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.

Results out - Negative Cash flow from operations and bank borrowing up !!!


Bank borrowings up to 23,284 in 2007, from 12,236 in 2006

Inventories up to 19,426 in 2007, from 10,122 in 2006

Trade and other receivables up to 31,479 in 2007 from 22,233 in 2006


Giving :


Net cash flows from operating activities to negative (3,026) in 2007, from positive 1,606 in 2006.



Cash Flow
The considerable increase in sales volume in 2007 resulted in the need for
greater working capital. Although debtor days reduced by 6 days from that of
2006, cash flow from operating activities in 2007 was still negative, at 3.03
million. The Group covered its deficit in operating cash flows by increased bank
borrowings. Interest paid was 1.46 million (2006: 822,000) and tax payments
were 976,000 (2006: 607,000).

The trouble is they really suffer with negative cash flow in the first half of every year, getting some of that money back into the system in the second half.

I would imagine that the coming interims will be pretty horrific in terms of increased borrowings, increased inventories, increased trade receivables and negative cash flow from operations - so get ready for a stinker in those terms comes interims in the Autumn imv.

If you look, the historic weighting is towards H1 for massive cash drain.

In 2006 they turned a 3m negative cash flow from operations at interims into a 1.6m positive come prelims.

In 2007 just reported they turned a 10m negative into a 3m negative at prelims just reported.


It would therefore suggest the business is growing at much faster than cash can handle........and so working cap will be hard hit in 2008........and likely result in a placing for cash for working cap imv.

They are massively in debt, and operationally now cash flow negative for the full year.

The onus is on the need for more working cap, and soon imv.

New article, click HERE

Nice news today of an Olympics contract win (see below).

My overall take on CHNS at present on a current year P/E of 4.9:

- recent outlook statements have been very bullish
- lead, which makes up 70% of CHNS' raw material cost, has plummeted in price in H1'08 to levels not seen for 18 months
- CHNS' telecoms markets are booming and expected to accelerate due to 3G
- CHNS' electric bike markets are booming
- the yuan's currency appreciation is in CHNS' favour re helping a higher EPS
- CHNS have already begun selling into solar power and wind energy markets
- they're also developing electric car batteries
- gearing is low at 40% and historic interest cover fine

The facts are in CHNS' favour at a 129.5p share price with 26.6p EPS forecast for this year. If they can continue to improve cash flow etc as per H2'07 and come through with good results again as per their track record, then CHNS should continue to thrive.

Here's the Olympics news:

http://www.chinashoto.com/news/detail.asp?ID=168&tID=&tName=

"Olympic win paves the way to green energy market
July 9

AIM-quoted China Shoto, China's largest producer of back-up lead acid batteries, has successfully initiated its planned move into the renewables sector with the delivery of 40 sets of super-capacitors for solar-energy street lighting in the Beijing Olympic Village.

The company, which is already established as a leading supplier of power batteries and back-up batteries to China's booming telecoms market, believes completion of the Olympic contract will pave the way to future sales into the green energy economy.

The super-capacitors were manufactured by China Shoto's subsidiary, Nanjing Shuangdeng Sci &Tech Academy in Jiangsu Province, following a tendering process involving two other Chinese competitors. The capacitors have now been installed ahead of next month's Olympic Games to power the Olympic Village solar street lamps.

China Shoto's Executive Chairman Cao Guifa said: "Our success in this bid follows development work to produce capacitors that combined low current output with high storage capacity. We are pleased both to be contributing to the environmental objectives of the 2008 Olympics and to have developed a product we believe opens new markets for China Shoto."

China is already responsible for a third of the world's solar cell production, and by 2010, hopes to be generating and consuming about 300 megawatts of solar energy, which would position it among the world leaders in the field.

Last May, China Shoto reported a 2007 pre-tax profits increase of 58.7% to 7.15m on sales up 81%, to 107.5 million. It said it planned a steady advance into renewable energy industries to become a provider of environmentally-friendly energy systems."

Sounds a bit "hairy fairy" to me. If their core business was so strong - like they said in the past, then why mess about with this green nonsense, which will obviously cost them money as opposed to make money ?

The thing to watch for CHNS is if, come interims, their debt levels rise YET AGAIN, and also see if they are YET AGAIN, net cash flow NEGATIVE from operations.

