Tuesday’s trading session will feature another “Triple Threat” of a penny stock which every trader should see: Wuhan General Group (China) Inc. (OTC: WUHN). Following the success Chinese penny stocks have given off our web-alerts like the 2840% China Logistics Group (CHLO) gave to start the year and the 106% Great China Mania Holdings (GMEC) gave on Friday, WUHN stock is a must have on the watch list at the pen tomorrow. With an insane amount of cash and other highly liquid investments as of their last Q filing, $40.33 million, you would have to have dental floss covering your eyes to miss out on this former NASDAQ listed penny stock alert.
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WUHN Stock Chart
Market Cap: 1.28M
Last: 0.0395 ▼ -0.0105 (-21.00%)
Dollar Volume: $5,549
Issued and Outstanding: 32,505,000
14-Day Rel Strength: 42.56%
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While CHLO stock is still up 703% since our alert and GMEC is still in play from the bounce alert on Friday, WUHN stock is a day traders dream. Wuhan General Group (China) has been engulfed in pessimism since mid-2012 when Nasdaq compliance (see here) became an issue for the multi-million dollar revenue reporting company. With Citigroup Inc. (NYSE: C) recently reporting the liquidation of all its shares (see here), OTC traders will be having a feast on their abandonment.
The Company is due to release its 10-K which will include the operating activities for Q4, 2012, within the next month. Sales were decreasing significantly as of September 30, 2012, $67,832,613 for the nine months ended compared to $92,883,756 for the same period in 2011, while operating income decreased by more than -50% during the same period, $11,345,743 for the nine months ended September 30, 2012 versus $23,089,846 for the same period in 2011. This steep decline in sales during 2012 is quite a shock considering the pace Wuhan General’s sales and gross profit wee already declining over the last two calendar years:
|Dec. 31, 2010||Dec. 31, 2011|
|Cost of Sales||97,676,431||83,949,091|
The sudden decline in sales coupled with the growing debt in short term bank loans and notes payable, $133.01 million as of September 30, 2012 versus $113.97 million as of December 31, 2011, is a clear indicator as to why Citigroup has pulled out of their investment in WUHN — 3,324,935 shares, 9.9% of the shares outstanding, as of April 30, 2012 (see here).
Wuhan General Group (China) makes extensive use of computer-aided design, CAD, & computer-aided engineering, CAE, in their design phase of power generation equipment manufacturing as evidenced by their licenses listed under intangible assets. While’s it’s a great line to throw out with the success companies focused on developing 3-D printing have had, it’s a function used, not the primary focus of their operations. Don’t expect WUHN to suddenly challenge the market share of any of the following companies also using or focused on 3-D printing:
- Stratasys Ltd. (SSYS)
- 3D Systems Corp. (DDD)
- Perceptron, Inc. (PRCP)
- Cimatron Ltd. (CIMT)
- Organovo Holdings, Inc. (ONVO)
Since the Company’s two operating segments, Wuhan Blower and Wuhan Generating, are the “bread and butter” after discontinuing operations from their Wuhan Sungreen segment, sales for the coming year should be expected to continue to be lower than previous years. That said, the Company is still economically viable and WUHN stock considerably undervalued assuming the Nasdaq inquiry regarding the departure of Philip Lo, the former CFO and Treasurer of the Company, on January 18, 2012 wasn’t a huge red flag for investors.
Those details aside, there is plenty of juice still left in the tank for WUHN stock to have a breakout session on Tuesday and put a quick triple digit gain into any traders portfolio as long as the approach is clear — day trade!
About WUHN Stock
Wuhan General Group (China), Inc., through their China-based operating subsidiaries Wuhan Blower Co., Ltd., Wuhan Generating Equipment Co., Ltd., and Wuhan Sungreen Environment Protection Equipment Co., Ltd. (fka Wuhan Xingelin Machinery Equipment Manufacturing Co., Ltd.), is a holding company whose Chinese operating subsidiaries are held through their wholly owned subsidiary, Universe Faith Group Limited. The Company’s primary business operations are conducted as follows: (i) Wuhan Blower, a manufacturer of industrial blowers that principally are components of steam driven electrical power generation plants, (ii) Wuhan Generating, a manufacturer of industrial steam and water turbines, also principally for use in electrical power generation plants, and (iii) Wuhan Sungreen, a manufacturer of blower silencers, connectors, and other general spare parts for blowers and electrical equipment. Click here to view the SEC filings for WUHN.
Last 5 Trading Sessions:
Bottom Line: Chinese penny stocks have been bery-bery good thus far to play off alerts this year and WUHN should be another hot one. Assuming a gap open as high as .105, the HOD from Friday, expect a volume spike to land on the chart of WUHN stock as large as the Great Wall of China in terms of being able to be seen from a distance — another reason why day trading this illiquid former Nasdaq lister is the best approach. One must remember, as stated on the Company’s last 10-K: A renewed outbreak of SARS or another widespread public health problem such as new strains of avian influenza or the H1N1 virus (swine flu) in China could have a negative effect on our operations.
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