China 3C Group Hits Major Milestone 7 comments
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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.
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