LJ (JADE) - notes from Roth Capital Conference

| About: LJ International, (JADE)
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China-based, LJ International (ticker: JADE), which is engaged in designing, branding, marketing and distributing
a full range of jewelry, presented at the Roth Capital Conference yesterday. Here are some key points:


Company description:

JADE distributes to fine jewelers, department stores, national jewelry chains, and electronic and specialty retailers throughout North America, Western Europe, Japan, Hong Kong and China.

Company details:

  • Directly source from mines all over the world, manufacture and produce in own Chinese factory, sell directly to customers.
  • Produce over 18,000 designs annually.
  • Annual production of more than 2 million pieces of fine jewelry and 3 million carats of cut stone.
  • Customers include: Wal-Mart (ticker: WMT), JC Penney (ticker: JCP),  Zale (ticker: ZLC), QVC, HSN, Sterling, Fred Meyer.
  • Sell to two-thirds of top 40 retail chains in US.
  • 74% of sales in US, 14% in Europe, 12% in other.
  • Sales by product: Colored stones (90%), Diamond (6%), Other (4%).
  • Sales by category: Rings (48%), Pendants (27%), Earrings (17%), Giftware (5%), Other (3%).
  • Opening retail stores in China.
  • US competitors: E.E.A.C. and Fabrikant.
  • International competitors: Pranda International and STS.

China market statistics:

  • Largest consumer of platinum and jade in the world over last 3 years.
  • Largest consumer of diamonds in Asia.
  • 4th largest consumer of gold in the world.

Strategy:

  • Now have 3 stores in China.
  • Planning to open 100 stores in China.
  • Positioned as foreign brand - even though HK-based.

Financials (as of September 30, 2004):

  • Cash: $11.6 million.
  • LT debt: None.
Why invest now (courtesy of Roth Capital and LJ International):

  • 20% historical CAGR since 1999.
  • Trading at 8.3X 2005 earnings expectations.
  • Opening retail chain in China with low start-up costs. Setup costs for each store: $300,000, of which $200,000 is for inventory.

JADE stock market performance:

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