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

Regardless of the "house broker" trying to ramp up some interest in GNG, other things are more important to consider.


The misleading pre-close statement on the 10th of April will be very off putting to many many potential investors.

When they take in the other things too, the weakness of GNG and minimal interest is easy to understand.

The RHPS article sums things up well, here is a copy, and they say "SELL" :


http://www.fspinvest.co.uk/Investment-Services/Red-Hot-Penny-Shares.html


GEONG (GNG): After the confusion caused by Geongs two recent trading statements the actual results for the year to March 2008 have raised further questions. First of all the gross profit margin has fallen from 55% to 47%. This was attributed to a higher percentage of sales of third-party products, which carry a lower margin. I raised this matter with GEONG and was told that the percentage of third party product sales had risen from about 5% in 2006/7 to 10% in 2007/8. But even if I accept these numbers and assume that GEONG makes no profit whatsoever on its sales of third party products, the gross profit margin on its proprietary software has fallen from 58% to 52%. The second major question mark over the figures concerns the cash position. In its presentation GEONG showed an increase in its year end cash from 515,000 to 1,996,000. However if we exclude the 3.4m of new cash raised last summer it is clear that there has actually been an outflow. The reason for this is easy to spot. The amount owed to it by its customers has increased from 946,000 to 3,276,000. Again I quizzed GEONGs directors on this and was told that GEONG had decided to set up a new company through which to transact some of its business, and that some customers had withheld payment to this new company until it had received proper clearance from the authorities. If this is the case I would have thought that GEONG would have explained it in the results statement rather than hoping that nobody would notice or ask probing questions. The good news is that sales growth continues at an impressive rate. Revenues increased by 77% last year and have continued at a similar pace in the new financial year. GEONG is now looking to make an acquisition to help its software to break into new industries, and it is also looking to take the product to overseas markets. So this is a difficult one to weigh up. GEONG has a good record of growth, and one must make some allowances for the fact that priorities of Chinese companies are not necessarily the same as those of UK investors. All the same, I am not convinced that GEONG can maintain its historic profit margins, or has proper control over its cash management. So, although the share price has rallied and chairman Henry Tse has bought some shares at 60p, this one bothers me. And I would rather not be bothered. SELL

GNG target price = 120p...is this a joke of the year?

Fundamental Asset Management, a well-known fund manager (also with a web site called Investors' Champion) have recently issued an update not posted here before:

"Its all happening at Geong - Results, contract wins and Directors loading up!

20th June 2008: Results

Preliminary results for the year ended 31st March 2008 showed turnover up 77% to 7.61 million, gross profit up 51% to 3.58 million, profit before tax up 28% to 1.14 million and basic earnings per share up 12% to 3.53 pence with the last of these somewhat diluted by the impact of a share placing in June 2007 which raised 3.41 million. Cash at the year end was 2.00 million (2007: 0.52million).

Gross profit margin was 47%, down from 55% previously due to increased sales of lower margin 3rd party software products which leverage on the groups relationship with its customers. Over the course of the year Geong has also had to absorb increased R&D spend, new office openings and a big expansion in people (520 from 330).

We even got a back track from management regarding the trading statement on 10th April which initially promised that the financial results would be ahead of market expectations. Unfortunately management subsequently determined that the revenue recognition milestones from two long-term projects had not been met in full and hence that the revenue from these contracts should be recognised in the current financial year; hence the somewhat bizarre second trading update on 3rd June. Lets hope the lesson has been learned!

The funds raised in the placing have helped the Group to develop and strengthen its sales and marketing channels, including opening a new office in Guangzhou to target Southern China, and to accelerate the roll-out of its award-winning PortalAge and new SmartBox product range targeted to SMEs. At the year end SmartBox had over 130,000 licensed end users in approximately 2,000 SME its not clear what initial targets were so its hard to gauge the success of this to date.

The group has a decent footprint in China with the HQ in Beijing and branch offices in Shanghai and Guangzhou in the South. The representative office in Vancouver, Canada also promises a great deal although I see Geong as a China market play rather than a China low cost/international market model!

