.

http://www.growthcompany.co.uk/recommendations/1020952/china-shoto.thtml

China Shoto - BUY

Companies: CHNS 28/04/2009

Despite substantial growth, robust prospects and a decent dividend, battery-maker China Shoto trades on a bargain-basement rating.

Results for 2008 show that the Eastern China-based group lifted revenues 70% to 183.1m, pre-tax profits by 61% to 11.6m and earnings by 76% to 43.1p per share. The balance sheet was awash with cash at the year-end, after a sharp swing from 19m net debt in June to 22m of net cash, benefiting from a ‘cash flow management plan’ and perhaps good timing.

The bulk of sales are of backup power batteries to the telecoms industry, which has been investing heavily in its infrastructure of late and is set to receive many billions in future government support. Shoto claims a leading 20% market share and espies considerable continued growth as the three national networks maintain their expansion.

Another growth avenue was signposted in last year’s 329% increase in overseas sales to 29.7m, much of which was derived from India, which like China suffers from inconsistent power supply. Shoto has high hopes for other new offices in Moscow, Dubai, Singapore and Frankfurt.

Finance director Zhou Weigang says the group’s manufacturing capacity remains focused for the present on higher-margin backup power rather than its secondary product line, electric bike batteries. The company has mooted a capacity increase as well as new products for other markets, but a fundraising would likely be needed.

Based on forecasts for 2009 from house broker Seymour Pierce – of 12.5m PBT and 47p EPS – its shares are trading on a prospective price-to-earnings ratio of just 3.7 times, which seems far too low. Buy.

Bit more media coverage :

http://www.investorschronicle.co.uk/

Spectacular results from China Shoto

Created: 29 April 2009 Written by: Nigel Bolitho

While the UK seems to have little money to spend on infrastructure schemes to pull the economy out of recession, China is pumping RMB4trillion of its mega cash reserves into infrastructure schemes. And of that, RMB400billion is earmarked for 3G networks over the next three years. This is all music to the ears of China Shoto, which is China's largest producer of back-up batteries with around a fifth of the market.

But that benefit is to come. Look first at last year's results. Twelve months ago, brokers were expecting 2008 turnover of around 137m and unchanged profits. Instead, China Shoto has reported stunning increases in sales and profits while net cash inflow from operating activities jumped to 38.57m against a 2007 outflow of 3.11m. So it's not surprising that over this trading period the company's net assets per share jumped by almost three-quarters.

Demand for back-up batteries from mainly Chinese mobile phone operators soared last year. Turnover rose 83 per cent to 117m with sales to China Telecom and China Netcom up 335 per cent and 193 per cent, respectively. Dollar revenues from non-China mobile operators jumped from 6.9m to almost 30m. Indeed, so great was demand for back-up phone batteries that production lines for bicycle batteries were commandeered to meet phone demand. Of course, the latest results also benefited from RMB and dollar strength against the pound while careful use of tax concessions meant that last year's 11 per cent tax charge of 1.26m was just 3,000 higher than the 2007 figure.

For 2009, broker Seymour Pierce's revised forecast is sales of 200m and profits of 12.5m, producing earnings of 47p.


SHARE TIP UPDATE

Buy - That puts the shares on a PE of under four coupled with net cash equivalent to more than half the company's market value. China seems to be coming out of recession fast. A year ago we upgraded the shares to a buy at 145.5p, and they remain so.


----------------


http://www.investegate.co.uk/invarticle.aspx?id=98751

China Shoto shoots for green and BRICS
By Rob Mackinlay

Full-year results from an AIM-quoted Chinese battery manufacturer - China Soto - were amongst the most read announcements on Investegate.


On Wednesday, China Shoto’s shares stood at 181.5p, a rise of 1.68 per cent or 3p. The company's shares are maintaining an increase in value of more than 100 per cent from an 87.5p low-point at the beginning of December 2008.

Jim McCafferty, analyst at Seymour Pierce - which is the nominated adviser and broker for the company - retains a "Buy" recommendation saying: "Despite strong performance of the shares, they are trading on a 2009 price earnings ratio of just 3.8. We believe this rating does not reflect the company’s growth prospects."

During a press briefing on Tuesday, China Shoto’s chief financial officer (CFO), Weigang Zhou, and two company directors answered questions about the sustainability of the back-up battery business which is the company’s main source of income(China Shoto makes batteries that back-up mobile phone networks in case of power failures.

The response was that, even when networks are completed and batteries in place, there will be requirements for upgrades as technology improves. The company also that it has increased its business abroad with its export revenue increasing from 6 per cent in 2007 to 16 per cent in 2008.

