Heng Ren Investments Calls On Fosun to Unlock 240% of Kingold Jewelry (KGJI) Value

Heng Ren Investments is calling on Chinese powerhouse Fosun International to implement five recommendations to help turn around Kingold Jewelry Inc. (Nasdaq: KGJI), a new Fosun investment.

Heng Ren's five recommendations to help Fosun turn around Kingold are:

1) Change Reporting Format: Present Kingold as the high-margin gold processor it is (69.5% operating margin), not a commodity-exposed, low-margin jewelry manufacturer as it currently reports (5.9% operating margin reported in 2014).

2) Increase Transparency, or Sell Industrial Park: Transparency on the progress and value of Kingold’s industrial park is essential. If not, sell it.

3) Due Diligence Checklist: Provide investors with easy-to-verify proof that Kingold is a thriving company. Fosun can be very supportive here to disprove skeptics.

4) Improve Corporate Governance: Strategic decisions material to Kingold’s future value need to be decided, first, with the Board of Directors' deliberation and consent.

5) Professional Communications: Kingold needs to hire an in-house investor relations person to help it appear more concerned about investors’ perception of the company.

Heng Ren's discounted cash flow analysis estimates Kingold's intrinsic value is $2.72 per share, or 240% above its stock price. Shares currently trade at 1.4x trailing 12-month earnings, one of the lowest multiples among Nasdaq stocks, Heng Ren notes.

The full letter in English can be seen here.

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