The cash flow surrounding its key Portal Age product remains somewhat of a worry to me with operating profit of 1.1m resulting in a net cash outflow of just over 1.4m. Accounts receivable at the year end were 5.3m on annual turnover of 7.6m. The reason given for this horrendous position was as a result of delays surrounding approvals for the new Geong Information Technology business formed for the purpose of securing tax benefits on sales in China. The delays resulted in invoicing being delayed and therefore a longer wait for the cash to arrive. Management reassured that the September interims will show a reversal of this position and a marked improvement in the cash position. The current cash position is apparently 2.5m against the 2m at year end. The groups blue chip customer base in this regard is also reassuring with the likes of Lenovo, Shanghai General Motors, Huawei, China Construction Bank key customers.

Recurring revenue now represents c44% of top line and as at the year end the order backlog for 2009 delivery was c5m. The new SmartBox product contributed c6% of the top line with estimates for this to be around 10% for 2009 and longer term targets of around 35%. This should also help improve the cash flow going forward. The bundling arrangement with IBM X-Server due to kick off in September 2008 should also help. Despite the attractive margins that could be earned in Canada with Geong working through a local partner for me Geong remains very much a China play. Look out for an acquisition in the short term to help expand the PortalAge coverage into new sectors.

Contract wins

Geong announced that it has signed four contracts with second tier banks across China worth a total of 648,000 (US$1.29million) that will be recognised in the March 2009 results.

Share purchase: Henry Hak-Yan Tse, Chairman, purchased a further 47,500 shares at a price of 60p per share and now holds 3,703,673 ordinary shares in the Company. The house broker has utmost confidence in the management to deliver against 2009 and 2010 forecasts and have set a price target of 120p that is confidence!"

But were they not having a good old fashioned hype up of this at 80p levels ?

Given its now half that - well.....say no more...........


LOL :)

Directors buying doesn't mean much these days...plenty of shares going down despite directors buying.

.

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)

PP's posted around 100 times on ADVFN alone today, let alone the other seven or eight bulletin boards he regularly posts the same mis-info on. Almost all are negative posts on Chinese companies.

Do you think he has an agenda? :o))

Whether 1.3 billion Chinese suffer a little more inflation or a few interest rate rises over the coming months is irrelevant. The fact is that China is a massive place on an upward growth path, and some companies in that environment are going to do very well indeed at some point.

As an example, I read that 97 new airports will be opening in China over the next few years. My initial thought was that this would benefit RCG, but of course GNG now have a good entree into the airline industry via Air China, who alone will surely be growing nicely over the coming years, let alone the many other airlines which will be started up or expanding.

With GNG's influence and management I'd be surprised if they're still a 13m m/cap minnow - with around 8m of tangible NAV comprising cash and debtors - for too long given the opportunity.

This is an interesting new article re JP Morgan and China - the shift towards high-end producing should hopefully benefit GNG as the Chinese market leader in ECM. The need for greater business efficiency will grow and smaller competitors may fall by the wayside or be snapped up by the likes of GNG:

http://www.citywire.co.uk/professional/-/news/other/content.aspx?ID=309076&ViewFull=True

"JP Morgan: Reappraise Chinese manufacturing
By Daniel Grote | 00:01:00 | 23 July 2008

Investors need to re-think their attitudes toward China as the Asian giants shift towards high-end export manufacturing fails to shake off its reputation as the workshop of the world, says JP Morgan.

JPMs Pinakin Patel (pictured) pointed to the impressive growth Chinese high-end manufacturing has seen over the last decade, rising from 24% in 1997 to 48% in 2007, but argued the trend was not being acknowledged by investors who still viewed it as a home for low-skilled labour.

Its the predominant view from people that should know better, said Patel, client portfolio manager on the companys Far East equity desk. Our perception of China being a low-end manufacturer just is not reality.

He added: Profit growth from high-end manufacturing is improving. China has been making this progression for some time.

Patel says that this growth is set to continue, highlighting Chinese investment in research and development that currently makes up 1.6% of GDP, but is set to rise to 2% in 2010 and 2.5% in 2020.

Within Asia, China continues to be the driver of growth. We are seeing no sign of GDP falling over the last quarter, he said.

Patel identified inflation and energy prices as some of the challenges facing the Chinese economy, but claimed that government action could see them overcome.

