3SOF

Hello Dave, damn what happened to snap this little dip...  I have tried to take advantage of it by adding 800 shares to my trading acct and started 800 shares with my IRA acct. Purch price $3.27

Quote from: sctrben on November 05, 2007, 04:28:02 PM
Hello Dave, damn what happened to snap this little dip...  I have tried to take advantage of it by adding 800 shares to my trading acct and started 800 shares with my IRA acct. Purch price $3.27

I guess what happened to CHME.OB yesterday was that the Hang Seng dipped 5% on the session (like it had anything to do with it - but for people trading the "China story", it does).

CHME.OB is just days away from posting what I think it will be about $0.3 EPS in one quarter. This is the cheapest stock in the entire market. I expect CHME.OB to at least double on this earnings news. If this doesn't happen it will be very odd.

I'll keep holding CHME.OB for the long term.

Can you remind us when the earnings statement will be please?  Thanks.

Quote from: spiritgate on November 06, 2007, 09:23:19 AM
Can you remind us when the earnings statement will be please?  Thanks.

The company didn't pre-announce a date for the earnings release, but it has to be on or before November 15, or else it needs to file an NT form with the SEC specifying the reason for the delay.

Over the latest two quarters CHME.OB filed on schedule, the Q1 report on May 15th and the Q2 report on August 14th.

I'll keep holding CHME.OB.

CHME.OB touched the 50 days SMA support for the second time, and again, it bounced. Earnings will be out next week and I expect $0.30 EPS for the quarter and this time there will be people interested. When they see the $0.3 I believe they'll push the stock up 100%. If this doesn't happen it will be odd ... I'll keep holding and waiting for the earnings news.

I think INSIDERS HOLDINGS should be part of the 3SoF model. This will be gauge of credibility and confidence of management in the business entity. For if the insiders can't appreciate the valuation or growth then who else can?

e.g. I see SDTH has good 42% insider share, compared to 8% for CHME, as per yahoo. Showing SDTH management as 5 times confident in the entity as compared to CHME. It may not be a fundamental analysis but insider holdings and insider purchases are great way to see management interests aligned with the investors interests. Now take the case of 3SoF holdings for whom I could get info from yahoo:

SYX  70%
GSB  63%
SDTH 42%
ASTI 38%
TBSI 37%
GIGM 10%
CHME  8%
IMMR  4%
JAKK  2%
PFSW  2%

However, an important improvement would be to also gauge interms of $. But still % is in itself is a vital indicator.

Quote from: stocky on November 11, 2007, 10:22:43 AM
I think INSIDERS HOLDINGS should be part of the 3SoF model. This will be gauge of credibility and confidence of management in the business entity. For if the insiders can't appreciate the valuation or growth then who else can?

e.g. I see SDTH has good 42% insider share, compared to 8% for CHME, as per yahoo. Showing SDTH management as 5 times confident in the entity as compared to CHME. It may not be a fundamental analysis but insider holdings and insider purchases are great way to see management interests aligned with the investors interests. Now take the case of 3SoF holdings for whom I could get info from yahoo:

SYX  70%
GSB  63%
SDTH 42%
ASTI 38%
TBSI 37%
GIGM 10%
CHME  8%
IMMR  4%
JAKK  2%
PFSW  2%

However, an important improvement would be to also gauge interms of $. But still % is in itself is a vital indicator.

This is an interesting idea stocky. I'm not sure if Yahoo Finance is accurate in those numbers, I'll have to check it one by one. Philosophically I would say that it doesn't matter all that much who owns the shares, but how much are they worth ... for example, what is the percentage of GE owned by insiders? I guess less than 2%. The bigger the company, the more difficult it is for insiders to own a big share.

CHME's earnings can be released any moment now. I expect the company to post $0.30 EPS for the quarter and that to be a huge positive surprise for investors.

I'll keep holding CHME.OB. 

results are in!!!!

GUANGZHOU, China, Nov 12, 2007 /Xinhua-PRNewswire-FirstCall via COMTEX/ -- China Medicine Corporation (CHME, Trade ), a leading distributor of medical products, traditional pharmaceutical and Chinese medicines, herbs and dietary supplements, today announced financial results for the quarter ended September 30, 2007.

Revenue for the third quarter of 2007 increased 65.72% to $12.6 million compared to $7.6 million for the third quarter of 2006. Revenue from product sales for the third quarter 2007 was $11,904,525, an increase of $5,537,906, or 87%, from revenue of $6,366,619 for the third quarter of 2006. The company obtained exclusive regional distribution rights in China's Guangdong Province for 160 new products during the first nine months of 2007.