Those are key indicators...........

Interesting and reassuring bearish views on the trend in the price of lead from Goldman Sachs, especially given the recent collapse in price. They say the next two years will see a continued downtrend, but that even after that when the price recovers, the highest point in 2012 would still only be just over where the price is now!

Has to be good news for CHNS - stability and relatively low prices comprising 70% of their input costs over the next 5 years will help them enormously:

http://www.livenews.com.au/Articles/2008/07/07/Commodities_Lead_Slumps_As_Oil_Rises

"Three month lead closed $US42 lower, or 2.6% at $US1,568 a tonne Friday in London. The metal has lost 39% so far this year, making it the biggest loser on the LME.

Goldman Sachs JBWere issued a bearish report midweek on lead, arguing that supply will outpace demand by 130,000 tonnes this year.

That's an estimated 29% more than all the lead held in warehouses monitored by the LME.

Lead stocks have more than doubled this year, to 100,675 tonnes.

Goldman Sachs said: "In the short-term (2008 and 2009), we see the global market remaining in surplus and, based on our expectations of mounting inventories and on our understanding of current industry costs, we expect further downside for prices over the next two years. We have made a reality downgrade for our 2008 lead price assumption based on recent/current trading levels; our 2009 forecast is unchanged.

"But in 2010 we envisage the market moving back to balance, and then into significant deficit in 2011 and 2012. We have therefore raised our price forecasts for the final two years of our forecast period as follows (previous estimates in brackets): - 2008: 99c/lb (105c/lb)- 2009: 70c/lb (unchanged)- 2010: 50c/lb (unchanged)- 2011: 70c/lb (45c/lb)- 2012: 90c/lb (45c/lb)"

I thought they were now fully hedged on lead, and it does not matter up or down it makes no difference with the hedge they have.............


?

CHNS said the following - very different from a "hedge" on the price of lead:

"alleviated pressure arising from the increase in the raw material price by passing it on to the customer, by agreement."

Nice bit of buying this afternoon from nowhere.

Last year's interims were on 18th September. Since CHNS issued a bullish AGM statement on 22nd May (only a month before the period end) we can be pretty confident that the H1 results should be pleasing.

Its the normal "hype" imv, they post an update bullish on a couple of things.

Then they will likely smash investors with bad news on rising debts and being net cash flow negative from operations at interims.

Then BB's will be full of people who go ramped into the hype of "revenue and paper profit"........asking why the SP is tumbling down as those in the know bail out after seeing frightening things on the balance sheet.

This is perhaps more likely ? is it not ?

All IMO, DYOR !!

.

pp take your own advice and stop ramping shares like AST and LEAD!

Would be a bad thing for many many companies in China, ramping up costs, ramping up wage increase demands etc...


http://in.reuters.com/article/asiaCompanyAndMarkets/idINPEK34395420080723

China parliament warns on inflation, export slowdown

Wed Jul 23, 2008 10:24am

BEIJING, July 23 (Reuters) - China's inflation is in danger of worsening and the government should liberalise pricing of oil and power to reduce the risks, the country's parliament said in a report published on Wednesday.

China should adjust policies for exports of textiles and toys, to avoid any slump in the export sector, according to the report by the financial committee of National People's Congress, which was published on the Xinhua news agency website.

"The national economy is moving from the stage of 'high growth and low inflation' to a state of 'high growth and high inflation' or even 'low growth, high inflation'," the report said.

The report was written at least a week ago, since it only included economic figures of the first five months instead of the first-half figures that were released on Thursday.

The report did not specify a timeframe for the proposed policy changes, but it noted the Chinese government's current policy of keeping some prices deliberately low through price caps would only worsen inflation in the long-term.

"It is just ineffective to control inflation through price controls," it said.

The report cited Venezuela as an example to support its view: "Venezuela, an oil producing country, has kept its oil prices artificially low, but the country's inflation was still 20 percent."

Liberalising oil and electricity pricing, on the contrary, can be helpful to curb inflation because it eases demand, even though such measures can push up short-term inflation.

On the export sector, the report said China's policies aimed at curbing exports of polluting products and balancing trade were badly timed because they coincided with the economic slowdown in the United States and the EU
"We suggest to pause the launch of any new policies targeted at the processing trade to maintain stable policies and to give exporters breathing time in order to avoid big impacts on the export sector," it said.

