Tuesday, May 31, 2011

China's Big Risk: Corporate Fraud

Article The Street

China Security & Surveillance (CSR) Fairness Opinion

Fairness opinion

Nice upside potential for the investor that has patience.

OFFER 6.50

Price 5.01


Yongye International Announces Agreement Regarding $50 Million Equity Investment By Morgan Stanley Private Equity Asia

BEIJING, May 31, 2011 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. (NASDAQ:YONG - News), a leading agricultural nutrient company in China ("Yongye" or the "Company"), today announced that Morgan Stanley Private Equity Asia ("MSPE Asia") has agreed to make a $50 million equity investment (the "Investment") in Yongye.

Yongye intends to use the proceeds from this investment for capacity expansion, repayment of commercial bank debt, working capital, and general corporate purposes.

"We are pleased that MSPE Asia, one of the leading private equity investors in the region, has decided to make a significant investment in our company," commented Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye International. "Yongye and MSPE Asia have structured a long-term cooperation based on our mutual belief in the strong prospects for our products and nationwide distribution network. Specifically, we are providing multi-year profit commitments to MSPE Asia which, upon their achievement, results in up to a $15.00 per share conversion price for the convertible preferred stock we are issuing. This investment will assist us in strengthening our balance sheet and positioning us to meet the growing demand for our Shengmingsu agricultural nutrient products."

"After extensive due diligence, we believe Yongye to be an exceptional company that has built significant brand recognition in China's agriculture industry through its integrated marketing campaigns, distribution strategy and the benefits its Shengmingsu-branded products have brought to Chinese farmers," stated Mr. Homer Sun, Managing Director of MSPE Asia. "The Company's core products address an important need for farmers to enhance yield for crops planted on soil that has become degraded by decades of over-fertilization. In addition to product efficacy, we are impressed by the Company's strategy and execution to develop an effective sales network directed at an underpenetrated segment of Chinese demand. We look forward to being long-term shareholders and partners with Yongye and intend to provide our full support to Yongye with respect to operating strategies and the capital markets."

In connection with this transaction, Mr. Sun is joining the Company's board of directors.

Mr. Wu added, "I would like to welcome Mr. Sun to our board of directors. He has significant experience adding value as a board member of numerous leading Chinese companies as well as strong expertise in the capital markets and mergers and acquisitions. I believe he will be a valuable addition to our board and we welcome his contributions."

The transaction is expected to close by June 10, 2011, subject to customary closing conditions. The Investment will consist of the purchase of $50 million of convertible preferred shares convertible into common stock ("Common Stock") of the Company at an initial conversion price of $8.80 per share, subject to customary anti-dilution adjustments and a full-ratchet adjustment in the event of future issuances of equity securities below the conversion price. The conversion price is also subject to upwards or downwards adjustments (up to a maximum of $15.00 per share) based on the Company's reported cumulative net income in the years between 2011 and 2014. The calculation of the adjustments based on the Company's reported cumulative net income is subject to certain further adjustments in the event of future issuances of equity securities by the Company not approved by the holders of the preferred shares. MSPE Asia also has the right to acquire from the Company's principal stockholder additional Common Stock in the event that the Company fails to meet certain net income targets and undertakes certain dilutive corporate actions.

Holders of the preferred shares will receive paid-in-kind dividends at an annual rate of between 3% and 7% (dependent on the future trading price of the Common Stock) and participate in Common Stock dividends on an as-converted basis. The convertible preferred shares will automatically convert into Common Stock in five years. Please refer to the Company's Form 8-K filed with the Securities and Exchange Commission for the complete terms of the Investment.

Short sellers could get burned!!!!!!!! TRADING OPPORTUNITY

Sunday, May 29, 2011

China’s Gold Demand Seen Rising by 17% in 2011

Think gold prices have lost their luster? China demand might put the shine back on.

China’s gold purchases could push imports of the precious metal bullion to 400 tons in 2011, up a little more than 17% from the estimated 340 tons imported last year, according to precious metals consultancy GFMS in London.

