You too. Remember, this still is only worth 3 times earnings. That's the underlying theme here. A valuation of 5 times earnings isn't exactly outlandish.
We're up near the old highs again and more sellers cam in. Remember the more tests of the prior high that we get the weaker the high will be and ultimately it will give way to much higher prices as the sellers dry up and only buyers are left.
Today was a prime example of what I was referring to above. I think we see a few more days of fluctuations like these. Remember the more tests of the prior high that we get the weaker the high will be and ultimately it will give way to higher prices as the sellers dry up and only buyers are left.
My target is $4.50 within 3 months. I won't share why this is the target price as its proprietary. This will be a rough double from the $2.30 level I mentioned was a buy.
Valuation at $4.50 would be roughly 3.7 PE or 2.5 PE after backing out cash. If we get there I'll re-assess upside targets longer term. If we see people coming back to China stocks in droves and GPRC back on the growth path then longer term targets could be a good deal higher.
I'd love to see a drop back to $2.5 but probably some consolidation around here as buyers from the prior highs look to get out. May be range bound between $2.8 and $3.2 for several days is my guess. I'd be careful trading too much though. The float is quite small and valuation is dirt cheap so there is a chance you could miss out on a big move higher. My target is $4.5 in the near term (1 to 3months)
Anyone read this? Good background checks on GPRC's suppliers.
Valuation should be a lot higher. Really no reason for a 2 p/e. Even a low 4 p/e means this is over $5. If this is a US based company it would be at $15 to $20.
Another good article...again the point is that you should be using this current weakness in the stock to buy. That's what I have been doing because the longer term future of GPRC is very bright and the stock is trading at 2X earnings:
"Surendra Borad, second from left above, who chairs the plastics committee of the Bureau of International Recycling, told the organisation’s autumn convention in Warsaw that although Green Fence had “led to widespread confusion and indecisiveness in the plastics scrap trade”, it would be for the greater good of all parties in the long term.
Borad acknowledged immediate difficulties over the Chinese rejecting poorer-quality imports:
Storage and logistical problems
EU exports of plastic scrap to China down 16% (H1 2013 compared to H1 2012)
EU exports to Hong Kong down 26% (same period)
German exports to China down 24%
US exports down 7%
But he said he was sure all economies would gain eventually: “Ultimately in any industry, quality is the precondition for sustainability. Our recycling business will survive and grow for a long time only if the quality is stressed. [Green Fence] is undoubtedly a blessing in disguise.”"
This is set to expire today. Any wonder why GPRC held off on expansion efforts? This is lifting very soon though and the company should have a solid 2014 and much brighter future. Read the article below:
"Scrap metal traders conducting business in China spent much of 2013 coping with the effects of Operation Green Fence, a multi-agency effort by the Chinese government to more closely manage the activities of containerized scrap imports.
Speakers at the 2013 Annual Convention of the CMRA (China Nonferrous Metals Industry Association Recycling Metal Branch) in November noted that the new procedures caused expensive delays for importers and exporters, although in the long run the changes may be beneficial for recyclers who play by the rules.
Operation Green Fence indisputably “affected the customs clearance of importers” stated Wang Jiwei, vice president and secretary general of the CMRA.
The increased scrutiny of imported scrap came at the same time as increased taxes and increased energy costs for nonferrous scrap recyclers and secondary metals producers, noted Wang, making 2013 a difficult year.
Delays caused by Green Fence were frustrating for metals recyclers, according to Wang, because “there are basically no smuggling cases for scrap metal,” and sub-standard shipments of mixed waste do not try to enter the country labeled as scrap metal.
“Copper and aluminum are not smuggled into China, however we were affected [by the port slowdowns] and our customs declaration process has been slowed down,” he stated.
Alexandre Delacoux, director general of the Brussels-based Bureau of International Recycling (BIR), acknowledged that Green Fence caused difficulties, but also played up the positive aspects of the initiative."
current quarter decline due to one time event (inspections related to China's Green Fence thing). They have waited to expand until after its done. expires next week. 2014/2015 should be very good for them.
Just remember that this stock is trading at 2 times earnings and they have $1.50 in cash and no debt and are generating an additional $0.30 in book value every single quarter.
