This share has started to rise rapidly after the trading update which was very encouraging. The company provides batteries for mobiles etc and alternative power supplies. floated at 135p-should be a good investment with results due on April 18th.

Debts Debts Debts, and the inability to be cash generative (ON A FULL YEAR BASIS, AS SOME PEOPLE LIKE TO SPOUT ABOUT ONE HALF, AND IGNORE FULL YEAR 12 MONTHS).

The Yuan getting stronger and stronger is going to keep impacting on their margins and ability to export. They may have made progress in 2008, but for 2009 orders they should suffer badly due to Yuan strength.

And given you were ignoring their mobile phone base station battery business and RAMPING their "electric bicycle one" - now the Chinese economy is crashing and people no longer buying the bikes, suddenly bikes is forgotten and its all about base station batteries.

LOL :) Slipping and sliding.

You were ramping this at over 200p on many boards and its crashed, on poor cash generation and the debts.


Why should anyone put their money into this ? Far too many better companies out there to put money into, and with far less risk attached.

To reiterate the facts, CHNS are on:

- a P/E of 2.9 or less
- a m/cap at 2/3 of net tangible asset value
- a 5% divi yield
- laughably good PSR with 130m of sales against a 23m m/cap
- excellent and fast-improving interest cover and reasonable gearing
- and outstanding future prospects given the telco spending explosion in China, India, Pakistan, Costa Rica etc.

We know that CHNS' cash flow is subject to seasonality, so last year's H2 should follow previous years' with a positive trend. More to the point, there are good reasons why CHNS' cash flow should remain good and be subject to some improvement assuming working capital is controlled:

- CHNS should be benefiting positively from a time lag effect in that they're probably now receiving cash proceeds from sales made when lead prices were high, whilst they're only having to pay lead prices which are at a 2-3 year low, at around 1/3 of previous highs
- Chinese interest rates have fallen sharply, which will obviously benefit cash flows, and energy costs will also have decreased rapidly

I'd like CHNS to report their net debt movements in the period in yuan to get a true picture, since it's obvious that stated in pounds the net picture will be distorted by the yuan's rise.

Since lead costs comprise around 70% of input costs there should be a highly beneficial impact on CHNS' cash flows and costs from the recent dramatic fall in the lead price.

There are just far too many "better" companies to put your money into IMO, than one like this with lots of Debt and an inability to be cash flow positive from operations on a full year basis.

There are also so many other companies in China making batteries, and competition is tough - people try to hype that CHNS is perhaps the only company - this is totally untrue, and many companies get the "stamp of approval" and "official supplier" to the big companies. They all have to undergo the qualification process to become "approved"

The Yuan getting stronger and stronger is going to keep impacting on their margins and ability to export. They may have made progress in 2008, but for 2009 orders they should suffer badly due to Yuan strength.

And given some were ignoring their mobile phone base station battery business and RAMPING their "electric bicycle one" - now the Chinese economy is crashing and people no longer buying the bikes, suddenly bikes is forgotten and its all about base station batteries.

Seymour Pierce brought out a rather positive note last week as follows...and it doesn't even mention the 5p+ dividend on a 102p share price.

Or that CHNS trade at only two-thirds of their tangible net asset value. Or that CHNS is the market leader in China and aiming for Asia as a whole. or that Indian, Pakistani etc telco growth should keep CHNS heavily occupied for ther next few years (let alone the electric bike market which is booming in Asia and starting to take off worldwide).

And gearing is low at just over 50%, whilst interest costs will be falling dramatically with recent rate cuts, thus benefiting profits further.

CHNS are forecast to make 8.8m pre-tax profit against a 23m m/cap!

http://www.smallcapnews.co.uk/article/Strong_telecoms_orders_underpin_profits_forecasts_for_China_Shoto/6529.aspx

"Strong telecoms orders underpin profits forecasts for China Shoto
Thursday, January 22, 2009

China Shoto, Chinas largest producer of back-up lead acid batteries, is rated a buy following the announcement of new investment plans by Chinas top mobile telecoms operators last weekend.

China Shoto supplies the countrys booming mobile telecoms industry with batteries for transmission masts. In a new note, house-broker Seymour Pierce says it believes the company has outperformed the market by 12.6% over the past 12 months, but is trading on a historic PE multiple of just 3.2.

The note adds that Chinas top mobile telecoms companies which are all China Shoto customers - are investing heavily in building 3G telecoms infrastructure.

Against this background, we are confident that the company will meet our forecasts for December 2008 and December 2009, the note says.

Pre-tax profits for 2008 are forecast at 8 million, rising to 8.8 million for 2009."

Year on year figures........have they managed to pay down debt ?

