC of $15.12 per share. Obviously, we suggest our members grab anything you can get under $8 per share!
About China Infrastructure Construction Corporation China Infrastructure Construction Corporation (BB: CHNC) was founded in 2002 in Beijing, China. Since then it has developed into one of the top ready-mix concrete producers in Beijing. Its products are environment-friendly and CHNC is among the few providers in China of "green" concrete. Both the Company's revenue and net profit have shown significant growth in the last few years. The Company is certified to produce all types of concrete for residential and commercial developers as well as industrial companies. Its products include: self-condensing concrete, anti-frozen concrete, fiber concrete, heavy concrete, anti-radiation concrete, lightweight concrete, water-penetrable concrete and colored concrete. The Company is one of the leading ready-mix concrete production companies in Beijing, China.
Concrete product producers are the
largest market for cement in China,
projected to account for approximately
40% of all cement consumption in 2010.
The PRC government's continued efforts
to modernize the country's
infrastructure are exemplified by such
massive projects as the USD$586 billion
economic stimulus package of 2008, with
two-thirds of the expenditure targeting
construction.
From their three current ready-mix
production facilities in Beijing,
Tangshan, and Xi,an the Company has an
annual output of over 1.8 million cubic
meters of ready mix concrete and expects
post-funding output to be over 3.6
million cubic meters. Proprietary Technology
Corporate Outlook – The Ready-Mix Demand Continues to Increase
China is the world’s largest concrete
producer, but the industry remains
fragmented with many small and outdated
facilities. Most concrete in China is
mixed at on-site construction locations,
as only 30% of the industry is ready-mix
vs. 80% in developed nations. The PRC
has encouraged consolidation, supports
modern and environmentally-friendly
production technology, and in 2007
decisively initiated a government
mandate to stop on-site mixing in all
large cities by July 2009. Recent Key Press Releases Tuesday, January 14, 2010 - China Infrastructure Construction Corporation Reports Unaudited Second Quarter Fiscal Year 2010 Financial Results - BEIJING, (PRNewswire-Asia-FirstCall) - China Infrastructure Construction Corp. (OTC Bulletin Board: CHNC) ("CHNC," "the Company," "We," "Us"), one of the major U.S.-listed providers of ready-mix concrete in Beijing, today announced its financial results for the second quarter of its fiscal year 2010 ended November 30, 2009. (Due to length, only portion of PR is provided – click the following link to view this PR in its entirety: http://finance.yahoo.com/news/China-Infrastructure-prnews-2181326342.html?x=0&.v=83 "We are very pleased to announce an outstanding quarter of growth in revenue, gross margin, and adjusted net income," said Mr. Rong Yang, chairman and chief executive officer of CHNC. "With the Chinese government's strong support to improve infrastructure construction, we are confident that our performance will continue to be strong in the coming quarters." Net revenue for the second quarter of fiscal year 2010 was $19.16 million as compared to $15.57 million the same period last year, an increase of $3.59 million or approximately 23.06%. The increase in net revenue is attributable to the increased demand for concrete due to the government's stimulus plan in the infrastructure and real estate industries, and is mainly due to the increase of the sales volume of concrete products. The sales volume of concrete products increased approximately 23% for the three months ended November 30, 2009 as compared to the same period last year. Net revenue from pumping services accounted for approximately 5% of the total net revenue for the three months ended November 30, 2009 and 2008. Gross profit for the second quarter of fiscal year 2010 was $4.23 million as compared with $2.69 million the same period last year, an increase of $1.54 million or 57.03%. Gross margin for the quarter was 22.09%, as compared with 17.31% the same period last year. The increase of the gross profit margin is mainly due to the decrease of the sales commission expenses that are included in the overhead costs, which are then transferred to the cost of goods sold. The sales commission expenses decreased approximately $340,729 for the three months ended November 30, 2009 compared to the same period of 2008. The sales commission expenses decreased mainly because the Company paid a lower percentage commission for the three months ended November 30, 2009, compared to the same period last year. Selling, general and administrative (SG&A) expenses for the second quarter of fiscal year 2010 were $28.53 million, an increase of $28.03 million or 5,611.08%, compared with $499,476 for the same period last year. The increase of SG&A expenses is mainly attributable to a one time, non-cash, stock based compensation charges of approximately $27.42 million. Operating loss for the second quarter of fiscal year 2010 was $24.29 million, a decrease of $26.49 million or 1,206.77%, compared with operating income of $2.20 million the same period last year. The decrease was mainly due to the $27.42 million one time non-cash compensation expense included in the selling, general, and administrative expenses. Excluding the non-cash equity compensation charge of $27.42 million during the second quarter of fiscal year 2010, operating income for the second quarter of fiscal year 2010 would have been $3.13 million with operation margins of 16.33%. The operation