Karl Francis

China 3C Group Finally Turns a Corner

This stock is grotesquely undervalued.

The downfall of the share price was caused by deficient communications from part of the management, a very conservative outlook for earnings at the beginning of the year and a general lack of interest in Chinese small caps this year. Such phases are recurring and are usually followed by some explosive share price recovery.

With current business trends, earnings of $.50/share in 2008 look very conservative.

Operating wise, management is doing a very good job - low cost operations, very fast turnover of merchandise. No debt, net cash currently around $35M or $.70/share.

Management is looking for acquisitions accretive to earnings. Without acquisitions, net cash will be around $50M or $1/share at year end.

Deducting that cash, expected 2008 PE is close to 2

It’s a $10 stock. The stock is coming down from $8.5. Nobody should be surprised if that level is revisited in the next 12 months.