Increased appetite for silver investment products too, combined with a forecast 16% annual growth just for industrial purposes, could mean that China’s total silver consumption will outstrip domestic supply this year, Philip Kalpwijk, executive chairman of GFMS said Friday. “There is a widening demand for silver as an investment in China because of its lower entry point. It is also being increasingly recognized as a physical investment asset, which will support demand,” Kalpwijk told a press conference in Shanghai on Friday.

The Chinese government does not publish official statistics on gold imports, but the World Gold Council said the country produced around 340 tons in 2010. Last year, total consumption was about 700 tons, leaving a gap of at least 300 tons made up either by imports or sales of existing stocks, according to a China Daily report on China gold consumption.

The surge in imports, which jumped fivefold last year, has turned China, already the largest bullion miner, into a major overseas buyer. GFMS forecasts imply that imports will continue to grow at a robust pace despite high gold prices.

The SPDR Gold Trust exchange traded fund (GLD) is up 7.92% year-to-date ending May 27.

Thursday, May 26, 2011

Emerald Dairy Inc. Reports First Quarter 2011 Results

Emerald Dairy Inc. (EMDY.ob - News), a producer and distributor of infant and children's formula products in the People's Republic of China (the "PRC"), announced financial results for its first quarter ended March 31, 2011.

First quarter 2011 Results

Q1 2011
Q1 2010
Net Sales
$ 14.7 million
$ 14.3 million
Gross Profit
$ 7.2 million
$ 7.1 million
GAAP Net Income
$ 2.0 million
($ 2.3 million)
EPS (Diluted)
In November 2010, Emerald Dairy completed equipping the first production line at its new production facility in Hailun City, PRC. In March 2011, the Company received a production permit for this facility from the PRC's State General Administration of Quality Supervision, Inspection and Quarantine ("AQSIQ").

"While we had begun operations at our Hailun Facility during the fourth quarter, and have found that the equipment is operating to expectations, we were prohibited from shipping product until we received the AQSIQ approval in March of this year," began Yong Shan Yang, Chairman and CEO of Emerald Dairy. "We were essentially operating solely through our existing Bei'an facility during the first quarter, which resulted in minimal year-over-year increase in sales. We are now fully operational, demand appears to be strong, and we are poised to gain additional market share as many smaller producers who cannot secure AQSIQ approval have shut down or suspended production. We remain confident in meeting our target of $70.0 million in revenues for fiscal 2011 and, based on the backlog of orders, we expect robust growth for the balance of this year."

First Quarter 2011 Review
Total revenue for the first quarter of 2011 was $14.7 million, up 3% from $14.3 million for the quarter ended March 31, 2010 due to an 8% increase in the average selling price per ton. Total volumes sold were down approximately 5% to 2,471 due partially to lower subcontracting sales but mostly attributable to shipment delays of Xinganling® infant formula from the Company's Hailun facility while it awaited AQSIQ certification from the government. Sales of Emerald Dairy goods increased by 3.0% as a result of sales of higher priced Xinganling®-branded infant formulas. For the first quarter of the year, sales of infant formula and milk powder accounted for 90% of the sales of Emerald Dairy. The remaining revenue segments in rice and soybean powders and subcontracting sales totaled $1.5 million, or approximately 10% of sales for the period.

Gross profit for the first quarter of 2011 was $7.2 million, 1% higher than the $7.1 million in the first quarter of 2010. Overall gross profit margin was down 80 basis points to 49% in the first quarter due to a reduction in milk powder margins. The cost per ton was up 10% year-over-year due to rising inflation in China. Despite the slight reduction of gross margins in the first quarter of the year, Emerald Dairy expects it will be able to pass along cost increases to customers and maintain its target margins detailed below.
Xinganling® Milk Powders – 45%-55% margins
Rice Powders (for lactose intolerance) – 60%-68% margins
Soybean Powders (for lactose intolerance) 20%-30% margins
Private Label Contracting 10%

Operating expenses for the first quarter of 2011 were 4.0 million, an increase of 1.7% versus the first quarter of 2010. Operating income totaled $3.0 million in the first quarter of 2011, a 17.7% increase from $2.5 million in the first quarter of the previous year. The Company's operating margin for the first quarter of 2011 was 23.6%, compared to 11.8% in the first quarter of the prior year, a 1,180 basis point improvement. Operating leverage resulted from prudent expense control coupled with ton line growth.

