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China GrenTech Corp. Ltd. Message Board

  • teleprobe teleprobe Nov 1, 2010 12:17 PM Flag

    Chickenhats Reporting of an Overvaluation

    Under several different message titles, over and over again, Chickenhats keeps talking about an overvaluation. Perhaps this is all due to a terrible error. Regardless of what you may think of Chickenhats logic, I believe everyone should be aware of a problem in how GRRF capitalization has been carelessly reported.

    Chickenhats claims GRRF's valuation to be "significantly higher than the entire China small-cap sector."

    I suggested to him he may have been going by "Reuters ProVestor Plus Company Report," which many stock brokers use. ProVestor reports 589.52 million shares outstanding. That is an error. The real number is 23.58 million shares.

    Using the correct number of shares to calculate the total capitalization, the valuation of company is $67.67 million. That's extremely low. I cannot imagine anyone considering $67.67 million "bloated" (as Chickenhats puts it) for a company with $234.79 million sales in 2009 and for a company with a $216.94 million book value.

    Of course, if he had been using the number of shares as given by ProVestor, indeed the valuation would be "bloated." The error is due to the fact that the common shares traded in the USA are 25 "ordinary shares" (in this case, the kind of shares issued overseas).

    By the way, Chickenhats entire response to this was:
    "When I speak about valuation, I'm sure as heck not referring to market cap. Market cap means absolutely nothing. It's EPS that matter."

    "Market cap means absolutely nothing." What a remarkable insight! Decide for yourself whether or not you want to follow stock trading advise from this guy.

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    • Wrong again TELEPROBE.

      You can't imagine this company being worth $67 million? Well guess what.. apparently it will be!

      • 1 Reply to republicann50
      • Your opinions are all over the place; against common sense; and against each other.
        First, you say the company is worthless and will disappear to nothing.
        Next, you say the stockholders are being cheated by a lowball offer.
        Now, you say the lowball offer is the true value of the company.

        Now, you say the lowball offer will probably stick and that’s what we’ll wind up with.
        Yet, yesterday you were urging us to hurry up and sell below the unfair offer.
        You told us there would be lawsuits, which are all the more reason to sell before it’s too late.
        Yet those lawsuits surely would be investor actions in favor of raising the price of the offer.

        I stand by my previous valuation of GRRF.

        Over and over again, you have argued management does not own enough of the company.
        Over and over again, I replied your views were extraordinary in view of the existing 63.7% ownership.

        Yes, I was wrong; but not by countering your opinion that 63.7% is not high enough.
        I was wrong by not pointing out an additional problem with your opinion.
        That is 63.7% is not only high enough; it is too high because of the danger of a lowball offer.

    • he is an idiot and write false information. i contacted investor relations and posted emails here for your everyone to view.

    • Dude, you just don't get it. I know full well about the "ordinary shares" and what that signifies as far as the O/S count is concerned. Do yourself a favor and calculate the EPS based upon what the company states per guidance. I'm saying that even if GRRF hits their target, the stock is expensive, yet you keep trying to say a certain market cap makes it cheap. Revenues and market cap mean absolutely nothing and if you're questioning my success in trading with insults, I'll gladly point out to where my portfolio gains were 2,880% last year ..... right here ....... with virtually every trade contained within the posts on that board ......

      • 1 Reply to chickenhatsdotcom
      • There's not one word in my comments that questions your trading skills. So why take offense when none was given?

        I haven't said anything insulting. I only questioned the wisdom of the statement that you just repeated: "Revenues and market cap mean absolutely nothing."

        So far as profit margin, that's not the only thing to consider when deciding what a company is worth. For example, just one of many items to consider when evaluating the quality of earnings is the company's investment in research.

        "As of December 31, 2009 we had 2,384 engineers and technicians on our project design and technical service team." [Annual Report, pg 29]

        Of the top "providers of wireless coverage products and services in China," GRRF is the fastest growing and is currently number two in size in China. They have 8.5% of "the total market in terms of the contract amount." [Annual Report, pg 31]

        This did not happen for free. Research and development expenditure for 2009 was $8.7 million at the 11/1/10 exchange rate. GRRF spent $10.5 million in 2008 and $8.45 million in 2007 for the same purpose. [Annual Report, pg 31]

        The arithmetic is important. It will serve you well to do it. Companies that only focus on quarterly earnings are not well run. Had GRRF skimped on research, the 2009 earnings would have been $13.49 million instead of the $4.79 million reported.