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China Security & Surveillance Technology, Inc.
13/F Shenzhen Special Zone Press Tower
Shennan Road Futian
Shenzhen,  518034
China - Map
Phone: 86 755 8351 0888
Fax: 86 755 8351 0815
Web Site: http://www.csstf.com

DETAILS   
Index Membership: N/A
Sector: Services
Industry: Security & Protection Services
Full Time Employees: NaN


BUSINESS SUMMARY   
China Security & Surveillance Technology, Inc., through its subsidiaries, engages in the manufacture, distribution, installation, and maintenance of security and surveillance systems, as well as in the development and integration of related software in China. Its products include standalone digital video recorders (DVRs); embedded DVRs; mobile DVRs; digital cameras; and auxiliary apparatus, such as DVR compression cards, video capture cards, digital light processing monitors, decoders, alarm notification switches, digital video fiber optics systems, and matrix switch/control systems. The company sells its products to government agencies, airports, customs agencies, hotels, real estate developments, banks, mines, railways, supermarkets, and entertainment enterprises through its distribution network. China Security & Surveillance Technology is headquartered in Shenzhen, China.

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China Security & Surveillance Technology Reports Fourth Quarter and Full Year 2007 Financial Results
Monday March 10, 4:05 pm ET 
-- 4Q07 Revenue Increases 106% to $84.2 Million Compared to 4Q06
-- 4Q07 Net Income increases 124% to $14.82 Million
-- Full Year 2007 Revenue increases 124% to $240.2 Million
--Full Year Net Income increases 54% to $35 Million


SHENZHEN, China, March 10 /Xinhua-PRNewswire/ -- China Security & Surveillance Technology, Inc. ("China Security" or the "Company") (NYSE: CSR - News), a leading provider of digital surveillance technology in China, today reported its financial results for the fourth quarter and full year ending December 31, 2007.
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Full Year 2007

The Company reported GAAP earnings per diluted share of $0.91 for the full year of 2007 compared to $0.85 in the full year 2006. GAAP results for the full year of 2007 include: (1) approximately $13.7 million, or $0.35 per diluted share, of non-cash expense related to the redemption accretion on convertible notes (as described below under the caption "Explanation of Redemption Accretion"); (2) approximately $5.0 million, or $0.13 per diluted share, of non-cash expense related to depreciation and amortization of long- lived assets due to our acquisition of subsidiaries, and (3) approximately $4.2 million, or $0.11 per diluted share, of non-cash expense related to employee stock compensation recognized pursuant to SFAS 123 ®. Additionally, the Company realized a one-time pre-tax gain of $13.63 million, or $0.30 per diluted share (after tax effect), related to the disposal of properties and land use rights during the year. Excluding these non-cash expenses and one- time gain, diluted earnings per share was $1.20, compared to $0.89 per diluted share in 2006 (see the "Reconciliation of GAAP to non-GAAP Measures" toward the end of this release). Diluted share count increased 44% in 2007 to 38.8 million from 26.9 million in 2006. Shares associated with the Company's convertible bond are not included in the GAAP fully diluted share count, as the corresponding increase in net income associated with the accruals would impact earnings per share in an anti-dilutive manner.

Revenue increased 124% to $240.2 million compared to $106.9 million in 2006. Revenue growth continues to be positively impacted by the increasing size of Safe City government contracts, as well as growth from smaller corporate contracts. Historically, the average contract size for safe city projects was $1-1.5 million. The Company is still receiving other contract awards sized well below that average, but recent contracts from Safe City projects have ranged from $5-8 million. These larger Safe City contracts tend to have longer time duration to fulfill -- in some cases as long as 22-25 weeks, versus historical durations of 6-12 weeks. Organic revenue during 2007 was approximately $190.7 million, or 79.4% or total revenue (which included the 2007 fourth quarter revenue contribution from Cheng Feng). Non-organic revenue, or revenue of acquired companies was approximately $49.5 million or 20.6% of total revenue in 2007 (which included the three quarters' revenue contribution from Cheng Feng). As a result, organic revenues grew during the year by $86.3 million, or 83% from $104.4 million in 2006.

Full year 2007 gross profits increased $38.5 million, or 124%, to $69.5 million from $31.0 million for 2006. Gross margin for the year was 28.9%, flat with 2006.

Income from operations in 2007 increased 68.8% to $42.7 million from $25.3 million in the prior year. Operating margin decreased to 17.7% from 23.6% in 2006. Such decrease was primarily due to the increase of our selling and marketing expenses as well as the general and administrative expenses. Net income in 2007 increased 54% to $35.3 million, up from $22.9 million in 2006. Net income per share was $0.91 versus $0.85 in 2006.

Fourth Quarter 2007

For the fourth quarter 2007, the Company reported GAAP earnings per diluted share of $0.35 compared to $0.20 in the fourth quarter 2006. GAAP results for the fourth quarter of 2007 include: (1) approximately $4.4 million, or $0.09 per diluted share, of non-cash expense related to the redemption accretion on convertible notes; (2) approximately $1.7 million, or $0.04 per diluted share, of non-cash expense related to depreciation and amortization of long-lived assets due to our acquisition of subsidiaries, and (3) approximately $2.2 million, or $0.05 per diluted share, of non-cash expense related to employee stock compensation recognized pursuant to SFAS 123 ®. Additionally, in the fourth quarter of 2007, the Company realized a one-time pre-tax gain of $8.11 million, or $0.16 per diluted share (after tax effect), related to the disposal of property and land use right during the year. Excluding these non-cash expenses and the one-time gain, diluted earnings per share was $0.38, compared to $0.22 per diluted share in the fourth quarter 2006 (see "About Non-GAAP Financial Measures" toward the end of this release). Diluted share count increased 28% in the fourth quarter 2007 to 42.15 million from 33.17 million in the fourth quarter of 2006.

