CPSL - Sector: Basic Materials - Industry: Iron & Steel

[setravis]

Someone is buying this stock...The uptrend is intact...
It is technically good. Volume is better today. Chart is better this time compared to Jan.
No debt and a high quality steel producer in China.

Cup with Handle (Continuation) Pattern
The Cup with Handle is a bullish continuation pattern that marks a consolidation period followed by a breakout. It was developed by William O'Neil and introduced in his 1988 book, How to Make Money in Stocks.


As its name implies, there are two parts to the pattern: the cup and the handle. The cup forms after an advance and looks like a bowl or rounding bottom. As the cup is completed, a trading range develops on the right hand side and the handle is formed. A subsequent breakout from the handle's trading range signals a continuation of the prior advance.

As with most chart patterns, it is more important to capture the essence of the pattern than the particulars. The cup is a bowl-shaped consolidation and the handle is a short pullback followed by a breakout with expanding volume. A cup retracement of 62% may not fit the pattern requirements, but a particular stock's pattern may still capture the essence of the Cup with Handle.

Example...

[setravis]

Breakout with Power!! Very impressive.
This play has legs...



China Precision Steel Announces Conference Call to Discuss Third Quarter Fiscal 2009 Results

SHANGHAI, May 4 /PRNewswire-Asia/ -- China Precision Steel, Inc. (Nasdaq: CPSL - News; "China Precision Steel" or the "Company"), a niche precision steel processing company principally engaged in producing and selling high precision cold-rolled steel products, today announced that it will conduct a conference call at 9:00 a.m. Eastern Time on Monday, May 11, 2009 to discuss the third quarter fiscal 2009 results.

This conference call will be broadcast live over the Internet and may be accessed by clicking on http://www.chinaprecisionsteelinc.com

52wk Range: 0.86 - 8.48
Volume: 6,804,704
Avg Vol (3m): 457,789
Market Cap: 136.89M
P/E (ttm): 13.36
EPS (ttm): 0.22
Div & Yield: N/A (N/A)

Technicals
Last Price Quote is:
86.91%above 13-day MA
112.98%above 50-dayMA
RS Rating: 95 

Fundamentals
Key Data:
Market Cap (M): $88.47 
P/E Ratio: 8.35 
PEG Ratio: N/A 
Next Earnings: 05/08/2009
Last Analyst Rating: Hold

[setravis]

CPSL - Momentum...

China Precision Steel, Inc., a steel processing company, engages in the manufacture and sale of high precision cold-rolled steel products in China.

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updated chart look...

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Updated chart scene...

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China Precision Steel Announces First Quarter Fiscal 2011 Results...

Press Release Source: China Precision Steel Inc. On Monday November 15, 2010, 9:46 pm
SHANGHAI, Nov. 15, 2010 /PRNewswire-Asia-FirstCall/ -- China Precision Steel, Inc. (Nasdaq:CPSL - News) ("China Precision Steel" or the "Company"), a niche precision steel processing Company principally engaged in producing and selling high precision, cold-rolled steel products, announced today its fiscal 2011 first quarter results for the period ended September 30, 2010. 

First Quarter Highlights


•Revenue increased 98.9% to $33.9 million compared to the first quarter of fiscal 2010
•Sales volume was a record 42,513 tons
•Gross profit increased 239.0% to $2.4 million with 7.0% gross margin compared to the first quarter of fiscal 2010
•Net income was $0.6 million
•Fully diluted income per share was $0.01




"We are pleased with the continued strong revenue growth as domestic demand remains robust.  Specifically, our sales for low carbon products during the quarter was a record $23.9 million as we received an overwhelming increase in orders for low carbon steel to manufacture home appliances.  In addition, with the added capacity from our new mill, our sales volume was a record 42,513 tons," commented Mr. Hai Sheng Chen, CEO of China Precision Steel.  "With the continued strong domestic demand and a backlog as of September 30, 2010 of $33.7 million, we remain upbeat on our future growth opportunities."

Revenue for the first quarter of fiscal 2011 was $33.9 million, up 98.9% from revenue in the first quarter of fiscal 2010 of $17.0 million.  The increase in revenue was mainly attributed to the increase in demand for low-carbon cold-rolled products used in construction and home appliances production.  Total sales volume and average selling price per ton in the first quarter increased to 42,513 tons and $797, respectively, compared to total sales volume and average selling price of 22,293 and $764, respectively, in the first quarter of fiscal 2010.  High carbon and low carbon sales accounted for 19.3% and 70.5% of total sales, respectively, compared to 34.5% and 55.3%, respectively in the first quarter of fiscal 2010.  Exports represented 8% of total sales for the quarter. 

Gross profit in the first quarter was $2.4 million, up 239.0% from gross profit in the same period a year ago of $0.7 million.  Gross margin was 7.0% compared to 4.1% in the first quarter of fiscal 2010.  The increase in gross margin was mainly due an increase in average selling prices and a higher equipment utilization rate.

