China HongXing Fundamental Analysis and Chart Pattern

China HongXing Fundamental Analysis

  • Current Price = $0.16
  • Current NAV = $0.30
  • Current PE = 15.36 (At Fair Value)
  • Rolling PE = 31.68
  • Dividend Yield = 2.78%
  • FY09 Net Profit Margin = 6.6%
  • FY09 ROA = 2.9%
  • FY09 ROE = 3.1%
  • FY09 Current Ratio = 21.3 (CASH RICH!) 
  • FY09 Debt to Equity = Net Cash
  • Net Cash per share = $0.12

What can a company do if the company is cash rich?

  1. Shares Buy Back. –> Improve EPS  –> Lower PE –> Stock valuation is cheaper.
  2. Pay Extra Dividend to share holders.
  3. As a target to be acquired by other competitor. The other company just needs to pay $0.16 per share to get $0.12 net cash per share.
  4. Acquire other company or brands to boost revenue and profits.
  5. Buy back all the shares and delist from stock market.

China HongXing Current Chart Pattern

China HongXing is currently showing a Bullish (Declining) Flag pattern. This is a continuation pattern in an uptrend. $0.155 should serve as a strong support as 200D MA support.

In summary: China HongXing is suitable for short term trading but not for long term investing due to weak fundamental. However, there may be some surprises in stock price due to the company strong cash position and the current stock price is 47% discount to the NAV.

This Post Has 9 Comments

  1. CH

    Hi Marubozu, in which you knowing that this stock is Fundamentally weak? I not yet done the analysis. Thanks.

  2. ric

    hi Marubuzo,
    Don’t you think that this counter might be forming a cup and handle pattern?
    Just my 1 cent worth of thought 🙂

  3. Grace

    Hi Marubuzo

    since 0.155 is a good support, is it a good price to buy China HongXing at this price? what is the next level of resistance? thanks for yr advice

  4. Marubozu

    Hi ric,
    Yes. I can see the Cup and Handle (from Jan 2010). Currently China HongXing may be forming a handle. Thanks for pointing this out. Seems like all the chart patterns pointing to a potential bullish breakout in future.

    I also attached my comment to Ravi questions here too for the sake of compilation of all the comments.

    Ravi: Marubozu, what is the difference between a downtrend channel and a bullish declining flag? They look the same to me.

    Marubozu : @Ravi (19Nov2010): It depends on your time scale of your chart. If you look at the chart from Oct to Nov, you are right that it is a short term down trend channel. If you zoom out to look at the chart from Aug to Nov, it is a bullish flag pattern. If you zoom out further from July to Nov, it is a potential Elliott Wave. While doing the chart analysis, we need to change to different perspective to see different patterns.

  5. Marubozu

    Hi Grace,
    Base on the chart, Yes.
    $0.155 should be a strong support as it is the 200D MA Support and also 50% Fibonacci Retracement Support.

    Next resistance is $0.177 (61.8% FR) and $0.209 (78.6% FR). You can click the chart I have posted for a detail look. Base on the chart patterns, I expect China HongXing price to go up to minimum $0.21 after breakout.

    However, all previous chart pattern analysis will no longer valid if China HongXing breaks the 200D MA support of $0.155.


  6. Marubozu

    Hi CH,
    I base on my criteria.

    Running a business with a single digit profit margin show China HongXing does not have wide economic moat and facing great competition. There is no margin of error if the management makes wrong business decision and that can lead to the company to lose money. The plus point is China HongXing has lots of cash. However, all the big problem will start if China HongXing starts losing money and starts to have negative operating cash flow.


  7. Robert Lee

    hi, perhaps something may happen after meet 0.145.

  8. Marubozu

    $0.155 support broken! Panic selling due to North, South Korea trade artillery fire!

    TA and chart patterns can be thrown away when there is such news!

  9. Robert Lee

    May reach $0.155-$0.180

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