Friday, October 21, 2005

Eternal Technologies

Yo. Ticker ETLT. This is a company that does livestock breeding operations in Inner Mongolia of China. They run a breeding center, transplant embryos, and breed meet sheep and other livestocks. This must sound pretty nasty for all you animal rights people... but just because it's nasty doesn't mean it wouldn't be a good investment!

This is the biggest mind-boggling investment that I have found in a while.
They have 21m in cash, and is trading for 13m!!!

But don't be fooled, that cash is restricted only for uses in China. Meaning, management has specifically allocated this resource for uses inside the people's republic, and if the company wants to expand abroad, it will have to do so through new stock/debt financing. But hey... what's wrong with keeping the money where it's at?

Even if you really don't feel comfortable with where the cash is being kept... this company makes a pretty good value company in America look like shit. You got a P/E of 3.18 on this company that is expected to have more growth in the future due to increased demand. Well, I guess you could argue that the cash earnings they make can only be kept in China (see above paragraph) so it's not really "cash" in USD. Yes, definitely arguable...

But! The RMB is supposed to appreciate against the dollar from now on isn't it? What's wrong with buying into a premenant RMB asset? Unless you just hate China.

On top of it all, the Chinese have a zero-tax policy to companies like these because they operate in agriculture, and this isn't expected to end until July 2008. Sweet deal.

They are expected to come out with a pretty awesome Q3 and Q4 (historically good quarters) because of new contracts and orders, which a bulk of is usually realized in these two periods. So there's a pretty good 'catalyst' if you can call it that.

Alright, I'm almost sold on this stock.

No comments: