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

Broker forecasts were 3.94p??? PP, you know the importance of a decimal point. Are you sure that's right?
G2Z:GR German Geong just dropped 30%!

So GNG might go down lower then...

Yep, that was the forecast for the prelims to be announced soon. 3.94p of earnings.

Now they say not less than 3.5p..........so a profits warning was made.

Still amazes me people on AFN are saying its just a "PR mistake" or "just a small problem".


It is not a small problem imv. It has been commented on (by me a lot as well) that GNG are pumping out news flow, even the smallest little cluster of contracts gets a press release. They seem, for some reason, to want to drive the price with as much PR and nonsense as possible imo.

What does that suggest ? Get rich quick scheme ? The underlying outlook is not as rosy as some think ? Pump it fast and dump your holdings before everyone catches on ? Get the price up for another placing soon ?

It is not the markings of a company with years and years of growth ahead, it is the markings of someone trying to be in the right place at the right time for a short period of time, and "bubble" here we go imo.

The simple fact is, they overstated their earnings and revenues in the April 2008 "ahead" statement.

WHY ?

Some reason must be behind this, and no matter how its spun from now on, I think most can appreciate the gravity of the situation, to have to release another update just before results to say "behind".

What are they up to ? What are their motives ? Can anyone believe what they say in future without always thinking back to this episode ? and perhaps another corrective statement will follow any future statement.

Still amazed at how the blinded large holders (obviously) are trying to portray this as a little mishap........its a major and very serious breach of trust to say "ahead" and then correct it weeks later to "behind" imo.


It would be very understandable to see wholesale dumping of GNG once results are out and any initial spike fades away fast.

A bit harsh PP -I fortunately sold most of mine before the fall but I have not lost confidence in this company. It has contracts with most of China's blue chip cos and is growing very rapidly, it's employees who are not well paid by our standards bought shares at 65p and Henry Tse has said he will clear up all doubts at results time on the 16th. I am involved with a co. that due to new accounting rules has to move over 2 million pounds worth of contracts into next year because work in progress but not all money received I suspect that GNG being a young company has fallen into this trap and is obliged to restate. We know the work is there and growth is rapid--I look forward to next year and feel this is a blip. They are still making good profits and doing well IMO.

what makes you think that chinese accounting rules have anything but a passing resemblance to those in the west?

reporting in sterling this time and I think? a UK based accountancy firm.

55p down 3p...GNG looking vulnerable... the graph looks like another tumble on the way.

I agree. 50p looks likely, imo

Results are going to be very interesting.

The "Pre Close" update of being "AHEAD" of expectations has not been retracted.

This is the update.

http://www.investegate.co.uk/Article.aspx?id=20080410070000P372A

10 April 2008

GEONG International Limited
("GEONG" or "the Company")

Pre-close trading update
Strong performance, ahead of market expectation

GEONG International Limited (AIM: GNG), the AIM listed, China based provider of
enterprise content management (ECM) software and solutions, is pleased to
provide a trading update for the year ended 31 March 2008.

The Board expects to report that revenue and profit before tax for the year
will be ahead of market expectations. .............

++++++++++++++++

With no retraction of the "AHEAD" statement, and with broker forecasts established at that time of

2008 PTP 1.46m
2008 EPS 3.92p


It must be therefore expected as the company have said "AHEAD" of market expectations in their "PRE CLOSE" that PTP and EPS are going to be well ahead of these figures.


Should they fail to be ahead of these forecasts that were in place at the time of the pre-close, well, it will shatter confidence in the company imo.

It will be very difficult for anyone to comprehend, imo, that with no retraction of an "ahead" statement that they could now publish results below those broker forecasts.

Therefore, total expectation must be of "ahead" results, in excess of the broker forecasts - that will please GNG holders if it is - or shatter their confidence if not, imv.

Geong announced that they will be ahead of market expectations in their Pre Close update on the 10th of April.

Broker forecasts at that time were :

2008 PTP 1.46m
2008 EPS 3.92p


So, with no retraction of that "ahead" and with no correction of expectations in any statement since, the minimum values to be expected should be 10% above the broker forecasts, that quantifies an "ahead" statement.

So in fact we must be looking for :

PTP of 1.6m
EPS of 4.3p

Come on Geong, you said ahead, you have not retracted it, or offered any guidance on the levels to be expected with reference to market expectations, apart from the earlier "ahead".......so lets see them figures.

Put a few figures together, which provide an easy reference point to investigate the GNG results once released.