Fourth quarter revenue increased 106% to $84.2 million compared to $40.9 million in the fourth quarter 2006. Organic revenue during the fourth quarter was approximately $69.3 million, or 82.3% of total revenue (which included the fourth quarter 2007 revenue contribution from Cheng Feng). Non-organic revenue, or revenue of acquired companies totaled approximately $14.9 million or 17.7% of total revenue in the fourth quarter 2007. As a result, organic revenues grew during the fourth quarter by $28.4 million, or 69.3% from $40.9 for the same period last year.

In the fourth quarter gross profits increased $14 million, or 130%, to $24.7 million from $10.7 million for the same period last year. Gross margin for the fourth quarter was 29.3%, as compared to 26.2% for the same period last year. The increase in gross margin reflected the growing recognition of sales of some higher-margin Safe City projects.

Income from operations in the fourth quarter increased 63.9% to $13.6 million from $8.3 million for the same period in 2006. Operating margin decreased to 16.1% from 20.2% in the fourth quarter last year. Net income in the fourth quarter of 2007 increased 124% to $14.8 million, up from $6.6 million in the same quarter last year. Net income per share was $0.35 versus $0.20 in the fourth quarter 2006.

The Company's cash position at the end of the year was $89.1 million, up from $79.8 million at the end of the third quarter. Total debt at the end of 2007 was $137.2 million, up from $130.5 million at the end of the third quarter of 2007.

Mr. Guo Shen Tu, Chief Executive Officer of China Security, commented, "We are encouraged by the integration of our 2007 acquisitions and partnerships, which are contributing nicely to our revenue growth, while providing synergies to our overall business. In the fourth quarter we continued to see significant demand from government Safe-City contracts, and importantly, the size, duration, and potential margins of the contracts we are signing are continuing to increase. Over the next four quarters, we will continue to focus our energies on integrating our acquisitions and generating revenue from the manufacturing and systems integration businesses, while building our operating services and international products divisions to prepare them to contribute more substantially to overall revenue growth in 2009."

Financial Outlook

For the first quarter of 2008, the Company expects to achieve revenues between $68-$70 million. Excluding the non-cash charges related to the redemption amount payable on convertible notes, the accrual of performance based employee compensation, and the depreciation and amortization of long lived assets related to the Company's recent acquisitions. The Company expects to achieve an adjusted net income of $13-$14 million and adjusted diluted earnings per share of $0.31-$0.34 in the first quarter of 2008.

The Company estimates that non-cash interest expenses associated with the redemption accretion on convertible notes, the employee stock compensation and the depreciation and amortization of long lived assets related to the Company's recent acquisitions for the first quarter of 2008, will be approximately $4.4 million, $3.1 million and $1.9 million, respectively.

For the full year 2008, the Company expects to achieve revenues between $350-$370 million. The Company expects to achieve an adjusted net income of $65-$75 million and adjusted diluted earnings per share of $1.50-$1.75. The major contributors to results should continue to be system installation and manufacturing of security and safety products with marginal contribution coming from operating services and international products. The Company expects non-cash expense related to the redemption amount payable on convertible notes will be approximately $17.6 million in 2008. Going forward, we expect to continue to incur accrual non cash stock compensation for 2008. We also expect higher depreciation and amortization costs related to the intangible assets from an increasing number of acquisitions.

Mr. Tu concluded, "We are more excited than ever about the future of China Security. We believe we have built the strongest foundation among our recent acquisitions and partnerships to make us a market leader in manufacturing and equipment. We will continue to deploy our resources and our efforts to build these segments of our business, while at the same time increasing our focus on our burgeoning operating services and international products divisions. We believe that the security expertise of our operating team will enable us to grow those businesses over time much the same way we've successfully grown the manufacturing and systems integration businesses. Demand for our products and our expertise continues to grow, and we plan to be ready with solutions to all security needs.

In the coming year, we expect to strengthen our foothold as a market leader and consolidator in our business. We believe we have the best possible strategy for growing internally and through strategic acquisitions in order to position China Security as the leader in providing turnkey security solutions. We expect that as our spectrum of products and services grows, we will become the logical choice for customers seeking comprehensive security solutions. We're confident that our focus on sophisticated security needs in the Chinese marketplace will enable us to stay ahead of demand and continue to report strong financial results."

Explanation of Redemption Accretion

The Company raised $60 million and $50 million through two guaranteed senior unsecured convertible note financings with Citadel in February 2007 and April 2007, respectively. These notes bear interest at a rate of 1% per annum and are due in 2012. Under the indentures, if the notes are not converted before their respectively maturities, the notes are to be redeemed by the Company on the maturity date at a redemption price equal to 100% of the principal amount of the notes then outstanding plus an additional amount of 15% per annum, calculated on a quarterly compounded basis, plus any accrued and unpaid interest.

As of December 31st, the Company accrued $13.7 million as a redemption amount payable under the notes, which was included in interest expense in the income statement of 2007. Unlike the annual interest rate of 1% that the Company is actually paying out to the note holders under the note on a semi- annual basis, the Company would only pay the accrued redemption amount under the notes if the notes are not converted into the Company's common stock before their respective maturities and are redeemed in accordance with its terms. Nevertheless, the Company believes that it must accrue the entire redemption amount under U.S. generally accepted accounting principles. This accrual will result in non-cash expense of approximately $17.6 million annually beginning in 2008.

Conference Call

The Company will hold a conference call to discuss the financial results at 5:00 p.m. ET today. The Company invites you to join the call by dialing 913-312-1235. A live webcast of the conference call will be available at http://www.csst.com . A replay of the call will be available from March 10, 2008 to March 17, 2008. Listeners may access the replay by dialing 719-457- 0820, passcode: 4517900.

About China Security & Surveillance Technology, Inc.

Based in Shenzhen, China, China Security manufactures, distributes, installs and maintains security and surveillance systems throughout China. China Security has manufacturing facilities in China and a R&D facility which maintains an exclusive collaboration agreement with Beijing University. China Security has built a diversified customer base through its extensive sales and service network throughout China. To learn more about the Company visit http://www.csst.com .