Have they managed to generate cash from operations ?

If not then a massive question mark over them.

Also, with the Yuan being so strong, their exports sales must be hurting in 2009........in terms of margins and profits.

Is it going to be more sales and revenues.............pumping the headlines, but not generation any cash in half 1 2009 yet again ?

CHNS are on:

- a P/E of 2.9 or less
- a m/cap at 2/3 of net tangible asset value
- a 5% divi yield
- laughably good PSR with 130m of sales against a 23m m/cap
- excellent and fast-improving interest cover and reasonable gearing at 53%
- and outstanding future prospects given the telco spending explosion in China, India, Pakistan, Costa Rica etc.

And of course the price of lead has fallen dramatically recently - lead comprises 70% of CHNS' input costs. This, plus the falls in energy costs and reductions in interest rates, should ensure that CHNS' cash flow continues to improve imo.

India's telco spending boom is even larger than China's, and due to CHNS' new partnership with Reliance Comms of India the company should continue to increase international sales in both India and Pakistan.

CHNS stated only last month that international sales (mainly to India) had increased from 7m in the whole of 2007 to around 35m in just the first 9 months of 2008! And this despite the strong yuan....

Here's proof this month of India's appetite for telco spending:

http://midastouch-mumbai.blogspot.com/2009/01/stock-ideas-nu-tek-india-ltd.html

"India has emerged as the largest growing telecom market in the world. Number of subscribers is expected to reach 500 million by 2010 and 650 million by 2012. Telecom regulator TRAI studies estimate the requirement of telecom towers to increase to 3,30,000 by 2010. Government too has aggressive targets. It plans to provide 200 million rural connections by 2012 (i.e rural teledensity to reach 25 percent from 8.35 percent in Dec'07). Besides targets for broadband services, 3G services and mobile TV etc indicate towards the massive telecom infrastructure that would be required."

More important questions................


Year on year figures........have they managed to pay down debt ? If business is good and margins wonderful and customer great, would think they could get out of this cycle of being unable to be cash generative from operations on a full year basis (always having a bad H1 a good H2 but overall for the year being not being able to generate cash from operations).

Constantly rising debt levels and not generating cash..........say no more.

Also, with the Yuan being so strong, their exports sales must be hurting in 2009........in terms of margins and profits, the effects of the strong Yuan will only be seen come later 2009 - in the first instance the strength will help obviously US$ translations of RMB sales, but after time it will severely hamper actual export sales, not just values of them.

Is it going to be more sales and revenues.............pumping the headlines, but not generatig any cash in half 1 2009 yet again ?

Brokers were saying "buy" at over 200p levels some time back, people have been ramping this like mad on ADFN.

The price action says it all.

Rising debts. Not generating cash on a full year basis.

And look at the dividend trend too given a 102p share price:

2006 - 3p per share
2007 - 4.5p per share
2008 - 5p per share
2009 - 6p perhaps?

With gearing at a reasonable 53%, excellent and improving interest cover, and the cash flow positives at present going CHNS' way in terms of:

- raw material prices falling precipitously
- interest rate cuts
- falling energy costs

there should be more than enough leeway imo for CHNS to continue to gain market share and new business whilst smaller competitors fall by the wayside, despite the slow Chinese payment culture.

The facts:

- a P/E of 2.9 or less
- a m/cap at 2/3 of net tangible asset value
- a 5% divi yield
- laughably good PSR with 130m of sales against a 23m m/cap
- excellent and fast-improving interest cover and reasonable gearing at 53%
- and outstanding future prospects given the telco spending explosion in China, India, Pakistan, Costa Rica etc.

We do have to look at the facts.

Loads of ADFN rampers locked into this from over 200p levels.

Its an illiquid stock, meaning you cannot buy any large amount without paying for a massive spread, and its difficult to sell as no MM wants sells, so you will struggle to sell any larger size holding for a decent price.

They are not cash generative from operations on a full year basis (they might struggle and just about do it in 2008, and maybe not)

They have just had a "Chinese Olympics" year, so their 2008 figures should be good in terms of sales, but 2009............ ???? as it goes on it should get worse.

Debts.......always going upwards........why is that ?? LOL :)

Strong Yuan, bound to hurt 2009 sales although will have provided a temporary boost to 2008 figures before the pain comes in later.

Paying a dividend whilst pushing up debt levels.......is that good business sense ?

Electric bike sales ??? Going to be going down now with China in recession (notice how the rampers were ramping this last year and not talking phones, and now they talk phones and not electric bicycles..........)

Certain broker was saying buy at well over 200p, and now its 50% of that.

