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Longwei Petroleum Investment Holding Limited Message Board

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  • pef1957 pef1957 Jul 3, 2011 11:11 AM Flag

    If and when the acquisition is announced .....

    Chicken, good post. Many of us have light positions waiting for confirmation;$2.50-$6.00 will come fast enough if scenario unfolds as promised. Glta

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    • "fast" is going to be a relative term. With the advantage now of hindsight (and a chance personally to be away for a while), it appears pretty clear what has happened over the past 8 months. LPH which is still basically in its "infancy" as a publicly traded company, was clobbered by events unfolding in the RTO space in China that were beyond its control. While us longs posted feverishly in hopes that LPH was not going to be "outed", behind the scenes LPH Mgmnt and BOD went about their business, and stuck to their plan. While it took them a while to "react" to what was happening, they have been working steadily to address the concerns and continue filling the pipeline. Toups has always said they want to get into "the big leagues" as a company, and when you look at where they are going and the steps they are methodically taking, it is clear that they are filling the pipeline with very quantifiable and simple opportunities to generate big time cash flow. So while the idea of "fast" is appealing, it is still going to take a change in macro sentiment everywhere before we start seeing those big numbers. The question I am now asking myself, is just how long do I want to hold this as the value starts to appreciate? If you have the patience to hold this until the fall of 2013, I believe you will indeed realize valuations on a par with the largest players in this particular industry.... 14+. By then, LPH may very well be in the neighborhood of 2 billion top line, with a $300MM EBITDA bottom line. Do the math, and then ask yourself if you have the patience and discipline to hold??

      • 1 Reply to cb_wilson
      • Hi CB, thoughtful post. I have not been involved in LPH nearly as long as most of the board and caught the beginning of RTO scenario and was not invested heavily but had a stakeholder position; so my approach has not been a "full in" kind of play, at least not yet. So I have a position but am aware that this could all be sand and everything could be gone tomorrow, but the value here is so compelling, and the macro backdrop so negative, that even a small position of LPH adds considerable alpha to portfolio. And, if there is positive news, I think we go right to $2.50 and then value and timing becomes more scripted; by that I mean, I might add more at $2.50 and then scale out of 50% of my position by $6.00 area and leave a core for longer term, but would scale out at higher prices. If volume becomes more predictable and we could get some kind of trading rhythm, swing trading around a core would be attractive. What I have learned(I had a similar past experience to RRU2) is, if this were easy, everybody would be doing it and there would be no price discrepancy in LPH; it would be similar to playing the cycle vs. a company; here you get both, an economy at inflection and cheap stock. What intrigues me about this space, is that you have all the ingredients for explosive boom or bust play with rife skepticism and fear rampant in the space thereby creating the ultimate Graham and Dodd play at 2x EPS and .63 book. How often does this happen to an entire sector; a black swan event so intense, that the good gets thrown out with the bad?. Ford Motor at $2? So my view is unless there is outright fraud, there is no where but up; LPH is coiled with a lot of energy for an upside move, and with good news we go up. I am wary but don't believe that this company is a fraud; and with the scandal and fallout, the stakes here are significantly higher for our central players - with harsh punitive judgments to follow for the guilty; is "Locked up Abroad" with Michael Toups and his case abetting fraud in the future? Is Cai involved in fraud, especially with a high profile strategic asset such as diesel? I think this unlikely. Toups had his opportunity to exit and did not; successful expats and American citizens working abroad have cultivated instincts for self preservation; and knowing China has a history of making an example of foreigners(industrial spying etc), their antennae is so tuned into China's approach to behaviour damaging to the state, and so acute, that any executive with half a brain would consciously avoid these kind of minefields; especially now, in the terminal phase of the scandal, Toups could have walked away. The PRC will prosecute some players with maximum prejudice and set an example for the workers, who have a tendancy to riot at the local level over these kinds of things. So I think this is what it is: A beat up stock at an extremely cheap valuation and worth a spec. I could be totally wrong, but then again....

 
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