About Non-GAAP Financial Measures

This press release contains non-GAAP financial measures for earnings that exclude the accrual for the redemption amount payable under certain outstanding convertible notes issued by the Company and certain other non-cash charges. China Security believes that these non-GAAP financial measures are useful to investors because they exclude non-cash charges that China Security's management excludes when it internally evaluates the performance of China Security's business and makes operating decisions, including internal budgeting, and performance measurement, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of China Security. Accordingly, management excludes the expense arising from the accrual of redemption amounts payable under its outstanding convertible notes and certain other non-cash charges when making operational decisions. China Security believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand China Security's financial performance in comparison to historical periods. In addition, it allows investors to evaluate China Security's performance using the same methodology and information as that used by China Security's management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non- GAAP financial measure. However, China Security's management compensates for these limitations by providing the relevant disclosure of the items excluded.

The following table provides the non-GAAP financial measure and the related GAAP measure and provides a reconciliation of the non-GAAP measure to the equivalent GAAP measure.




        Reconciliation of GAAP to non-GAAP Measures, Table 1 (Unaudited)
                    Exclude non cash items and one time gain
       (All amounts in millions of dollars, except for per share figures)

                                  Twelve Months Ended     Three Months Ended
                                 December     December   December    December
                                 31, 2007     31, 2006   31, 2007    31, 2006
    GAAP Net Income                $35.32       $22.93     $14.82      $6.63
    Add:
    Depreciation and
     amortization                    5.04         1.12       1.70       0.55
    Non-cash employee
     compensation                    4.16           --       2.10         --
    Redemption accretion on
     convertible notes              13.70           --       4.36         --
    Less:
    Gain on disposal of land
     use rights and properties
     (net of tax)                  (11.59)          --      (6.89)        --

    Adjusted Net Income
     (Excludes all
     non-cash items)               $46.63       $24.05     $16.09      $7.18
    GAAP Diluted EPS                $0.91        $0.85      $0.35      $0.20
    Add:
    Depreciation and
     amortization                    0.13         0.04       0.04       0.02
    Non-cash employee
     compensation                    0.11           --       0.05         --
    Redemption accretion on
     convertible notes               0.35           --       0.10         --
    Less:
    Gain on disposal of land
     use rights and properties
     (net of tax)                   (0.30)          --      (0.16)        --

    Adjusted Diluted EPS
     (Excludes all
     non-cash items)                $1.20        $0.89      $0.38      $0.22
    Diluted weighted average
     number of shares
     outstanding                    38.80        26.94      42.15      33.17




         Reconciliation of GAAP to non-GAAP Measures, Table 2 (Unaudited)
         Assuming conversion of Citadel notes, and exclude one time gain
        (All amounts in millions of dollars, except for per share figures)


                                      Twelve Months Ended  Three Months Ended
                                       December 31, 2007    December 31, 2007
    GAAP Net Income                           $35.32              $14.82
    Add:
    Redemption accretion on
     convertible notes                         13.70                4.36
    Less:
    Gain on disposal of land use
     rights and  properties                   (11.59)              (6.89)
    Adjusted Net Income (Assuming
     conversion of
    Citadel notes and adjust for the
     Gain on disposal of land use
     rights and properties)                   $37.43              $12.29

    Net Income Diluted EPS (Assuming
    conversion)                                $0.81               $0.31
    Add:
    Redemption accretion on
     convertible notes                          0.31                0.09
    Less:
    Gain on disposal of land use
     rights (net of tax)                       (0.27)              (0.14)
    Adjusted Diluted EPS (assuming
     conversion of Citadel notes
     and adjust for the Gain on
     disposal of land use rights and
     properties)                               $0.85               $0.26
    Diluted weighted average number of
     shares outstanding (assuming
     conversion of Citadel notes)              43.50               47.60

    * There were no convertible notes outstanding in the three and twelve
      months ended December 31, 2006.


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China Security & Surveillance Technology Announces Significant Safe City Project Win
Monday March 17, 8:30 am ET


SHENZHEN, China, March 17 /Xinhua-PRNewswire/ -- China Security & Surveillance Technology, Inc. ("Company") (NYSE: CSR - News), a leading provider of digital surveillance technology in China, today announced that it has won a bid for a Safe City project in Kun Ming City, located in the Yun Nan province, to build out road monitoring and an electronic police system within the city which includes traffic junction and highway monitoring, camera installations in main public areas and traffic walkways.
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The total project value of this contract is approximately RMB 209.4 million (approximately USD$29.5 million, based on a conversion price of USD: RMB 1.00:7.10). This is the biggest Safe City project ever won by the Company to date. Project work is expected to commence during the second quarter of 2008. Kun Ming City is located in Southwest China with a population that exceeds 5 million, and is considered by the Company to be a tier 2 city.

Mr. Guo Shen Tu, Chief Executive Officer of China Security, commented, "We are extremely pleased to have landed our largest Safe City contract win to date. We have the proven capability to win large contracts on a standalone basis in addition to working with other high profile partners in China. This contract was largely secured because of our diversified integrated solutions platform, highly experienced operational team, strong brand recognition and efficient pricing. We are well positioned from a competitive standpoint in the China market and are encouraged that we'll continue to increase the size and scale of our contracts going forward."
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China Security & Surveillance Technology CEO Purchases Shares
Monday March 24, 8:30 am ET


SHENZHEN, China, March 24 /Xinhua-PRNewswire/ -- China Security & Surveillance Technology, Inc. (the "Company" or ''China Security'') (NYSE: CSR - News), a leading provider of digital surveillance technology in China, today announced that its Chief Executive Officer, Mr. Guo Shen Tu, has purchased an aggregate of 151,000 shares of China Security stock in the open market during the course of the last week. In addition, his wholly owned company, Whitehorse Technology Limited (''Whitehorse''), has adopted a Rule 10b5-1 plan for the purpose of buying China Security's shares in open market transactions within a specified price range.
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The written plan was adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. Under this written plan, Whitehorse intends to purchase up to US$4.8 million worth of the Company's common stock. These purchases will take place weekly over a five month period beginning April 2008 and will be subject to a maximum price limit of $30 per share. Transactions under this plan will be disclosed publicly through Securities and Exchange Commission filings.