GAAP net income for the first quarter of 2011 was $2.0 million compared to a $2.3 million loss in the first quarter of 2010. Earnings per share were $0.06 per diluted share in the first quarter of 2011. Earnings per share increased 100.0% to $0.06 based on 34.5 million weighted average diluted shares outstanding on March 31, 2011, compared to 32.9 million fully diluted shares in the same period in the prior year.

Financial Condition
Emerald Dairy had $0.3 million of cash outflows from operations in the first three months of 2011, resulting in a cash balance of approximately $16.3 million at March 31, 2011. Working capital was $26.5 million compared to $24.4 million as of December 31, 2010; accounts receivable were $8.5 million, compared to $8.2 million as of December 31, 2010. The Company had $6.4 million in short term loans as of March 31, 2011. Shareholder's equity was $49.7 million versus $47.2 million reported on December 31, 2010.

2011 Guidance
Management reaffirmed its 2011 financial forecasts of approximately $70.0 million in revenues. The Company currently expects to produce and sell approximately 15,000 tons of products in 2011 compared to 10,050 tons in 2010, although there are no assurances it will do so.

Xinyuan Real Estate Co., Ltd. Declares Dividend and Announces Share Buyback Program

Xinyuan Real Estate Co., Ltd. (NYSE:XIN), a residential real estate developer with a focus on high growth, strategic Tier II & III cities in China, announced today that its Board of Directors has declared a cash dividend of US$0.05 per common share, or US$0.10 per American Depositary Share (ADS), payable on June 20, 2011 to shareholders of record on June 10, 2011.

Xinyuan also announced that its Board of Directors has approved a share repurchase program under which the Company may spend up to US$10 million to repurchase common shares, either in the form of common shares or American Depositary Shares in the open market or in privately negotiated transactions over the next 12 months at the discretion of management.

The shares will be purchased from time to time at such prices, and in such manner as are authorized by management depending upon market conditions. Under the program, the purchases will be funded from available working capital. There is no guarantee as to the exact number of shares that Xinyuan may repurchase and Xinyuan may discontinue purchases at any time that management determines additional purchases are not warranted. As of May 25, 2011, Xinyuan had approximately 153 million common shares, or 76.5 million ADSs, outstanding.

Mr. Yong Zhang, Xinyuan's Chairman and Chief Executive Officer commented, "These actions reflect our confidence in the future financial performance of our business and the prospects of China's real estate industry. For the past several years, our key priorities for using our cash were to invest in our development projects. We have made significant progress on these efforts, and they will continue to be a focus. However, given the weakness in our share price, we believe accelerating the repurchase of shares and the implementation of a dividend is a highly appropriate use of cash at this time. We are pleased to maximize value for our shareholders through these initiatives. We believe the company remains well positioned for future development, and will have a strong growth and solid profits this year."

A good sign of the company. I hope that more US-listed China companies follow this example. If they can distribute twice a year a dividend of $0.10 you have a potential cash cow. At the current stock price of $2.18 the company represents a 2011 PE of about 2 with a 67% discount to book value. The strong cash position makes regular cash dividends possible.

Tuesday, May 24, 2011

Why I'm Still Bullish on U.S. Listed China Food Stocks

Article Seeking Alpha

China TechFaith Q1 profit doubles

* Q1 rev up 29 pct

* Q1 gross margin up 10 pct points to 32 pct

China TechFaith Wireless Communication Technology Ltd said quarterly net income almost doubled with gross margin rising 10 percentage points, as the mobile handset-maker sold more high-margin, company-branded phones.