This valuation is basically the same valuation you would see in a bankrupt company. It makes zero sense from a rational standpoint. The company has been vetted by European inspectors, the founders were educated in Japan and modeled the company based off advanced Japanese recycling business model. Insiders own a huge share of the company that they haven't pared down at all, they pay themselves reasonable salaries. Liquidity is sky high with a current ratio of 16:1.
Operation Green Fence has completely upended the recycling industry (just read about the impact it has had on European and US exporters) and GPRC still has managed to keep pace with 2012 levels despite all of this turbulence. Expansion efforts were delayed but as soon as this passes they will be able to expand and the company could eventually be doing $2 to $3 a share in earnings. Especially when you consider that they may have favored status given how much emphasis their manufacturing facilities have on pollution control and China's focus now on focusing on pollution control in addition to economic growth.
If investors come back to Chinese stocks this could eventually be a $20+ stock. Not only are you buying it during a down year for the entire industry because of temporary factors, but you're buying it when everyone hates Chinese stocks. The longer term picture is still completely intact. The company is in the early stages of a long term growth cycle. I personally think it's one of the most undervalued companies I've ever found.
When Green Fence ends we should have more clarity on what they want to do. It ends in 6 days.
I think valuation matters. I heard the same arguments about stocks in general in 2009, then about European Stocks in 2011/2012, then social media / internet stocks after FB faceplanted. Valuation matters ultimately and the Chinese small caps are the most hated yet cheapest asset class. People will come around to them.
The company is currently being valued at $8 Million after backing out cash. They make that in 3 quarters. In 1 year I think you will see a drastically higher valuation.
Yeah sorry. They are tons of tiny shops that don't sort plastic and just burn waste and allow polluted water to run into their sewage systems and China has identified those as a cause in part for their pollution. They're cracking down on those companies. Read this which can be found online. Note the 2nd paragraph. Then go to GPRC's 10k which details in full their treatment process.
"Guan Aiguo, chairman & CEO of China Recycling Development Co. Ltd. and president of the China Resource Recycling Association, said the industry will undergo dramatic restructuring in the next three to five years as costs rise and government regulations cut down on pollution.
In a speech to the conference, he said “99 percent” of China’s scrap plastics companies do not have equipment to properly clean the water they use in their factories.
“They do not process or clean the water,” said Guan, whose beijing-based company owns plastics recycling factories and invests in industrial parks for recyclers. “They emit it directly. It is a very serious problem.”
Many of the recycling plants are operated by farmers, using simple technology, and are not safe places to work, he said.
Guan said he finds it difficult to visit such factories for more than 10 minutes because of their environmental conditions, but people spend hours a day in them and become ill after years of work: “They sacrifice their health for money.”"
Rich - Sure thing. It's a pretty simple business. They import plastic waste from European suppliers and recycle it into a granular form of plastic to be used in things like shoe soles, pipes for sewage, and other end products. They have approval from Umweltagentur Erftstadt, a company that provides certificates of approval for plastics mfgs that meet strict German environmental standards, including air/water/noise discharge. German suppliers are only allowed to sell plastics waste to manufacturers who have this certificate. GPRC is one of a handful of importers / manufacturers with this certificate.
They've been growing pretty steadily for the past 5+ years but this year they have slowed down because they're not expanding capacity until they are clear about the direction from the new leaders in China on imported plastic waste. China is cracking down on companies that are importing dirty waste or toxic waste as part of their Green Fence initiative. Look it up for more info. Lots of US exporters are getting killed because they have had containers rejected at customs for not passing inspections. This has capped growth of importing for the time being but Green Fence expires this month and indications are it should return to normal soon. GPRC was inspected by 3 different agencies this quarter which caused them to shut down operations for a week (about 8-9% of the quarter). Earnings took a hit so the stock took a hit.
They're sitting pretty, though, because their entire recycling process is environmentally friendly. They may even benefit from this as end customers are forced to order only from companies with licenses. I'm not banking on that, but at the least I think when this Green Fence initiative ends they will then announce an expansion plan and revenues will grow again. It doesnt really matter if they don't though. They're going to have more cash on hand than the co is worth in less than 2 years.
Good luck. I think patience wins out here.