It added that a tight monetary policy and prudent fiscal policy should be maintained, but advocated "flexibility" when carrying out the policies. (Reporting by Zhou Xin; Editing by Ken Wills)

Nice to see the price up for a fourth successive day. On tiny volumes admittedly today, but then again that's perhaps a sign of a lack of stock around, which might result in interesting action with further good news.

Perhaps an overview of the company is useful.....

- recent outlook statements have been very bullish
- lead, which makes up 70% of CHNS' raw material cost, has plummeted in price
- CHNS' tangible NAV at 28m is 4m more than their m/cap!
- CHNS' telecoms markets are booming and expected to accelerate due to 3G
- CHNS' electric bike markets are booming
- the yuan's currency appreciation is in CHNS' favour re helping a higher EPS
- CHNS have already begun selling into solar power and wind energy markets
- CHNS have just won a solar energy contract for the Olympic Village
- they're also developing electric car batteries
- gearing is low and historic interest cover fine

The facts are in CHNS' favour on a P/E of only 4.6. CHNS are a fast-growing company in a slow-paying payment culture, so working capital and cash flow may continue to be poor, but with low gearing, undrawn facilities and input prices plummeting CHNS should be able to continue to thrive given all of the above.

If they can continue to address cash flow etc following the 7.9m operating cash inflow in the last H2, and come through with the usual good results as per their track record, then CHNS should have a full deck of positive cards to play with.

Its coming up to results, its also late summer, this is when the normal pump and dump crew start to buy stocks (they buy now ready to sell into any results spikes in late August through end September). Therefore, expect to see "old faces" start to return to threads as they start to pick up their little holding now, ahead of trying to ramp the bottom off of it into results time. This happens all over AIM, especially on the stocks where a good ramp could be got going (say China stocks - low PE's - thats a great ramp to attempt).

So, as summer draws to a close watch trading volumes on AIM tiddlers, expect some buying to be going on, and then the threads start to get busier, old names re-appear as do new names start to appear.

All telling you how cheap this stock is and what a bargain.

But do not forget, these are in the most just trying to ramp the price up and will disappear before or just after results are out in the Autumn

Its time for Rampton........unlimited attempted ramping to create as many AIM spikes as possible into results season - that they can sell into whilst posting on BB's how wonderful the results will be/have been

My opinion if anyone wants it, LOL :)

If anyone is thinking of buying AIM stocks ahead of results, do it now, do it until end July, then stop.

Don't be the ones caught buying the results spike and holding the baby as the SP crashes after results - beat the rampers at their own game, and be the ones selling on the spike ahead of them getting out for their small gains.

Price spikes might be subdued this year, owing to a risk of bad economic news making markets tumble, so the buying should be lower and less risk taken - they do not want to be caught with their pants down if the tide goes out.

More Olympics contract news, from Jiangsu Shuangdeng (the CHNS subsidiary):

http://translate.google.com/translate?u=http%3A%2F%2Fwww.shuangdeng.com.cn%2Fnews%2Fnews.asp&langpair=zh%7Cen&hl=en&ie=UTF8

It seems to me per this article that CHNS have won an awful lot of business at the Beijing Olympics, under three categories as follows:

- "green products used in the Olympic Village supercapacitor solar street lighting projects"

- China Mobile's GSM network build in the Everest region

- providing green energy and batteries "for the Olympic Games, the nest, water cubic meters, Olympic figure buildings, Wukesong Sports Centre, Fengtai Softball Hall, the Olympic Village underground garage, T3D Capital Airport Terminal Building, Beijing's new South Station, the Capital Gymnasium, and other venues"

CHNS still trade at well under their 28m tangible NAV!

Another reason I like this company is that all of its sectors are largely free of worries about the world economy as a whole etc:

- 3G telecoms expansion is government and industry-driven
- electric bike sales are accelerated by cost and green factors
- railways expansion is government-driven
- solar and wind power are government-driven and have "green" momentum
- nuclear power is becoming a must-have option

Thus growth in forward sales is visible and recurring.

CHNS are the market leader in China, yet trade on a P/E of only 5 and a laughable PSR of 0.2 or so, the only caveat being that gearing (at only 40%) and interest cover remain low/high respectively and thus manageable given the slow Chinese payment culture and the fast growth.

