As the market decides whether it is ready for a return, bargains are quickly disappearing. Those solid companies that were beat down but held value are starting to rise in price from where a bottom fishing expedition could return solid profit. Bank of America, Alcoa and, to a lesser degree at the moment, US Steel are just a few opportunities where buying at the bottom has doubled the investment. These opportunities won’t last much longer but if an investor can find them there is still profit to be made.
China Precision Steel Inc., a manufacturer and marketer of precision cold-rolled steel products, works to provide and market a range of steel products to the automotive, saw blade and textile needle markets. The company has been experiencing the same slowdown that other industries around the world have been experiencing, but is online to be a large beneficiary of the Chinese stimulus. The company is based in Hong Kong and serves Indonesia, the PRC, Philippines, Nigeria and Thailand.
Although an investor might be a bit cautious when considering a Chinese steel company, they should be sure to take a look behind the scenes to understand the company. China Precision Steel Inc. appears to be in a solid position even as one considers the current state of the industrialized world. It is on the leading edge of the Chinese stimulus package, has been courting past customers it was unable to serve in the past due to production capacity issues and is on track to open an additional manufacturing facility in the first quarter of 2010. Although current conditions may indicate a slow growth in the Chinese automotive sector (the generalized term for slow growth in China is approximately 5-6%) the company has been using its slower expectations to expand and diversify its product base for a return to quicker growth.
The company does appear to have a solid balance sheet, current conditions notwithstanding, it has no long term debt and managed to work through the later part of 2008 and first part of 2009 with moderate losses. These losses amounted to $2.6 million, where during a comparable reporting period of one year ago a gain of approximately $13 million was achieved. Although China Precision Steel may be going through the same issues that most industrial producers are going through, it does seem to have weathered the economic storm well and is poised to take advantage of a strong Asian market in the closer term. As a longer term move, China Precision Steel may be one to look at and put away for a robust return down the road.
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