Highpower International, a maker of lithium ion and nickel-metal hydride (Ni-MH) rechargeable batteries, battery management systems, and a provider of battery recycling, today announced that its Board of Directors received a non-binding proposal from Mr. Dang Yu (George) Pan, the Company’s Chairman and Chief Executive Officer, to acquire certain outstanding shares of common stock of the Company at a cash purchase price of $4.80 per share. In the proposed potential transaction, Mr. Pan would acquire all of the outstanding shares of common stock of the Company not currently owned by him through a merger of the Company with a newly formed acquisition vehicle that Mr. Pan would control. The Board intends to form a special committee consisting of independent directors to consider this proposal.

Highpower International has been growing revenue nicely.

Revenue has grown by 35.08% in the past year. This is very strong growth! Measured over the past 5 years, revenue has been growing by 13.67% on average per year.

The company is on track to do $252 million in sales in 2018. The company currently trades at a market cap of $42.8 million. Mr. Pan’s offer at $4.80 per share values the company at $71.4 million. Will Mr. Pan’s offer flush out another offer and we get the start of a bidding war?

Even without this offer, the company is undervalued. Highpower International stock trades at a P/E ratio of 3.61! What?! Compared to an average industry P/E ratio of 20.35, HPJ stock is extremely cheap. HPJ stock is cheaper than 91% of the companies listed in the same industry!

HPJ stock trades at a price to book ratio of 0.67. Compared to an average industry price to book ratio of 2.54, HPJ stock is really cheap. In fact, HPJ is cheaper than 93% of the companies listed in the same industry!

Highpower International Stock

HPJ stock large players volume dumps on move up

I really don’t like how large players volume dumped on the PR about Mr. Pan’s offer. Why was there that many big players who sold into the upward move? I can’t imagine though that the company ran a pump and dump with the stock being valued so cheap. The definition of a pump is that a stock is pushed up to an insane, unjustifiable valuation. A company that will do around $250 million in sales in 2018, trading at a market cap of $42.8 million is not a pump but instead a steal IMO.

The real danger about this stock is that it’s a value trap. Highpower International’s profit margin is 5.2% which is worse than the rest of the industry. The industry average profit margin is 6.74%.

Disclosure: As Premium members know, I went long HPJ stock.