ETLT.OB

[David Randolph]

This is interesting:

Five Tasks Finished by Chairman in U.S

«Fifthly, the shareholder meeting has gone into the preparation. The time and place of the shareholder meeting will be fixed soon, not later than early November.»

We'll probably hear something from ETLT's management on this issue soon. I see that ETLT's managers perhaps write and speak English even worse than I do, but there's no doubt their company is deeply undervalued. If they start delivering those 10-Q's and 10-K's in a timely manner and keep growing the company, undoubtedly the stock price will adjust to reflect its true value.

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

[David Randolph]

ETLT has a problem at $0.9, because every time the company makes an acquisition (and it made several), it issues some shares (not a lot) to fund part of the acquisition cost and always tells people the shares are worth $0.9 each.

Take the latest two acquisitions, as an example:

• Eternal Technologies Group, Inc. (OTC BB: ETLT) Purchase Price Reduced on the Two Recent Acquisitions
Business Wire (Mon, Sep 17)

«For the acquisition of the 30% equity interest in the Mango farm, the company will pay 70% in cash (US$4,400,000) and 30% in its common stock (2.3 million shares, US$0.90/share). For the acquisition of the 30% equity interest in the Lychee farm, the company will pay 70% in cash (US$4,800,000) and 30% in its common stock (2.64 million shares, US$0.90/share). Both acquisitions will be accretive to earnings in 2008.»

So we now have these guys probably selling 4.94 million shares around $0.9, because that's what they think they're worth, it is their expectation for their value.

This selling pressure is what is keeping ETLT so undervalued. For the next update I'll check how many more shares are probable being sold in the $0.9 area.

The good news is that when ETLT closes above $0.9 for two or three consecutive days, and I'm sure sooner or later it will happen, the stock will probably shoot towards $2 very fast.

I'll keep holding ETLT for the long term.

[David Randolph]

So we now have these guys probably selling 4.94 million shares around $0.9, because that's what they think they're worth, it is their expectation for their value.

I've re-read ETLT's 10-Q form filed with the SEC and I don't see any other shares for sale at $0.9, other than the 4.94 million we talked yesterday. So, less than $5 M in volume around $0.9 will probably make ETLT.OB break it on the upside and move the stock sharply higher. I believe it is just a matter of time before that happens and I'll continue holding ETLT.OB for the long term.

[David Randolph]

ETLT.OB trades at 5 times earnings, there's nothing else to do but to keep holding and waiting for this inefficiency to be corrected. I believe it is a matter of crossing the $0.9 all important barrier. If we do that, as I'm sure with time we'll do, the stock will move 100% to the upside in, say, a couple of months. That's how micro cap stocks usually move.

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

[babouk]

Dilution ?
http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=5227735

[David Randolph]

Dilution ?
http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=5227735

Yes, they're distributing newly issued shares to most of their 68 full time employees, as you can read at page 12 of that prospectus. But the big chunk of the 2.5 million shares will go to the Chairman of the Board, Mr. Jijun Wu, with 1,780,000 shares. Strangely it appears that after this incentive he'll be the owner of just 1,836,000 shares, so he almost didn't have any before this offering.

I wonder who owns the big majority of the ...

«As of October 1, 2007, there were 47,073,579 shares of our common stock outstanding.»

... 47 million shares outstanding, that is, who owns ETLT.OB?

Anyway, 2.5 million more added to 47 million represents just 5.3% dilution, which isn't a big deal. ETLT.OB should be at $2.5 instead of $2.63, something like that

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

[David Randolph]

ETLT's reaction to that form S-8 announcing new 2.5 million shares issued wasn't bad ... my take is there isn't much supply in this area, and the real fight is to be made around $0.9. When we get to close significantly above $0.9 I think we'll run up towards $2 pretty quickly.

The issue is that ETLT made acquisitions and used shares, valued at $0.9, to pay for a part of those acquisitions. Now, the people who sold their businesses want cash, not shares, so they're selling their shares at $0.9, creating supply pressure in that area.

But the company's value is at least $2, according to my fundamental analysis, so we just need patience to profit. I'll keep holding ETLT.OB for the long term.

[David Randolph]

At least ETLT.OB has been holding $0.74 on a closing basis. The stock is trading at $0.74/$0.11 = 6.7 times 2006 earnings. I think this is cheap and that there will be EPS growth in 2008 so I'll keep holding ETLT.OB for the long term.

[David Randolph]

At least ETLT.OB has been holding $0.74 on a closing basis.

Not anymore

The stock is trading at $0.74/$0.11 = 6.7 times 2006 earnings.

Will ETLT.OB be my teacher in the "knowing how to divide two numbers isn't enough to profit over the long term» lesson?

I guess a low Price Earnings Ratio isn't enough. There also has to be growth, or a promise of it ... some kind of catalyst.

Or else, yesterday's close at $0.725 was just "short term technical noise". I think this is the most likely case. The next few days will bring us the answer and I'll keep on holding ETLT.OB.

[buddjas1]

I would like to see Q3 results before buying in.  Maybe there are others on the sideline like me, just taking a wait-and-see approach.

[berloga]

I wasn't as comfortable with ETLT as I was with, say ASTI or SDTH, so I decided to wait for the earnings as well.

[David Randolph]

I would like to see Q3 results before buying in.  Maybe there are others on the sideline like me, just taking a wait-and-see approach.

Yes, maybe that's the cause for the lack of follow through.

I wasn't as comfortable with ETLT as I was with, say ASTI or SDTH, so I decided to wait for the earnings as well.

Very different companies and stories. I hope 3rd quarter earnings convince people to get in this very undervalued stock.

Or else, yesterday's close at $0.725 was just "short term technical noise". I think this is the most likely case. The next few days will bring us the answer and I'll keep on holding ETLT.OB.

It looks like that was it, "short term technical noise". This happens so often, a slight cut of an important technical level before the most likely move indeed happens. Just shaking the tree a little bit, don't want the weak hands on board.

ETLT's fight is to be made around the $0.9 level and I'm sure that over the long term bulls will win, because value is too compelling at current levels.

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

[David Randolph]

Down 5.8% yesterday, back below $0.74. Doesn't matter, I'll keep holding for the long term.

[David Randolph]

ETLT.OB needs a fresh new catalyst to reestablish the fight at $0.9. Probably this will be provided by the 3rd quarter earnings release. If enough volume is achieved at $0.9 and the stock is able to close significantly above this level, I think it will move towards $2 pretty sharply.

I'll keep holding ETLT.OB for the long term, despite the short term weakness.

[Ramsburg]

Because of a technical issue on David's internet connection he was not able to publish this update.

The instructions for this position is: HOLD