I bought some GNG recently at 18p (price now up to 26p) given:

- excellent trading update giving a current year P/E of 8 or 9 on likely 3p-3.5p EPS
- 2.6p historic EPS to 31/3/06 and a historic P/E of 10
- contract wins announced post-IPO in June 2006
- 1.9m of net assets, with 820k of cash, against a 6.8m m/cap
- results to be announced 28th November following the trading update

Here's the trading update:
http://www.investegate.co.uk/Article.aspx?id=20061031080000P4198

I gather GNG's CEO and CHairman (both superb English speakers) will be over here next week to tour the City, give press interviews etc.

GNG intended to raise $7m at IPO, but raised only 500k due to terrible matket conditions at the time in June. Despite this they've now announced that they're almost going to meet the broker's estimates as calculated on raising the full $7m.

GNG should now be on course to make around 3p-3.5p EPS this year to March'07. This leaves them on a current year P/E of only around 8 or 9.

Heres their IPO RNS from 23rd June 2006 (the Board of Directors is extremely impressive):

http://www.investegate.co.uk/Article.aspx?id=20060623081500PF52B

This is what GNG do:
GEONG has established itself as one of the market leaders in the Peoples Republic of China in providing content management solution software products and related services for large enterprises. GEONG's flagship product range, the GEONG PortalAge series, is used by the top 5 Chinese banks and 12 out of the top 20 securities firms in China. It is an enterprise server software product which combines a number of optional business solution components and customisation modules that can be used to provide individual solutions for a range of industries including those that require real-time or time critical applications such as internet banking.

Note the wording a range of industries.

In slightly more detail, GNG has a 6.8m m/cap, with 26.12m shares in issue.

GNG made $1.28m post-tax profit for the year to 31/3/06. At $1.87 that's 685k, or 2.6p EPS, for a historic P/E of just 10.

The brokers forecast on IPO was for $1.89m post-tax profit this year to 31/3/07, or around 3.7p EPS, for a P/E of just 7.

And per the pro forma in the prospectus GNG had at 30/4/06 1.9m of net assets, including 820k of cash, against the current 6.8m m/cap. Thus the continuing business making a $1.28m historic profit after tax is valued at just 4.9m.

The prospectus noted that GNG are trading in line, and there's been some excellent announcements post-IPO at the end of June to indicate that things are continuing to go well:

July : a $350k contract win with Huawei-3Com, who employ more than 4,500 people worldwide:
http://www.investegate.co.uk/Article.aspx?id=20060724074128PFD9C

October : a $500k contract win with Air China:
http://www.investegate.co.uk/Article.aspx?id=20061018071237PC25A

In the same RNS, GNG stated that their solutions "are already being used by Shanghai Airlines and China Travel International and will allow us to gain a larger share in this fast growing sector."

October : core supplier status from IBM:
http://www.investegate.co.uk/Article.aspx?id=20061018071206PB237

November : new contract win with China's Bank of Communication (one of China's "Big Four" banks):
http://www.investegate.co.uk/Article.aspx?id=20061121070205P7788

The reason for the post-IPO fall is some of the pre-IPO $300,000 loan note holders from late 2005 turning their converted stock for a quick profit, and a complete lack of PR. GNG also raised less than they hoped for on IPO because they floated just after the FTSE had dropped calamitously from 6,100 in May to 5,600 - this of course also contributed to the artificial fall in the share price post-IPO.

Note also from the prospectus that 80.16% of the shareholders, including the directors, are locked in for from 6 months to a year, so there are only 5.2m shares in free float, or around 1m worth.

On a 6.8m m/cap, a company making 1m post-tax profit could have rather a long way to go imo. DYOR etc.

Corporate website : http://www.geong.com/Site/Home/EN

Morning all - a bit of a mark-down by the MM's this morning, by the looks of things. They must be trying to shake out some stock before the results. that's the only interpretation I can give to a 15% drop in the SP on turnover of a very piffling 72k shares.

Roll on a continuation of the upwards trend on results day tomorrow!

Hi Soul,

I welcomed your comments. I wondered what might be going on. Fingers crossed for tomorrow results. Only just bought on Friday on anticipation of a contiuing sp moving north.

Mr T, thanks for your feedback. I hope I'm right; it's just my best guess, but I can't think of any other reason for such a drop given the apparent level of anticipation about the forthcoming results, and the volume traded certainly doesn't warrant the value destruction involved. This kind of thing happens with very illiquid stocks - SOLA's SP has also been all over the place recently as the MM's try to stimulate some movement.

Best of luck, etc.

Just topped up - drop seems overdone on the selling.

