China 3C Group Hits Major Milestone

With China 3C Group's (CHCG.OB) announcement this week that it has partnered up with major Chinese appliance retailer Yongle to open new stores-within-stores, the company is finally in reach of its long stated goal of having 1000 stores. This is a major achievement, especially given the fact that CHCG has been on a mission to close non-performing stores in the last six months or so.

This is more than a symbolic victory, as Yongle, with 200 locations, is the third largest appliance retailer in China and has 60 stores in Shanghai alone. The agreement is for CHCG to open in 30 Yongle locations, with the possibility for more stores in the future. While it may seem counterintuitive that a major appliance retailer would allow another to open stores within its location, I think this merely attests to the strength of China 3C Group's businesses.

For CHCG is doing exactly what it should do: leveraging upon its core competence of logistics and distribution to carve out business segments for it to maintain its retail outreach. And it goes without saying that partnership with Yongle in the retail area could enhance CHCG's business with the company on the distribution side, which is where, ultimately, it could win big.

This deal follows CHCG's recent partnership with Shuimu Huali, where the company will act as distributor of cell phones, digital cameras and MP3 products to this laptop retailer. Shuimu Huali has 21 locations in eastern China.

I think CHCG's stock price, currently at ~$1.28, presents a great entry point, for this translates to a less than 5 times 2008 (conservatively) estimated earnings. Once the next quarter's earnings are out, I have no doubt we will be seeing a return to a higher trading range. Don't be left out.

My Position: Long.

Comments

[Karl F.]

If I have interpreted the recent quarterly statement correctly, 2008 EPS should be .45 or better. So, the PE is less than 3.

[intelligence]

the Company had $25 million of cash at Dec 30, 2007 and if it earns 45 cents this year, will have close to $1 per share by year end. With no debt, the Company will be selling for 1 times earnings net of cash

[wagnermr14]

I like that you pulled out what I viewed as one of their greatest assets "leveraging upon its core competence of logistics and distribution to carve out business segments for it to maintain its retail outreach". Long

[Bisso_zwei]

Isent this kind of too good to be true, theres something fishy about this stock?

messages.finance.yahoo...

[User 79572]

Mr Petti, Mr Bear Steans working for red Chinese Now.

[wagnermr14]

Stay away from the message boards especially with otc stocks. Not to be trusted. I did my own DD and feel confident about my long position even with the stock down.

[wagnermr14]

43% gain today. Any updated insights from alpha?