Broker Forecasts in place at "AHEAD" statement in pre close update 10th April :

2008 PTP 1.46m
2008 EPS 3.92p

"AHEAD" means +10% or more of the broker forecasts.

So in fact we must be looking for minimum on Monday of :

PTP of 1.6m
EPS of 4.3p

___________________________________________________________

Therefore, figures to watch compared to Interims are :

Expected PTP = 1.6m Actual PTP = ????

Expected EPS = 4.3p Actual EPS = ????

Interim Cash level was : 2,148m Cash level now is ???? (more is good)

Net cash generated from ongoing ops : -1.4m Now is ???? (Negative means eating cash in working cap)

Trade receivables was 3,494 Now is ???? (Less is good - not eating cash)

Other receivables was 712K Now is ???? (Less is good - not eating cash)

Inventories was 173K Now is ???? (Less is good - not eating cash)



Figures are approximate, and using 1.97 exchange rate.

Links :

Pre Close update - "Ahead" not retracted - http://www.investegate.co.uk/Article.aspx?id=20080410070000P372A

Interims in US$ - http://www.investegate.co.uk/Article.aspx?id=20071122070000PCAE0


.

Well, sorry for the late response to results, busy today. Well, below below below BELOW.

Below even the standard broker forecasts. How can these people, get away with saying in the April 10th statement "Pre Close Trading Update" that they were ahead, and now put results below even what an "in line" statement would have made the market expecting.

Awful.

Inventories rising, working cap requirements rising, what now looks like a very misleading April 10th Pre Close update, cash falling....

The April 10th update saying they were ahead is, well, damn awful imo.


*****************

Broker Forecasts in place at "AHEAD" statement in pre close update 10th April :

2008 PTP 1.46m
2008 EPS 3.92p

"AHEAD" means +10% or more of the broker forecasts.

So in fact we must be looking for minimum on Monday of :

PTP of 1.6m
EPS of 4.3p

___________________________________________________________

Therefore, figures to watch compared to Interims are :

Expected PTP = 1.6m Actual PTP = 1.13m (WELL BELOW)

Expected EPS = 4.3p Actual EPS = 3.53p (WELL BELOW)

Interim Cash level was : 2,148m Cash level now is 1,996m (GOING DOWN)

Net cash generated from ongoing ops : -1.4m Now is -1.47m (Negative means eating cash in working cap)

Trade receivables was 3,494 Now is 5,363 (OH DEAR - RISING)

Other receivables was 712K Now is 761K (OH DEAR - RISING)

Inventories was 173K Now is 191K (OH DEAR - RISING)



Figures for interims are approximate, and using 1.97 exchange rate.

Links :

Pre Close update - "Ahead" not retracted - http://www.investegate.co.uk/Article.aspx?id=20080410070000P372A

Interims in US$ - http://www.investegate.co.uk/Article.aspx?id=20071122070000PCAE0

Papalpower, are you saying that Geong is doing creative accounting?

tut tut! how could you ever think such a think of a chinese company?

:o))

GNG now has an 17.8m m/cap at 56p. Against this it has 7.2m of tangible net assets, basically comprising 2m of net cash and 5.4m of blue chip trade debtors.

The EV is therefore only 10.6m, against which GNG made 1.24m adjusted PBT last year (3.7p EPS). GNG is now forecast to make 2.36m PBT this year and 3.38m PBT next year. These equate to 6.5p EPS and 9.1p EPS.

Seymour Pierce have a target price of 120p. They've assumed 15% tax this year again, which I think will again be conservative as last year GNG only paid 5% and they have a tax reduction scheme in place.

I note that the Chairman bought abother 30k of shares today at 60p.

Debtor days are very poor and trade debtors high. But there are good reasons for this - read the ADVFN thread for more - and in particular this year it seems that a company restructuring to reduce tax has led to debtors being temporarily high. Those who attended today's presentation say that GNG have reduced the year end debtors by 1m already.

The presentation attendees also note that the order book is up to 5m from 2.5m last year. Recurring income is up to 44% from 40%. GNG forecast they'll have 4.4m of net cash by the year end.

Given the defensive characteristics above, plus the director buying at 60p (today)and 65p last year, the high order book and the consistent profit growth in the past and as forecast, I don't consider a historic P/E of 15 and a current year P/E of 8.6 to be expensive.

GNG cocked up their reporting by essentially booking certain contracts as completed last year which on review were agreed to be completed in this current year. Some may hold this against them for a while, which is fair enough.

