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.

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 !

Joe Say, its only on the "recommended supplier list".

Which is a list of many companies that can be used for supply. This is a major difference to what some people try to portray.

CHNS is, well, ever increasing their debt levels, and cash flow negative from operations. They will get hit in 2009 imv with the strengthening Yuan on their exports, and their 2008 figures, whilst good, were only, imv, boosted up by Chinese Telecoms spending in the rush before the Olympics.

All in all, its very highly illiquid, and when you try to buy the price shoots up, when you try to sell the price collapses fast.

If thats a good "investment", well.........say no more.

From the last Annual Report (which excludes developments since - selected snippets only)

Key customers

Back up battery business: China Mobile; China Unicom; China
Netcom; China Telecom; China Tietong; and India Reliance.

PTB business: Beijing Xinri Electric Vehicle Co. Ltd. ("Beijing
Xinri"); Tianjin Taimei Electric Vehicle Co. Ltd. ("Tianjin Taimei");
Tianjin Taifeng Xiaoniao Electric Vehicle Co. Ltd. ("Tianjin
Taifeng"); Jiangsu Yadea Science and Technology Development
Co. Ltd (Jiangsu Yadea).

China Shoto has become the largest back up lead acid battery
producer in China, and we intend to become the largest lead
acid battery producer in Asia.

Last results : http://fool.uk-wire.com/cgi-bin/articles/200809171359336557D.html

Notice :

Net cash generated from operations is in brackets (Negative) - they are therefore cash flow negative from operations.

Cash generated from/(used in) operations (3,261)


Also look at :

"Bank borrowings" and "Trade and other payables"

Rising upwards.........

Proshorter - you can read accounts so lets be honest about them.

Net cash down 4,412 because

div paid 1,050
int paid 1,106
property bought 1,004
short term investment bought 2,832

Not surprising really - as I think you know, so why distort ?

Errr.... trying looking at "NET CASH GENERATED (USED IN) OPERATIONS"

This is the line that corresponds to business performance.

There are other lines which deal with other items, but the one I look at is the operations one, which shows if they are making money.....or are making paper profits and their cash is getting used up generating the revenues (eg, cash flow negative from operations).

Great to see CHNS taking off prior to results - only two or three weeks to go now.

Despite the surge it's still on a P/E of barely 3, with a 5p divi too, plus almost assured growth prospects for a number of years to come as I've posted before.

Nice article here from T.M.F - the title says it all :o))

Good mentions for my Asian faves GNG and CHNS (doesn't mention RCG, but you can't win 'em all!):

http://www.fool.co.uk/news/investing/company-comment/2009/03/24/stocks-so-cheap-theyre-nearly-giving-em-away.aspx

"Stocks So Cheap They're Nearly Giving 'em Away
By Steve Scott

Published in Company Comment on 24 March 2009

"China Shoto (LSE: CHNS) looks like another successful and growing business. The Company manufactures and supplies batteries, mainly to the Chinese market. Its recent trading statement revealed that profits in 2008 will be ahead of market expectations and 50% higher than in 2007. There is some bank debt although it looks comfortably manageable at only 23% of the value of total tangible assets. So why does the market value China Shoto at only 2.9 times 2008 earnings, especially when there is a forecast dividend yield of 4.3% on offer?

It's not alone amongst Chinese based companies in that respect. Fast growing and debt free software provider Geong International (LSE: GNG) may be valued at a more realistic 5.2 times expected current year earnings, however this would fall to only 3.9 times earnings if they meet next year's forecast by broker, Seymour Pierce.

Clearly investors are very sceptical about the sustainability and quality of earnings from Chinese companies. That's not helped by high profile disappointments such as Bodisen Biotech (LSE: BODI). But if the market is wrong, then there is clearly huge upside in these shares."

The price continues to advance, now up to 155p. Still only on a likely historic P/E of 3.7 or maybe less based on the forecast 41.5p EPS for 2008.

News dated today - CHNS' major customer in India, Reliance Comms is stepping on the gas for its expansion plans. It's spending around 120m in one state alone (Karnataka) according to this article!

The Chinese and Indian telecom booms appear so far to be unaffected by and independent of the global downturn - the respective governments obviously see it as extremely important:

http://www.business-standard.com/india/news/reliance-aircel-idea-to-slug-it-outrs-3000-cr/353436/

"While economic recession may have bitten new investments hard, the telecom sector looks set to witness a flurry of activity as it expands into hitherto uncharted territory. Three GSM mobile services providers are hitting the ground running in their foray into Karnataka. These companies are looking to pump in close to Rs 3,000 crore to establish their presence in the Karnataka market, presently growing at a blistering pace.

Reliance Communications, Aircel and Idea from the Aditya Birla Group are set to take on established players Airtel, Vodafone and BSNL in a market which grew at 60 per cent last year with a total subscriber base of 21 million. Bharti Airtel currently leads the pack with close to 10 million subscribers in Karnataka.

However, further transformation lies ahead for the market with Reliance Communication rolling up its sleeves to go all out in the state. Reliance is set to invest around Rs 800 crore to establish its state-wide network. The company already has a strong footprint in the CDMA segment in Karnataka with around 4 million subscribers; and is set to replicate its coverage with the GSM platform as well, being the only operator to offer both services.

According to Reliance Communications, Karnataka is part of its largest launch worldwide the Reliance network covers over 2,000 towns and 18,000 villages in India. With the launch of its enhanced GSM service, Reliance customers will now be able to use a range of over 250 handsets and devices. Reliance customers can now roam on more networks globally in over 200 countries offering a wider choice to customers in India, a source in the company noted.

The company, with a customer base of over 60 million, including over 1.7 million individual overseas retail customers, ranks among the Top 10 Telecom companies in the world by number of customers in a single country."