Rhinophobia, that I am right now. But CXTIE is beggin me to buy it. (Editted: This is no longer true, read my last paragraph) Here is the break down.
Annaul Report here: http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0001137050-07-000075&Type=HTML
First off, they have $257mil on contract, using current just return on on assets at 19%, we have fair value of $48.8mil. But don’t forget all the assets. The current market cap is at $82.5 mil, only twice as much.
I will ignore all the current financial numbers, like the current ratio, lets skip this. I am not saying its not important, this is the very basic, if they don’t look bright in this, I won’t even consider wasting my time. Here some points in the report.
“The Company is the first private enterprise with the authority to provide technological achievement appraisal services for IT.
The Company conducts its principal business operations through its subsidiary ENS which is based in Shenzhen and Fujian, the PRC. Since its establishment in 1999, ENS has obtained 23 contracts with 12 city or county governments in the Fujian province of the PRC for the provision of large-scale e-government infrastructure construction, consulting, training and maintenance services and 1contract with a city government in the Zhejiang province for the provision of service of design and planning of an e-government system.
The Company does not own any real property.”
Ok, also, with the underlying growth in China, goverment will spend more money to provide the internet infrasturcture. So the industry is sound.
There is one thing i see in the report, that I don’t like. They are issusing half million of stocks to all of these consultant, not only diluting the shares, but also, this doesn’t reflect as operating or business expense on the finianical statement. If the consulting comissions were paid out of business operating, the net income will be lowered. Also, I smell corruption. Constuant, ya right, more like free stock for gaining favors, much too common in chinese businesses.
Also, Ben Graham probably would not approve this, due to its lack of history. And since its an IT company provides e-goverment service, they don’t really have any good moat around the company. The one upside I see is its the first company got its foot in the door.
So conclusion, I think CXTIE is bargin company with potenital for growth, but its lack of intellectual properties doesn’t provide any barriers for compentation. Until it has more customer base, I think this is a rather risky investment. I should rather stick with Great Business at resonable price, than average company at bargin price.
I started this post favoring the CXTIE, but after reading the quarter and annual report and some research, they don’t look so attractive to me. bah, selling at limit $3 what I brough it for. Memo to myself, post a report before buy stock next time and stop get influenced by analyists with fancy words and catchy numbers. Research yourself. If they can do it, I can do better. On a good note, it’s good to learn lessons early.