But its very likely that they will turn in at interims a performance that is "net cash generated negative from operations".

Thats a key thing..........keep an eye for that.

The Yuan is up to almost 12.8 against the pound! Last year's average was around 15 from memory, so this year's EPS will effectively gain around 10%-15% on last year's in currency terms alone averaged out I'd have thought.

If CHNS merely meet the 26.6p EPS forecast, hopefully currency effects alone
will push the EPS up to say 29p-30p EPS this year.

In addition, lead prices (which make up 70% of CHNS' input costs) are diving again:

http://business.timesonline.co.uk/tol/business/economics/article4517485.ece

"lead prices slipped to their lowest for five weeks.

Prices for lead staged some of the biggest falls. The cost of lead for delivery in three months plunged by 9.6 per cent to $1,740 (916) a tonne, its lowest since July 9.

From the FT - just look at the huge amounts to be spent by CHNS' main customers (Unicom, China Mobile etc) on telecoms/3G infrastructure. These are surely guaranteed increased revenue streams for CHNS in this and future years imho:

http://www.ft.com/cms/s/0/dcad6aaa-6959-11dd-91bd-0000779fd18c.html

"Unicom lays foundations for 3G services
By Justine Lau in Hong Kong

Published: August 13 2008 18:16 | Last updated: August 13 2008 18:16

China Unicom plans to spend up to Rmb100bn ($14.5bn) in the next two years to improve its network as the countrys second-largest wireless operator prepares to introduce third-generation services.

And further news from today's FT about China Southern Railways raising loads of money in a successful IPO. As with the telecoms sector, the huge amounts to be spent modernising China's railways are (again) guaranteed irrespective of any market ups or downs and should be good news for CHNS.

Just look at the amounts involved - $180 billion!!

http://www.ft.com/cms/s/0/1eb1d550-6c8c-11dd-96dc-0000779fd18c,dwp_uuid=9c33700c-4c86-11da-89df-0000779e2340.html

"Chinas present five-year plan allocates Rmb1,250bn ($180bn) of capital expenditure to railways quadruple the amount in the previous period and so far just 27 per cent of the money was spent in 2006 and 2007, according to Julius Baer, the wealth managers."

Wonder how the rampers who were pumping this from over 200p and still are trying to pump it feel.........LOL :)

In case anyone wondered I have been enjoying a superb holiday and have been away from the net a lot, apart from the occasional post on III.

I refuse now to post on A DVFN, its has got terrible in terms of abusive rampers this year, totally pathetic and not worth anything now. The good thing is of course they are all now losing money, and I really hope some of those abusive idiots lose everything in the ongoing crash.

Some of us did warn back in January that it was best to sell anything and everything, and we were ridiculed by the abusive rampers, and now it comes to pass...........LOL :)

With what is going on, you can be sure that Asia will be into severe problems come 2nd half 2009, going into 2010.............not a time to be loaded up with "China" exposure stocks..........now people can see why everyone has been selling these "bargains" and not buying them.

The ultimate sign was China dropping interest rates, in the face of inflation, that was a real admission that they are now heading into severe problems :) ho ho ho.

Couple of posts from the SC site.


Richard Gill Reged: 28/06/07
Posts: 495
Re: China Shoto [Re: JamesFaulkner]
#429812 - 18/09/08 08:00 AM

Fuuny how they dont mention the negative cashflow being the house broker and all


PapalPower Reged: 17/10/04
Posts: 4889
Re: China Shoto [Re: Richard Gill]
#432230 - 14/10/08 12:08 AM

Warnings were given that this company seems set on increasing debt and being operating cash flow negative.

In this climate, to go about a process of gaining revenue by offering "deffered payment", in effect ramping up your working cap to get revenues, its in my opinion very stupid.

Revenue is vanity, real profits and generating cash is sanity.

This company increases revenues and paper profits, and then bumps up debt and working cap all the time to go with it.

Not a well run business at all imo, and one that could collapse when the China slowdown and banking crisis bites.

GNG warned today already of a slowdown hitting H2 figures, imagine what these Chinese companies are going to be saying when it comes to reporting 2009 H1 and H2.

The outlook on China is now darkening fast.