Selling expenses for the first quarter of fiscal 2011 were $110,205, or 0.3% of revenue, compared to $31,809, or 0.2% of revenue, in the first fiscal quarter of fiscal 2010. The increase in selling expenses was primarily attributable to increased focus on sales and marketing efforts. Administrative expenses were $871,470, or 2.6% of revenue, compared to $578,698, or 2.6% of revenue.  The increase in administrative expenses is due to an increased travelling costs and professional fees during the period. 

Operating income for the quarter was $1.4 million, compared to operating loss of $68,003 million in the first quarter of fiscal 2010.     

Net profit for the first quarter of fiscal 2011 was $644,511, compared to net loss of $275,191 in for the first quarter of fiscal 2010.  Fully diluted earnings per share were $0.01 compared to fully diluted loss per share of $0.01 in the same period a year ago. 

Financial Condition

As of September 30, 2010, China Precision Steel had $12.7 million in cash and cash equivalents, $18.3 million in long term debt, total liabilities of $63.2 million and working capital of $66.2 million.  Stockholders' equity stood at $129.4 million compared to $127.1 million as of September 30, 2009. 

Business Outlook

China Precision Steel is ramping up production capacity with the addition of its third mill, which went into production in January 2010.  The new mill is currently operating at 25% of its design capacity.  Total production capacity is expected to increase by approximately 35,000 tons to 195,000 tons by the end of fiscal 2011 as the new mill continues to ramp up production.  Once all mills reach full design capacity in approximately three to four years, total production capacity is expected to be approximately 260,000 tons.  As of September 30, 2010, China Precision Steel had a backlog of $33,772,326.

"We believe that the next few years will continue to provide numerous growth opportunities for us as domestic consumption is expected to remain strong.  Specifically, the Chinese government recently released its 12th five-year plan in which it stated that its focus for economic growth is shifting from dependence on export-led sectors to increasing domestic consumer demand," Mr. Chen continued.  "Moreover, we expect that demand for our precision steel products will also benefit from the increasing number of international manufacturers moving their production facilities to China."

About China Precision Steel, Inc.

China Precision Steel, Inc. is a niche precision steel processing company principally engaged in the production and sale of high precision cold-rolled steel products and provides value added services such as heat treatment and cutting medium and high carbon hot-rolled steel strips. China Precision Steel's high precision, ultra-thin, high strength (7.5 mm to 0.05 mm) cold-rolled steel products are mainly used in the production of automotive components, food packaging materials, saw blades and textile needles. The Company primarily sells to manufacturers in the People's Republic of China and overseas markets such as Nigeria, Thailand, Indonesia and the Philippines. China Precision Steel was incorporated in 2002 and is headquartered in Sheung Wan, Hong Kong. Additional information can be found at the Company's website http://chinaprecisionsteelinc.com.

Conference Call

China Precision Steel will host a conference call on Tuesday, November 16, 2010 at 9:00 a.m. Eastern Time to discuss fiscal 2011 first quarter results. To participate in the live conference call, please dial the following number fifteen minutes prior to the scheduled conference call time: 866-800-8648. International callers should dial 617-614-2702. When prompted by the operator, mention conference passcode 334 143 05.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Tuesday, November 16, 2010 at 11:00 a.m. Eastern Time. To access the replay, dial 888-286-8010 and enter the passcode 97099877. International callers should dial 617-801-6888 and enter the same passcode.

This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://www.chinaprecisionsteelinc.com. Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a 90-day replay will be available shortly after the call by accessing the same link.

Forward-Looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release and oral statements made by China Precision Steel on its conference call in relation to this release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding China Precision Steel's ability to prepare the Company for growth, the Company's planned manufacturing capacity expansion, predictions about improvements in the global economy and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, such as business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which China Precision Steel is engaged; cyclicality of steel consumption including overcapacity and decline in steel prices, limited availability of raw material and energy may constrain operating levels and reduce profit margins, environmental compliance and remediation could result in increased cost of capital as well as other relevant risks not included herein. The information set forth herein should be read in light of such risks. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement.  The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations. 




Contact Information:
 
China Precision Steel
 
Dan Carlson,
 
[email protected]
 

 
Elite IR
 
Leslie J. Richardson, Partner
 
+852-3183 0283
 
[email protected]

[setravis]

Day's Range: 1.60 - 1.75
52wk Range: 1.26 - 2.67
Volume: 271,515
Avg Vol (3m): 290,083
Market Cap: 78.22M
P/E (ttm): 14.00
EPS (ttm): 0.12
Div & Yield: N/A (N/A)

Technicals
Last Price Quote is:
3.14%above 13-day MA
5.41%above 50-day MA
RS Rating: 64 

[setravis]

China Precision Steel: Ready for a Major Run...

