Saturday, September 22, 2007
Harbin Electric (HRBN) quick look
Revenues up around 44%, although this may be slowing. Over 50% gross margins! 39% operating margins. Huge interest expense just started showing up recently. Debt discount being amortized at $1.1 million per quarter. $757K non-operating income this quarter (not much last quarter). No taxes. This all needs some "color" to know what's going on here.
Cash flow from operations is a bit less than net income due to AR/inventories/advances which is largely offset by the non-cash debt discount amortization. Capex is $861K vs $209K depreciation.
A huge chunk of advances fall into the investment cash flow category.
Here's the cash flow story for 6 months: Operations generated $7 million on $27 million of revenue and $8 million of net income, much of that income was in Q2. Operating assets increased by $4 million. Around $12 million was invested in advances on equipment. $1 million went into a currency hedge deposit which has brought back around $300K in cash. Total cash dropped from $67 million to $63 million.
Very few options/warrant exercised. Very low allowance on AR.
This is worth more investigation if/when it falls below $12 per share. Right now it's about $14, so it doesn't seem cheap enough, although once again, I get a sense that it will do well over the long term. I should really be taking a better look to find new-school-Buffett type stocks that have very good long term characteristics. I really missed out with MTW. I knew it was very solid back in 2000-2002, but "it wasn't cheap enough." Early 2003 was the perfect chance to scoop it up at a low point for a nearly 10-bagger. Damn!
Why don't you grab a little HRBN now and a little at 12 when it gets 'cheap enough'.
Some of this stuff is going up 40% a day...
Finding a solid Chinese stock with real value is hard enough..