China Expert Technology Has Much More In Store For Shareholders

Dec.26.06 | About: China Expert (CXTI)

A few months ago I suggested that readers keep an eye on China Expert Technology (OTC:CXTI), noting that shares appeared to be poised for another leg up. Its been a nice ride for those that climbed aboard, but what is next for the stock?

After a 120+% run in three-and-a-half months, I am very tempted to take profits. But I'm not going to, and here's why:

(1) Improvements in the company's fundamentals have kept pace with the momentum in share price. Since my last article on CXTI, the e-government software company cleared up most of the outstanding overhang from a toxic convert, posted a decent third quarter, and announced some huge contract wins: a $15M contract with the Cangshan District of Fuzhou City; a $25.5M contract with Minqing County of Fuzhou City; a $34M contract with Quangang District of Quanzhou City; a $26M contract with Pingtan County of Fuzhou City; a $25M contract with Mawei District of Fuzhou City; and a $32M contract with Yongtai County of Fuzhou City (all contract amounts are gross and the company will receive slightly lower amounts after PRC business tax, hardware costs, and commissions are deducted).

(2) The largest holder keeps buying at increasing prices. Jeffrey L. Feinberg, who I believe is presently the largest outside shareholder, keeps adding to his position.

Bottom line: CXTI shares have come a long way, but with these developments I believe they could go significantly higher.

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Disclosure: Author is long CXTI.OB.