Joining the party in CHME.OB

[la-onda]

I have liked AOB much (still on my watchlist)

I have bought a bunch of CHME, imho this is an accumulation phase

nice summarization:
http://hcinternational.net/pdf/client_overviews/CHMEcorporateprofile.pdf

chart:

[David Randolph]

I have liked AOB much (still on my watchlist)

I have bought a bunch of CHME, imho this is an accumulation phase

nice summarization:
http://hcinternational.net/pdf/client_overviews/CHMEcorporateprofile.pdf

chart:

Very nice to have you on board of this one la-onda

That summarization looks fine, just one issue with it ... they're talking 19.5 million shares outstanding in the future. I wasn't counting on that many. It doesn't change the long term story though, I wish they make all the necessary conversions as soon as possible so we can get dilution out of the way. 

CHME.OB looks like the next AOB. Same country, same industry, same problems at the start, same growth strategy. If it works CHME.OB will be a 15 bagger. But I would be happy with less than that ... I'll just keep holding and studying CHME.OB.

[la-onda]

David,
your comments please:

http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=5378600
&
http://www.3stocksonfire.org/trading/index.php?action=post;topic=10365.75;num_replies=76

[David Randolph]

David,
your comments please:

Yeah, sure la-onda

The information CHME.OB filed yesterday with the SEC is consistent with what I've been writing about dilution:

«(4) As of the date of this prospectus, a total of 7,137,563 shares of common stock have been sold in this offering, and 3,471,913 remain eligible for sale at the discretion of the selling stockholders.»

More than 2/3 of the warrants conversions and issuance of new shares are behind us. This dilution wasn't unexpected, it is related to the Konzern acquisition:



Hmm, now I'm confused by what they say next:



It can't be 24.76 million after the offering, since the 7,137,563 shares already sold had to be already included in the following:



I'm going to contact investor relations right away.

[la-onda]

Any feedback from IR David?

fyi:
AR discussion link:
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_C/threadview?m=te&bn=52169&tid=11&mid=11&tof=1&frt=2#11

[David Randolph]

Any feedback from IR David?

No

I wrote to CCG Elite and to the company using various means and didn't get any reply. This is quite frustrating, because I believe they posted erroneous information on that SEC form (damn, initially they even filed the wrong form).

Hmm, now I see that in the following press release they provide different contact information. I'm going to write to these contacts instead today:

• China Medicine Retains CCG Elite for Investor Relations Campaign
PR Newswire (Wed, Dec 5)

In the meantime I'll continue holding CHME.OB. 

[la-onda]

please change 

[David Randolph]

please change 

I'm sorry for the wrong chart la-onda and others, I wasn't able to see your warning yesterday.

Here's the e-mail I wrote to CHME's CFO:

«My name is Cesar Borja and I own 5,500 CHME.OB shares. I'm also a portfolio manager for www.3stocksonfire.org and I recommended to our subscribers buying your stock.

I've studied the financial statements of your company thoroughly and I don't understand the information constant in page 7 of the form POS AM you filed with the SEC in January 9, 2008.

The numbers in point 2 ...

«(2) Does not include the 3,375,262 shares of common stock issuable upon (i) conversion of the 111,649 remaining outstanding shares our Series A preferred stock, (ii) exercise of our remaining outstanding Series A warrants to purchase a total of 378,948 shares of our common stock, or (iii) exercise of our remaining outstanding Series B warrants to purchase a total of 2,881,316 shares of our common stock held by the selling stockholders. If those shares of common stock, all of which are unissued as of January 7, 2008, are added to the total number of shares of our common stock outstanding, the resulting total number of shares is 18,196,903.»

and the numbers in point 6 ...

«(6) Assumes prior conversion into common stock of all of our outstanding Series A preferred stock and exercise of all of our outstanding warrants to purchase common stock» - 24,764,122 shares

... should match, shouldn't they?

My question is: after all the convertible shares and series A and series B warrants are fully converted, which will be the number of shares outstanding? 18,196,903 or 24,764,122?

