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Lihua International, Inc. (LIWA) Message Board

  • johnskokie johnskokie Jul 30, 2013 10:02 AM Flag

    The Waiting Games...

    As we collectively scratch our heads wondering about the lack of movement in LIWA's share price, I again submit that the transition of power in the Chinese government is a crucial factor. There are various messages (sometimes mixed) coming from the central government on a daily basis regarding economic reforms that are being proposed and / or put in place. This uncertainty regarding banking practices, tax rates, and State Owned Enterprises has, I believe, put many institutional investors on the sidelines for now. They, and retail investors, are probably waiting to see what's the economic plan the central government is unveiling in October.

    In the short run, there has been (I believe) some positive news for a private company like LIWA. For example, the government has expressed a willingness to make bank lending to non-SOE companies more available. And, they are giving tax breaks to small businesses to encourage more private enterprise. Under the new Chinese leadership the economic model is changing, and they want to eliminate "outdated" and surplus production facilities. This latter development, as I have mentioned before, supports and may enhance LIWA's profit margin.

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    • Are we just fooling ourselves trying to figure out why the stock is not heading up. In my mind the only reason is sitting at the top doing nothing to enhance shareholder value. Why are some companies able to pay dividends out of the country and were not. Also he can make any excuse in the world but the lack of any shareholder buyback makes no sense at all. The company at $2.00 per share E.P.S. is worth a minimum of $60 million in new cash. He could reach out a $7.25 a share and buy back 4 million shares. This would obviously show his intent to shareholders and take most of the loose hanging stock off the market. This would be the catalyst more funds would need to start buying. Instead he chooses to do nothing.

      Sentiment: Hold

      • 2 Replies to rbf471
      • Only about $75mil in LIWA stock is not owned by insiders. This represents half the outstanding shares. If an institution stays under the 5% threshold then its maximum investment is limited to about $7.5 mil which may not be consequential enough to justify taking a position in the stock. LIWA may appeal only to smaller investors to whom a smallish investment can be of consequence to their total portfolio.

        Shrinking the market cap by buying back shares only lessens the appeal of LIWA to larger institutional investors because they can't accumulate a large enough position to be meaningful to their total portfolios. jaydawson is probably on the right track when he suggests the appeal of LIWA's stock might be greater if the bigger investors were able to take larger more meaningful positions.

      • I wholeheartedly agree that a regular quarterly dividend would definitely boost shareholder value. I've been clamoring for that for a long time, and I suspect it would benefit all by also giving some street cred to this orphan stock.

    • elpasojet Jul 30, 2013 11:04 AM Flag

      Definitely LIWA needs some product mix that can enhance their gross margin in the long run, it is difficult to do it with less than 10%. But do you really believe what you have stated above is the main reason LIWA is trading 50% below BV and $1 below cash in bank? Institutions still have doubt about their number and waiting for catalyst to commit more investment on LIWA. There were at least 11 questions raised in last conference call asking question concerning dividend & stock buyback besides suggestion on ways that LIWA might be able to convert RMB to USD.

    • We are in Plato's The Cave. Every quarter we get results from LIWA, but we know nothing else and are left to speculate, in the Cave, what might be occurring on the outside with LIWA. The good news is that if everything was transparent, this stock might be $15 right now and I'd never have gotten in; so we in the Cave who pieced together a LIWA success story from this sorted tidbits are on the leading edge (while those on the sidelines still think we are not leading but actually over the edge).


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