China Precision Steel (CPSL) is both a short-term and long-term "must own," a company that has clearly been overlooked by analysts. Several years ago, the stock had a major sell off, dropping from the $14 level after it made the strategic decision in 2006 to switch its product mix from lower-quality steel products with lower margins to high-precision products with much higher margins.

The company has completely turned around after incurring the associated capital expenditures, including R&D, which caused the stock to drift lower over several years. But now the company is spending only 1% of revenue on R&D, has returned to handsome profitability and is on track to reward investors with rapid and sustained earnings growth. None of these developments have been factored into the stock price.

The stock is extremely undervalued as I will discuss further in this article. I expect the stock to easily break through the $2 mark prior to its upcoming earnings release, and to make a new 52-week high above $2.67 shortly thereafter and reach the $4-$5 range by 2012.

China Precision Steel is a steel processing company engaged in the manufacturing and selling of precision cold-rolled steel products and in the provision of heat treatment and cutting of medium and high carbon hot-rolled steel strips. Its specialty precision products are used in the manufacture of automobile parts and components, steel roofing, plane friction discs, appliances, food packaging materials, saw blades, textile needles and microelectronics.

There are several factors that compel me to buy more of the stock:

1) Increasing Demand/Hyperbolic Market

The company conducts its operations and sells its products in China. Its products are also sold in overseas markets (approximately 19k tons in 2010), such as Thailand, Nigeria and Ethiopia, but the key is China.

In its news release announcing the forecasts, the World Steel Association noted that the country will use 45% more steel in 2011 than it did in 2007, and 3.5% more in 2011 than in 2010. It does not take a rocket scientist to predict that China will continue to enjoy its prominence as the dominant force in global manufacturing and therefore will continue to be a key market for steel. Skeptics may comment about the steel producing capacity of China. And, in fact China has increased its steel exports tremendously over the past several years, making it the number one ranked steel exporter globally.

However, while China is a net exporter of crude steel, it is a net importer of higher value precision cold rolled steel products such as those produced by the company. Manufacturers of products that use specialty precision steel products in China have traditionally imported precision steel products from Japan, Korea, the European Union and the United States. And generally, the quality and standards of China's high precision steel industry have lagged behind the international norm.

Nonetheless, during the last five years, CPSL has developed and established a nationally recognized brand in China. In fact, the precision steel market in China has been growing at 16% for the past five years, and the company sold over 124k tons of precision steel in China in 2010. This contributed to an increase in sales revenues of 44% over 2009, which is phenomenal by any standards. I expect the demand to increase in China not only due to the factors mentioned above but also due to the cost advantage of sourcing precision steel domestically, which includes a 5% tax credit and reduced transportation costs.

Ultimately, for the company's customers, this translates into a 5-10% price discount and shorter delivery times over imports.

2) Increasing Capacity and Backlog

The company currently operates three mills, one of which came online in the beginning of 2010 and is running at 25% capacity. It typically takes three years to ramp a mill up to capacity and I expect the company to increase production by 50k tons annually, achieving full capacity of 260k tons by 2013. This is sustainable growth as the company demonstrated a similar increase YOY from 2009 to 2010 from 81k tons to 134k tons. Combined capacity utilization at the three plants is now 75% and the company still has a sizeable backlog of orders. In fact, the backlog doubled between June and September of 2010.

It should be reiterated that the capacity investments are substantially behind the company, as net cash flows used in investing activities for 2010 was $3.7M as compared with $25.3M for 2009. Cash flows used in investing activities decreased as they completed construction of the new 1450mm cold rolling mill, and there was no additional material construction project during the year.

3) Key Customers

In FY2010, the company increased its sales 2 and 3.5 times with its top two customers, respectively. The company also added a key customer, Hangzhou Cogeneration Co, which is has $2 billion in revenue. Hangzhou's orders now account for 9% of sales and its orders are expected to increase.

4) Rapid Earnings Growth Through Solid Management

In FY2010, the company had earnings of $0.12 per share versus a loss of $0.01 for 2009. The 1470% increase in net income is clear evidence that the company has rounded the corner. The company managed to achieve phenomenal top-line growth during a period of decreasing prices ($748 vs $826 per ton) while also maintaining its margins.

5) Ownership/Insiders

The company has 46M shares of stock outstanding with a float of only 27M. Insiders own 42% of the outstanding shares and have not sold in the past two years. Note, the trading float is only 15M so this stock could move upward very easily on the upcoming earnings news. Also, watch for new institutional money inflows once the stock price stays north of $2 a share for more than 90 days.
The stock trades at a significant discount to sales (P/S of 0.65) and book value of $2.78 per share. The company will announce earnings on February 14th. I expect the numbers will do the talking and drive the stock upward. This could be cupid's arrow!

Investors in other china stocks such as Qiao Xing Universal Resources (XING) and China GengSheng Minerals (CHGS) may want to consider buying CPSL.


The Golden Cross has taken place.......