Whitehorse's share purchases are being funded from the $50 million loan of Whitehorse announced in January 2008.

Mr. Tu commented, ''These recent transactions, including the establishment of a share purchase plan, highlight my belief that China Security's current share price levels do not reflect the true value of China Security. China Security has a highly compelling platform for growth with an exciting array of initiatives that are expected to contribute significantly to future success. I am pleased to be able to take advantage of weakness in the market through a stock purchase program and am fully prepared to adopt additional purchase plans in the future.''

Rule 10b5-1 allows insiders who are not in possession of material nonpublic information to establish prearranged plans to buy or sell company stocks over a specified period of time or at a specific price in the future, regardless of any subsequent material nonpublic information they receive.

About China Security & Surveillance Technology, Inc.

Based in Shenzhen, China, China Security manufactures, distributes, installs and maintains security and surveillance systems throughout China. China Security has manufacturing facilities located in China and an R&D facility which maintains an exclusive collaboration agreement with Beijing University. China Security has built a diversified customer base through its extensive sales and service network that includes numerous points of presence throughout China. To learn more about the Company visit http://www.csst.com .
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China Security & Surveillance Technology Announces RMB 800 Million Safe City Project Win
Thursday March 27, 8:30 am ET 
-- Company's Safe City Project with Jining City is Largest to Date --


SHENZHEN, China, March 27 /Xinhua-PRNewswire/ -- China Security & Surveillance Technology, Inc. ("Company") (NYSE: CSR - News), a leading provider of security solutions in China, today announced that it has won a bid for a Safe City project directly with the government of Jining City. Located in the Shandong province, Jining has a population of approximately 8.1 million people. The Safe City project is expected to cover all of Jining City and includes the installation of security cameras and related equipment, a build out of the city-wide secured network infrastructure which will enable digital images and data to be transmitted over a wide area. It will also include the digitization of an existing information database that will allow for more efficient and effective analysis of data.
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The total project value of this contract is approximately RMB 800 million (approximately USD$114 million, based on a conversion price of USD: RMB 1.00:7.03). As part of this agreement, CSR will sub-contract the build out of the telecom infrastructure to a licensed telecom provider of its choosing. This is the biggest Safe City project ever won by CSR to date. The Company expects to begin realizing revenue from this agreement in 2008 with the majority of the revenues expected to be recognized in 2009. After the implementation of this contract, CSR will also have a right to provide security related services under a separate contract from the one announced today. In addition, as part of the project, CSR will have rights to place advertising banners on the surveillance camera poles deployed throughout the city. This will enable CSR to enjoy additional revenues.

Mr. Guo Shen Tu, Chief Executive Officer of China Security, commented, "This is a great win for CSR. Our recent Safe City project wins, including this project with Jining City highlights the continued success of our consolidation strategy and serves as further proof that we have assembled a total solutions offering that is unmatched by our competition. Our Safe City projects are becoming more comprehensive and as one of the few total solution providers in China, we are becoming more successful negotiating a larger segment of the business than ever before. Scale is highly important in the China market. The consolidation strategy that we have adopted over the past few years is beginning to show results. For this project, we were successful getting the local city government to award CSR this project in one large phase instead of smaller phases -- the Jining City government has formally agreed to award us with subsequent services work such as data management and back-end operating services before we have commenced initial work on this project. We are also allowed the right to provide operating security related services under a separate contract at a later date. As the leading one-stop-shop security solutions provider in China, we continue to see strong momentum in our business and look forward to record growth for our business in 2008."
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Significant breakout this morning, on a great stock with BIG potential.

Hi BigSully1, thanks for posting this one on the Watch List, it is a very interesting company.

Please allow me to make one suggestion. Why don't you post just the link to the news instead of the complete text? It's just that it reads better on Yahoo, for example, and this way we quickly get our comments and analysis.

1. Fundamental Case for CSR

As you can see here, the price target, given by analysts, rose 64% yesterday ...



... this was mostly due to the following news:

China Security & Surveillance Technology Announces RMB 800 Million Safe City Project Win
PR Newswire (Thu 8:30am)

Now I have a service, which costs $1,240 a month, with a lot of useful information, like for example, instead of having just the recommendation and price target, I get the full analysis from all brokerages and analysts.

I think today's recommendation from Susquehanna is a very good summary of CSR's fundamentals and I certainly wouldn't do it better myself. So I'll just copy paste the full research and use it as my fundamental case for buying this stock:

Improving Visibility with the Largest Project Win in CSR History

This morning, CSR announced a major Safe City project win valued at RMB800 million
($114 million) in Jining city (8+ million in population), Shandong province. It is worth noting
that this is the largest Safe City project win in the company's history and allows CRS to
generate high margin service revenue and possibly advertising revenue upon the
completion of the project. Together, with the recent RMB209.4 million ($29.5 million) win
in the Safe City project in Kunming (the capital of Yunnan province with 5+ million in
population), the contract win demonstrates a strong pipeline and continued momentum in
Safe City projects in China. Although these revenues remain non-recurring in nature, we
believe the established relationships with the local governments are critically important
and position CSR well to generate recurring, high margin revenue in the years to come.

