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Friday, March 21, 2008

Update: China 3C "buy," target price reduced

Target price may be reduced - but not that much considering the level one could enter the stock now.

03/18/08 - Maxim Group

NEW YORK, March 18 (newratings.com) - Analyst Albert Lee of Maxim Group maintains his "buy" rating on China 3C Group Inc (CHCG), while reducing his estimates for the company. The 12-month target price has been reduced from $7 to $5.

In a research note published this morning, the analyst mentions that the company has posted its EPS and sales for the previous year short of the estimates. China 3C’s guidance for 2008 indicates that the sales momentum in 2H08 would be offset by higher-than-previously-anticipated gross margin pressure, the analyst adds. There is low near-term visibility into the company’s internal unit expansion strategy, Maxim Group says. The EPS estimate for 2008 has been reduced from $0.62 to $0.44.

Monday, March 17, 2008

China 3C Group, (CHCG)

For those who know me know I have been investing since I was 15. Every once in awhile I divert from the usual web 2.0 topics to that of a investment I have taken a position in. Today is one of those days since China 3C Group, CHCG has gotten pummeled today as what I believe to be a over-reaction by speculators to FY2007 results today. I consider the consumer electronics retail sector in China as an opportunity to reap the history of one of the fastest growing staples of any growing economy. Mix that with $25 million in cash on the books and a solid, real (sometimes you just don't know with over the counter stocks). As always, do your own DD but as I see it the stock still looks extremely cheap on a valuation basis even after the guidance, and is building a base on which to spring higher. Not including cash and simply assigning an industry PE of 10 we should be at $4.50 on normal growth rates. Besides the speculators, & extremely volatile world markets, the company has still struggled to provide decent insight through PR about operations leading to rumors, misinformation, and like what we saw today, over-reaction.

Here is China OTC Player's take:

Monday, March 17, 2008

Update: CHCG.OB Pummeled

revenues and earnings were quite stellar. Sales increased by 86% to $276 million and EPS was $0.44, the high end of guidance. Yet, the stock has fallen to its 52-week low. Why is this the case?

Well, it looks like Q1 2008 is going to be pretty bad. We already know that the recent winter storm was devastating, and now CHCG is quantifying it for us:

The first quarter of 2008, which is seasonally the Company's strongest quarter, is expected to be negatively impacted by the heavy snow storms that paralyzed much of China during January and February of this year. The Company believes that 2008 first quarter revenue results could fall by as much as 15-20% compared to prior year results of $84.5 million.

Given this, CHCG is expecting overall FY2008 revenues to be flat in the best case scenario, and perhaps even be 5% less than 2007's figure, not accounting for acquisitions. There is an important implication in this, which is: same-store sales growth for the last three quarters of 2008 is expected to equal, at the most, $16.9 million, or looking at it another way, the implied growth rate is a paltry 8.8%, at best. Also note that CHCG closed about 27 non-performing stores in the last three months, and is looking to close another 100+ over the course of the year.

And there is worse news. Due to mandated employee benefits, CHCG's operational margins will be negatively impacted, by up to 5%. I'm now estimating a FY2008 EPS of $0.25 for the company, which would be a decline of over 40% from 2007. Having said that, China 3C has cash of approx. $25 million and is looking to make an acquisition, possibly in the second half of 2008. The company may also consider a share buy back.

I am long and added more today. If your not light-hearted and can take some turbulence, you might want to consider.

Tuesday, March 04, 2008

Differences in 2.0'S; Reborn

Sort of, during my search for new oppertunities I've been talking with many people and the conversation usually seems to settle on just this topic. So, I dug up an old post I wrote, while acting as Product Marketing Mgr at Enterprise Mashup software company JackBe, with a diagram created by JackBe's CTO, John Crupi.

Sunday, June 3, 2007

A lot of people ask us here at JackBe about the definitions and or differences between Web 2.0, Enterprise Web 2.0 and Enterprise 2.0. So here are some of my thoughts simplified for a blog post.

Web 2.0 – There are two parts to this one which will make sense when I get into the difference between Enterprise Web 2.0 and Enterprise 2.0.

1. Web 2.0 – the user-driven paradigm shift. Youtube, blogs, wikis, RIAs with greater self-service capabilities… all of these are examples of a paradigm shift from older HTML static, mostly one way communication of ideas and information to a new User-Driven web model which enables you and me to more easily contribute content, share information and collaborate with each other through the web.

2. Web 2.0 - technology enablers. This user-driven shift has been made possible in part by new or now accepted technologies and techniques which have gained greater penetration as web application tools. Such include: Ajax, proprietary RIA tools like Flex and Lazlo and now Silverlight, Service Orientated Architecture (SOA), Ruby on Rails and other lightweight dev models, Web Services like REST and RSS, Mashups (data and visual) and Tagging. Of course this is not an exclusive list but I think you get my point.

Enterprise Web 2.0 – the Web 2.0 technologies mentioned above put into practice in the enterprise. For example: richer, more productive customer self-service apps, inter-department collaboration through bogs, and wikis. But simply ‘slapping’ these technologies into a rooted organization will not bring about the same successes and value that Web 2.0 apps have enjoyed in the public domain. Enterprises have too many constraints and need a mind and culture shift along with deep embedment of these 2.0 tools into its processes to have any kind of a definable impact.

Enterprise 2.0 – The Enterprise 2.0 is analogous to #1 above in that it represents a user orientated paradigm shift of the enterprise makeup itself. It embraces the decentralized organization built around disparate data and information with users empowered to create new information built around and on top of others ideas through sharing, and collaboration. An organic organization loosely designed and constructed to empower knowledge workers to do what they do best by giving them what they need, when the need it and how they need it by enabling them with 2.0 technologies and nurturing this new paradigm mind set internally. Here enterprises reap the benefits of 2.0 through network effects from its user’s contributions and collaboration and realize success that increases proportionally as more users contribute to the organism creating a potentially indefinable value proposition to stakeholders.

Each of these could be expanded in much more detail but why make it more complicated as this? If you have any thoughts please feel free to share or contact me. That is after all the point.