Companies: CHNS ��

Investors looking to ride the buoyant Chinese telecoms equipment and electric bicycle battery markets should look no further than China Shoto, which raised �5m on AIM at 130p last December.

The producer of industrial batteries and power supply systems beat forecasts with maiden full year figures for 2005, with sales sparking 52% higher to �28.4m (�18.7m) on growing demand from the domestic telecoms sector. Pre-tax profits were �3.8m.

China Shoto’s industrial batteries are mainly sold as back up power to the telecoms sector, which made up more than 80% of last year’s sales and where major customers include China Mobile and China Telecom. Telecommunications infrastructure continues to develop speedily in The Peoples’ Republic and this year’s roll out of 3G equipment should provide a further growth boon. The company also supplies batteries to the burgeoning electric bicycle market and a new production facility, expected to come on stream in May, should boost battery production capacity for this market more than twofold.

For 2006, Alan Matthews of shop broker Seymour Pierce suggests sales will more than double to �63m on the inclusion of turbine design business FTD, now 51% owned by the group following acquisition of a controlling stake in January, as well as the aforementioned new factory, which management insist could generate revenues of �30m more than 2005 sales. Pre-tax profits could charge up to �5.4m, giving earnings of 21.6p and placing the shares on a prospective multiple of only 9.7.

That looks too miserly for a company with great positions in growth markets, although operating so far a field, unexpected risks could yet unearth. Nevertheless, we think the shares are worth a flutter.

Growth Company Investor is the UK’s leading authority on small-cap and AIM companies. You can gain immediate access to all the recent share recommendations with no-obligation, with a free 30-day trial. Click here to join today.

China Shoto	AIM	�35.98m	179.00p	-2.00p
Click here for interactive charting
Other company articles:
ITM breaks new ground			21/04/2006
China Shoto			20/04/2006
Newcomer - China Shoto			06/12/2005