HIGHLIGHTS

• Strong project pipeline into 2009, with high margin service/ad revenue. The
majority of revenue from the $114 million contract announced today will be recognized
in 2009. Our current 2009 revenue estimate is $486 million (+35% Y/Y). Assuming 80%
of the new contract value is recognized in 2009, close to 20% of our 2009 revenue
estimate is already in the bag. It is also important to note that CSR will be able to
generate high margin service revenue and potentially advertising revenue after the
completion of the project. Recall that CSR signed ~$100 million worth of new contracts
in 4Q07 and backlog into 1Q08 is $60.5 million, of which $57.3 million (or 95%) are
system installation related and the remainder is hardware products. Positive Factor

• CEO will continue to purchase shares with a pre-set plan. Chairman and CEO Mr.
Tu Guoshen purchased a total of 260,600 CSR common shares on March 18, 20, and
21. In addition, Whitehorse Technology (owned by Mr. Tu) has adopted a written plan
under SEC Rule 10b5-1 with the intention to buy up to $4.8 million worth of CSR
shares. These purchases will occur weekly over a 5-month period beginning April 2008,
subject to a maximum price of $30 per share. Recall that Whitehorse entered into a $50
million loan agreement with Abax Global Capital on January 31, with the use of
proceeds only in: 1) buying CSR common stock in a private transaction; 2) making a
loan to CSR and the proceeds of which may be used by CSR to fund certain
acquisitions; and/or (3) buying CSR shares in the open market. In our view, the CEO's
recent share purchase and the adopted plan to purchase more helped to increase
investor confidence in the long run. We note that all management is subject to a two year
lockup and cannot sell any shares without board authorization. Positive Factor

• Valuation. At 11.2x (ex cash 9.9x) our 2008 non-GAAP EPS estimate of $1.63 (+35%
Y/Y), CSR is trading at a significant discount relative to its near-term earnings growth
potential, as well as its market opportunities in the long run. We do not believe a
significantly discounted valuation is justified and strongly recommend investors to
accumulate at this level.

CONTRA CASE
Risks to our investment thesis include: 1) any missteps in CSR's acquisition and
integration of complementary businesses; 2) slower than expected expansion of China's
nationwide surveillance network due to government budget constraints and/or political
factors; 3) significant advancement of competitors' technologies that render CSR's
products obsolete or less competitive; and 4) significant increases in raw material cost
due to a shortage of certain electronic components and/or other factors.

2. Technical Analysis

As BigSully1 wrote, CSR had a bullish breakout after yesterday's news:



Still a bit on the fundamental side, I think that with the CEO buying shares up to $30 and this analyst's price target also set at $30, we'll have $25 in the short term horizon.

So I would be buying in the current area expecting to take profits in the $25 level. The stock shouldn't lose momentum after yesterday's news. I say that a close below yesterday's white candle midpoint would be enough to show that the trade has no merit, at least not in the time frame this portfolio was designed to operate in.

3. Trading Plan

Buy between $18 and $18.5. Don't buy above $18.5. Expect to take profits in the $25 area. Bail out if the stock is set to close below $17.64.

Forget this plan. I had doubts right after I posted it. The revenues are non-recurring and that always means a deep discounted valuation and stock is up 73% in a couple of weeks already.

I had to write something so I picked this one, but I doubt it's a good one ... anyway, if you like the story and the chart and opt to go ahead, good luck

We'll have to be patient, there's a lot of work to do and it will take time ...

I am hard pressed to think of a business that does not have non-reoccuring revenue.  CIMT, SDTH, CHME, UTVG, SIX, DROOY, all provide products or services that are not non-reoccuring (i.e., sale by sale basis).   ASTI doesn't sell anything. 

Perhaps IMMR does, with the licenses, but that's it.

What am I missing?

Quote from: buddjas1 on March 28, 2008, 12:32:39 PM
I am hard pressed to think of a business that does not have non-reoccuring revenue.  CIMT, SDTH, CHME, UTVG, SIX, DROOY, all provide products or services that are not non-reoccuring (i.e., sale by sale basis).   ASTI doesn't sell anything. 

Perhaps IMMR does, with the licenses, but that's it.

What am I missing?

I didn't get that one at all either Buddjas. What, like there won't ever be any more revs? I'm already in it and not buying more right now, but for those that are not, it might be more prudent to wait for a possible better entry., maybe around $17.00. IBD would say it's already too far extended (more than 5%) past it's pivot to consider for an entry. But then again by waiting, you might just miss out on a good one.

Actually you can find businesses with recurring revenues in software industry.
For example, CRM (Salesforce.com) or Riverbed (RVBD).

I work in an IT company that actually is not (yet) listed and our business is oriented to have recurring revenues, that are given by renewals made by existing customers when the SaaS of one year expires.
For example, our company sells remote access, remote support and remote administration.
customers pay for one year and when contract expires they can choose to renew or not.

In this kind of business is very important to keep very low the churn rate, that is the rate that measures the number of customer that will not renew.
So, every year you can count on a basis of customer (in our case, approx 90%) that give you recurring revenues, and at the top of this you continue to add new business getting new customers-

every year, your revenue increase from the sum of recurring revenues + new business and this gives an extreme power to income statement.
In fact, adding new business does not impact on operationa expenses or labour cost because actually we are working at full of capacity: our sales continue to add new business, while customer care are provides the renewal.

At the end, you have an impressive growth rate and very large profit margin (both gross and net).
Net income, generally at the third year of operation, skyrockets.

Hope this helps and hope also David can benefit of this post when looking for great investments.

I will let you know when our company, in which I work as marketing & operations, will be listed

Quote from: buddjas1 on March 28, 2008, 12:32:39 PM
I am hard pressed to think of a business that does not have non-reoccuring revenue.  CIMT, SDTH, CHME, UTVG, SIX, DROOY, all provide products or services that are not non-reoccuring (i.e., sale by sale basis).   ASTI doesn't sell anything. 

Perhaps IMMR does, with the licenses, but that's it.

What am I missing?

CIMT sells software to small companies around the world and then maintenance and support services. There are hundreds of thousands of companies to sell to and upgrades are paid.

SDTH sells NPCC to be used in the production of tires, PVC, plastics, paper, etc, which are perishable goods. SDTH's revenue is recurrent.

CHME.OB sells medicines in China. Medicines are bought, used and then people have to buy them again. The revenue stream never ends.

UTVG.OB sells travel and tourism related services in China. One doesn't travel just once in a lifetime ...

About 25 million people visit SIX's parks every year. Some are different, some are the same people. Revenues are recurrent.