Medical formula sales were $684,413 and $1,229,912 for the three months ended September 30, 2007 and 2006, respectively. These amounts represent proceeds from the sale of certain technology and know-how relating to the production of medicines. We initially acquire the technology in an undeveloped state from other companies, undertake research and development to make improvements, and sell the improved technology to other drug manufacturers. The primary reason for the decrease in medical formula sales is that fewer new customers have signed contracts for medical formula sales in 2007. We believe this is due to action by the State Food and Drug Administration ("SFDA"), which must approve every transfer of ownership of a medical formula in China, and which recently enhanced its approval procedures by setting higher application criteria which require more time for review.

Gross profit for the third quarter of 2007 was $3,823,461, an increase of $716,985, or 23%, from $3,106,476 for the third quarter of 2006. Gross margin for the third quarter of 2007 was 30.37%, as compared with 40.89% for the third quarter of 2006. The decrease in gross margin was due primarily to increased sales of over-the-counter products in the third quarter of 2007, which have lower margins than the prescription drugs and other products we sold in the third quarter of 2006; and decreased medical formula sales in the third quarter of 2007, which have much higher margins than the regular products sales.

Research and development expenses were $336,794 for the third quarter of 2007 compared with $31,361 for the third quarter of 2006. In both periods, these expenses were used primarily for the pre-clinical study of the Yutian capsule, a traditional Chinese medicine designed for use in the treatment of lung cancer.

Selling, general and administrative expenses were $830,518 for the third quarter of 2007, an increase of $645,001 from $185,517 for the third quarter of 2006. The increase was mainly caused by the increased expenses in payroll and sales bonuses to sales representatives, marketing expenses, office rent and furnishings, transportation and trade shows.

Net income for the three months ended September 30, 2007 was $2,205,914, a decrease of $71,465 from $2,277,379 for the comparable period in 2006. The decrease was due primarily to increases in selling, general and administrative expenses and research and development expenses.

As of September 30, 2007, China Medicine had working capital of $23,574,193, an increase of $13,715,998, or 139%, from $9,858,195 as of September 30, 2006. The company received $5.7 million proceeds through the exercise of warrants during the first nine months of 2007, which increased the company's working capital. The company used cash of $1,844,778 in operations for the nine months ended September 30, 2007, an increase of $1,148,801 from the cash used for the comparable period of 2006. The increase in net cash used in operating activities was largely due to the increase of advances to suppliers and inventories related to our increased quantity of sales.

"Our third quarter results were consistent with our internal expectations," explained Mr. Senshan Yang, CEO of China Medicine. "We sold more OTC drugs during this quarter, which lowered our profit margin. But this is just a temporary result. We expect our profit margins to improve through our efforts to increase the sales of high-margin products, proprietary products and medical formulas in accordance with our long-term sales strategy. Our administrative expenses were relatively high in the third quarter because we obtained exclusive distribution rights in Guangdong Province for over 160 products from the beginning of this year. Greater expenditures are typically needed for the marketing of such new products, and these expenses will be decreased once the sales network is set up." Mr. Yang added, "we are undertaking a search for a bi-lingual CFO and a qualified investor relations firm, so that we may better communicate with investors, integrate our financial system and enhance our internal control system. We are confident of having a great year in 2007 and we expect continuing success in 2008."

Yes basanlas, thanks for the news

Well, unfortunately CHME.OB represents another disappointment in the .OB world, but this is a different case from ETLT.OB.

But let's get the numbers first.

Revenue:

«Revenue for the third quarter of 2007 increased 65.72% to $12.6 million compared to $7.6 million for the third quarter of 2006.»

Net Income and EPS:

«Net income for the three months ended September 30, 2007 was $2,205,914, a decrease of $71,465 from $2,277,379 for the comparable period in 2006.»

EPS on a fully diluted basis was $0.14 on 15,586,809 shares outstanding, compared to 7,749,000 shares outstanding in Q3 2006.

So, instead of the $0.30 I expected in terms of EPS, we got $0.14, due to two primary reasons:

1) The share count doubled, but I already knew that. In the future dilution will probably be a lot less ... the share count increase over the past year had to do with the way CHME's IPO was made;

2) Revenue growth wasn't 100%, but just 65.72%;

Also, management blames a temporary rise in costs for the 3% fall in net income:

«"Our third quarter results were consistent with our internal expectations," explained Mr. Senshan Yang, CEO of China Medicine. "We sold more OTC drugs during this quarter, which lowered our profit margin. But this is just a temporary result. We expect our profit margins to improve through our efforts to increase the sales of high-margin products, proprietary products and medical formulas in accordance with our long-term sales strategy. Our administrative expenses were relatively high in the third quarter because we obtained exclusive distribution rights in Guangdong Province for over 160 products from the beginning of this year. Greater expenditures are typically needed for the marketing of such new products, and these expenses will be decreased once the sales network is set up." Mr. Yang added, "we are undertaking a search for a bi-lingual CFO and a qualified investor relations firm, so that we may better communicate with investors, integrate our financial system and enhance our internal control system. We are confident of having a great year in 2007 and we expect continuing success in 2008."»

