A very good call. The Q&A was the most helpful I thought. The rest of the presentation was just more of what we all know;
-will be considering new auditors but the Top 4 aren't taking on any new clients, and they are happy with their current auditor (who has Top 4 KPMG work experience). Conclusion: They are in no rush to do this, are considering it, and if it appears that there is an upside to doing it, will make it so.
-volumes down to preserve margins and not reduce price for the sake of cranking more volume through. Govt is trying to cool off economy and it sounds like it is working to some degree. Rather than artificially crank up the volume by lowering prices, they are holding prices and preserving margin. Conclusion: In a 10% GDP economy, the volume will ultimately take care of itself. Keep those margins up!
-Haujie acquisition will probably close some time in October. He Keeps saying 2nd QTR so as not to be pinned down to a specific date. My guess is they'll wait until sometime just prior to the Q1 results for maximum impact, so say early November? That would certainly be the latest anyway. If they are generating $20MM to bottom line per Q, (his words), it only seems logical.
He provided some interesting candor to my question about his tenure with the company and why he doesn't get something more than a 1 yr contract. He talked about the extensive DD he has done to ensure he was hooking up with an honest and transparent company, what it means to be the lone US executive, and most interestingly, his obvious strong relationship with Cai. Hard facts are important, but sometimes relationships are even more important. I found his response to this to be very confident.
Reading between the lines a little, there seems to be little doubt that they are aware of the frustration with a ridiculous P/E of <2. They are clearly going to consider ways of getting profits into the hands of investors, once Haujie is complete and generating free cash flow. That won't take very long, as he indicated they are confident in their numbers based on the under-serviced nature of the area this facility is in. They did it with Gujaio, they will do it with Haujie.
He commented on that fuel consumption will continue to grow at a very high rate, typical of a GDP 10% economy. China is the largest fuel consumer now, they will be the largest new car sales nation shortly, and Haujie is in an area of major power generation for Beijing, along with a lot of mining and construction interests - all requiring fuel.
He reiterated guidance for 2012 using just the 2 facilities, and also same 12 month guidance for Haujie upon completion.
I took minor exception to the one questioner who called LPH an "acquisition story". That seems pretty myopic. This is a revenue & income story plain and simple. Once this latest acquisition is complete, it puts them in the position of easily and quickly becoming a billion dollar revenue company, generating over a buck a share in earnings, with ZERO debt. An acquisition story?? Gimme a break. Maybe for a trader.
I hate waiting, but it will pay off handsomely.
Great summary CB!
I'm very happy with LPH's execution of their business plan. The traders that want short term, artificial tactics to be deployed, I.e. reverse split, lack concern about the long term success of LPH. In time, LPH, by following their growth plan, geographic expansion, will eventually deliver a higher pps.
FANTASTIC update CB! Thank you. You summed up everything I wanted to know. I'm going to be piling on shares for the rest of the year until we get to proper valuation. It'll come and it'll pay handsomely.
I was pleased with the cc but I am still taking the position that a 52 week price target can't be really called.
Obvious factors are China stock performance and whether a dividend is paid.
Thanks CB --I sent Mike my questions about Cai's salary and why no independent dr's were buying stock....as it is delicate and thought they might weave it in to the presentation....anything mentioned on this?