Cleantech Solutions International Inc (NASDAQ:CLNT) Gains With More To Come

The Insider Financial team has covered Cleantech Solutions International Inc. (NASDAQ: CLNT) on April 27, 2017 and April 12, 2017. We repeated several times that the company was massively undervalued. Have a look:

"On April 12, 2017, the share price was $5.41 per share, which is 60% the amount of cash. This way of valuing the company is called liquidation method. It means that you could buy the company for 60% of the total amount of cash holding in the balance sheet and obtain the cash. If you believe that the rest of the assets in the balance sheet are worthless, then you would obtain 40% return by acquiring the company." Source

Very recently, we were pleased to discover that our thesis was correct. An investment company, which could have seen our article, did exactly what we said. YSK1860 announced that on April 27, 2017, it acquired all the shares of CLNT previously held by Mr. Jinhua Wu, its CEO and President. How many shares? To be precise, the buyer purchased 416,249 shares. Have a look at the market reaction:SourceOther investment websites also noted the market reaction after it happened. This is for example the article put out by Zacks: "Here's why Cleantech Solutions (CLNT) stock is Skyrocketing 70% today". In this article, we will explain to you the transaction and the share price movement.Recent Developments and transactionIn our previous piece, we reminded investors that CLNT had regained compliance with the NASDAQ minimum bid price listing requirement. Additionally, we said that this fact would increase the visibility of the company, and the chances of having new investors on board was larger now. That news were put out on April 7, 2017.The market did not get to know anything new from CLNT until May 9, 2017, when the holding company YSK1860 announced the acquisition of a large stake in the company. The director of this company, Dr. Thomas Chan, said the following about the acquisition:

"This investment in Cleantech Solutions demonstrates our trust and confidence in the US stock market and the Company for its long-term growth potential and opportunity to participate in the growing Chinese energy market. We also expect to leverage our investment expertise and connections in the technology, media and telecommunications sectors to support Cleantech Solutions in identifying new business opportunities in the future. We are confident in the current management's ability to put this year of transition behind us and focus on improving the long-term business outlook." Source

The acquisition was quite opportunistic. This holding company acquired shares of the company paying less than 10% of its book value per share. We believe that the transaction was not at all beneficial for the sellers, who seemed desperate to exit the company.Market reactionThis was an event that brought a lot of liquidity to a small company; savvy traders call it a liquidity event. When outsiders buy stakes in small companies, traders push up the price, as the price paid is always higher than the current open market price. Hence, the transaction was very good for the investors who could identify the company before the big buyer did. We are happy that our email subscribers and readers benefited.What happens now?The total amount of shares outstanding is 1.42 million and the buyer acquired only 416,249 shares. In our opinion, the current share price still undervalues the company. The following financial figures show it very well:

• Book Value Per Share: $46.14
• Total Cash Per Share: $1.05
• Revenue Per Share: $14.59
• Enterprise Value/EBITDA: 3.30x
• Share price as of May 10, 2017: $4.32

As we wrote in the other articles, American investors don't appreciate anymore Chinese companies, since they discovered too many using "creative accounting" techniques. The best thing that the managers can do is buyout the company. Before this happens, investors need to read this: if the company is bought out, it will come at a much higher share price.ConclusionWe wrote two articles about this company claiming that it was being undervalued by the market. We also said that outsiders could money buying the company and selling the assets inside. It seems that we were right because a new holding company just bought a large stake in the company. Additionally, we wrote in this article that we believe that the company is still undervalued. Hence, we believe that traders may make more money if they hold on to their shares. To sum up, there is a lot to like in the company. We will be updating our subscribers as soon as we know more. For the latest updates on CLNT, sign up below!Disclosure: We have no position in CLNT and have not been compensated for this article.