Surely we won't have a 100% upside day today and I'm sorry for inflating expectations on this one. I was overly optimistic.

Anyway, this company made $0.30 EPS in the nine months so far into 2007 and I expect $0.45 EPS in the full year of 2007, so the stock is trading at 7.1 times 2007 earnings, which is very cheap (but not below 5 times earnings like in ETLT's case, which would be too cheap to be true).

I'm disappointed because my expectations were very high, not because the company did badly. It is still deeply undervalued in my view.

I'll keep holding CHME.OB.

David, I am gonna make an "emotional" appeal to you: stay away from the combination of .OB and China. 

My younger brother used to be a big trader in China back in 99-01 Chinese bull market, he made some fortune at a time, yet still got washed away in the end. He told me numerous stories about how they manipulated the stocks over there and how disrespectful they have towards security laws (very immature any way).

The point is, Chinese stock market is very like the US market 100 years ago, too many inside plays and too many frauds. You can not have much trust on whatever they say on paper. Of course there are honest companies, if they choose to be listed on NASDAQ or NYSE, I assume they are much better. Yet if they are .OB, I really don't have much faith in them holding long-term. Lots of these .OB stocks are actually manipulated by people who came from China ... I know this for a fact because I have been to Chinese stock forums and lots of pump and dump actions over there.

In summary, your current strategy relies on company fundamental information. If you can not trust them? How can your strategy work?

QuoteDavid, I am gonna make an "emotional" appeal to you: stay away from the combination of .OB and China.

Thanks for the advice realcoolhead. I'll do that from now on. But I'm still not ready to sell CHME.OB or UTVG.OB.

QuoteMy younger brother used to be a big trader in China back in 99-01 Chinese bull market, he made some fortune at a time, yet still got washed away in the end. He told me numerous stories about how they manipulated the stocks over there and how disrespectful they have towards security laws (very immature any way).

The point is, Chinese stock market is very like the US market 100 years ago, too many inside plays and too many frauds. You can not have much trust on whatever they say on paper.

I agree.

QuoteOf course there are honest companies, if they choose to be listed on NASDAQ or NYSE, I assume they are much better.

SDTH trades on the Nasdaq and you're right, its business looks more transparent.

QuoteYet if they are .OB, I really don't have much faith in them holding long-term. Lots of these .OB stocks are actually manipulated by people who came from China ... I know this for a fact because I have been to Chinese stock forums and lots of pump and dump actions over there.

Yeah, sure, but I don't go after pumps and don't sell on dumps.

QuoteIn summary, your current strategy relies on company fundamental information. If you can not trust them? How can your strategy work?

Well, currently I have just 10.3% of the Main's capital allocated to "suspicious" OTCBB stocks. But I agree with you, can't trust their financial information. The upside potential doesn't compensate the risk.

I'll think about this for some more hours (I never change the trading plan while the market is open), but I'm still inclined to keep holding CHME.OB and UTVG.OB.

Just one more thought: If CHME's management was cooking the books why would they report a 3% decline in net income while revenue grew 66%?

They could have easily posted a better net income number ...

Got to go now, see you later.

David, since we follow 3SoF main with real money and the main has aim to get atleast 30% return with low risk over a year time, it would be prudent to reduce risk by excluding .OB from the portfolio. I hope that there will be atleast 15 stocks with attractive enough fundamentals that they donot warrant taking risk that is manifested by .PK and .OB. I hope you will consider the suggestion. CHME and UTVG could become multi-beggars, but I hope that before they do that they may like to move to bigger exchanges and then they can become part of the main.

These stocks are falling at 500 mph and guess what's going up,etlt. Go figure. Just a lousy day all around.

Quote from: soxguy on November 12, 2007, 02:25:29 PM
These stocks are falling at 500 mph and guess what's going up,etlt. Go figure. Just a lousy day all around.

You have to remember were in a down market/correction ...whatever you want to call it.  Usually the high flying stocks of a few weeks ago take a hard beating as profit selling begets fear selling  ???begets shorting begets lack of buying . 

When the downside subsides in the next week or two...these stocks will begin to ascend quickly again and by the end of the year we'll all forget about this past week.  One bad week isn't a market make.