margin for the second quarter of fiscal year 2009 was 14.10%. Financial Condition As of November 30, 2009, CHNC had cash, cash equivalents and restricted cash totaled $6.66 million, an increase of $5.74 million from May 31, 2009, primarily due to the net proceeds from the public offering in October 2009. As of November 30, 2009, the Company has working capital of $27.65 million. Net cash used in operating activities for the six months ended November 30, 2009 was $3.66 million as compared with $191,753 the same period last year, an increase of $3.47 million, or 1,809.72%. The increase of net cash used in operating activities was due to the increase of trade accounts receivable. The trade accounts receivable increased because of the growing sales. We typically had long-term annual and multi-year contracts with our major customers. We entered into varying payment terms with our customers ranging from payment before delivery, payment on delivery or up to 1 year after the project completion. As of November 30, 2009, trade accounts receivable with aging over twelve months old amounted to $554,357, only 1.47% of total trade accounts receivable. Business Outlook Mr. Yang concluded, "Looking forward, we are very confident that we are very well prepared to embrace the opportunities that the fast growing China infrastructure construction industry will bring us. We recently signed a three year agreement with the Institute of Building Materials, a subsidiary of the China Academy of Building Research. Under the Agreement, CHNC will work exclusively with the Institute of Building Materials to obtain technical research, development and support. We are currently building three new production facilities with five production lines in three different cities. These facilities will increase the total annual production capacity by 3 million cubic meters. Our stringent cost control initiatives are designed to help us to obtain higher gross margin and remain competitive in the near-term." Monday, January 11, 2010 - China Infrastructure Construction Corporation Signs Technology Agreement With Institute of Building Materials, the Earliest Established Department of the China Academy of Building Research – BEIJING - China Infrastructure Construction Corporation (OTC Bulletin Board: CHNC), one of the major U.S.- listed providers of ready-mix concrete in Beijing, today announced that it reached a three year agreement with the Institute of Building Materials, a subsidiary of the China Academy of Building Research ("CABR"). Under the Agreement, CHNC will work exclusively with the Institute of Building Materials to obtain technical research, development and support. The Institute of Building Materials will also provide training courses to CHNC employees. CHNC will feature the Institute of Building Materials as CHNC's technological partner in its corporate material. The Institute of Building Materials will use its relationships and brand influence in the construction industry to assist CHNC in business development. Mr. Yang Rong, Chairman and Chief Executive Officer of CHNC said, "Technology plays a crucial role in the Company's development. Our cooperation with the Institute of Building Materials will enhance and advance CHNC's technology strengths to next level and prepare us well for continued rapid expansion and growth of our business. Being a partner with the Institute of Building Materials will enhance our Company's strong brand image." About the Institute of Building Materials The Beijing, PRC-based Institute of Building Materials (IBM) is the earliest established department of the China Academy of Building Research (CABR). IBM carries out research focused on concrete technology, reinforcement materials, waterproof materials and additives, drawing on IBM's considerable technical expertise. Over the past 50 years, IBM has made a series of outstanding scientific achievements and help to create a number of industry standards. (See: http://www.cabr-bmjg.com/cp1e.asp ) About the China Academy of Building Research The China Academy of Building Research (CABR), founded in 1953, was the largest comprehensive research institution attached to China Ministry of Construction. It was transformed from a scientific research institution into a technology-based enterprise in 2001, and is now affiliated with the State-Owned Assets Supervision and Administration Commission of the State Council. CABR covers 79 research fields, including building structure, aseismatic engineering, building material, groundwork foundation, residential systems, intelligent building, building CAD, and quality supervision, and conducts tests on engineering construction, among other competencies. Tuesday, January 5, 2010 - China Infrastructure Construction Corporation Enters into Strategic Agreement with Major Client China Railway Construction Group; Opening $40 Million Capacity Xi'an Facility - China Infrastructure Construction Corporation (OTC Bulletin Board: CHNC), one of the major U.S.