All in all, its just an illiquid AIM "nasty" in most peoples views, one you cannot sell for a good price if you buy, so why bother, plenty of better trades about. Look at LLOY, up over 50% in a few days.

The Olympics year was actually a hindrance since much of China shut down for most of the summer.

Not only that, but last year saw the huge natural disasters of Sichuan, nationwide flooding, huge snowfalls etc....and despite all these factors, affecting almost half of 2008 in total, CHNS have indicated they'll beat expectations.

So 2009 should be decent by comparison.

And then of course we know that the Chinese and Indian telecoms infrastructure booms are only just beginning...

If China does go into recession, then it'll likely be electric bike sales that boom as people choose them over cars for reasons of cost, or if they downgrade from cars since they can't afford to run cars any more.

On a P/E of around 2.9 or less there shouldn't be much if any downside here imo, especially given the bullish outlook. But the upside could be huge. Or perhaps people prefer to be locked into Britain's bankrupt banks....

The momentum is building - China Mobile, Unicom and China Telecom are all CHNS clients:

http://www.intomobile.com/2009/01/26/china-plans-to-invest-more-than-585-billion-on-3g-over-next-3-years.html

"Three Chinese mobile operators China Mobile (NYSE: CHL), China Unicom and China Telecom plan to invest 400 billion yuan ($58.5 billion) over the next three years to build 3G networks.

Of that amount, China Mobile alone will spend 58.8 billion yuan to build about 60,000 TD-SCDMA base stations by the end of this year, when its coverage will serve more than 70% of all Chinese cities. Two smaller rivals, China Unicom and China Telecom, will each spend about 30 billion yuan in 2009 to develop their WCDMA and CDMA 2000 based networks, respectively.

As a result of adopting WCDMA and CDMA 2000 technologies that are widely used around the world and because of the sheer size of China Mobiles user base, China Unicom and China Telecom are expected to grow faster than China Mobile in terms of new users and sales. Still, China Mobiles network will be the best over the next 2-3 years, according to ratings agency Fitch Ratings."

Nonsense...........2008 was a massive year for CHNS with all the batteries for the Chinese systems installed before the Olympics.

Expectations should be a big jump in turnover/revenues............for 2008 but another problem year in generating substantial cash from operations.

Higher debts perhaps, and then a poor outlook for 2009 2nd half and the effects of the strong Chinese Yuan hurting exports.

Looks like an avoid IMO........far better stocks out there IMV.

What a joy to read such balanced, flowery opinions from a non-holder like Prosolenes/PapalPower - and on such a regular basis too :o))

To take such an interest in a stock he has no interest in...it's just too altruistic for words!

Right, my little experiment here is over. Time to love you and leave you until there's more news of interest, in particular a likely trading update in a month or so.

In the meantime, here's a reminder of the December update which should mean 35p+ EPS for 2008...so:

CHNS are on:

- a P/E of 2.9 or less
- a m/cap at 2/3 of net tangible asset value
- a 5% divi yield
- laughably good PSR with 130m of sales against a 23m m/cap
- excellent and fast-improving interest cover and reasonable gearing at 53%
- and outstanding future prospects given the telco spending explosion in China, India, Pakistan, Costa Rica etc.

http://www.investegate.co.uk/Article.aspx?id=20081210070019M8903

"Pre-Close Trading Update

China Shoto is pleased to announce that the strong progress previously reported for the six months ended 30 June 2008 has continued into the second half of the financial year. As a result of the continued strengthening of both domestic and international sales, the Board is confident that the results for the current year will be ahead of market expectations.

In the domestic telecoms sector, demand for the company's back-up batteries remains a key driver of the business. China Shoto has cemented its position as a market leader by remaining the largest back-up battery supplier to China Mobile, and has also successfully increased its sales to a number of other leading domestic operators.

Over the financial year China Shoto has also continued to expand into overseas markets, most notably and successfully in India where contracts with a value of US$54.92 million had been signed by the end of September 2008. While domestic sales continued to increase during the nine months ended 30
September 2008, international sales rose faster, accounting for approximately 15% of the Company's total revenues for the period, up from 6% during the 2007 financial year.

The Company has benefitted to some extent from the financial stimuli given to the Chinese economy by the Government in response to the global financial crisis. Following substantial interest rate cuts, and with falling prices of raw materials, the Company aims to take advantage of the easing of financial conditions whilst continuing vigorously to pursue its business opportunities despite
competitive product price pressures.

The Board is pleased to be able to report this positive progress, and is looking forward to developing the business further in 2009."

One can only reiterate :

2008 was a massive year for CHNS with all the batteries for the Chinese systems installed before the Olympics.

