Wednesday, February 24, 2016

Seeking Alpha: Geely Automobile On A Better Road

Following Geely Automobile (OTCPK:GELYY) (0175.HK) is an interesting experience, as the volatility gives you a lot of opportunities to make buy/sell calls. Back in June of 2015, I thought that Geely's shares could approach $12/ADR as the company started delivering the results of its restructuring and new product launches. The shares did come close to that level before year-end - before concerns about sales momentum, subsidies, the health of the Chinese consumer, and assorted other issues led to a nasty decline.

From an operational standpoint, I think Geely is in better shape than the market valuation suggests. At a minimum, I wouldn't overlook the fact that Geely has shown it can develop new models that are competitive with foreign/JV models. There are definitely valid concerns here, including the corporate structure, the heavy influence of government subsidies, the health of the Chinese economy, and the healthy of the export business, but the shares seem to more than reflect those concerns. If you have an elevated appetite for risk, this could be a name to consider.

While the ADRs do trade from time to time, I would recommend investors consider the far more liquid Hong Kong-listed shares.

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Geely Automobile On A Better Road

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