Business in India makes up 85 per cent of its export revenue but it hopes to do business in other BRIC countries, as well as in Africa, where power supplies are also unreliable.

Efforts to develop new technology are also being made in other battery markets including electric bicycles. In its results statement the company said: "As China's largest producer of back up batteries and a China Environment Friendly Enterprise, the group intends to, ultimately, become a worldwide green energy solution provider. To that end, a new type of green energy storage product with high technology content is being developed."

Transparency, corporate governance, and allegiance to investors, have been among the concerns of professional investors in China and other emerging markets. Weigang Zhou said that being an AIM-listed company made it more transparent than many of its peers.

Also a survey of AIM-quoted Chinese stocks by Seymour Pierce showed that China Shoto’s largest shareholder, its president Y Shanji, holds a smaller stake in the company than the largest shareholders in other AIM-quoted Chinese companies. Y Shanji, who also founded the company, owns 47 per cent of its shares. Weigang Zhou said that Shanji did not have any other businesses.

According to its last available factsheet, the New Star Select Opportunities fund had 2.89 per cent of its assets invested in China Shoto, it fourth largest investment. The holding in China Shoto was made while the fund was being managed by Patrick Evershed who left New Star last year, and has recently joined Hargreave Hale. The New Star Select Opportunities fund is now managed by Trevor Green.

This comment from Hoodless Brenan in their end of week small cap summary. Personally I am buying more WCC as to me thats more undervalued now that CHNS, but anyway, I was into CHNS at 113p so plenty in the bag from earlier.

http://www.hoodlessbrennan.com/

China Shoto (CHNS, 179.5p, 41.9m) Final results to December 2008 for this Chinese producer of batteries and power supplies saw revenues increase to 183m (107.5m), pre-tax profits rise to 10.07m (5.62m) and EPS increase to 43.14p (24.45p) – very slightly short of the broker forecast of 10.5m pre-tax profits. DPS is 5p per share. As China’s largest back-up battery producer the company looks forward to 2009 with optimism, noting the boost to its local market place by the award of 3G mobile phone licenses. Forecasts are for 11.5m pre-tax and EPS of
43.5p with a held dividend, putting the company on a prospective PER of just 4.1 times – too cheap for such a well established business. BUY up to 270p level.

Up another 5% and now over 200p mid price.

I do not hold CHNS anymore, moved it all over into WCC as I think WCC is the best Chinese stock on the AIM, and so lowly rated it should multibag in 2 years.

Write up from the CHNS AGM, looks like earnings are forecast to fall from 43p to 40p.

http://www.fool.co.uk/news/investing/company-comment/2009/06/17/alices-agms-china-shoto.aspx

.

Did the same this morning, have held since 06 and not done a lot for me bar divvy, so got 193p, + div. little profit better than none.

Yep. Looks like tax is going to increase and their currency gains diminish now with sterling going upwards.

Markets will see a fall in earnings from 43p to 40p and it could be sold off hard then.

Shame, nice business but markets and sentiment are just that. I am much happier having put all this money into WCC earlier, that one has potential to grow wildly in the coming 2 years.

Good luck Prosolenes.

The EPS forecast for this year is 47p EPS (43p EPS last year) and is unchanged - I've spoken to the broker today. The AGM attendee's note was incorrect.

At the current 186p the P/E is just 3.95, and CHNS still trades at less than tangible NAV with half its m/cap in cash.

The average rate for sterling last year against the yuan was 12.86. Even though the pound has risen slightly recently, at the current rate of 11.1 CHNS will continue to benefit strongly from exchanger rates this year.

Given:

- lower raw material prices
- favourable exchange rate movements
- lower interest payable on borrowings
- the explosion in Chinese and Indian telecoms

I'm hopeful that 47p EPS is a conservative estimate.

The broker also indicated there should be an H1 trading statement - this could happen in the next month or so given the 30/6 period end.

We can also be confident that trading to date this year is at least in line with expectations since no update was given at the AGM.

There is what I believe is EXTREMELY important news just up on the CHNS web site.

China Mobile have now announced the results of their procurement of back-up batteries for the near future.