I think the 24,764,122 number doesn't make any sense, since the preferred shares and warrants already converted and sold are/should be, already part of the «Common stock outstanding as of January 7, 2008 - 14,821,641 shares (2)», but you please tell me.

Thank you!
Cesar Borja
www.3stocksonfire.org»

I'm going to wait for Monday afternoon to get her reply ... if I don't get one I'll make phone calls to get the information. This is crucial because, if we're talking about 18 million shares in total that would be consistent with everything I've been writing and thinking about this company. If instead the number is 24.7 million, then there are additional sources of future dilution and I need to know why is this and what for.

There's no incentive, for convertible warrants holders, to sell shares below $2.43 (since this is their conversion price), so the stock price shouldn't stay below $2.5 for long - unless other shareholders just dump the stock.

I have doubts and need answers quickly. But I'll hold CHME.OB at least through Monday.

[David Randolph]

I'm going to wait for Monday afternoon to get her reply ... if I don't get one I'll make phone calls to get the information.

I still didn't get any reply to my e-mails and didn't phone call yet ... I'm sorry, I just hate talking on the phone, especially in English to a Chinese person

But because it's hard and a new skill that I need to learn I'm going to have to make that phone call ... I can't delegate it to anyone because they wouldn't understand the issue. I'm not going to do it today because I need to go to the doctor and I don't know how long that's going to take, but tomorrow or the day after I'll have to do it.

Anyway, 18 million or 24 million shares doesn't change a lot to the company's fundamentals, considering the company is so cheap and AOB also had massive dilution at its start and it still was a 14 bagger, but I really need to know if the math in that SEC form is right or not.

I'll hold CHME.OB.

[la-onda]

fyi:
http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=5395846
424B3 Amended filing - 19.7 FD shares; as expected, they amended the filing.

I get 19.7 mil max fully diluted 

[David Randolph]

fyi:
http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=5395846
424B3 Amended filing - 19.7 FD shares; as expected, they amended the filing.

I get 19.7 mil max fully diluted 

Indeed, this is great La-onda, look at their reply to my e-mail:

«Dear David:

Please refer to the revised filing, which correct the mistake we made.

Thank you for your reminding.

Huizhen Yu
Chief Financial Officer

China Medicine Corporation
Guangzhou Konzern Pharmaceutical Co., Ltd
Suite 702, Guangri Tower
Guangzhou, China 510600

Tel:   (8620)8739 1718，8737 8212»

Now they got their numbers right and consistent with everything I wrote on this thread:



I'm glad that the mistake was corrected and have regained confidence in this holding, since there aren't any new shares coming from mysterious sources. All the existent dilution was already to be expected. Moreover, only 3.37 million shares remain for selling, and none will be sold under $2.5 (since the conversion price is $2.43).

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

[David Randolph]

CHME.OB trades at 4.5 times 2007 EPS, it's ridiculous. But well, AOB also traded at 4 times earnings before rising 14 fold so ... nothing new here.

[David Randolph]

CHME.OB recovering some ground here ... only weak hands sell below $2.5, anybody with some knowledge of the company wouldn't do this. CHME.OB trades at 4.9 times its 2007 EPS now and I'm remain confident that this will be the next AOB ... in a couple of years time nobody will have a problem in paying 20 times plus the annual earnings of this company in my view.

[David Randolph]

CHME.OB continues to be asleep here. This is better than falling some more

Anyway, I still feel like an investor who bought AOB in 2004 for about $4 and then saw it slide below $2:



Two years later the buyer at $4 had a 200% plus gain, but before that he had been losing more than 50% ... of course, it would have been better to buy the stock now than 100% above, but perfect trades only exist in our minds and looking after the fact.

CHME.OB was attractive at $4 and it is two times more attractive at $2.

I'll continue holding this Chinese micro cap for the long term.

[David Randolph]

CHME's institutional investors have been adding on weakness.

On August 8, 2007, First Wilshire Securities filed a form 13 with the SEC showing it held 1,071,500 CHME.OB shares. And yesterday they filed another form showing they now have 1,586,967 shares.

The stock gave a technical bullish signal yesterday, closing back above $2.22.

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