-This 10K, you know the one so many were so convinced would never be released by the end of the month, was not only on time but very clear and informative.
-The company's CEO is a huge plus. He has often stated goal to make his company a world leader that makes this a continuing good investment. He has once again put up his own money ($735K) interest free to keep the company fluid. He has never sold any of his shares. He has never raised his salary in the last 3 years, nor has he given himself tons of options.
Now the cause of concern de jour is on the AR issue and expansion. These two issues should not even be on the table because they are matters that Mr Fu and management know a lot more about that any of us.
The ARs jumping $11 million was larger than anticipated and the 10K correctly anticipated this event and explained very clearly the reasoning behind this approach. The AR strategy is what made ABAT a success in the first place; what would be a real cause of concern would be if the company abandoned or greatly reduced their efforts to grow this way.
-As for the expansion, the 10K points that out clearly as well. "With a current backlog of firm orders exceeding $49MM, the need for expansion is obvious." Since Mr Fu has a wealth of business and construction experience to assume that we know better is the height of conceit.
Gross margins seem to be another topic of concern. The range of gross profits is between 43-55%, depending not on the particular customer but on the product being made. It should be noted that the margins stayed the same for the larger contract with Wuxi, which is exceptional.
And anyone using the word "only" next to the "43% margin" is a fool.
-What would be a cause of concern regarding the company, from a shareholders point of view, would be if the margins started to drop and if the backlog dropped with no increased revenue. Instead 2008 begins with almost a 200% increase on firm orders and with a steady (and very high) gross margin.
-There have been no warranty costs due to defective products.
-The company is currently reviewing its staffing to improve its financial reporting. The new CFO, a position not even filled a year ago, is very experienced and has signed on with ABAT until the end of 2015. The company also has added an audit committee.
-The property on which ABAT has its current facilities is leased at no cost for many years.
-The 10K, by its nature, can't include what might happen. Like contracts from the Shenzhen HuaJIn partnership. Or the nano patent, which should be finalized this summer. Or the possible contracts from the hybrid Wuxi cycle, both in the EU and US. One of ABATs primary countries that it has done business in for years is Taiwan and with the new pro-China government installed in Taiwan now, it shouldn't be a real stretch to assume more contracts will be done there.
Tomorrow, who knows what happens to the pps. The PR will be released hopefully early in the morning with all the spin that a 10K can't include. Those who bought in the last few days will sell, but they would have sold tomorrow regardless of how the moved. Wall street looks ahead more than behind and 2008 is srtonger than 2007. Reverse what happened and make 2007 very strong but 2008 weak, then the stock would sell off. Right now the future looks as good as could be hoped.
And if earnings improve and the new facilities come on line, the p/e should rise. 2008 will not see many companies expanding and growing.
Bottom line, if those who ultimately own shares in ABAT simply allow the company to run its affairs regarding exapnsion, margins and ARs, the pps will do fine. Let the new PR company work with management and eventually hold CCs and road shows. As shareholders, give the company and its management the respect they've earned over the last 4 years.
Thanks for analysis. It is hard to find anything
negative in the 10k. Since there are no estimates
for ABAT to gage performance, there's no telling which way the pps will go. Qoq eps declined, but q4 06 seemed abnormally high. Long term should be OK, but the commodity factor may play a part.
what a great evaluation of the report
as posted. let those who want to make
a quick buck make their choice tomorrow.
Mr. Fu has given us the information with
out exeeding the forward looking guide
lines. I haven't seen to many
executives go as far without breaking
the rules. Mr. Fu has grown this
company using the leverage he has to
work with, and I may say, who would put
their money up front without knowing
what the risks are and the potential of
this company. Thank you Mr fu for all
you have done, and I expect that the
financing will completed in the very
near future and all the concerns will
be for not....thank you again........
While appreciate your in depth reply, you really seem to dismiss the fact that this company needs cash flow. It makes perfect
sense to use the A/R strategy to generate
business, etc., but at what point do you
call those payments in. There is no way
that the the attempt to collect on those A/R's didn't precede Mr. Fu from writing his own check. I'm sure they attempted to contact
at least some of the bigger accounts and
I think it would be a safe assumption that
they were told that payment could not currently
be made. And who wouldn't want to business with
someone who won't demand payment at any point in the near future? Mr. Fu effectively sold $700M+ worth of batteries to himself. If payments start rolling in, he's a genius and the stock will soar. If not, it will languish. We need an explanation from him and a current aging report. Long the stock but took alot off this week with the runup. Will sell all my position tommorrow if we don't get a PR and a good explanation about the A/R's.
You probably aren't familiar with the Asian culture. I can tell you that it's considered "bad manners" to call and request payments on AR's or any credit arrangements in Asia. The culture also considers it "good manners" to pay off debts and the subject is rarely discussed. It's called "saving face"
Any breech of asian values will "blackball" you in both business and social contacts.
We do not need a pr tomorrow. Read the SEC filing, for heaven's sake. For some time I have been trying to estimate a good time point and price for selling covered calls. Nothing hit. Not to jinx myself, but I have to say that tomorrow, for the first time in I don't know how many years (I think 24), I'm placing a number of orders for uncovered ABAT calls. For the lazy among y'all, it all boils down to how Mr. Fu will finance expansion. My hope is that enough of you fear substantial dilution so that I can finish work on my position tomorrow. Give me a good ol' fashioned dose of fear.
Could be, too, that the tiny investment community that actually follows ABAT knows how to read an SEC filing, and ends up putting some pressure on the buy side at the opening. In that case, I'll just go back to my covered call strategy, a notch or so above Black Scholls.