Personally I believe the fundamentals and prospects are too good to ignore.

Here's the new broker note which came out today - there's a typo as there's actually 130,000 SmartBox user seats, not 13,000:

"Sustainable delivery continues

Having grown revenues and profits by 77% and 33% respectively for
the financial year to March 2008, and forecast to grow profits by 90% in
2009 and by 43% in 2010, Geong, currently trading at 7.5x March 2009,
looks extremely attractive. March 2008 PTP of 1.24m was below our
forecast of 1.4m as revenue recognition milestone led it to defer
revenue from 2008 to 2009. We remain keen buyers with a price target
of 120p and utmost confidence in the management to deliver our
forecasts for 2009 and 2010.

In October 2007, Geong established itself by increasing its presence in
Guangzhou, Southern China, a region and area that is seeing significant
growth compared to the rest of China. Administrative costs increased from
1.1m in 2007 to 1.7m in 2008. R & D cost increased by 95% as Geong
introduced SmartExpress, the entry level product of the SmartBox product
family, designed for very small enterprises. Margins dropped from 55% to
47% as the revenue mix began to shift towards reselling of 3rd party licenses.

With 2m of net cash, Geong should expand into new markets and new
products thus significantly increasing its customer base. It currently has
relationships with over 100 blue chip companies in China who either have
used or are using its ECM product PortalAge and revenues from its top 10
PortalAge clients doubled during 2008. It has almost 13,000 licensed users
of SmartBox and SmartExpress in over 2,000 SMEs.

Geong has the capacity to generate underlying growth of 40% to 50% quite
comfortably. Recurring revenue continues to increase, 44% in 2008
compared to 40% in 2007. 2009 order book is strong and growing as
evidenced by the signing of 4 new contracts today. The management is
focused and workforce has grown from 330 a year ago to 520 at March year end.

Trading at 7.8x March 2009 Geong is extremely undervalued.

BUY."

a synopsis would have been more readable, but i happened to note "Debtor days are very poor and trade debtors high" ..... i don't want to hear the excuses ..... from running my own biz and seen others, i know that cashflow and credit control are paramount ..... perhaps the chinese can delude themselves that book debt = profit .... not until it's banked it ain't, any more than a profit on shares! ..... in fact it is a truism that any debt 90+ overdue becomes progressively harder to collect .... it is also self-apparent that Geong don't pay their bills either .... well, i guess that's no surprise iof they don't collect what is owed!

the graveyard is full of companies that were theoretically profitable but just ran out of cash .... this can happen through over-trading or under-capitalisation or, as in this case, incompetent credit control

oh dear .... not more misrepresentation surely? ...... booking certain contracts as completed last year which on review were agreed to be completed in this current year".

oh dear again ...... company running significantly less profitably .... "Margins dropped from 55% to 47%".

and you STILL want to buy these shares????

Cynic, you certainly live up to your name :o))

The debtors comment was mine, not the broker's (as you seem to indicate?).

Cash is king. So:

- it's fortunate that GNG have 2m of the stuff
- almost all its 5.4m debtors are blue chip, so GNG barely has any bad debts. The bad debt write-off has risen to just 35k from 1k last year! Thus any comment about debts over 90 days being hard to collect is just not relevant
- the high year end debtors appear to be due to a specific company restructuring, creating a new debt-collecting company entitled to collect all the debts, which apparently will bring about a lower tax charge. Attendees at the presentation say this has been completed
- as a result cash inflows post year-end are reported as healthy and debtors have reduced by 1m since then
- further, the cash position is such that those attending the presentations report that the flagged acquisition will likely be paid for from cash rather than in shares
- GNG expect to have 4.4m of cash at the year end, i.e 25% of the m/cap

As for your comment on creditors, these are tiny at 1.45m compared to trade debtors of 5.4m.

The small reduction in margins is fully explained and was flagged previously. It's not a surprise to those who've read the company's RNS's.

There are bear points to be made, the cocked-up trading statement and working capital amongst them, but it seems that GNG have addressed working capital and are currently on an institutional tour to address the former.

In particular, there are many, many bull points. It would be a treat to see some balance and a measured response to those points I've laid out in post 227.

small typo in the accounts booking orders in one year when they belong in the next.

margins .... small reduction??????? .... 55% down to 47% ..... what planet were u born on?

trade debtors ..... disgraceful credit control assuredly damages cashflow and some of that may well turn out to be bad debt in the final analysis.

pah! .... stinks of the gullible being conned by silken words from the management.