Inflation will start to come down from a 12-month high. Were starting to see signs of that moderating, he said, attributing the shift to better supply side policies and the recent good harvest.

Although energy prices have increased they are still low when set against non-oil producing nations, and Chinese government policies mean households are exempt from the heavy new tariffs.

Berkshire-based adviser Colin Last said that sophisticated investors were switched on to the changes China was undergoing, but that the man on the street would be wary of investing.

Last has personally invested in China, as do some of his clients, but he cautioned that it was not suited to all investors and that they should be made aware of the volatility in such a market.

However, Patel thinks that ideas about risk should be re-evaluated to avoid the misconception that developed countries posed less risk."

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.

Excellent contract wins announced this morning with a value of almost 1.5m in the current financial year. GNG have now announced 13 new contracts worth around 4m in the current financial year since the 31st March year end. The value of these announced contracts already represents circa 55% of last years total sales....and that's without adding on day-to-day sales which aren't RNS'able and also 44% recurring revenues.

At 45p GNG remain on a current year P/E of only 7 based on 6.5p EPS, and the 14.4m m/cap is backed by 7.5m of NTAV, represented by a 2m cash pile and a multinational blue chip set of debtors comprising the likes of Lenovo, Huawei, Dell, IBM etc.

Today's agreement with PTC is extremely interesting:

- PTC are HUGE. Quoted on NASDAQ with a billion dollars annual turnover...yet here they are using little ol' GNG. Yet more kudos for GNG. Take a look at PTC's web site - they've just won contracts with EADS for starters....

- this is a lucrative entry into the manufacturing sector. Chinese manufacturing is moving upstream, and this will be the way the surviving manufacturers will all be going

- finally, these contracts represent around 20% of last year's turnover. How many companies regularly announce such huge percentage wins ? The answer is - not many :o))

The AGM is later this month. The trading statement should be pretty upbeat judging by newsflow.

Here's the two RNS's from today for the record:

"GEONG Wins Contract Extension Worth 1.2m
5 August 2008

GEONG International Limited (AIM: GNG), the AIM listed, China based provider of enterprise content management (ECM) software and solutions, today announces that it has signed an extension to a contract signed in April 2008 with a leading global provider of next generation telecommunications networks ("the Client"). The contract, which is in its second phase, is worth in the region of 210,000 per month from July through to 31 December 2008. Under the terms of the contract, GEONG will continue to source and manage a number of freelance consultants who will assist the Client in developing a management system relating to its Global Financial Planning and Risk Management requirements. Commenting on the contract win, Wang Weidong, Chief Executive of GEONG, said: "The extension of this contract demonstrates GEONG's continued ability to help its clients at a high level."

GEONG Signs New Contract Worth 215,000
5 August 2008

GEONG International Limited, the AIM listed, China based provider of enterprise content management software and solutions, today announces that it has signed a contract with Parametric Technology Software Co. (PTC), a world wide leading Product Lifecycle Management (PLM) solution provider, worth 215,000 with at least 190,000 in the current financial year. Under the contract, GEONG will develop an integrated PLM solution based on its PortalAge platform. The new solution, which has already been extensively and successfully tested in four pilot studies in the Manufacturing and Aerospace industries, will significantly enhance GEONG's product offerings within manufacturing related industries which is one of the largest and fastest growing sectors in China. Commenting on the contractwin, Wang Weidong, Chief Executive of GEONG, said:"By partnering PTC we have been able to quickly develop a product which will significantly enhance our product offering in what is one of the fastest growing sectors of the Chinese economy."

You mean like the April Pre-Close update said "ahead" and then later they delivered results "below"............... ??????? ;)


rivaldo55555 - 05 Aug 2008 17:01 - 259 of 259

...........The AGM is later this month. The trading statement should be pretty upbeat judging by newsflow.

GNG announced today a defacto downgrade going forward. Their trading update remains in line, but the outlook is not so good now, and they admit that China is slowing down, this is what you will see, as it becomes apparent over all the hype that in fact recession is coming the way of China.

Chinese stocks certainly should be excellent shorting candidates for 2009 and 2010.

Excellent trading update today, about as good as can be expected.

GNG are confident that they'll meet 6.5p EPS expectations this year given the high recurrring income and huge order book, but with any new contracts or an acceleration in SmartBox they could quite easily beat expectations yet again.

