Companies: CHNS    ETC    GNG   

Small-cap specialist Seymour Pierce has issued a note urging investors to consider revisiting companies from the People’s Republic of China. ‘We think there is a realistic prospect that China will not only revalue its currency this year but may continue to do so over the next few years…[and] in the event that we are right, many of AIM’s Chinese companies ought to be beneficiaries,’ says Seymour Pierce, adding that ‘a stronger yuan will bolster UK sterling-translated profits’.

Stock selections include industrial battery manufacturer China Shoto (see page 8), £38 million travel agent ET-China and £15.6 million software provider Geong International. China Shoto ‘is now a major industrial concern with a very strong position’ and its high growth rates are expected to continue in 2008 and beyond. ‘The rating of the group is at a substantial discount to Western industrial businesses, which are likely to find such high growth rates harder to come by.’

With all divisions showing strong growth, ET-China is ‘on schedule to meet our net profit target of £1.1 million for the financial year 2008’ and may even surpass that forecast thanks to significant marketing spend this year.

A platform for growth
As for Geong, it ‘has the platform to sustain steady organic growth of at least 40 per cent at a 40 per cent gross margin for the foreseeable future. But it also has substantial capacity and resources to surpass that growth level with judicious and earnings-enhancing acquisitions.’ Geong’s products are now available in English and, having inked agreements in Canada and the US, further growth is likely to ensue.

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