TechFaith, which makes CDMA and GSM-based mobile handsets, including multimedia and smartphones, and gaming terminals that function as phones, said first-quarter gross margin improved to 32 percent.

The company said it plans to launch six new mobile phone models in the second quarter, mostly smartphones that will be based on the Android operating system.

First-quarter net income attributable to the company increased to $13.8 million, or 26 cents per ADS, while revenue jumped 29 percent to $78.7 million.

TechFaith expects second-quarter revenue of $82-$84 million, with gross margin levels similar to the first quarter, it said in a statement.

Mr. Deyou Dong, President and COO of TechFaith in charge of the Company's mobile phone business, said, "Demand for our mobile phone products remains strong based on our innovative offerings, quality performance, functionality and total value offered by TechFaith. We plan to launch an additional six models in the second quarter of 2011, of which the majority will be smartphones as we leverage continued demand for Android-based solutions. We are also seeing increased traction in our traditional ODP mobile phone business, with recent wins in the area of mobile solutions for corporate clients in the China market, the U.S. market and the Latin American market. This directly reflects our sales and marketing strategy. Overall, we are well positioned in the market, which has substantial growth potential, given our capabilities to tailor hardware and software solutions to meet customers' specific needs."

Mr. Defu Dong, Chairman and CEO of TechFaith, added, "We have achieved continued progress in our mobile phone business and our motion gaming business, with new hardware offerings and our recent announcement of three major content licensing agreements. We have a powerful, clear business vision, under which our mobile phone business focuses on mobile solutions providing business and brand name phone sales business; and our gaming business focuses on the motion gaming line. For the motion gaming business, we have achieved further significant growth led by our unique products which differentiate TechFaith. Sales of our motion gaming devices were also much higher, as we have reached unit sales approximately 40,000 to 50,000 per month. We expect the sales of motion gaming devices to further increase as we will launch our 17Vee motion gaming console box in the second quarter of 2011. We have had positive responses in the pre-launch phase of our 17Vee motion gaming box. We expect the growth in our motion gaming business, together with the continued development in our mobile phone businesses, will help drive further growth in 2011."

This will become a $10 stock.

Wednesday, May 18, 2011


From May 18 until May 22 I will be in Playa Del Carmen (Mexico).

Unfortunately this blog will not be updated!!!

Tuesday, May 17, 2011

Death by China: Confronting the Dragon - A Global Call to Action


Editorial Reviews

Product Description

China is now the #1 danger facing America. Best-selling author and economist Peter Navarro exposes every form of "death by China"—from lethal products to espionage, imperialism, and nuclear proliferation through China's relentless attack on the U.S. economy. A must-read book for every American, by the best-selling author of The Coming China Wars.