Expectations should be a big jump in turnover/revenues............for 2008 but another problem year in generating substantial cash from operations.

Higher debts perhaps, and then a poor outlook for 2009 2nd half and the effects of the strong Chinese Yuan hurting exports.

REVENUE IS VANITY - CASH PROFITS IS THE SANITY !!

Will CHNS have lots of revenues and paper earnings, but not be generating real cash again ?

Looks like an avoid IMO........far better stocks out there IMV.

RNS out today which confirms that CHNS will smash expectations and achieve at least 8.55m profit after tax for 2008 (2007 was 5.7m)....that's 36.9p EPS.

The current share price is 106p, giving a historic P/E of 2.9 and a 25m m/cap.

The share price could triple to 300p and the historic P/E would still be only 8.

I'd expect at least 40p EPS this year given:

- CHNS' order book
- favourable currency movements
- raw material and energy cost reductions comprising the vast majority of CHNS' costs
- the telco spending boom in China and India, CHNS' two main markets
- fast-reducing interest rates on CHNS' reasonable gearing of around 53%

The PSR is outstanding, with 130m forecast historic sales for 2008 against that 25m m/cap.

There's also a forecast 5p divi.

Lots more info about what CHNS do and their prospects here:

http://boards.fool.co.uk/Message.asp?mid=11354913&sort=w...

Here's today's RNS:

"Trading Update

China Shoto is pleased to announce that the results for the year ended 31 December 2008 are expected to be ahead of market expectations. The Directors expect that net profit for the year ended 31 December 2008 will increase over 50% compared with that of 2007. The Company has a sound order book and the Directors anticipate a satisfactory result for the current financial year."

Is this the same CHNS that is always increasing their debt and working cap levels ?

Is this the same CHNS that is now setting a standard for being cash flow negative from operations ?

Is this the same CHNS that will likely have to endure lower margins due to RMB strength in 2009 ?



The simple fact is, they keep pumping up their debt/working cap needs, and are cash flow negative from operations - and thats why the rating is where it is.



Revenues and paper profits are vanity, in this market cash profits is sanity.........and thats something that CHNS do not seen to be able to grasp.....it appears ??

I understand Seymour Pierce have today increased their forecasts to 41p EPS for 2008 (from 31.6p EPS), against the current 106p share price.

Even better than my expectations :o))

And 2009 increases to 43.5p EPS.

They still go for a 5p divi. And I would assume the above forecasts to be appropriately cautious given natural broker sensitivity in these times. One could hope

At 117p the historic P/E is just 2.85 with 41p EPS. The current year P/E is 2.7...

A 100% increase from here to 234p would still mean a current year P/E of only 5.4 to put things in perspective.

Since most of CHNS' turnover is in China the yuan's appreciation doesn't matter. Its exports to India have exploded over the last year as parners like Reliance Comms gear up for the billions of pounds to be spent setting up networks there - this despite the yuan's appreciation against the rupee during that period (though this is not anything like as much as against the pound).

Neither of the two recent trading updates have even bothered mentioning gearing, cash flow etc. If there were a problem in this respect CHNS would be obliged to say so under the listing rules. They have not. This is presumably because it is not an issue.

CHNS' cash flow has not been good due to the slow Chinese payment culture, but that is symptomatic of a fast-growing company. Its gearing is fine at 53% and its interest cover is excellent and fast-improving since interest rates have reduced by so much recently.

In particular CHNS have an H2 positive cash seasonality which should come through again, especially given the beneficial time lag between CHNS' receipt of debtors in H2 at high prices from early 2008 because of high input costs, and its purchasing of raw materials in late 2008 at a third of previous prices.

Prosolenes' comments have been made and addressed many times before and are all accounted for in CHNS' derisory rating imho. If CHNS were on a P/E of 12 rather than 2.7 in the current climate such comments would have more credence.

Debts debts debts...........

Rising debts and working cap.

A one off "Olypmic year" to boost 2008, and RMB strength to boost earnings in sterling terms.

Its getting ramped big time.............be careful, when the short terms start to sell, watch this fall back very fast, as its illiquid.

One wonders what your agenda is Proshorterleans - for someone so negative on this share

Why don't you post on boards of shares you fancy ?

Its a share that is highly illiquid, its well into debt, rising debt, rising working cap, its not cash generative from operations - and some people are ramping it like mad cause they got trapped in at over 200p levels.

This is the kind of illiquid dross you avoid in a bear market, so I am merely pointing this out, people can make up their own minds.

I think most will - personally have invested as this company is in a rapidly expanding market, and has contractual relationships with all of the major players present.

If you think they're bear signs then god help you when you look at the banks balance sheets !