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China Ceramics Co., Ltd. Message Board

  • helpme_hanna helpme_hanna Aug 1, 2011 4:23 PM Flag

    Most undervalued stock I have found

    Here are some numbers:

    Return on equity 31%

    Expected peg ratio .10 for next five years [most stocks have an expected five year peg around I. The lower, the more undervalued.]

    Price to sales .50

    Current ratio 2

    Price to earnings 1.96

    This is the most undervalued, overlooked, hidden gem I have found.

    So helpme_hanna

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    • I have read all of the posts--positive and negative-- about cccl, have read and reread the 10Q, read all the third party information I can find, have examined all analyst statements I can find, spent a lot of time looking at the cccl stuff on Trading China website, etc.

      My conclusion remains what is was: This is the most undervalued stock I have found, despite the chart being absolutely horrendous.

      Why is the market so down on this stock, even more than on other Chinese minis? Dunno.

      So helpme_hanna

      • 2 Replies to helpme_hanna
      • "Why is the market so down on this stock, even more than on other Chinese minis? Dunno."

        You are kidding me, right?

      • Probably a lot of uncertainty as to whether ceramic tile pricing from China will hold up. The provisional EU anti-dumping tariffs imposed against Chinese ceramic tile manufactures earlier this summer appears to have resulted in a final version of a 5 year tariff. While CCCL may not export to the EU, from what I've read China is a major exporter of tile to Europe and everywhere else. I'd bet the concern is does that lead to an oversupply in China which pushes prices lower and compresses margins. I don't know the industry well enough to say, but it's certainly a concern out there I ran across while looking at CCCL competitors.

    • So if you don't speculate, then you either value the company based on a multiple of normalized earnings or a balance sheet analysis.

      If you do a net-net, this company is worth about $2.08 per share. If you value it based on book value it is about $8.72 per share (I guess you could call this a reproduction valuation, an optimistic one).

      I won't bother figuring out normalized earnings for this company because of its short history and it would be speculative to guess what might be normal.

    • I appreciate your analysis. I think it is great that you went to the same school as Warren Buffett and the birthplace of value investing.

      My big question about CCCL is what happens to it if the real estate bubble pops. I know China is building subsidized housing and probably will for some time to come, but I can't help thinking that this is a game of musical chairs. No one knows when the music will stop, but when it does, what will happen to CCCL?

    • The short interest is only about 0.5% of the float, so it is tiny no matter what other stock you compare it against.
      Days to Cover is only that high because of the average daily volume (low) and really doesn't mean anything bad. In fact I think longs are in a great position at this point:
      - Short interest dropped a bit last period so it shows that short sellers are going away or at least not piling in. They obviously don't think it's wise to short more... at least not under $5.
      - Up until last week, the price has been relatively stable considering increased short interest over few periods. - Now that the price is lower because of the overall market and most likely a record Q2, the shorts will have to cover with a very low volume... That's where I think Days to Cover number is actually in favor of longs. It should be shorts nightmare.

      I think that the short interest spike is just retail shorts jumping on the Chinese RTO with no short interest.

      Correct me if I'm wrong somewhere.

    • i think you just snapped off your own tail, ouch

    • We also have gators where I live! Come on over they love to be fed!

    • Hanna,
      I have no position in CCCL, but partially because I saw you and Fernando are in it, I decided to take a better look. I know you two do pretty good DD. But before falling too much in love with the stock, there may be some things to take a closer look at.

      Although many of the consumables (clay, coal) are not given in Mt, you can calculate consumption by using the cost of sales and percent costs of raw materials data provided on pages 5 and 47 of the F-20. Aggregate by consumable category of suppliers (Page 37) and compare the results to estimated tonnage of consumables from the first step. Noting that they appear to list all suppliers providing at least 3% and compare that to the delta you find from the above calculations.

      You may want to also look at the government mandated retirement fund contributions (page F-24) as a percentage of salaries and related costs. Regardless of when people were hired during the respective years, the retirement fund percentages should remain relatively consistent as a ratio. Compare 2008 to 2009 to 2010. Since most employees fall under the 'other personnel' category and is therefore less likely to be skewed by other costs, it is probably the most meaningful.

      I have no intention to debate anyone--just pointed out a couple areas which I personally had problems reconciling the math. Good luck and hope CCCL makes you some money but I have to pass on this one.

      • 2 Replies to southernred_dog
      • Southern ,your long GURE so you understand some hair on stocks ,dont you???

      • Thanks for your post, Red_Dog. I can respect when someone is not comfortable with any given company. My reply would have to be that any China company, trading at a P/E of 2, will have a few inconsistencies. I have been short quite a few names in the RTO China space and am only long a few of them -- Ones I consider to have better risk/rewards.

        One of the reason I am relatively comfortable with CCCL is that I have seen on-the-ground research information from multiple investigation teams -- Some of the things they did were take pictures, interview low-level employees at Hengdali and Hengda to verify production-capacity and worker-counts, check tile pricing in local stores, conduct channel-checks with customers/suppliers, talk with industry experts to verify the brand-name being well known, compare numbers with other tile companies, etc, etc. Such information has given me a decent level of comfort that the SEC filings are within the realm of reality.

        At some point I will release pictures here that one investigator took of Hengali in January of this year, showing the huge facility with lots of construction/etc going on. I have to wait on that though, since I don't have the go-ahead from the person who paid for the research.

        None of this makes the company bullet-proof of course, it just reduces the risk profile in my mind compared to many other names.


    • wait til tommorrow. the way things are going it will be
      an even better deal!

    • only down $1 in a week
      so undervalued, sure
      swampland anyone

    • Like half a dozen other Chinese companies, there is high return on equity selling at half the book value or less. But are the numbers real? Who has visited the factory and verified inputs and outputs? What is the quality of the factory and their business processes?

      To me those are the questions that should be the starting point for any Chinese investment, not just the financials.

      • 1 Reply to peristentone
      •'s more likely there's a reason for it being valued as it is, rather than "it hasn't been discovered yet". Like you, lots of traders/investors, institutional and retail, have good stock screeners that will pull stocks like this(which is how I found the stock). I've learned to be careful when I find these "undervalued gems" - I've lost money recently on better known "value-growth stocks like NANO, TER and ASYS. Yes, if everything is as it seems, they will eventually pop, but if they've remained at these low valuations for any length of time, someone probably knows something we don't. So the real question is, has anyone found anything on CCCL? The business culture in China is definitely less forthcoming than here. Does anyone know, has there been any legit research on it? If I were buying for an institution I would sure as heck try to find out if I discovered a stock with these numbers. Earnings tomorrow.

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