From the Back Cover

“Like a modern-day Paul Revere, this book offers the most urgent of warnings about how China is systematically destroying the American economy under the false banner of ‘free’ trade–and in the process, severely weakening our national defenses.”
Ian Fletcher, Senior Economist, Coalition for a Prosperous America
“The authors rightly and squarely point the finger at all of the corporate turncoats and China apologists in America who are helping to make China’s rise anything but peaceful.”
Alan Tonelson, Research Fellow, U.S. Business and Industrial Council, AmericanEconomicAlert.org
“A high-powered rifle shot that hits the Beijing bull’s-eye dead-on.”
Dylan Ratigan, host of MSNBC’s The Dylan Ratigan Show
Death by China is further proof that we are sowing the seeds of our own demise.... This book is shocking and is a must-read for all.”
Paul Midler, author of Poorly Made in China
“This clarion call carefully researches and intricately details the clear and present dangers that an anything but ‘peacefully rising’ China poses to the world.”
Congressman Dana Rohrabacher, 46th District (Rep, CA)
“This liberty bell of a book should shake American leaders out of their slumber so that they finally–finally–realize that China’s economic policies are bankrupting the United States of America.”
Richard McCormack, Editor and Publisher, Manufacturing & Technology News
“I’ve been long concerned about China’s evolving military challenge to America and our allies.... Every Western political and military leader should read this book. Now!”
Jon Gallinetti, Major General, USMC, retired
“Be forewarned: Once you start reading, you won’t want to stop.”
Damon DiMarco, author of Tower Stories: An Oral History of 9/11 and co-author of My Two Chinas: The Memoir of a Chinese Counterrevolutionary with Baiqiao Tang
“A chilling compilation of China’s gathering storm.”
Brian Binnie, Commander USN, retired; test pilot; commercial astronaut and winner of the Ansari X Prize
China is now the greatest threat to America.
Soon to be the world’s largest economy, China is attacking on every front, with every available weapon—from protectionism and currency manipulation to cyber attacks and espionage. Around the globe, China is also doing whatever it takes to capture crucial resources—even if it means promoting nuclear proliferation by the world’s most dangerous regimes. Inside the United States, Americans are being injured or killed by the Dragon’s dangerous exports: poisoned food, spiked drugs, toxic toys. Meanwhile, huge U.S. corporations have allied with China’s state-owned enterprises to destroy American manufacturing—and, ultimately and ironically, destroy themselves.
It’s an incredible and incredibly shameful story, and Death by China tells it all. But understanding the reality of China’s assault on America is only the beginning. Leading economists Peter Navarro and Greg Autry offer a complete plan for surviving the global power shift China has already engineered—and halting the Dragon’s onslaught before it’s too late.
It’s not China “bashing” if it’s true
Challenging the China apologists and appeasers
The Dragon’s death to America’s manufacturing base
How China’s totalitarianism, mercantilism, and protectionism are winning
China’s “dark visitors” steal the “rope” to hang us with
Beijing’s Red Hacker Brigades vow: “We will bury you, Chinese-style”
Death by Colonial Dragon—A rising hegemon’s revenge
Vacuuming up Africa’s resources, plundering Latin America, bullying Asia

Monday, May 16, 2011

American Lorain Q1 Results

Q1 results

AT MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

ASSETS Note At March 31,
At December 31,
Current assets
Cash and cash equivalents 2 (d) $ 18,603,272 $ 12,730,626
Restricted cash 3 4,858,780 2,308,898
Short-term investment 7,794,153 9,447,585
Trade accounts receivable 4 21,835,538 33,226,612
Other receivables 5 1,976,234 1,492,850
Inventories 6 38,730,930 29,807,198
Advance to suppliers 7,467,094 7,744,976
Prepaid expenses and taxes 949,956 434,061
Deferred tax asset 104,689 103,713
Security deposits and other Assets 628,998 693,858
Total current assets
$ 102,949,644 $ 97,990,377
Non-current assets
Property, plant and equipment, net 7 72,782,827 72,095,007
Land use rights, net 8 4,884,453 4,877,438
Deposit 15,878 20,297
TOTAL ASSETS $ 180,632,802 $ 174,983,119
Current liabilities
Short-term bank loans 9 $ 16,139,139 $ 25,164,469
Long-term debt – current portion 13 220,998 218,935
Notes payable 10 6,106,777 4,249,977
Accounts payable 5,468,206 6,284,532
Taxes payables 11 1,248,383 3,266,502
Accrued liabilities and other payables 12 1,780,060 1,335,947
Customers deposits 1,180,590 89,370
Total current liabilities $ 32,144,153 $ 40,609,732
Long-term liabilities
Long-term debt 13 15,126,807 5,030,930
TOTAL LIABILITIES $ 47,270,960 $ 45,640,662

See Accompanying Notes to the Financial Statements and Accountant’s Report

AT MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

At March 31,
At December 31,
Preferred Stock, $.001 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively
- -
Common stock, $0.001 par value, 200,000,000 shares authorized; 34,419,709 and 34,419,709 shares issued and outstanding as of March 31, 2011 and December 31, 2010, respectively
14 34,420 34,420
Additional paid-in capital
14 52,545,183 52,371,481
Statutory reserves
2 (r) 12,060,229 11,340,739
Retained earnings
50,395,173 48,688,375
Accumulated other comprehensive income
10,753,537 9,475,745
Non-controlling interests
15 7,573,300 7,431,697
$ 133,361,842 $ 129,342,457
$ 180,632,802 $ 174,983,119