DROOY sells gold it takes from the ground. For as long as their mines have gold to extract, they'll continue to sell.

As for CSR, specifically in the case of the latest news affecting the stock ...

China Security & Surveillance Technology Announces RMB 800 Million Safe City Project Win
PR Newswire (Thu, Mar 27)

How many 5 million people cities are in China to sell to?

Say, 20 or 30? When the company sells to every potential big city the revenue stream ends. So these revenues are, as the analyst says, "non-recurrent in nature".

QuoteI didn't get that one at all either Buddjas. What, like there won't ever be any more revs?

No, there will be more revenues, but the particular news affecting the stock right now isn't recurrent due to what I've wrote. Buyers are attaching a valuation of 11 times annual earnings, but it isn't clear that the earnings will be big in the future, when there aren't more big cities to sell their cameras, software and all the other stuff that they sell.

I just thought that the discount valuation is justified.

QuoteI'm already in it and not buying more right now, but for those that are not, it might be more prudent to wait for a possible better entry., maybe around $17.00. IBD would say it's already too far extended (more than 5%) past it's pivot to consider for an entry. But then again by waiting, you might just miss out on a good one.

Yes, $17 might be a nice entry point. Or maybe it will close the gap at $16.05.

$30 will be a magnet for the stock, since the CEO mentioned that value as his limit for purchases and its Susquehanna's price target. But I'm not sure it will approach that level due to the non-recurrence of the deal currently moving the stock upwards.

I had the following trading plan:

QuoteBuy between $18 and $18.5. Don't buy above $18.5. Expect to take profits in the $25 area. Bail out if the stock is set to close below $17.64.

I'm glad I got cold feet, but I would still be in, with just a little bit of margin, since CSR closed yesterday at $17.75. We'll see what happens next, good luck BigSully1

QuoteHope this helps and hope also David can benefit of this post when looking for great investments.

It does help, thanks terainvestment.

QuoteI will let you know when our company, in which I work as marketing & operations, will be listed 

Yes, let us know, it would be nice to have a bit of insider information (just kidding).

Tell your management to do like the Israelis do and list on the Nasdaq and not Italy ... the company will probably be worth more just because it is listed in the US, it has more global visibility.

"After the implementation of this contract, CSR will also have a right to provide security related services under a separate contract from the one announced today. In addition, as part of the project, CSR will have rights to place advertising banners on the surveillance camera poles deployed throughout the city. This will enable CSR to enjoy additional revenues."

The analyst is wrong and too lazy to read the PR.

QuoteThe analyst is wrong and too lazy to read the PR.

I don't think that was the case buddjas1. Nobody said all of CSR's revenues are non-recurrent, just that the $114 M announced in that specific headline are non-recurrent:

China Security Wins $114M Contract
AP (Thu, Mar 27)

«Although these revenues remain non-recurring in nature, we believe the established relationships with the local governments are critically important and position CSR well to generate recurring, high margin revenue in the years to come.»

The analyst is on the bulls side, he recommended buying and has a $30 price target. He actually didn't consider the non-recurrence of part of CSR's revenues a very relevant issue, it was I who did that.

Don't let your distrust of analysts in general cloud your judgment buddjas1.

Let me leave you an updated chart, good luck

Press Release Source: China Security & Surveillance Technology, Inc.


China Security & Surveillance Technology Completes Two Acquisitions
Wednesday April 2, 9:05 am ET


SHENZHEN, China, April 2, 2008 /Xinhua-PRNewswire/ -- China Security & Surveillance Technology, Inc. (the "Company" or ''CSST'') (NYSE: CSR - News), a leading provider of digital surveillance technology in China, today announced that it has completed the acquisition of two Chinese companies, Stonesonic Digital Technique Co., Ltd. (''Stonesonic'') and Longhorn Security Technology Co., Ltd. (''Longhorn'').
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Under the terms of the acquisition of Stonesonic, the total consideration is RMB227,037,605 (approximately US$32.4 million) comprised of 55% cash and 45% restricted common stock. The issuance of China Security's shares included in the equity portion of the purchase price for the Stonesonic acquisition will be subject to the achievement of certain net income performance targets over a two year period, including a 2008 net income guarantee of RMB 35 million (approximately USD $5.0 million).

Stonesonic, founded in 1993 and based in Chaozhou, Guangdong Province, is a leading monitoring equipment hardware manufacturer. This business will compliment China Security's existing product suite for Safe City projects. Stonesonic has received its High-tech Enterprise Certificate as well as 3111 product recognition.

Under the terms of the acquisition of Longhorn, the total consideration is RMB120,557,510 (approximately US$17.2 million) comprised of 30% cash and 70% restricted common stock. The issuance of China Security's shares included in the equity portion of the purchase price for the Longhorn acquisition will be subject to the achievement of certain net income performance targets over a two year period, including a 2008 net income guarantee of RMB 18 million (approximately USD $2.56 million).

Longhorn specializes in the manufacture and installation of security alarm systems in China. Longhorn's security alarm systems will compliment China Security's existing suite of security and surveillance system installations in China, allowing China Security to provide a more comprehensive security solution.

Mr. Guo Shen Tu, Chief Executive Officer of China Security commented, ''We are pleased to close these transactions, each of which will further strengthen our presence in China's growing security market.

Stonesonic is a leading monitoring equipment solutions provider in China that has a broad array of large flat panel display equipment. This addition to our product portfolio will provide us with a more comprehensive solution for Safe City projects with local governments. As one of China's leading alarm system manufacturers, Longhorn will allow China Security to move further into alarm monitoring for Safe City projects. It will also provide us the opportunity to penetrate the residential alarm monitoring service for our service division.

We are pleased that the Stonesonic and Longhorn acquisitions will be accretive immediately to earnings and believe that each of the transactions announced today will further strengthen our overall service offering and expand our geographic presence in China. We look forward to working with the senior management teams at each of these companies and are confident that their contributions will be meaningful to our business going forward. As the emerging leader in China's security industry, we remain highly encouraged with CSST's overall prospects for growth.''

