Seeking Alpha: Very Little Seems Expected Of Lianhua Supermarket

How to value publicly-traded companies is a question where you will get multiple answers. I am generally a big fan of discounted cash flow models, while others prefer to look at EBITDA, book value, or PE ratios. I mention this because I think how you approach the valuation question will go a long way toward determining whether you see opportunity in China's Lianhua Supermarket (0980.HK) (OTC:LHUAY).

I don't think anybody will argue that Lianhua is a particularly outstanding retailer, particularly as the market reacted quite favorably to some recent changes in the company's management. I'm not sold on the franchise model for supermarkets over the long run, and the company is going to have to deal with quite a lot of competition in its core markets of Shanghai, Zhejiang, and Jiangsu. If you value Lianhua by its earnings per share, I can agree that there wouldn't seem to be much potential here, but if you look at the cash flow the picture changes quite significantly and Lianhua could yet be undervalued.

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Very Little Seems Expected Of Lianhua Supermarket

Seeking Alpha: CRE Playing The Long Game In China, And Looks Significantly Undervalued

Investors know all too well how challenging it can be to generate long-term gains from Chinese equities. Leaving aside those companies that play fast and loose with accounting or pin their hopes on favored relationships with government officials, there are the rapidly-changing economic trends that may make long-term forecasting even more challenging.

All of that said, I think investors should give serious consideration to China Resources Enterprise (CRHKY.PK). While CRE carries the black mark against it of being a state-owned enterprise, the company has emerged as a leading retailer and brewer in this fast-growing economy, and is looking to invest more in its food processing and beverage businesses.

What's more, the company plays the long game - using JVs and foregoing quick near-term profits to build a larger, more profitable business down the road. All told, I believe a case can be made that CRE shares should appreciate 40% to 50% over the next 12 to 18 months as China recovers and investors return to names leveraged to Chinese consumer spending.

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CRE Playing The Long Game In China, And Looks Significantly Undervalued

Investopedia: Zhongpin Takes Investors To The Abattoir

Zhongpin (Nasdaq:HOGS) is proving to be a tough company to love. While I still like the opportunity offered by China's fourth largest pork processor, this quarter shows once again that commodity markets are unpredictable and sometimes irrationally competitive. Though Zhongpin continues to offer solid long-term prospects to patient investors, more conservative investors may want to take their chances instead with company's looking to exploit China's protein demand through the export markets.

A Disappointing End to 2011  
Zhongpin doesn't necessarily make analysis easy on investors, as they did not print quarterly numbers for the fourth quarter results. Luckily, backing out the results isn't all that difficult.

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