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China Precision Steel, Inc. Message Board

  • mao.tse888 mao.tse888 Sep 28, 2007 8:10 AM Flag

    SDTH Top Growth Stock!!

     

    By Tim Beyers September 27, 2007 The Motley Fool

    < I can say that Chinese chemist Shengda interests me the most.
    I'm struck by the financials and the valuation. First, the financials. Return on capital has remained above 25% since 2004. Return on equity, meanwhile, hovers near 40%. Very few companies -- let alone a staid chemical firm -- ever attain those heights.

    Next, the valuation. Capital IQ (a division of Standard & Poor's) has Shengda trading for 12.4 times current year estimates, for a microscopic PEG ratio of 0.30. That's hardly a perfect indicator, but it at least suggests that Shengda's stock has plenty of room to run.

    Of course, every company has its good years, so how can we know that Shengda is a sustainable business? CAPS All-Star jahbu offers this thesis:

    Has one business that has good cash flow and allows expansion of their other high-growth business.

    Coal-based chemical business: ammonium bicarbonate for fertilizer, liquid ammonia for refrigerants and pesticides, methanol for formaldehyde and fuel, and melamine for adhesives. Low growth but steady income.

    Growth comes from limestone -- nano precipitated calcium carbonate. Used in rubber, plastics, coatings, paper, paint, and possibly many more things in the future. ... Sounds like they have a patent pending on their techniques and a strong R&D team. Also they have economy of scale by having a limestone quarry close, which reduces production costs and helps create higher margins. >

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