It was almost a quarter ago when China Vesting upgraded China Direct (CDII) to our
Dragon Undervalued Index because the company deserves a higher
valuation based on the fact it is an American based company.
Shares of CDII promptly reached an interim high of $1.59
per share from when we
introduced the company to readers at $1.35
per share. This potential gain of 17.78%
is just the beginning because we see China as a long term play and
China Direct as one of the company's that is going to benefit
shareholders. If you missed it be sure to read our original
article featuring China Direct (Link
to
Article).
The stock has settled down and closed Monday at $1.31 per share which
incidentally is also the same price as its 50 and 200 day moving
average. China Vesting believes that the current valuation of 3.86
times 2011 earnings estimate of $12MM represents potential value
for investors. Based on 35,313,390 shares outstanding and $1.31
per share the whole company is being valued at $46.26MM
USD. In CDII's Fiscal Q2 conference call, management reiterated
earnings of $12MM and revenue ranging from the original $180MM as
discussed last quarter, to a range of $180 to $200MM. (Link to Q2 Conference Call Transcript)
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Focus On Q2
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In looking over CDII's Fiscal Q2 Filing (Link
to Q2 SEC Filing) these are some of the highlights:
- For the second quarter of fiscal 2011 total revenues increased to
$42.3MM up 81% compared to total revenues of $23.4MM
recorded in the second quarter of fiscal 2010. We recorded operating
income of $96,000 for our second quarter of fiscal 2011 as compared to
an operating loss of ($480,000) in the second quarter of fiscal 2010.
- For the first six months of fiscal 2011 we recorded net income
attributable to common stockholders of $2.8MM.
- At March 31, 2011, our total assets were $112.0MM and
shareholder equity was $63.0MM with 35.3 million shares
outstanding.
- Revenue of $88MM for the first six months of fiscal 2011
ended March 31, 2011, up 93% from revenues with $45.6MM recorded
in the first six months of fiscal 2010.
- Over $20.6MM in cash and prepaid expenses, along with over
$45.2MM in working capital.
The most imporant words that we heard and read is that China Direct
expects revenue for the full 2011 fiscal year of $180 to $200MM
with net income of $12MM. That means from April 1 until the
end of September CDII will generate $9MM in net income. In
the conference call Amit Dayal of Rodman & Renshaw actually asks
the company to explain how they will accomplish this benchmark.
CFO Andrew Wang explained that 1/3 will come from the Magnesium
business, 1/3 from the basic materials sector and 1/3 from the
consulting side of China Direct.
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Buy
China With An American Warranty |
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It is important to understand that China Direct (CDII) is an American
company doing business in China and not just a Chinese company listed
on a U.S. exchange. China Vesting has actually visited CDII's
Florida headquarters and met
with the company's entire senior management team. We then visited
CDII's Shanghai headquarters located right by the famous Jin Jiang
Hotel in Shanghai and spent considerable time with the company
Chairman/CEO and CDII's China team. It is impossible not to see some
strange things in China when you've visited hundreds of cities and
companies. We can tell you one thing, there is a peace of mind in
knowing the
people behind this Chinese company live in the U.S., have their
families in the U.S., and also are held to U.S. standards across
the board.
During this past quarter we have seen numerous Chinese companies get
charged with fraud and/or accused by short sellers of being a scam,
and/or
having its shares halted by the authorities. The scrutiny is
increasing and Chinese companies cheating American investors are going
to pay
the price. That is exactly why China Direct offers a much needed
relief from the anxiety of owning a pure Chinese company.
Call the company at 1-877-China-57 and talk to the management team,
read
CDII's SEC
Filings and see how the company files U.S. taxes with the IRS and
also files Chinese tax reports.
