My ~2% position in Duoyuan Global Water (DGW $13.02) is up ~8% after reporting third quarter results that exceeded expectations. While all three segments helped drive the 35% revenue increase, the main growth driver was water reuse equipment, up 42% y/y. Most important, management expects revenue to increase 29% in constant currency for C2011, compared to the street estimate of 23%. Given my expectation of the yuan rising against the dollar, the growth should look larger for U.S. investors.
Part of what I love about this position is the high short interest, 11% of shares outstanding. These are buyers at some point. As fundamentals continue to favor bulls these shorts will eventually cover. DGW currently trades just over 8x the consensus C2011 EPS estimate, which likely goes up when the updated estimates come out tomorrow since the current consensus projects only a 7% increase next year.
No comments:
Post a Comment