China 3C Group Ditches Ineffective IR Firm

Smart move by China 3C Group (CHCG.OB)! The company has been expecting a FY2007 EPS of approx. $0.42 and what has the stock done? It started 2007 at $3.46 and closed at $3.42 - meaning absolutely nothing. Part of that had to do with its failed PIPE in September.

But did the company, or more importantly, the IR firm (Hawk has been IR since October 2006), do any damage control? Nada. We find this out from an 8K. Ditto the subsequent firing of the company's CFO, again from an 8K. Sure, Hawk did put out 9 press releases between November and now. But I think it is a case of too little too late. And some (actually most) of these press releases I can write in five minutes. The bottom line is, Hawk added zero value.

At one point in 2007, ALL the C.O.P. stocks I owned that had outside IR had Hawk Associates as the IR firm (namely CHCG and Universal Travel Group (UTVG.OB)). Very painful. Let me give you some concrete examples:

1) First, compare this press release on CHCG's partnership with Carrefour and my write up. What did the press release tell us beyond the headline? Nothing. Did it mention that Carrefour was the fastest growing foreign retailer in China, growing faster than Wal-Mart (WMT)? Did it mention how many stores Carrefour had and how many it was opening? Did it give us the important context upon which CHCG hoped to reach its stated goal of getting to 1000 retail stores? You tell me.

2) And dispensing raw data without bothering to dig deeper or give us the context is what Hawk is good at. Anyone can cut and paste information from another source such as the 10K/10Q or 8K and slap on a quick quote from the CEO. If only IR were that easy. The examples here are legion, take a look, here, here and here.

3) And finally, most egregiously, take a look at this press release on UTVG. When investors see something about a restatement of financial information, we expect the worst. And that's what the headline was. But when you read the text, you'd quickly realize that this was about (i) the fact that UTVG's net margin should have been HIGHER, 24% and not 15%, and more importantly (ii) the company RAISING ITS GUIDANCE. But all that's completely hidden. How anyone could create such a press release is beyond my comprehension.

Today's post is not about the merits of ICR (affiliated to ICR Xchange). I'll tackle that another time. Suffice it to say that anyone's going to do a better job than Hawk Associates. And UTVG, if you are listening, it's time to switch too.

My Position: Long CHCG.OB, UTVG.OB.