Gushan Environmental Shares Popped: What You Need to Know
Tue, 28/12/2010 - 08:39 by Matt Koppenheffer
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Chinese biodiesel producer Gushan Environmental Energy (NYSE: GU)soared more than 45% in intraday trading on heavy volume.
So what: China's Finance Ministry decided to exempt pure biodiesel from consumption taxes and made the decision retroactive to January 2009. The decision removes a significant overhang on Gushan's primary business and will allow the company to restart some idled capacity. It will also let the company reverse tax reserves held on its balance sheet.
Now what: The Finance Ministry's decision is important for what it specifically does -- that is, provide the biodiesel consumption tax exemption. But it also seems like an important positive for Gushan and other biodiesel producers because it underscores the government's interest in seeing the industry succeed. Gushan still has plenty of work ahead of it -- including managing rising feedstock costs and getting idled plants back online -- but the news is a big positive for the company. While Gushan's stock is still one that I'd put in the "speculative" pile, its current valuation could make it an interesting stock to at least have on the radar.
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