China Direct Reports Blockbuster Q3 Results

The stock market is officially in the middle of earnings season with hundreds of companies reporting their quarterly numbers this week. Just when it seemed like the market has halted its roller coaster ride investors can look forward to more turbulence caused by the individual stocks in their portfolios. Fortunately, some stocks are seeing a nice bump in their prices as they report their results. One such company is China Direct (CDII) which released blockbuster fiscal Q3 results last night and is up 5.05% today.. Before we get into the actual results we want to remind readers about something very important...China Direct (CDII)...is an American company doing business in China and not just another Chinese company listed on a U.S. exchange.

We don't know about you but... there's peace of mind in knowing the people behind CDII live in the U.S., have their families in the U.S., and can also be held accountable legally. China Vesting has previously visited CDII's Florida headquarters and met with the company's senior management team. We also visited CDII's Shanghai headquarters and spent considerable time with its China team. At the end of the day institutional and individual investors are clamoring to invest in China...SAFELY...we believe that China Direct (CDII) is an excellent way to gain China exposure to your portfolio while being assured that management can be held accountable.

Q3 Results

For the third quarter of fiscal 2011 total revenues increased to $57.0MM up 78% compared to total revenues of $31.9MM recorded in the third quarter of fiscal 2010. Net income attributable to common stockholders was $4.3MM in the third quarter of fiscal 2011 compared to a net loss of ($1.1MM) in the comparable period of fiscal 2010. Consolidated earnings per share of $0.11 in the third quarter of fiscal 2011 compared to loss of ($0.04) per share in the third quarter of fiscal 2010. For the first nine months of fiscal 2011 net income was $7.0MM or $0.20 per share on 35 million weighted average shares as compared to net loss of ($492,000) or ($0.02) per basic and diluted share on 29 million weighted average shares in the comparable period in fiscal 2010.

This quarter has been the best so far this fiscal year with 61.4% of the nine months net income being produced in these past three months. Going forward the company has already stated they expect to achieve revenues over $200MM and net income to be approximately $12MM for the fiscal year. Considering that we are a few months away from the end of CDII's fiscal year it would appear that the the company should achieve its revenue and net income targets.

Deeply Undervalued

As of June 30, 2011 there are approximately 37.8 million shares outstanding and with CDII achieving net income of $12MM for the fiscal year... earnings per share (EPS) is around $0.32 cents Based on today's closing price of $1.05 the current price to earnings ratio for CDII is 3.25 current years earnings. That is insultingly cheap for a US company. The problem is that CDII is being lumped together with other Chinese companies trading in the market while in fact it is really a US company doing business in China.