Message Font: Serif | Sans-Serif
No. of Recommendations: 8
I am new to global gains


are you still behind china fire?

Yes, in that I think the company has good long-term prospects for growth and that the stock is selling for a reasonable, though not outlandishly cheap, valuation.

That said, China Fire is a small-cap Chinese company that we consider an aggressive/emerging Asia pick, and I believe you want to hold a volatile stock like this within the context of a diversified global portfolio.

For my information on that, see our special report on asset allocation guidance:

Can you explain why one quarter would be weaker than another in this industry.

Like any construction company, China Fire relies on contracts with clients to generate business. China Fire's clients are, generally speaking, large state-owned companies in China that work in the iron & steel, power generation, and petrochemical sectors. When these companies need fire detection systems installed in their facilities, they call China Fire.

However, there is no constant dealflow here. A company will only need a fire safety system if it is building a new facility or if it decides it has money in the budget to retrofit an old facility.

What China Fire saw in Q1 was clients holding off on starting new projects because 1)it was the two week Chinese New Year holiday and 2)they may not have had the money. Thus, the company claimed these companies deferred projects to later in the year when they would have the money. Given that the company did not revise its guidance, this leads me to believe that they believe the Chinese economic stiumulus funds, which were largely distributed to SOEs by reports, are starting to flow through the system and revigorate capital projects planning.

I hope that answers your question and that you found it helpful.

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.