MHJ a possible "undiscovered" Chinese play

[mystiky]

I hope everyone is having a nice Thanksgiving today and not getting too much heartburn.

Anyhow, with bunch of Chinese stocks running wild for the past few weeks (like EFUT, GRRF, CYD, CHNR, JST, CLWT, and others), I started to look for some "sister-plays". There were quite a few but one that I found interesting in MHJ, which trades on the AMEX.

Man Sang Holdings, Inc., (MHJ) through its subsidiaries, engages in purchasing, processing, assembling, merchandising, and wholesale distributing pearls, pearl jewelry products, and jewelry products. Its product lines include freshwater pearls, Chinese cultured pearls, Japanese cultured pearls, South Sea pearls and Tahitian pearls, pearl jewelry, and other jewelry products. The company also provides assembled pearl jewelry, including necklaces, earrings, rings, pendants, broaches, bracelets, cufflinks, and miscellaneous pearl products. In addition, Man Sang owns and operates a commercial real estate complex in Shenzhen, People's Republic of China. Its customers principally include wholesale distributors and mass merchandisers in Europe, the United States, Hong Kong, and other Asian countries.

It's a small floater (2.4 million shares), and the avg daily volume is around 10K. Interestingly enough, it traded almost 3x daily avg on Wed. What also has attrracted my interest is that the company is profitable with growing margins. The P/E is around 12.

I am thinking that if it can get over 4.80, it can run into the 5.10 area. Here is a basic chart that I have:

http://stockcharts.com/h-sc/ui?c=mhj,uu[h,a]dhclyymy[pb10!b30!b50!d20,2][vc60][iub14!la12,26,9!lp14,3,3!lf!lc20]

Would love to hear some thoughts from others on this "find". For sure, this is quite speculative, but maybe worth to keep one's eye on.

Gobble...gobble...gobble...

[Gwhiz]

Thanks for pointing out that stock Mystiky.

I looked at it and it's pretty interesting.

I listened to the most recent conference call and they actually have a lot of real estate value that is not represented in their book value becuase they bought 27 blocks of a city in china in 1992, and that is still being shown at cost, and the real estate market in china has been going crazy since then.

Also, I had a few questions about the company which I emailed them:

I see that your Sales have been decreasing.
Why is this?
Will Sales likely continue to decrease?

Also, I see that your margins have been improving.
According to the Sept. 30 report, this is because of a "change in sales mix"
Could you please further explain this and include whether future improvements in margins are likely?

Why has your Sales and General administrative expense increase recently despite a decrease in Sales? Could you please explain the reason because as Sales decrease this expense should decrease as well.

What is your growth outlook for the next year, and the next five years? What percentage of growth do you expect for both Sales and net income?

As gold and oil prices continue to rise, how will this affect your business? Please fully explain this point.

Finally, what are your expectations for future labor costs? I am aware that overall labor costs in china have been increasing dramatically. How will this affect your business?

What are your future expectations for interest income. You mentioned in the quarterly report that interest rates had gone up. Will interest rates in china continue to go up? What future interest income can you expect for the foreseeable future?

[mystiky]

emailing MHJ

Gwhiz,

Nice little find on the "real estate" part. Did not even realize that had this!
Please let us know how they have replied to your direct inquiry.

I actually wrote their "IR" with a general inquiry, and got an almost immediate reply. In case you don't hear back from them, here is the email that I used to contact them:

Sonny Hung (Director & Assistant to the Chairman)
[email protected]

Here is the reply that I got from them a few hours ago:

"Your suggestions are very useful and constructive to us, unlike other companies in Asia, we understand that we should act and think like a US company. So we will fine tune our Investor Relationship strategies including press releases, investor presentations and others. Something that I want to share with you, we have a very high level of corporate governace that differentiate us from other companies - first of all, we are filling 10Q/K instead of 20F, we have MRM as our auditor, Baker & Mckenzie as our Hong Kong legal adviser, Paul Hastings as our US lawyer. For Investor Relations, we have Altman Group. We have the Audit Committee and Compensation Committee that they are very very experienced and professionals since Day 1 we listed in US.

As we are on the other side of Pacific, we cherish shareholders’ common hope of raising the company’s share value by consistently working hard in our core business and investor relations activities, you suggestions are treasured."

[mrmarket]

I'm not really in love with this one. I don't like the way the stock has been lingering and I also don't like the lack of revenue growth. Good luck with it, however.

