Selling July 7.5 Puts on CBEH
Posted: 25 May 2010 11:23 AM   [ Ignore ]  
Total Posts:  49
Joined  2008-05-06

May 25, 2010 – Selling July 7.5 puts on China Integrated, at $0.50. The company recently guided for FY10 revenues at $387 million and net income at $49.5 million. If the stock moves below $7.50 and we get put the stock, we own it at $7 (exercise price less the premium received to sell put). At $7, our entrance point is at a $299.6 million market cap, or .77x this year’s guided revenue and just over 6x this year’s guided earnings.

The company has a diversified fuels (petrol and biodiesel) business in a growth market – China, with expanding distribution. A $7 entrance point, in our opinion offers little downside risk if we are put the stock. If the stock maintains above $7.50 between now and the July expiration date, we pocket the premium on the put.

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