Quickly ramping production to meet current and anticipated demand
Confident in our ability to deliver record performance in 2010.
Q3 looks good, Q4 will be better: not unlike the comments to Zack Buckley — and this shouldn’t surprise anyone following the story. Zack’s notes are at the bottom.
“We are also very excited to begin fulfillment of our large scrap supply contract over the remainder of the year.” Going to try to deliver the entire $100M contract by the end of the year. I don’t expect them to do so.
“We are aggressively looking to add other steel customers to our scrap operations and anticipate adding additional customers as we move forward to 2010. We also intend to execute on our plans to add a second facility to increase our capacity should our sales warrant it as we move through 2010.”
Downward revised guidance:
$180M Top Line
$10M Bottom Line
1M metric tons
500K metric tons
60% capacity
300K metric tons
$110-$130M revenues – just recycling,
$25M Q1 Q2, Top line to do: $155M Q3, Q4
Better than $25M in trading Q3, Q4
Shareholder structure:
14.7M shares as of June 30, 2010
1.4M $5 warrants
1.5M $7.50 warrants
=
17.6M shares fully diluted
Given guidance:
$150M
10.5M
7-8%
Forward Calculations: In 2009, they did 86M Revenues, $5M net income.
If they expect 60% for the rest of this year adds $120M in revenues
Their assumptions of 300K metric tons of recycling yielding $110-$130M in revenues puts per ton prices at $400/metric ton
at 7.5% net margins:
Given that they have done $25M Q1Q2 Top line that implies $155M Q3Q4, out of which $120K comes from recycling and $35M comes from their trading business
They also haven’t made any money for the year and are forecasting $10.5M in profits in 1/2 a year at 60% capacity of their new recycling facility.
This is equivalent to $0.596/share in just half a year.
So, normalize this and run it into the first half of 2011 to get a FP/E and you get $310M Revenues — $23.25M net income — $1.32/share
if they hit 100%, that’s $70M + $400M = $470M revenues, $35.25M net income, $2/share
the upside here is if they ever run at 100%, which sounds likely as they are already guiding that they have plans to add an additional facility, possibly starting before EOY
for each recycling facility they build, it adds up to $1.70/share.
The current stock price is $4. forward p/e of 3 at 60% utilization.
The current stock price is $4. forward p/e of 2 at 100% utilization.
The current stock price is $4. forward p/e of 1.08 at 2 plants 100% utilization.
note that they have identified the issue in procuring supply. this implies that demand apparently is huge?
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Zack’s Notes:
China Armco Metals (NYSE AMEX:CNAM) began operating a scrap metal recycling facility this year and is also an iron ore distributor.
Q – How are earnings looking for the rest of the year.
A – 2nd quarter – no response; 3rd quarter – should be strong; 4th quarter – should be stronger than third quarter
I was able to talk with the CNAM representative after the conference on the first day, and he explained that CNAM would be changing several things with their company in the next year, including the auditors. He also pointed out to me that the only potential issues with the new scrap metal recycling factory is not the demand for the metal, but actually the supply of metal for the factory. I was worried that the demand would not be there for the factory, but he said demand is very high, so they are focusing on supplying scrap metal, which is more difficult.
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Another thing still in the air out there:
CNAM – Dear Mr. Bradford,
Thank you for your inquiry on China Armco Metals regarding Crisnic Fund. The company is releasing the following statement in regards to Crisnic Fund’s press release on August 9, 2010 at this time:
Kexuan Yao and China Armco Metals denies the statements made by the Crisnic Fund SA in its August 9, 2010 press release. Mr. Yao has been in discussions with the Crisnic Fund to return 1.3 million shares of his China Armco Metals stock he pledged to Crisnic Funds SA as collateral for a loan that was never completed. Following unsuccessful efforts on Mr. Yao’s part to resolve the dispute, Mr. Yao intends to take legal action against the Crisnic Fund and other individuals involved in the transaction to recover his shares of China Armco Metals stock and damages and vigorously defend any action by the Crisnic Fund.
Should you have any further questions, please let me know.
Best regards,
Lillian Wong
U.S. Representative
China Armco Metals, Inc.
954.363.7333
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CONFIDENTIALITY NOTICE: The information contained in this e-mail message and its attachments is intended solely for the use of the individual(s) to whom it is addressed and may contain trade secrets or information that is the confidential information of China Direct Industries, Inc. and its subsidiaries. If the reader of this message is not the intended recipient, you are hereby notified that any dissemination, distribution, or copying of this e-mail is strictly prohibited. If you have received this communication in error, please immediately notify me and destroy the original message. Thank you.
From: Glen Bradford [mailto:globalspeculation@gmail.com]
Sent: Tuesday, August 10, 2010 5:17 PM
To: ir@armcometals.com; Info@ArmcoMetals.com
Subject: Spam> Crisnic Fund
Came across this information:
http://www.newswire.net/newsroom/index.php/permalink/69140.html
Crisnic Fund entered into a loan transaction with Yao secured by 1,300,000 shares of common stock of China Armco. The shares were transferred by DWAC transfer into the account of Crisnic Fund and were purportedly freely tradeable and available for sale. In reliance on the transfer, Crisnic Fund wired $1,000,000 to Yao. In truth, Yao had defrauded Crisnic Fund, the Company’s transfer agent, and possibly even the Company as to the nature of the shares. As a direct result of these actions, Crisnic Fund has been damaged not only with respect to the funds wired, but with respect to business activity at the broker, the clearing firm, the transfer agent and with respect to its business reputation in general. The litigation seeks damages in excess of $5,000,000 for these matters.
Securing a $1M loan with $5M worth of stock. What seems to be the problem? They are suing for $5M for this?
I was just curious if this was a real suit or it was fake or if you’ve even entered into a loan transaction with the Crisnic Fund.
Do Not Lose,
Glen Bradford
CEO ARM Holdings LLC
VP China Growth Partners
www.glenbradford.com
www.armholdingsllc.com
www.chinagrowthpartners.com
None of the above is intended as investment advice. I can’t guarantee the information I gathered is from an accurate source. I may buy or sell any stock or security without prior notice.
Disclaimer: http://www.glenbradford.com/disclaimer.php