Top Three Chinese $1 Picks in Chips, Cryptos & Smart Maps

Cheap Chinese stocks with significant upside potential - EDU, PBTS, LKCO
Mar. 09, 2022 18:23
Top Three Chinese $1 Picks in Chips, Cryptos & Smart Maps

(CapitalWatch, March 9, New York) My top three Chinese $1 picks today involve semiconductors, crypto mining, and smart navigation tech. I am leaving oil stocks out of this one despite the energy crunch because – well, China is still buying Russia's natural resources even as some other nations are looking to halt imports. So, let's leave oil hanging for now and look at the other promising plays.

Reincarnation of the Beaten Education Giant

First off, let's zoom in on a company that is staying afloat thanks only to its top managers. Back in 2006, the largest private educator New Oriental Education & Technology Group Inc. (NYSE: EDU) celebrated the first U.S.-China IPO in the education industry. And the stock has been sound, growing consistently until a year ago. Now, after the wipeout of the sector in the 2021 regulatory crackdown and losing 94% in market value, New Oriental is transitioning to another business.

Earlier this year, New Oriental's founder and chairman, Minhong Yu, attempted to generate some cash through livestream retail. The company also got involved in software technology, human resources, and other areas. The latest update on New Oriental's new focus involved chipmaking – though this has not been made official. Should the company proceed to design semiconductors, it will immediately need a lot of cash – and will require significant batches of investments until its microchip goes to market.

If New Oriental does proceed to enter chipmaking – an industry heavily supported by the authorities amid the global chip shortage and Washington's tech sanctions on China, this will be a sure win. Minhong (Michael) Yu is a forward-looking entrepreneur who will use his reputation and the company's resources wisely in the new venture.

At $1.26 today, New Oriental's market value sits at $2 billion.

Crypto Goes Overseas

If you have followed crypto news at all over the past half-year or so, you would have stalled on the lede, thinking – huh, crypto mining and China? Indeed, there is no more legal crypto mining in China – because it has all gone overseas. Since the nationwide ban on digital currency transactions and crypto mining last year, a slew of Chinese companies set up operations abroad to seize the opportunity.

In this market, I single out Powerbridge Technologies Co. Ltd. (Nasdaq: PBTS). The company entered Bitcoin mining right after the ban in China, so it's pretty new in this field. Its main business centers on global trade technology services, but it's the mining operations that will significantly boost the revenues of Powerbridge this year, as co-founder and CFO Stewart Lor said in an interview in late December.

Since August 2021, Powerbridge has taken several steps in diversifying its revenue channels. One was the metaverse solutions for travel and leisure, and the other – crypto mining. For this business, Powerbridge opened a location in Singapore and forged partnerships with some mining companies that have delivered its first machines. Next, Powerbridge announced it is building environmentally-friendly mining fields in Asia and North America and expects to see the first income in the first quarter. The company has said it plans to operate 10,000 miners in total.

Why do I find this company credible? Because it's in business since the late 90s. Its stock traded at 32 cents per share as of Wednesday compared with over $3 at the same time a year ago, meaning significant upside potential. And I think its low value today is a result of its outdated English-version website and bad PR.

The Smart Map Key

Next up, let's zoom in on Luokung Technology Corp. (Nasdaq: LKCO). Like PBTS, LKCO has been under the radar mostly. If you have heard of this company, it's probably because of its court win against the U.S. Department of Defense after the latter attempted to banish Luokung from U.S. investment. As you can tell, the DoD did not succeed – Luokung is still U.S.-listed and was worth at a bargain of 57 cents today.

To go straight to the point and avoid picking apart the business of Luokung – "spatial-temporal intelligent big data services company and provider of interactive location-based services ("LBS") and high-definition maps ("HD Maps") in China" – I'll just list some of Luokung's partners and collaborations, because they will tell more than I ever can. Indeed, Luokung has behind it the weight of some noteworthy giants: Microsoft (Nasdaq: MSFT), Ford Motor Co. (NYSE: F), Geely Auto (HKEX: 0175), and Zenseact, a provider of Advanced Driver Assistance Systems operated by Volvo (OTC: VLVLY).

Another point to make here is the improved financial standing of Luokung since it acquired the electronic map services provider eMapGo. For the nine months through September 2021, the company reported $74.9 million in revenue compared with $13.1 million in the same period of 2020. Luokung' s chairman and CEO, Xuesong Song, said earlier that the company was on track to hit $100 million in revenue in the full year 2021.

In January, both Luokung and Powerbridge received a warning from the Nasdaq after the companies' stocks traded below the required $1 minimum for a period over 30 consecutive business days. LKCO and PBTS have until mid-July to regain compliance with the listing requirements.

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