CHNS's subsidiary, Jiangsu Shuangdeng, are easily the biggest supplier of all the companies in every category shown. This should secure a large portion of CHNS' sales for a while to come imho.

http://translate.google.com/translate?hl=en&sl=zh-CN&tl=en&u=http%3A%2F%2Fwww.shuangdeng.com.cn

" WIIG successful dual 12V Battery China Mobile Products

中国移动2009年UPS后备电池（12V）产品集中采购工作于近期完成，中国移动对外公布了本次采购结果及各厂商份额分配情况公布如下（排名不分先后）：

China Mobile in 2009 UPS back-up battery (12V) products focused on the completion of procurement in the near future, China Mobile announced the results of the procurement and distribution companies announced share is as follows (in alphabetical order):

1、12V/65Ah产品：江苏双登集团有限公司（32.26%）、浙江卧龙灯塔电源有限公司（25.81%）、深圳市今星光实业有限公司（22.58%）、广东中商国通电子有限公司（19.35%）等4个厂家； 1,12 V/65Ah Products: Jiangsu Double Tang Holdings Limited (32.26%), Zhejiang Wolong Lighthouse Power Co., Ltd. (25.81%), Shenzhen City Industrial Co., Ltd. today Starlight (22.58%), Guangdong in the state Electronic Co., Ltd. ( 19.35%) and other four manufacturers;

2、12V/100Ah产品：江苏双登集团有限公司（38.89%）、深圳市今星光实业有限公司（31.11%）、山东圣阳电源股份有限公司（8.33%）、浙江卧龙灯塔电源有限公司（6.67%）、广东中商国通电子有限公司（5.83%）、艾诺斯（中国）华达电源系统有限公司（5.00%）、北京南都昊诚电源设备有限责任公司（4.17%）等7个厂家； 2,12 V/100Ah Products: Jiangsu Double Tang Holdings Limited (38.89%), Shenzhen City Industrial Co., Ltd. today Starlight (31.11%), Shandong San Yang Power Co., Ltd. (8.33%), Power Co., Ltd. Zhejiang Wolong Lighthouse (6.67 %), Guangdong in the state Electronic Co., Ltd. (5.83%), EnerSys (China) Huada Power System Co., Ltd. (5.00%), Cheng Hao Beijing has the Southern Power Equipment Co., Ltd. (4.17%) and other seven manufacturers ;

3、12V/150Ah产品：江苏双登集团有限公司（27.78%）、深圳市今星光实业有限公司（22.22%）、浙江卧龙灯塔电源有限公司（19.44%）、山东圣阳电源股份有限公司（16.67%）、广东中商国通电子有限公司（13.89%）等5个厂家； 3,12 V/150Ah Products: Jiangsu Double Tang Holdings Limited (27.78%), Shenzhen City Industrial Co., Ltd. today Starlight (22.22%), Zhejiang Wolong Lighthouse Power Co., Ltd. (19.44%), Shandong San Yang Power Co., Ltd. (16.67 %), Guangdong in the state Electronic Co., Ltd. (13.89%) and other manufacturers 5;

4、12V/200Ah产品：江苏双登集团有限公司（38.89%）、浙江卧龙灯塔电源有限公司（31.11%）、深圳市今星光实业有限公司（9.68%）、艾诺斯（中国）华达电源系统有限公司（7.74%）、广东中商国通电子有限公司（6.77%）、山东圣阳电源股份有限公司（5.81%）等6个厂家。 4,12 V/200Ah Products: Jiangsu Double Tang Holdings Limited (38.89%), Zhejiang Wolong Lighthouse Power Co., Ltd. (31.11%), Shenzhen City Industrial Co., Ltd. Star today (9.68%), EnerSys (China) Huada Power Systems Limited (7.74%), Guangdong in the state Electronic Co., Ltd. (6.77%), Shandong San Yang Power Co., Ltd. (5.81%) and other six manufacturers."

Sold out of this one when it first went through 200p some months back, and it was a good move as I have trebled that money again in recent months.

As its now back to over 200p and results are soon its worth pointing out to watch for cash flow at the interims.

There could be significant outflow of cash into working cap, and the level of this will be a key thing to look for.

The headlines will be good, but the devil may be in the detail of the cash flow statement, so keep an eye out for that.

rivaldo look, its now even cheaper ;)

There are rumours doing the rounds of cash problems, perhaps thats why the Chairman left and dumped his entire holding.

Wonder if CHNS will do like GNG, sudden big discount placing to get some money.

Its the trouble with these types of companies, its the easiest way they can get orders is by offering the product free up front and "pay when you want later" terms. Its an easy way to ramp up revenues, its also an easy way to ruin when it all goes wrong.

Lets guess, they need to "strengthen the balance sheet" to "pursue large orders" - which means they have run out of cash and need some more working cap more times than not.

Interesting article :

http://www.fool.co.uk/news/investing/investing-strategy/2009/11/03/china-and-the-bigger-fool-theory.aspx

.

One to avoid for now ? Interesting write up.

http://www.stockopedia.co.uk/article/view/34120


.

