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Friday August 13, 2010
China speculations: High risk duo
by Paul Goodwin, editor Cabot China & Emerging Markets Report  I recently attended the Global Hunter Securities China Conference 2010, with representatives of around 100 Chinese companies and a mix of institutional investors and financial analysts.Two of my favorite presentations were New Energy Systems Group (NEWN), a transformational story, and AgriSolar Solutions (AGSO), a "toxically speculative" penny stock that was also the best presentation at the conference. New Energy is a transformation story. In 2009, New Energy bought Anytone, a maker of OEM batteries for cell phones, MP3 players and laptops as well as after-market replacements and backup power appliances. Anytone has over 30 patents and a robust R&D program. The Anytone takeover put New Energy squarely into the retail business. And it’s worth noting that the CEO of Anytone (who became Chairman of the Board of New Energy Systems) elected to take his share of the takeover payment in New Energy stock rather than cash. Not a bad vote of confidence. 
The second acquisition, takeover of Chinese lithium ion battery-maker NewPower, closed in January 2010 giving New Energy Systems a vertically integrated production model and allowing the company to control its costs. NewPower makes the batteries that go into all kinds of portables, including phones, music players, cameras and the like. Lithium ion battery sales are forecast to increase by an average of 20% a year over the next five years. So with a P/E ratio of just 6 and a possible uplisting coming, New Energy Systems looks like it’s in a high-potential position. The hands-down talk of the conference was AgriSolar Solutions, a company that makes what everyone was calling “the solar bug zapper.” Despite the installed base of 40,000 of these zappers on commercial farms in China, the attitude of those in the room while the presentation was being made was palpably skeptical. The AgriSolar zappers are undergoing tests in the U.S., and there is at least one businessman who is investigating importing them and leasing them to U.S. farmers. AGSO.OB is an OTC stock that’s trading at 60 to 65 cents per share. Volume is almost nonexistent. The big deal with AgriSolar Solutions is that IF IT WORKS (huge qualifier!), the solar bug zapper has the potential to be an enormously disruptive technology. It’s cheap, organic, renewable and highly effective, none of which can be said for pesticides. Despite being a highly risky, toxically speculative penny stock, it has the best story I heard at the entire conference. Learn more about this financial newsletter at Paul Goodwin's Cabot China & Emerging Markets Report. |
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