China has been one of the worst performing emerging markets this year. Corporate mistrust and economic as well as political uncertainty are three factors that have combined and spooked investors away from the world’s second-largest economy. However, as a contrarian and value investor I am attracted to the Chinese market in search of deep-value deals and turn-around plays.
Chinese companies have bad reputations
Nevertheless, Chinese companies do have a reputation for aggressive as well as misleading accounting. So, investors should proceed with caution in this market. That being said, here are three Chinese ADR’s that currently appear to be trading below their cash value per share and deserve further research.
1. CNinsure Inc. (NASDAQ:CISG)
CNinsure Inc. (NASDAQ:CISG) is an insurance intermediary company, which provides insurance brokerage and claims adjusting services within China. In addition, the company sells insurance products spanning a range of markets to individual customers. CNinsure also provides consumer financial products and services, and wealth management products and services to individuals. At present the company has a market capitalization of $247 million and an average daily volume of 81.6k shares.
At the end of the fiscal third quarter, CNinsure Inc. (NASDAQ:CISG) reported a cash balance of $371 million, which works out at around $7.42 per ADR. Moreover, book value per ADR at the end of the third quarter stood at $10.16.
2. Linktone Ltd. (NASDAQ:LTON)
Linktone Ltd. (NASDAQ:LTON) provides entertainment content to mobile phone users within China and Indonesia. The company offers entrainment through short messaging services (SMS), including ringtones, icons, screen savers, interactive SMS messaging in television programs, adventure, action, trivia and fortune-telling games, horoscopes, jokes, fan clubs, and event-driven or entertainment news updates. Currently, the company has a market capitalization of $102 million and an average daily volume of 25k shares.
According to Linktone Ltd. (NASDAQ:LTON)’s first half results, the most recent available financial data; the company had net cash and short-term investments of $130 million ending June 30th. This works out at around $3.2 per ADR. Book value per share for the period was US$4.2. The company had $7 million in short-term debt.
3. Actions Semiconductor Co., Ltd. (NASDAQ:ACTS)
Actions Semiconductor Co., Ltd., a fabless semiconductor company. The company offers integrated platform solutions, including SoCs, firmware, software development tools, and reference designs for manufacturers of portable media players and smart handheld devices, such as tablets. Actions also offers semiconductor product testing services. At present the company has a market cap of $192 million and an average daily volume of 58k shares.
Actions Semiconductor Co., Ltd. (NASDAQ:ACTS) reported a net cash and short-term investments position of US$220.3 million at the end of the company’s fiscal third quarter. This works out as a cash balance per ADR share of US$3.2. Book value per ADR share stood at $4.12.