The monetary exchange rate used for each transaction is US$1.0=RMB 7.01.

About China Security & Surveillance Technology, Inc.

Based in Shenzhen, China, China Security manufactures, distributes, installs and maintains security and surveillance systems throughout China. China Security has manufacturing facilities located in China and an R&D facility which maintains an exclusive collaboration agreement with Beijing University. China Security has built a diversified customer base through its extensive sales and service network that includes numerous points of presence throughout China. To learn more about the Company visit http://www.csst.com .

 
SmallCapInvestor.com
Cashing in on China
Friday April 11, 6:20 am ET
Jim Trippon


Jim Trippon, editor in chief of the newsletter China Stock Digest, runs the largest equity investment research firm in mainland China and advises corporate pensions, private trusts, and high-net-worth families on their China investment strategies. Trippon spoke with SmallCapInvestor.com's Jennifer Schonberger Tuesday, sharing his outlook on Chinese small caps and the Chinese economy.

Trippon, who returned to the United States from China earlier this week, is the author of  "Becoming your own China Stock Guru: The ultimate investors guide to profiting from China's economic boom," published by John Wiley & Sons, Inc. Part two of Trippon's interview will appear on SmallCapInvestor.com on Monday.

"I would say there're two trends that people need to focus on that became real clear on this last trip [to China]. One is that the economic growth is continuing at a breakneck pace. This industrial revolution in China is not a short-term thing. It's a 30- to 40-year trend ... and they have at least another 30 years to go before it's all done.

"The second thing that struck me on this trip was how inflation is hitting China hard — much higher than what we typically see in the media in the United States. This is dramatically different than what I saw just three months ago because I go to China six months a year. [Everyone's] cost of living is going up 10% to 15% a year. [Most businesses are] giving out major salary increases to make sure [people] don't get hurt. The other side of that coin is that although [inflation is] a huge issue in China right now, it's going to be a huge issue for us in the United States before we know it, not only because of the declining dollar, but because most of our consumer products today are made in China. 

"I would think they would increase interest rates, but there's only so much the central government can do to control an economy — and we're seeing this with our own economy. Once you let the free market take hold in a free economy — as ours has done for a long time and as theirs has done more recently — what happens, to a large extent, is going to be dictated by market factors more so than government policy. China has tried very, very hard for the last 10 years (when their economic growth rate has been 8% to12%) to control the growth of inflation. I noticed from this last trip that at this point they're not able to control it anymore.

"As investors, for us that means that we have more inflation here in the United States and that may affect what U.S. stocks you buy that may be beneficiaries of inflation rather than victims of it. It also affects what Chinese stocks we want to buy for our small-cap portfolios — which plays into my recommendations.

"The banking companies of China would be beneficiaries of [an inflationary] environment in which they could charge more for their loans and could still get their deposits at a fairly low cost. In China there are three places you can put your money: the bank, real estate or the stock market. Real estate is not liquid and the stock market hasn't been the best place to be over the past six months, so banks are taking in huge deposits and pay out a fairly low interest rate on them, but are charging a decent rate on their loans, so I think [banks] will be big beneficiaries.

"We like commodities, technology and agricultural stocks right now. Commodities are a play on the inflation that's going on in China right now. If you own the producer of the commodity, and they're going to get better prices for their commodity if they can control their costs, then as long as their costs aren't rising as fast as their revenues from the value of the sale of the commodity, they're going to be a beneficiary.

"In the technology space, as China's middle class proliferates, what do they buy? They buy cell phones and they buy computers and you're seeing that happen all over China. Things that play into those industries make sense.

"China Direct (AMEX:CDS - News) is an investment banker that makes loans to Chinese industries that have a shortage of working capital because their banking sector is not good at providing working capital to mid-size companies. They pick up a stock interest in the companies, and if they like the company they'll try to pick up a majority stake in it. China Direct started investing heavily in magnesium and is making tremendous progress, basically taking over the magnesium industry in China. Magnesium is an alloy that makes cars lighter and is used in virtually every cell phone. It's a high-strength, low-weight metal. The reason auto manufacturers want it is to lower the weight of cars and retain their strength or structural integrity, [which would result in] less gasoline [consumed] than [heavier] cars.

"They produce magnesium at an extremely low cost using a byproduct called coal gas — a less energy-efficient form of natural gas — that results from a process of extracting high-quality coal used to make steel. As inflation occurs in China and people pay $3 or $4 per gallon of gasoline in the United States, it's going to play directly into the back pocket of a company like China Direct, which is manufacturing a product at rock bottom prices.

"China Security & Surveillance Tech (NYSE:CSR - News) develops software and technology applications that are used by first responders in China. It's used by the police force, ambulance force and fire department. For example, let's say you're walking down the street in some city in Southern China and some thug tries to steal your purse. You call 911 on your cell phone. In China they immediately triangulate your location, tie it in with cameras on street lights and track the offender down the street in the closest police car. They can also identify which ambulance or hospital is closest to your location and can easily send a first responder to help you so that in case you're injured, you get the medical treatment when you need it as quickly as possible.

"As the population of China continues to shift from the rural areas to 60% in the urban areas from the current 40%, and doubles to 80% from 40% over the next 30 years, they're very well-positioned to profit from it.

"[Additionally], there is a big "illegal immigration" problem in China from the rural areas into the urban areas because people are seeking economic opportunity in the urban areas. In China they don't allow you to move whenever you feel like it because they want to ensure that they have room for you to live in the urban areas, so [the government] makes you get a permit to relocate. China Security & Surveillance has a monopoly on the ID cards they use in Southern China to identify when someone is relocating legally or illegally.

"China Agritech (OTC BB:CAGC.OB - News) is primarily involved in fertilizers and other things to increase production and productivity of the farm lands. I think as the demographic shift occurs [from the rural areas to the urban areas], they have a good opportunity to profit off that. If you look at [the company's] most recently published financial results, they had EPS of $0.40. The stock is trading right now at $2.65, so arguably you're buying it for roughly seven times earnings.

