The U.S. has Rockwell Automation (NYSE:ROK), and Switzerland has ABB Ltd (NYSE:ABB). China's in the industrial controls game too though, with its Hollysys Automation Technologies Ltd (NASDAQ:HOLI), and of the three, it's the latter that looks like it's the most compelling investment idea for newcomers.
Hollysys Automation Technologies manufactures automation and control technologies, primarily for Chinese customers, though it's making headway outside of the country's borders. It can help factories automate fabrication processes, builds track-switching and train control centers, installs nuclear reactor control systems, and more. With the exception of its size (market cap of $463 million), it truly is the American equivalent to a General Electric's (NYSE:GE) industrial division, or perhaps a close cousin of the United States' Rockwell Automation.
There is a key difference between HOLI, ROK, or GE though... on a P/E basis, Hollysys shares cost less than Rockwell Automation or General Electric shares do (or ABB Ltd for that matter), and aren't as overbought as most of its industrial overseas counterparts. Indeed, it may be the technical view of Hollysys that's the most compelling.
The first 2/3 of 2011 weren't kind to this stock, cutting it down from a peak of more than $17 to a low $4.54 by August. Since that point though, HOLI has made higher lows and higher highs, and as of last week has started to test the 200-day moving average line (green, on the chart below) as resistance. With last week's second retest effort though, we're seeing higher volume in the shadow of support around the 100-day moving average line (gray) as well. Though the 20-day average at $8.75 still needs to be hurdled for the tide to be fully turned, the chart's within striking distance.
And, the underlying value it needs to get over that hump is in place.
Not that it's the whole story, but Hollysys Automation Technologies Ltd trades at a mere 10.5 times its trailing earnings. For comparison, General Electric trades at a trailing P/E of 13.7, while ABB Ltd and Rockwell Automation are prices at P/E ratios of 14.2 and 15.3, respectively. HOLI's forward-looking price/earnings measure of 7.8 - representing an expected 26% improvement in income - is also better than any of the other legitimate competition.
More than anything though, Hollysys Automation Technologies is looking compelling because it's getting traction on the sales front.
It was awarded three major contracts in December alone, with a total value of more than $22 million... and that's above and beyond the ongoing, smaller business it's been managing to garner. HOLI continued to grow the top line through 2008 as if the recession wasn't happening, and the bottom line's been growing again since 2010. Now that it's starting to penetrate the U.S. market and gaining a foothold in the thermal (solar) power plant market - previously dominated by much larger players - exponential growth may be around the corner for this small Chinese name. Look out Rockwell Automation and ABB Ltd.