See Accompanying Notes to the Financial Statements and Accountant’s Report

(Stated in US Dollars)

Note March 31, 2011 March 31, 2010
Net revenues 2 (t),16 $ 30,449,805 $ 24,560,216
Cost of revenues (23,674,895 ) (18,836,126 )
Gross profit $ 6,774,910 $ 5,724,090
Operating expenses
Selling and marketing expenses (1,362,686 ) (1,372,352 )
General and administrative expenses (1,475,947 ) (1,016,452 )
(2,838,633 ) (2,388,804 )
Operating income $ 3,936,277 $ 3,335,286
Government subsidy income 293,093 181,421
Interest income 2,475 2,804
Other income 44,609 119,277
Other expenses (159,572 ) (27,523 )
Interest expense (653,123 ) (920,424 )
(472,518 ) (644,445 )
Earnings before tax $ 3,463,759 $ 2,690,841
Income tax 2 (q),17 (895,868 ) (671,992 )
Net income $ 2,567,891 $ 2,018,849
Net income attributable to:
-Common stockholders $ 2,426,288 $ 1,860,531
-Non-controlling interest 141,603 158,318
$ 2,567,891 $ 2,018,849
Earnings per share 2 (u), 18
- Basic $ 0.07 $ 0.07
- Diluted $ 0.07 $ 0.07
Weighted average shares outstanding
- Basic 34,419,709 26,075,413
- Diluted 35,155,958 26,730,651

Q1 2011 Operational Highlights
•Each product segment increased by over 16% in sales year-over-year
•Convenience food segment continued to grow as a percent of total revenue
•Company's international sales continued to improve, increasing 49.2%

Q1 2011 Financial Highlights
•Total revenues of $30.4 million, an increase of 24.0% year over year
•Gross margins decreased slightly to 22.2%, compared to 23.3% year-over-year and 22.7% at 12/31/2010
•Net income attributable to common stockholders of $2.4 million, up 30.4% year-over-year
•Diluted earnings per share of $0.07
•Operating cash flow of $3.8 million for the period ended March 31, 2011

American Lorain's Chairman and CEO, Mr. Si Chen, stated, "We are extremely pleased with the performance of the Company in the first quarter. We believe the largest contributor to our growth in the coming months will be the continued expansion of our convenience foods segment, as was the case in the first quarter. We continue to focus on both diversifying our lines to include a wider variety of food products and leveraging our known brand name among different segments, as evidenced by our expansion in the instant rice market."

"Although the first quarter is seasonally one of our weakest due to the chestnut business, American Lorain's highly competitive cost structure, coordinated sales and marketing platform, and continued diverse food operations allowed us to deliver another solid quarter. Over the past two years, American Lorain has made significant improvements to the balance sheet and cash generation. We reported $3.8 million in operating cash flow during the period. We believe that the Company is appropriately capitalized to grow organically in the coming months."

Outlook for 2011
Mr. Chen concluded, "Chestnut sales (both domestically and internationally) have remained strong throughout the first four months of the year when compared to last. While it is always a challenge to precisely assess customer demand for our products, we are optimistic about fiscal 2011 based on what we are seeing thus far. The efforts of our management group in all three business segments are producing greater efficiencies in both the operating infrastructure and costs control which will help us as we continue to grow. We are in a very basic business, supplying easy, ready-to-eat food to individuals across the globe. In tough economic times, people tend to cook at home by shopping at their local grocer. This is our core business and, along with our international presence, we should be better positioned than many of our local competitors in this regard. We are optimistic about the outlook of our market growth in China and abroad because of growing demand, improving brand recognition, and balanced supply. We will continue to execute on the Company's core strategies of driving growth through each of our business segments."