Cogo Group, Inc. (NasdaqGM: COGO)
With any Chinese company it is critical to know that the company is truly in the business it is said to be in. On the smallcaps there have been many issues in recent years, particularly with bulletin board and pink sheet Chinese stocks. That is why I want to see the real and provable clients and partners before I truly believe. I can say this with certainty in my opinion COGO is definitely undervalued – but that’s just my opinion. Let me tell you why I think that is the case.
The rather odd press release of July 15, 2013 shows the Chairman and CEO of COGO acquiring 30.4% of Cogo’s net assets. These assets – according to the release – generated 98.7% of the Company’s assets via a company he – CEO Jeffrey Kang – wholly owns.
Here’s why I like shares of the stock now. Quoting from that release:
As a condition of the proposed transaction, Brilliant Group would be required to pay $750,000 to Cogo on a quarterly basis for Cogo’s remaining subsidiaries and the target companies to continue to provide cross guarantees to each other until the end of 2014. Consideration is proposed to be payable in 2 installments, of which $10 million would be payable on Closing and $70 million by the end of 2013.
Upon completion of the transaction, Net Asset Value of Cogo shares is expected to be more than $6 a share. At the NASDAQ close on July 12, 2013, Cogo’s share price was $2.05 a share.
I would have to think that at least 80% of that net asset value should be priced into the share price. REMEMBER – THIS IS CASH. There is no better asset to make a stock trade close to the net asset value.
They have a conference call on Thursday August 15, 2013 at 8:00 PM Eastern Time US. That’s probably a great thing to hear before jumping in.