Xinyinhai Tech (PINK:XNYH)

Added to the GeoSpecial list on October 22, 2009 @ $0.38
 
Catalyst: Stock was selling it book value per share; XNYH provides services to China’s banking sector, Speculation that account receivable situation would improve.
Peak performance: Reached a high of $0.45 on October 22, 2009
Current Price: $0.21
 
Current road block:  Lack of investor awareness; Financial printing equipment operations are remain weak; Company has still not exhibited significant EPS gains during a time when China has experienced substantial growth:

"In the first quarter of 2010, which ended on March 31, 2010, the effect of the recession was most dramatic in our equipment distribution business, where revenues declined by 73% to $147,168.  The decline in equipment distribution reflected delays in the construction of new manufacturing facilities in China, as potential customers wait to see whether demand for their products is revived."

Remains on the GeoSpecial list.  XNYH still sells below its book value share of $0.70 and maintained profitability in its 2010 first quarter. The EPS numbers have been meager, but the company's new printing facility is fully operational, and management expects the traditional growth of its financial note printing business to be renewed. We are not quite sure how dramatic the growth will be and have attempted to contact management on several occasions, but to no avail.  It is our opinion that investing in XNYH is a high risk situation until the company reports meaningful EPS and improves its communication with shareholders.

Liquidity appears to be intact:

"Harbin Golden Sea’s business plan calls for significant investment in the growth of Harbin Golden Sea during the next twelve months. We are purchasing new equipment for our new production facility. We also plan to invest in the development of additional product lines. To accomplish those goals, during the third quarter of 2009, we obtained a $2.9 million bank loan collateralized by our real property. The loan bears interest at 5.31% per annum and is due in the third quarter of 2010. We are utilizing the borrowed funds to implement the capital improvements necessary for our growth. Because the loan amount is substantially less than the value of our real property and because we are operating profitably, we expect to be able to refinance the loan when it matures.

"With the proceeds of our bank loan, we held $2.0 million in cash and equivalents at March 31, 2010. We will have no debt payment obligations until the bank line comes due in the third quarter. And, in accordance with customary banking practice in China, we expect that the bank loan will be extended when it reaches maturity, provided that our financial results are satisfactory to the bank. For that reason, we expect our liquidity will be sufficient in the next year to fund our ongoing operations as well as our near-term growth."