AFFC, I'd join you if I had any liquid - may still give it some thought.

soul traders - GNG was probably due a small pullback in share price, considering the rise in the share price of late. But even so today's pullback seemed a bit harsh, so took advantage of it.

Agreed - with the SP doubling in less than month, you could expect some kind of profit-taking. However, the timing and nature seemed all wrong - anyone who bought on the basis of the figures quoted in this thread is certainly not going to be selling now unless very overweight in the stock.

Agreed. I am not selling.

SP recovering some of the morning's losses:

GNG Bid: 28p Offer: 30p Change: -3

Well done, AFFC, looks as if you topped up at a good time.

What S.P. did you get in at Soul? wondering how potentially high these could go, are the results out yet?

I got in at about 32.25p on Friday, so you could beat that if you bought today.

Results due out tomorrow. How high they could go is anyone's guess, but see the earlier posts on this thread for some predictions.

Looks good to me, but could be risky, and of course PDYOR.

Well the shares are back to 26p which is where I came in.
Contract wins and DELOITTE'S FASTEST 50CHINA awards and they still drop, despite a cheerful set of results.
This another case of China's Griffin Mining which I sat on at 28p for 18 months until
production really took off.

Morning all,

Can't pretend I'm not a little disappointed by today's drop, but the small-cap market has been having a torrid time - almost all of my stocks are down, so GNG could only have escaped if it had turned in some really stellar results.

I'm inclined to gree with you, Peter, but I think we can also take a certain amount of comfort from the statement that GNG's revenues are heavily weighted towards the second half. Certainly they are continuning to win contracts for PortalAge and SmartBox, which only really got going in the last half of the interim financial period, also ought to start making its presence felt in the top line in due course.

Could be a bargain buy for those who like a bit of risk. I'm holding and watching.

All IMO, fingers crossed etc.

Hi SOUL

I totally agree with you Soul. Almost all of my stocks look sick today.
I am in for the long term but somewhat disappointed based on the results and short term potential having bought in at 31; only slightly less than you.

Morning, Mr. Turbot.

I am wondering what the effect of a weakening US dollar might be. May not be too bad as GNG's core market is actually China and should therefore see more revenue dollars per renminbi, but the reporting in USD and conversion to Sterling for the earnings figures could be another thing.

so current S.P. could be a bit of a bargain for 1st time purchase?

"looks forward to the future with cautious optimism"
couldn't they have skipped on the "Cautious"?

Morning folks, disappointed in the share price reaction to the results this morning, but can see 3 reasons for the fall in the share price,
1: Traders taking profits.
2: Down day on the markets, Chinese stocks in particular have taken a hit.
3: At first glance EPS of 1c (US) looks disappointing, so a few investors may have took fright and sold, without realising that earnings are heavily weighted to the second half of the financial year and in fact they have started this period strongly (as they have themselves stated this morning, under Trading Outlook within the results).


In fact EPS would have been higher if it was not for the one of costs of the AIM admission etc.

Plus with the contract wins (RNS's) that have been released to-date, will help boost the second half earnings.

Then of course not forgetting the Trading Update:
"the Company expects figures for the full year to 31 March 2007 to be
only marginally below current market expectations, which were based upon a much
higher level of funding being achieved in June".
(since pre IPO expectations were for 3.7p EPS for the full year, so in my view somewhere around 3.5p EPS may be achievable for the full year).

Market cap this morning is only 7.1 @ 27p mid price, even with all those blue chip clients on their books.


So all in all, I can see more value in GNG, and intend holding for the long-term.

Dead right - good point about the profit-taking - those who have almost doubled their money will doubtless be plesed to take out some profits.

Adjusted operating profit is actually up, to $382k from $294k, if you strip out AIM admission costs and amortisation of intangibles. And that's before you account for the additional SmartBox marketing costs this H1.

But just the same performance in this year's H2 as last year, with no growth at all, would give 2.7p EPS before even stripping out AIM costs etc...

Interesting to note GNG have 2m of net assets, almost all tangible, per the Balance Sheet. Excellent asset backing for a 7.5m m/cap company.

How many 7m m/cap companies can say this about their customer list?

"During the period GEONG won a number of significant contracts with Air China,
Huawei-3COM, Motorola China, Bank of Communications, Shanghai General Motors,
Shanghai Telecom and DELL"

And GNG are diversifying - they "are now working with customers in the
transportation, power and automotive industries."

We've also now found out for the first time that GNG are selling overseas:

"We also, in September, introduced an English version of Smart BOX(TM) which has sold in beta form in Canada and Hong Kong."

And how many companies are on this low a m/cap with this much potential - and likely to make at least $1.3m PAT for the current year which ends in four months? Not many.