- listed providers of ready-mix concrete in Beijing, today announced that it has entered into a 10-year strategic agreement with one of its major clients, China Railway Construction Group Co., Ltd. ("CRCG"). Under the Agreement, the two parties will join to produce and sell concrete in north central China's Xi'an region, and CHNC has already built and will open a new manufacturing facility there. As of press time, a CHNC branch mixing station with an annual production capacity of 3,600,000 m3 has been set up in the city of Xi'an. The new station will be put into production in early February 2010 to supply concrete for a series of construction projects in the Xi'an region. At CHNC's historical capacity utilization rates, estimated annual sales revenue from the new Xi'an facility may reach up to $40 million. Mr. Yang Rong, Chairman and Chief Executive Officer of CHNC said, "We have always been successful in maintaining good relationships with our major clients. The achievement of this agreement is a validation of China Railway Construction Group's high recognition of CHNC product quality and our leading after-sales service levels. As China Railway Construction Group establishes mass-market penetration in the Xi'an region, this agreement can in turn accelerate the expansion of the CHNC business throughout northwest China." For full details of the Agreement, please refer to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 6, 2010. About China Railway Construction Group CRCG is one of the leading general contractors in the Chinese construction industry and a core member of Asia's biggest construction corporation -- China Railway Construction Corporation Limited (CRCC), a Fortune Global 500 enterprise. China Railway Construction Corporation Limited, together with its subsidiaries, engages in construction, survey, design and consultancy, manufacturing, logistics and goods and materials trade, capital investment, and real estate development operations in China and internationally. It operates in four segments: Construction Operations; Survey, Design, and Consultancy Operations; Manufacturing Operations; and Other Operations. Founded in 1948, it has over 190,000 employees and is listed on the Shanghai Stock Exchange with a market capitalization of over $16 billion. Management
The Company applies an effective
management system from material
purchasing to production. Their
comprehensive strength of delivering
high quality products and services
together with their knowledgeable
management enables the Company to
compete effectively in the marketplace.
In order to continue providing the
utmost quality products and service to
their clients the Company has installed
a scientific quality management system.
All of the Company’s products have
passed the ISO9001-2005 Certification
Quality System and Integrated
Certification System including Quality
Management System Certification,
Environmental Management System
Certification and Occupational Health
and Safety Management System
Certification issued by the Beijing
Zhong Jian Xie Certification Centre.
In Management's view, our seasoned and
experienced management team makes the
company very competitive in every sense.
In the past years, our team has
successfully carried out its overall
strategic operational goals and targets.
We have confidence that our management
team will lead the company into its next
stage of growth.
Some of the management and their
background is listed below:
Ms. Guoying Li, Chief Technology Officer Ms. Guoying Li, senior engineer, has more than 16 years’ experience in the ready mixed concrete industry. As a technique principal, she has participated in many construction projects such as: South-to-North Water Diversion Project, Beijing South Railway Station, Beijing West Sixth Ring Road Project, etc. Ms. Li is also member of the Beijing Concrete Association Experts Committee and the Ready-mix Concrete Committee of China Academy of Science.
Ms. Yiru Shi, Chief Financial Officer -
Ms. Yiru Shi, age 36, before joining the
Company, served as the Chief Financial
Officer of Shengtai Pharmaceutical,
Inc., a U.S. public company since 2008.
From 2005 to 2008, Ms. Shi was the audit
manager for Kabani & Co., Inc., a PCAOB
registered auditor headquartered in
California. From 2002 to 2004, Ms. Shi
was a controller at Aroa Marketing.
Prior to that, Ms. Shi worked as Channel
Program Manager at Sun Microsystems and
as a financial analyst at Hewlett
Packard China. Ms. Shi is a Certified
Public Accountant since 2007. She
graduated with an MBA degree from
University of California, Irvine in
2003. She received her bachelor's
degrees in Computer Science and
International Trade and Business from
Beijing Polytechnic University in 1997. It is truly refreshing to see a stock begin to trade at respectable price to earnings multiple immediately out of the box. It is rare to find. The Green Baron Report believes it has stumbled upon a tremendous value that will not last. Whether CHNC should be trading at 8 times earnings or 30 times earnings, at our profile price we believe the stock is vastly undervalued and remains the potential to make a lot of money. China is advancing its economy in a few decades in what took The United States several generations to generate. Multiply the effect by a much larger population and we are likely going to see tremendous growth for many years to come. Cement is literally what holds the cities together, and China Infrastructure Construction is positioned to benefit from the continued movement of China’s population to the cities. Add still the huge stimulus commitment from the PRC central government to the infrastructure and you can quickly determine that CHNC is perfectly positioned to profit for years to come. CHNC is aiming to gain and will likely be granted a National Market listing on the NASDAQ or AMEX over the next year. This will surely help the price further. Earnings and new contracts should also benefit stockholders. Any numbers of factors could really get this stock moving. Regardless of the reason behind our predicted move, we believe it is a great time to smartly accumulate shares of CHNC and hold them for a giant move over the coming days, weeks and months. Company Contact: Investor Relations: Email: chncir@hotmail.com +86 10 58090110
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