JRJC growth plan brings skeptical reaction (1Q05 conf call quotes)

| About: China Finance (JRJC)

From The China Stock Blog (permission granted): China Finance Online (ticker: JRJC), a provider of
subscription-based online financial data covering China listed
companies, reported Q1 2005 earnings yesterday. Here are key points from the earnings results conference call:

How does the company plan to offset the effects of the weak Chinese stock market?

  • By developing new sources of revenue.

Source #1: Advertising

  • Management is confident advertising will grow despite its sequential decline.
  • No deals signed yet - but management is convinced ad revenue will materialize.
  • No detailed guidance provided.

Source #2: Personal finance package

  • To be launched in Q3.
  • Price of the product: $10 - $12.
  • No detailed guidance provided.

Why the increase in G&A costs?

  • One-time expenses.
  • Purchase of domain name for $75,000.
  • SEC compliance costs.
  • Management confident costs will stabilize.

Is it possible revenue might decline in future quarters?

  • Management says "no".

Management sees Q1 as a bottom

  • Q1 included the holiday period when business was quiet.
  • The stock market is at a 6-year low.
  • Management claims that Q2 and Q3 growth will come from advertising revenue.

Points of interest

  • $20M from IPO being used to operate two Chinese shell companies.
  • Management looking for acquisitions.
  • As part of the previously announced stock buyback, management has not acquired any stock.

Guidance in the future?

  • Not likely.

Comment: So what did we learn? Management is relying heavily
on advertising for its near-term growth. While it appears no deals have
been signed, somehow, some way, significant advertising revenue will
materialize in the next two months. Most every caller in the Q&A
portion expressed concern. And for good reason. As one caller put it,
this growth plan is difficult to digest when advertising revenue
decreased sequentially from $250,000 in Q4 to $179,000 in Q1.

Oh, and in case you didn't understand the conversation in Mandarin
Chinese between the final caller and the China Finance CEO, don't
worry. The CEO wanted to know when she was coming to Beijing. He said
he would
be very happy to see her. He told her to call him once she gets there.
She, in turn, told him that she would send him an e-mail with
relating to her trip.