"Now [remember] Chinese stocks are subject to the whims of Wall Street. If the headline on The Wall Street Journal tomorrow is that [a large investment bank] has gone bankrupt, then there's going to be a pullback in the U.S. markets and a pullback in the Chinese market. That's the way it is. But if you're in it for the long haul, it's a totally different story. If you have a time horizon of three to five years and you don't mind a little bit of turbulence, I think you're going to make a heck of a lot of money.

"When the volatility got high last summer we went to 85% cash. We don't believe in the buy-and-hold routine. We buy low, we sell high and if the market starts going against us, we go to cash. That's what allowed us to have such strong returns last year. We didn't go roundtrip and allow [stock prices] to come back down to our purchase price. We sold at our profit and we held on to our cash. If the volatility bothers you, you have to be willing to pull the trigger and have a reasonable stop loss. The key in China is to study your stocks well enough to know where that stop loss should be set. If you use the traditional Investors Business Daily 7% stop loss, then you're going to get stopped out every time and you're going to lose your tail. But if you take the time to study the charts and learn more about the trading patterns of the stock, you can set stop losses that will work and will protect you in a total market melt down. What you don't want to do is get stopped off on normal volatility.

"I think you'll see a [rebound] by the end of the year. We're talking about factors in the United States that have impacted global markets. I think to a large degree it's because there is this linkage, or correlation, between what happens on Wall Street and what happens in global markets. We saw the meltdown in the United States starting last September and October, which was the same time China started their big pull back. I think as we get closer to the presidential election, people will stop focusing on the problems that we have now and start looking toward a change. Human nature is such that people tend to be somewhat optimistic as change approaches. You've got historic levels of cash in money markets right now and as we are going into a new administration I think that human nature of optimism is going to be such that you will see money come out of money market accounts and go back into equities. When that happens, the U.S. market will recover and global markets will recover in tandem.

"Have we seen the bottom in the Chinese market? I don't think you've seen the bottom for the domestic exchanges of China. There is a total disconnect between share prices for equities in mainland China and share prices for equities that are traded outside of the country. 

"People have got to invest through ADRs or the Hong Kong shares. It's valuation. If you look at the companies we can buy here in the United States — the blue chip companies of China that trade in U.S. markets — they often trade at price-to-earnings multiples of less than 20. If you were to buy the same companies that trade in U.S. markets in China, those companies are trading at 10, 12 and 20 times earnings, because there is no derivatives market there, you can't buy put options and can't engage in arbitrage. You can buy in China for 50 times earnings, but you'd have to be out of your mind to buy them in China because you can buy the companies here for cheaper. There's no price advantage of doing so.

"Continued high earnings, continued economic weakness in the United States and the continued erosion of the dollar are going to drive those Chinese stock values. Even if you buy them as ADRs you still have the underlying currency that's appreciating against ours and that helps our stock price over time.

"Everybody talks about the Olympics. I don't think it's going to be that much of an impact. The analogy I would give you is this: we had the Olympics in Atlanta not too long ago. Did that drive the U.S. economy? It probably did for local construction for a short period of time, but what's the legacy of having the Olympics in Atlanta? I don't think it solved U.S. economic problems or made a fundamental shift in the U.S. economy. I think what the Olympics will do for China, more than any thing else, is [break the] prejudice of what China really looks like and how modern it has become. It's the "ah ha" investors get when they realize the economic activity in China is real and that the country's economy is going in a 180-degree different direction than ours. As an investor, there's no reason on earth that China should be trading at a lower stock valuation than the United States. They have a growing economy and we have a shrinking economy.  They have a growing currency and we have a shrinking currency. They have a trade surplus and we have a trade deficit. The story of the Olympics isn't the economic activity that comes with it."

4:04PM China Security and Surveillance signs distribution agreement with MOBOTIX (CSR) 19.06 -0.77 : Co announce that it has recently signed a distribution agreement with MOBOTIX AG, a worldwide leading manufacturer of digital, high-resolution and network-based video security systems. Under the terms of this agreement, CSR receives the right to distribute MOBOTIX products within the China. As a world leading manufacturer of mega-pixel IP cameras, MOBOTIX AG can enhance and expand CSR's portfolio of security & surveillance products and solutions it can offer to current and potential customers in China. It will allow CSR to bring MOBOTIX IP video solutions into the Chinese market which will not only favor the trend of changing from analog video surveillance to IP video solutions, but also help meet the demand for high-end security monitoring and provide CSR's government and business customers with more sophisticated IP-based solutions.

Bought some CSR just before the close!


Note was issued the 29th April. Some highlights:

CSR China Security and Surveillance tgt raised to $27 from $24 at Susquehanna, Improving Visibility for 2009 with New Contract Wins and Acquisitions

We reiterate our Positive rating on CSR shares and raise our price target to $27 from $24,
ahead of 1Q08 earnings. We expect CSR to report a solid quarter with significant top-line
growth and encouraging margin trends in a seasonally slow quarter, partially offset by
higher expenses on a rapidly growing platform. In our view, recent market trends and
contract pipeline all point to upside to management guidance for 2008, in which we
believe there is room for an upward revision. With the recent announcement of a
framework agreement with Qingzhou City in Shandong province, we see clear indication
that the build-out of Safe City is accelerating in China. As CSR continues to capture these
emerging opportunities, the company's 2009 visibility has improved substantially. In
addition, CSR is executing well on the acquisition front, with yesterday's announcements
of the Guanling acquisition, following the completion of Stonesonic and Longhorn earlier in
April.
CSR becomes the go-to partner for international vendors. Along with recent
announcements of exclusive distribution agreements with Germany-based, Mobotix
AG, and Korea-based, LG, CSR is now the appointed distributor of multiple
international brands, as the company continues to assemble the best-of-breed product
portfolio to complement its own offerings. In our view, CSR has become the go-to
partner for top international equipment vendors to tap into China's fast growing security
and surveillance market.