Zhongpins second quarter results are excellent. Revenue is up strongly driven by increasing pork prices. Margins are holding a reasonable level. Dilution is modest around 14%. Altogether EPS increased 33% from $0.36 to $0.48. Guidance was increased to $1.80-2.05. Book value increased to $12.00.
With the latest stock price of $8.45 HOGS is now priced at P/E2011=4.1-4.7 and P/B=0.70. Those are attractive numbers IF the company is legitimate.
Other legitimate (as far as I know) companies like LDK Solar (LDK), Renesolar (SOL) and Jinko Solar (JKS) are right now priced in the range P/E2011=2.25-2.50. In October 2008 Trina Solar (TSL) was also priced around P/E2008=2.4. To me this suggests that HOGS' pricing is NOT abnormal for a legitimate company and therefore NOT proof of fraud. Still HOGS could be a fraud for all I know.
For your information I have purchased a small position in HOGS at $10.05. I did so after thourough studies. To me HOGS looks like a legitimate company and I thus decided to take a bet against the shorts.
Solar and pork are different business alltogether for sure. The point is some chinese stocks are valued at surprisingly low multiples. Another example is Jinhui Shipping (JIN, Oslo). That dry cargo shipping company is no doubt legitimate. JIN is trading at P/E<2 and P/B=0.22. JIN has relatively low debt and a strong operating profit. Outlook is terrible but still...
nice analysis. appears they are legit, i followed them for several years, but i was way spooked by the CER report. also not sure HOGS management addressed the # of hogs slaughtered well enough....but enough for me to buy a little. Cheers.