China Shoto misses by a mile - warning from China
Having issued 2 disappointing statements in 2010, China Shoto (LON:CHNS) , the Chinese battery producer has opened 2011 with yet another disappointing announcement covering trading for the year ended 31 December 2010. Further to previous announcements the Company has reaffirmed that it has experienced “challenging trading conditions”. A substantial decrease in the levels of investment made by the three major Chinese telecom operators, to which CHNS is a leading supplier, is expected to adversely affect the Company’s financial performance for the year ended 31 December 2010. The Government fuelled spending of 2009 has slowed and competition has increased, both of which has contributed to a decline in gross profit margins compared to the prior year ended 31 December 2009.(Gross margins Dec 2009: 23.09%; Dec 2008 23.3%)
Although the trading performance did improve during the second half of the year they now estimate that net profit for the year ending 31st December 2010 will decrease by approximately 30% when compared on a year-on-year basis to the previous financial year. Pre-tax profit for the year ending December 2009 was £11.55m and analyst estimates for 2010 appeared to be for pre-tax profit of £16.1m and earnings per share of 59.70p.Maybe I’m misreading things but with December 2009 net profit £10.3m a 30% fall suggests net profit of approx £7.2m and therefore massive miss if estimates were for pre-tax of £16.1m or net profit of approx £14.5m!
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2 comments
I agree with what rivaldo says above completely. I rarely post on these kinds of forums, but was moved to do so by the incorrect information in the article by investorschampion. As rivaldo says the 2008 figure of £11.55m for the pre-tax profit was used above (2008 £10.29m profit after tax), and the figures for 2009 are £25.07m pre-tax (£23.46m after tax).
I would also agree that investorschampion should either withdraw or re-write his article as the errors mentioned above mean that the final section is misleading and incorrect.
The above article from Investors' Champion is completely incorrect!
He's used the figures from 2008 as his benchmark, not from 2009 - this makes a HUGE difference to his calculations and the thrust of the article as he should be looking at a drop from £23.5m, not £10.3m :o))
He should withdraw his article pronto and revise his stance somewhat given that CHNS actually BEAT forecasts by 15%...
CHNS produced 70p EPS - up from 43p EPS two years ago. Pretty good compound growth, as noted by others here, interrupted by an exceptional year last year in which CHNS earned 98p EPS.
It's worth noting that CHNS had £40m net cash (including short-term investments) at 31/12/09 - this could now be anything between £50m and £58m.
Not bad against a £64m m/cap. even when taking liabilities into account.
To prove that the article is incorrect, firstly In their small cap round up HB say CHNS is a Buy - they too realise that the results are well AHEAD of expectations which were too low:
"HB Update:
China Shoto (CHNS, 257.5p, £59.85m)
China Shoto (CHNS, 257.5p, £59.85m) After a very questionable fall ahead of today’s profits warning CHNS has warned that lower spending by 3 customer in the telecoms will lead to post-tax profits for the year ending December 2010 will be 30% below 2009 (2009 was £23.46m) so implying post-tax around £17.92m. However this was already factored into the view. As such treat the weakness as an opportunity to Buy with a fair value maintained at 360p. BUY (Julian Tolley)."
But most importantly, Seymour Pierce have confirmed here that the historic EPS will be around 70p, i.e 10p EPS more than forecasts. Growth Company Investors say this is a "good buying opportunity":
http://www.growthbusiness.co.uk/news/smallcap-spotlight/1514738/chinese-bump-for-shoto.thtml
It's worth reading yesterday's ADVN thread. Note the way the penny drops as everyone realises that the RNS actually shows profits way AHEAD of expectations and is actually totally misleading in the way that it's been drafted!
Here's the link:
http://www.advfn.com/cmn/fbb/thread.php3?id=22293111&from=1048