[mystiky]

MHJ traded 300 shares today!

Well, at least it's nice to know it's not a pump & dump.

Still like the story and the possible run.

If stuff like PNTR can run, why not this one...

[Gwhiz]

Dear Mr. Martindell,

I deem that you have sent the questions to our CFO before and he has given you the answers.

Sales/ Revenue decreased are resulted from the decreased sales of South Sea pearls, partially offset by an increase in sales of assembled finished pearl and jewelry products.

We cherish shareholders’ common hope of raising the company’s share value by consistently working hard in our core business. So..... we work hard in enhance the products mix and improve the margins. The old book: "How to double your profit within 1 year" (Like "how to swim with the shark without being eaten alive") stated that there is no magic in double your profit - increase sales, cut costs and increase margin. In our last 10K, you may discover the high oil price together with fluctuating gold price affect market demand and customers reacted conservatively in placing their orders. About other questions that you have asked they are rather standard in other manufacturing companies, but not apply in our case, "interest income - we do not have deposit in China (chinese currency is RMB or Yuan, it bears only around 0.25% per year in HK).

About the tax rate, I have answered you in last e mail. We may not go thru the detail tax arrangements with you as they are complicated and more essential confidential.

May we be excuse that as some of your questions are fall into "fair disclosures" or "forward looking", so I do have have them answered.


Thank you


Not very enlightening...

CFO never replied.

Are the questions I asked really too "forward looking to answer"?

No experience with this kind of thing.

[mystiky]

Mhj

Gwhiz:

Well, I am not dissapointed by the answers you got. Many companies would just 1) completely ignore the inquiry or 2) give you a generic reply.

My idea on MJH is that it has still not been discovered by almost everyone. Chinese plays are on fire, and with many, when traders get a hold of a low-floater (such as MHJ), they could easily run it up 50%+. If I can find an investment at $4.50 and sell it at $7-$8, I would never complain.

Things like EFUT (runs from $10 to $50+) are almost unheard of, but looking at co's like CLWT, TSTC, ATEA within the past week or so gives an excellent idea what can happen.

I have long ago learned about the "trends" and "mo-mo" of the market. MHJ just looks like it could be the perfect stock to fall into that category.

Dear Mr. Martindell,

I deem that you have sent the questions to our CFO before and he has given you the answers.

Sales/ Revenue decreased are resulted from the decreased sales of South Sea pearls, partially offset by an increase in sales of assembled finished pearl and jewelry products.

We cherish shareholders’ common hope of raising the company’s share value by consistently working hard in our core business. So..... we work hard in enhance the products mix and improve the margins. The old book: "How to double your profit within 1 year" (Like "how to swim with the shark without being eaten alive") stated that there is no magic in double your profit - increase sales, cut costs and increase margin. In our last 10K, you may discover the high oil price together with fluctuating gold price affect market demand and customers reacted conservatively in placing their orders. About other questions that you have asked they are rather standard in other manufacturing companies, but not apply in our case, "interest income - we do not have deposit in China (chinese currency is RMB or Yuan, it bears only around 0.25% per year in HK).

About the tax rate, I have answered you in last e mail. We may not go thru the detail tax arrangements with you as they are complicated and more essential confidential.

May we be excuse that as some of your questions are fall into "fair disclosures" or "forward looking", so I do have have them answered.


Thank you


Not very enlightening...

CFO never replied.

Are the questions I asked really too "forward looking to answer"?

No experience with this kind of thing.

[Gwhiz]

Gwhiz:

Well, I am not dissapointed by the answers you got. Many companies would just 1) completely ignore the inquiry or 2) give you a generic reply.

My idea on MJH is that it has still not been discovered by almost everyone. Chinese plays are on fire, and with many, when traders get a hold of a low-floater (such as MHJ), they could easily run it up 50%+. If I can find an investment at $4.50 and sell it at $7-$8, I would never complain.

Things like EFUT (runs from $10 to $50+) are almost unheard of, but looking at co's like CLWT, TSTC, ATEA within the past week or so gives an excellent idea what can happen.

I have long ago learned about the "trends" and "mo-mo" of the market. MHJ just looks like it could be the perfect stock to fall into that category.

That's certainly true, and it looks like it may have just started a new uptrend so MHJ looks viable from that perspective.