The Best Chinese Company In America

Webster's Dictionary defines CONFLICTED as..."experiencing or marked by ambivalence or a conflict especially of emotions." For China Vesting and our tens of thousands of readers every week the conflict lies in their heart and in their portfolios. Why? Everyone wants a piece of China's growth and have been trying to figure out how to profit from this economic phenomenon. This is much easier said then done...without some professional guidance.

China Vesting has visited hundreds of cities in China and have met with hundreds of companies and corporate executives. Our team makes field visits to Chinese companies every month. We have an incredible local network to assist in our due diligence. Then there are the bankers, auditors, IR firms and everyone in between who help us gain a clear picture on Chinese companies that are listed in the U.S. markets. The company China Vesting is featuring today we regard as one of our easiest assignments.

Commodities, Commodities and BRAIN TRUST?!?

On paper China Direct Industries (NASDAQ:CDII) looks like every other Chinese stock trading at a PE of 2 or 3 or 4. The company operates two main segments, magnesium and basic materials. The magnesium segment produces and distributes various magnesium products while the basic materials segment is involved in the sale and distribution of industrial grade synthetic chemicals, steel and non-ferrous metals. CDII also offers consulting services to Chinese companies that are already public or are looking to go public in the U.S. markets. So what's the attraction you ask? The company is based in Florida and the Chairman/Chief Executive Officer, Chief Financial Officer, and most of the senior management team are all American Citizens living in America. That means this Chinese public company is in reality American and it can and will be held accountable for its actions.

An American Company Operating In China

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. China Vesting has upgraded CDII to our Dragon Undervalued Index because the company deserves a higher valuation based on the fact it is American.

Undervalued By Any Standard

China Direct has very impressive numbers providing Wall Street guidance with revenue for the full 2011 fiscal year of $180 million with net income of $12 million. Cash and cash equivalents is currently $8.1 million with an additional $12.4 million in prepaid expenses. The company has almost no long-term debt. CDII has $35 million in working capital and is not in need of raising any additional capital.

The stock closed the day at $1.35 per share and with 34.98 million shares out the company's entire value is $47.22 million. The $12 million in net income means the current PE is 3.94 which we believe is cheaper than any USA company we could find in any sector. If you subtract the $8.1 million in cash along with the $12.4 million in prepaid expense the company's value is really just $26.02 million. Considering that the working capital is $35 million one can say that CDII is being given a NEGATIVE value for their business. Think about how much money it would cost in the U.S. to build a company with $180 million in revenue with $12 million in net income. Then factor in the cash on the balance sheet of $8.1 million, the $12.4 million in prepaid expenses and the $35 million in working capital.

This is truly the Best Chinese Company in America.