Wednesday, August 24, 2005
China Energy & Carbon Black Holdings (CHEY)
Dec 29, 1995, Huayang International Trust signed over 95% of its investment in Haitong and 20% of investments in Hotel Group to Power Capital Corp in exchange for 6 million shares of PCC stock. PCC changed to Huayang International Holdings. Shares traded on OTC BB as HIHI in Jan 1996. Delisted in 1999 due to non-reporting. Jan 2002 re-listed back as HIHI. Aug 2004, HIHI completed share exchange with China Carbon Black Holdings Company in HK ("CCB"). HIHI acquired CCB in exchange for 6 million HIHI shares after a reverse split. CCB now owns 100% of Xin Jiang YaKeLa Carbon Black. Sept 2004, company name changed to current name. Sept 2004, Company sold 95% of Shenyang Haitong House Properties Development to former CEO Gao Wan Jun.
They make 2 kinds of carbon black: regular and ultra pure (which is used in metals).We buy stranded natural gas (a form of natural gas derived from oil exploration
and production) from SINOPEC and PetroChina. With the Company's proprietary
technology, we process stranded natural gas into various grades of carbon black.
Carbon black is widely used in tire making, road building and steel manufacturing
in China. The quality of our natural gas carbon black is superior to that of tar
carbon black in that our product is cleaner to make and easier to purify.
The 10-K then spells out the facilities in excellent, precise detail. Also it lists the main customers of each type of carbon black.
12 sales people in 12 provinces, all report to the CEO.
Regular: 10 external regional distributors.
Ultra pure: 30 regional distributors, with main cities listed.
- Proximity to resources
- Access to raw materials through relationships with Sinopec and PetroChina
- Have been lowering costs of production over time
- Sales channel developments
- Vertical integration with fields and pipe facilities
- Expanding to further lower costs
Extra Crispy: The major competitor is Sichuen Chuen Nam Carbon Black Company Limited (700 tons/year).
120 full-time employees: sales (12), production, QA, admin, tech services.
Start of 2005, entered energy and power business, acquired South Xinjiang Power Holdings from HK for 1.338 million shares. Power plant in Xinjiang PRC. Estimated net asset value of $1 million.
In an August press release, they describe the details of this deal. Issuing 39 million shares!!! for a 14 megawatt power plant (which would power about 12,000 homes) which they claim is worth $6.8 million. A quick Google check seems to verify that value, roughly. But now they have what seems to be an inferior business with huge capital requirements for growth. The carbon black industry probably would generate $700K/year and grow with the economy.
7 million shares worth perhaps $11 million. (roughly $1.57/share)
destroying roughly 75% of the value of each share!
Why not just wipe your butts with a Ming dynasty painting while you're at it?
Meanwhile YHGG's stock performance continues to shock and awe. But what's with all those press releases? They do about one a week except when they do two. And the releases range from from the extravagant (lysozyme DNA technology patent worth $1/2 bill./yr...if, if) to a weather report. I usually view this sort of corporate behavior as a big red flag, but maybe not in this case (?).
Every now and then I run into some interesting example of a business, like Mesabi Trust (MSB): "The Trust will terminate twenty-one (21) years after the death of the survivor of twenty-five (25) persons named in an exhibit to the Agreement of Trust. The youngest person on this exhibit is now 44 years old."
As far as YaSheng goes, I mean, don't all of your stocks go up 150% within a month or so after buying them? :-) I'm really amazed by it. There must be some people with serious money who want into that stock now, well before it goes onto NASDAQ or AMEX.
LiveWorld has also surprised me somewhat. Although it wasn't large volume, the stock jumped up to 65 cents a number of times and someone even briefly pushed it up to 70 cents (on tiny volume). The bid is now fairly consistently above 50 cents.