News blog
China Growth Opportunities Ltd
- BY: Andrew Hore |
- POSTED: 30/11/2008 |
China Growth Opportunities Ltd is currently valued at a similar level to its cash in the bank.
That means that there is little value put on its investments. The shares jumped 3p to 11.5p a share, which values CGO at £5.75m. There was £3.7m of cash in the balance sheet at the end of September 2008 but since then the Asia Wind stake has been sold for £2m. Even allowing for ongoing operating costs the underlying cash position should still be more than £5m.
The net asset value of the company is £47.2m. That is down from £71.7m six months earlier.
The fall in the value of the portfolio is mainly down to the use of lower PE multiples in valuing the investments. Generally, the PE multiples have been halved. That is in line with the falls in the Shanghai Stock Exchange. Discounted cash flow valuations are also calculated. Some of the investments have also been hit by short-term financing problems which has hit their valuations. This has partly been offset by the strengthening of the US dollar.
Putting a value on unquoted investments is an inexact science and there is no guarantee that the stated values can be turned into disposals at those valuations. Even so, the investmentsshould have some worth.
CGO, which used to be known as London Asia Chinese Private Equity Fund, is a Guernsey-based investment company specialising in Chinese companies. Many of the investments are focused on the cleantech and the water technology sectors.
Executive director Simon Littlewood says that most people have given up on this year and are waiting for next year, which makes it difficult to raise finance. Many of the US banks are withdrawing from Asia and the Chinese banks have not been keen to lend, although Littlewood says that they have solid balance sheets.
Littlewood says that although growth rates in China are falling the economy is still growing. The government has told banks that they can start to lend again.
Littlewood believes that things should turn for the better for the company in the middle of next year. He thinks that there will be buying opportunities then and there should also be finance available. The strong balance sheet means that CGO will be around to take advantage of the upturn when it does come.
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