China Architectural Engineering, Inc. (AMEX:RCH) went public back in Sept 2007 and was an overnight success. It opened at $4.95 a share and closed at $6. Days later it was in the low $20's and by November it fell back to $6 to $10 a share. Since that run shares of RCH have been floating in the $6 range. They have a market cap of $349 million and despite the recent crush in share price, their $106.3 million backlog for 2008 looks promising.
Just last month China Architectural Engineering said 2008 should be a banner year for the company and announced that its backlog for 2008 currently stands at $106.3 million, which includes 17 separate domestic and international contracts. Of that amount, RCH expects to book $80.3 million in new revenue in 2008 based on contracted projects not yet started, with additional revenue of $26 million from projects already underway. Management says it is especially worth noting that the growth in orders is being propelled by a sharp rise in orders from outside China.
Good for them right? Now when is the stock going back to $20?
Let's check out the financials thanks to Google:
Financials
(In millions of USD)
| Income Statement |
Quarterly
(Sep '07) |
Annual
(2006) |
Annual
(2005) |
| Total Revenue |
27.08 |
64.03 |
49.98 |
| Gross Profit |
6.54 |
17.24 |
13.61 |
| Operating Income |
4.67 |
7.44 |
7.15 |
| Net Income |
3.13 |
6.15 |
5.91 |
| Balance Sheet |
|
|
|
| Total Current Assets |
62.72 |
43.82 |
21.70 |
| Total Assets |
67.99 |
44.86 |
22.31 |
| Total Current Liabilities |
24.03 |
21.78 |
14.02 |
| Total Liabilities |
31.01 |
24.35 |
14.02 |
| Total Equity |
36.98 |
20.51 |
8.30 |
| Cash Flow |
|
|
|
| Net Income/Starting Line |
3.13 |
6.15 |
5.91 |
| Cash from Operating |
0.75 |
-2.98 |
3.52 |
| Cash from Investing |
-3.74 |
-2.88 |
0.99 |
| Cash from Financing |
0.70 |
6.94 |
-7.23 |
| Net Change in Cash |
-1.94 |
1.60 |
-2.48 |
Not bad considering now shares are back to the $6 range which puts the P/E at 39.16. I know, it's not great, but these guys have potential.
China Architectural Engineering which began operations in 1992, specializes in the design, engineering and installation of high-end specialty curtain wall systems, including glass curtain walls, stone curtain walls, metal curtain walls, roofing systems, and related products, for public works projects and commercial real estate. CAE has designed and installed and completed over one hundred major size projects throughout China, including the National Grand Theater, Exhibition Conservatory of Beijing Botanical Garden, The COSCO Tower at Chang'an Avenue Beijing, and the Wumen Exhibition Hall in Beijing's Forbidden City, and a number of commercial structures in Southeast Asia
This company isn't an all out buy, but one to keep on your 'maybe' list. The stock is only down 7% over the last month, which isn't bad considering the DOW is off 4.5% and the NASDAQ is down 8.25% during the same period. Back to RCH's wonderful 2008 backlog, 36% consists of orders for projects outside the company's home market of China. This is a substantial increase in such orders from the fourth quarter of 2007, when they comprised about 21% of the expected revenue total.
For investors looking to get back into a stock that benefits from both China and not dependent entirely on China or U.S. business, this could be your ticket.
Disclaimer: The Author does not hold any positions or shares in the securities mentioned in this publication