Not a bad year then - PAT to be up at least 72% :o))

A spectacular increase in the order book too - up to 9.6m now is excellent news going forward.

And even better, recurring income is now up to 4.5m, a tremendous buffer for future years. GNG's clients are locked in to using PortalAge, so GNG will continue to have this excellent buffer, as they will from SmartBox.

Last month Legal and General anounced they'd bought 5% of GNG, 1.61m shares in total. Perhaps today's statement will encourage further institutional buying.

Interesting to note that last year's tangible NAV was around 7.2m. Add on 2m PAT this year, and revalue upwards for the almost 20% movement in exchange rates since then, and the tangible NAV becomes around 11m.

Which means that the remaining 1.5m EV in the business on the 12.5m m/cap at 40p is represented by an annual 2m PAT!!

And the cash pile is likely to be up to 3m - and maybe even 4m - if cash receipts are as good as indicated in the trading statement.

But that is not what people look at is it, you of all people should know the market is forward looking.

When a company mentions the 2nd half will be impacted a bit, and given the crisis started well into the 2nd half, this means that the 1st half of the next year, and all of next year could see significant reductions in business levels.

This is why, despite such bullishness by certain posters, the SP has done nothing.

The market looks forward, the outlook is not looking so bright, so why should anyone buy this, which is precisely what happened today.

You cannot continue to try to hype these China stocks rivaldo, the outlook for China is deteriorating fast, and the potential impact over there is bigger than the impact when it all went pear shaped in the USA.

On top of the GNG admission that things are slowing down, today also saw ZTC (Chinese telecoms) say this which again is more evidence to say that things in China are under pressure, and those who said 2009 would be a bad year for anything China related, might well be proven correct :

"As has been widely reported, trading and credit conditions for SME's in the PRC have become increasingly difficult throughout the third quarter of 2008. This is due to deteriorating macro economic conditions outside the PRC and slowing economic growth and restrictive credit policies in China. As a consequence, our markets have become increasingly competitive, disruptive and oversupplied. ZTC has therefore achieved sales significantly below those seen in the same period last year.

As a consequence, the Company's working capital available to operate and expand its business has become constrained, as has been previously announced. The Company continues to review all aspects of its operations to reduce costs and improve efficiencies to improve the availability of working capital for new model and market development. The possible sale of assets referred to above is one example of a potential method of cash generation that is being actively considered."

GNG will not survive as China starts to slow down. Selling at 35p would be wise.

I believe the facts speak for themselves at the current valuation which already prices in any downturn. To reiterate....

At an 11m m/cap at 36p GNG is trading at only just above tangible asset value at current exchange rates, despite having say 3m cash now plus blue-chip debtors and confirming it should make 2m PAT this year.

Recurring income has surged to 4.5m now - against total overheads last year of just 2.5m (admin, selling, R&D costs etc). Not a difficult equation to work out.

And the order book is worth around say 11m at today's rates, against just 7.6m turnover last year.

GNG said two weeks ago they're confident of making 2m PAT this year. That could be reduced to 300k and GNG would still be good value, since it's trading at only just above NTAV :o))

If GNG were priced at 100p there might be an issue. At 35p it's a no-brainer imho given the cash pile, locked-in client list (big barriers to entry), profitability and huge potential.

The high recurring income, low overhead base, cash pile, locked-in clients with high barriers to entry, multinational customers etc make GNG a far more defensively secure option than most companies.

The accelerating yuan also means that this year's challenging forecast of 6.5p EPS is even more likely to be met or beaten - not something that most companies can say, especially only halfway through the year.

it's also a no-brainer to to remember that China is slowing down rapidly and a lot of these overhyped Chinese companies are heading for the incinerator ..... i know markets have been dire worldwide, but it is worth taking a look at the performances and recent pathetic trading volumes of such former darlings as GNG, WCC, TAIH and even SOLA, a company where it has been impossible to open a new short position for 6/8 weeks or more

Yes cynic, all there is now in China stocks is lots of longs all trapped in with big losses.

This means lots of selling pressure to come, as they have to bail out, or sell on any rises to get some of their cash back out.

Weak stocks, no appeal, and of course China is going to be lots of bad news to come.