This morning I spent the proceeds from the sale of my shares in Hutchison Whampoa (13) on shares in China Zhongwang (1333), paying an average of $7.22 per share.
China Zhongwang was listed earlier this year. It's business is the development, manufacture and distribution of aluminium products. It's products have a number of uses - transportation and infrastructure being the main ones but also industrial machinery. As such the company is a proxy for both government spending on infrastructure and car manufacturing.
The latest interim report showed a clean balance sheet with cash on hand exceeding the aggregate of long and short term liabilities. It is audited by a big four audit firm.
The company's share price suffered a set back when a local publication alleged that the company's prospectus contained a misrepresentation (falling from a high of $11.30 to a low of $6.51). The person making the allegation has since retracted. The company has also appointed an independent firm (Ernst & Young) to review the basis of the allegation and report to shareholders. That report is outstanding.
Brokers have mixed views on the stock. Morgan Stanley has an overweight rating with a price target of $12.39 which leave considerable scope for further upside once investor confidence returns. Morgan Stanley was not one of the joint global co-ordinators in the IPO.
Horrible price action on 1333 these past 2 days. Even though 7.22 was a good level to buy in at based on resistance around this and 6.95 it as fallen 15% in the past 2 days with no news. The concern is that these Chinese companies are not transparent enough although prospects and opportunities are good as you say. News flow has to improve as the volume of shares traded this week clearly shows that news is leaking out about something....
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