The company openly says cash is tight and so cuts a small interim dividend to save cash, yet the figures released show cash at 32m (but with borrowings up to record levels).

The Chairman throws the towel in, dumps all his stock, at the same time.

The company has committed to a recycling plant thats going to severely use up the cash.

Whilst H2 is always cash positive for CHNS, in general H1 severely uses cash in working cap (or you can fund it by bumping up your borrowings from the banks).


With cash being used to fund this recycling plant, and with the company openly saying cash is tight, would it not, looking forward, suggest to people that whilst the Finals might look nice, interim figures in 2010 could be rather "cash tight". Could it be that the Chairman did not agree with the recycling plant as it will necessitate more cash being found by the company ? Will it mean that come year prelim figures, the company will be looking for placing monies in order to boost the cash position ?

Was the point of the recent city presentations a first step for the begging bowl to be put out soon, in order to raise funds to ensure that come H1 2010 they are not going to be struggling for cash and with bank borrowings already high could it be they will be forced into a sudden placing to boost the balances, if they cannot secure funding in the interim period ?

2008 and 2009 was a period of massive expansion for telecoms with new base stations going in on a massive scale, however, the outlook for 2010 is less new stations and lots more simple upgrades to existing. That would explain CHNS trying to move into new markets as the outlook for base station batteries is weakening along with increased competition.

I am unsure why the Chairman moved on so suddenly and dumped all his shares, but IMO he could have seen that the recycling plant is going to push cash to the limit and might mean a placing to raise funds. On top of that the base station battery outlook is weakening when you look to 2010 and 2011.

Therefore, as I am sure many have learnt, do not get fooled by people spouting EPS figures.

Cash (and committed cash spend) and outlook are key, not the EPS figures.

I have warned about placing worries for some time, nice to see a certain CHNS bull finally admitting that it may be necessary.

However, in the present market, the wolves will drive the price down if they get any sniff its going to be attempted.

To be expected.Could be a long period of negative growth now...not good at all. With the RMB to get even more appreciation it will cut back further on their export business and margins.


China Shoto plc
AGM Statement
RNS Number : 9760N
China Shoto plc
22 June 2010

AGM Statement & Trading Update

China Shoto plc, a leading Chinese battery producer and the largest supplier of back-up battery to China's telecommunication operators, will hold the Company's Annual General Meeting at 10.00 am today.

Yang Shanji, Executive Chairman, will make the following statement at the meeting:

Current Trading

In the Preliminary results for the period ended 31 December 2009 announced on 28 April 2010, the Company stated that they expected that China's major telecoms operators would shift their investment priorities from infrastructure construction to product marketing and development.

The Chinese government has increased greater control over low carbon, energy reduction and environmental protection. Accordingly, China's major telecom operators have reduced investment in infrastructure projects. Lower levels of investment have reduced domestic demand for back up battery products.

The Board had hoped that a recovery of global markets and the development of overseas, export opportunities would mitigate the fall in domestic demand. The Company remains committed to developing international sales, and it has achieved higher sales of certain product lines in difficult conditions. Nevertheless, the Company has experienced significant competition in overseas markets and global markets remain fragile. Further, exports and margins have become less competitive as the Renminbihas strengthened.

As a result of these factors, during the first five months of the 2010 financial year, revenue and profitability has fallen by approximately 15 per cent. when compared against the same period in the previous financial year.


Outlook

The Board is confident of remaining the largest back up battery manufacturer in China. It is well placed with its large R&D facilities providing improved products. The Company continues to expand its environmental activities and is progressing with its major lead recycling programme which will position the Company favourably. The Board remains committed to developing its strategy of developing international sales. A further update on trading, will be provided as appropriate.

Bad news comes in three's normally, and todays statement suggests to me this is just the start, there is more bad news to come.........

Brave people buying today, this could easily fall to 120p levels with more bad news to come.

Perhaps 40p EPS this year (down from 98p) and with a company thats gone ex-growth then 3 times earnings is fine, pending further bad news.........

One to avoid many will say.

Signs of a slowdown in China and increased competition overseas the valuation looks cheap and seemingly for good reason!

China Shoto surely now risks being viewed as an old style polluter, having to spend increasing amounts on environmental compliance, operating in what could unfortunately turn out to become a low growth market. The strengthening currency could also make life increasingly hard in overseas markets hardly the high growth offering investors seek from emerging markets.

www.investorschampion.com

CHNS is still too overvalued at 200p... 100p would be a fair value.

185p now... continuing downwards.

Looks like it missed by a mile and the business model with a focus on telcos needs revision!

Back to electric bicycles - the original focus on IPO
Commentary on www.investorschampion.com