I was unable to attend the meeting in NY today.
However, I did speak with a major shareholder who was there (no, not Harry). He said that Harry gave a good presentation. His takeaway from what Harry said was that the fundamentals of the company are strong, cautioning that steel prices are weak.
My interpretation of this is that we are going to continue to be in a "hold" pattern here for sometime, with opportunities for buying.
I don't disagree - CHOP is awful at PR. I'm just saying that until the XXX comes off the Chinese small cap sector, no PR is going to make any difference. At best, a PR push would alert people to the CHOP opportunity so that they could invest it in if/when the XXX is removed.
I'm just not sure when that XXX will be gone.
There are a few things CHOP is not terribly good at - one of them is public relations. In fact, they are quite bad at it.
Still, it doesn't matter. They could have commercials on the major networks, but as long as the sector says "XXX" written across the front of it, no one is going to buy.
Essentially the PRC needs to clamp down on auditing so that the fraud issue becomes a non-concern. Once that happens, and people start to actually believe the numbers, CHOP ain't goin' nowhere. In the meantime, CHOP can continue to do what it is supposed to do - increase margins, build up exports, etc.
That said, cash in CHOP is in a holding pattern until larger structural issues are resolved. Of course, I'd prefer it if that happened sooner rather than later.
everyday is comical. As to the Chinese sector, one Spac that is holdng up well is Holi, and Chop is a much better company in my opinion.
Note, Holi has huge accounts receivable numbers on their BS and Chop almost none which is a huge plus for the company.
WHAT IS NEEDED IS FOR EVERYONE TO BE PATIENT. CHOP WILL HAVE ITS DAY, MONTH, YEARS OF FLYING HIGH..
If CHOP were to do that, I would promptly take the divy payment and use it to repurchase shares. I suspect many would do just the same.
Unfortunately, they aren't going to do that. They have a death grip on their cash.
I see one possible helpful fix.
And that's one monster special cash dividend and/or regular Q dividend after that.
Seen CYOU announced this couple of days ago.
Yeah I see CHOP won't do that, but they should.
To add to Temp's point -
It was this reason exactly that caused Morningstar to stop coverage of CHOP. Freas' claim was that investors had lost interest in the stock precisely because price and fundamentals were entirely disconnected, due to macro issues beyond CHOP's control. Essentially, it made no sense anymore to cover the stock when the details of that coverage couldn't be leveraged to make a profitable investment in this environment.
I do not think we are missing the point at all. Many of us have been saying, over and over, that the stock price of CHOP is disconnected from the fundamentals.
Frankly, no amount of PR, no amount of pryotechnics, no amount of information dissemination is going to change that.
The fact is that there are no natural buyers of Chinese small caps right now. None. Zero. Nada. Just look at the prices in the sector. They are a disaster and the volumes have dropped sharply also. The shorts have been given a very comfortable ride down on this phenomena, across the board. You just had to be short.
I don't see any quick fixes here. Its just a matter of time. A substantial amount of time.
"His takeaway from what Harry said was that the fundamentals of the company are strong, cautioning that steel prices are weak."
I think I may need some further education regarding CHOP's "cost-plus" business model. My understanding is that as compensation for their processing of raw inputs into the output product the customer desires, CHOP simply tacks on a value-added fee (presumably some % of the raw input cost). As such, fluctuations in raw materials costs are passed on to the customer (which can be good or bad for them, depending on the price of raw steel). In such a scenario, it doesn't seem as though steel prices should significantly impact the company's revenues -- the main driver of revenues should be factory utilization, no? CHOP should get its percentage regardless of where steel prices sit at any given time.
Is the problem that CHOP's %age added onto the cost of raw inputs is fixed, such that for low input costs, profits are less? Or is there some other issue I'm missing?
What Frankoe replied is basically correct, although CHOP doesn't "lose" perse, they just don't make as much (its a matter of wording only and I definitely understood what Frankie was saying, in context).
Example, if steel goes down 100 dollars a ton, Chop loses 30 dollars a ton. Therefore, if they do 90000 tons for the quarter thye lose 2.7 million.
My guess for Q2 is 22 cents to 27 cents based on depressed steel prices.