3SOF

CHID's revenues in 2003 were $0, in 2004 were $2.34M and for the nine months until September 2005, revenues were $9.63M (year over year revenue growth will be about 5 fold).

Market cap is just $22.88M. Working capital is plenty. The company is profitable, returning 1 penny a share in EPS for the last 3 quarters, so P/E Ratio is about 10.

This penny stock seems to be severely undervalued. I'll buy it for the 3 Pennies on Fire, around today's open, about $1,150 of stock, or 10% of the 3 POF capital.

I was looking at this this weekend and was going to buy this morning, but my scottrade account says I cannot buy his and can only sell and to call local branch to place order. First time I have had this. I thought it looked promising.

I bought today on David's recommendation.  Looks good from a TA and fundamental perspective.  We will see.   

What caused CHID to fall from $ 1.50 on the chart ?
Thank you for the input.

-Jeff-

chid infos:
CHID: Receives $2.5M Purchase Order
Friday , January 06, 2006 08:17 ET
China Digital Communication Group (CHID) announced that its wholly owned subsidiary, Shenzhen E'Jenie Science and Technology Development Co., Ltd., has received a purchase order from Shenzhen Yin Si Qi Electronic Co., Ltd., a subsidiary of HeNan Star Technology Stock Co., Ltd. HeNan, which trades on the Shenzhen Stock Exchange Market, is the largest non-governmental and multi-industry high- tech group in the HeNan province of China.
Yi Bo Sun, China Digital's Chairman and Chief Executive Officer, stated, "Yin Si Qi is an innovative company, responsible for creating patented, environmentally-friendly battery technologies that meet today's emerging global industry standards. Yin Si Qi has an excellent reputation and large production base in the Shenzhen Guangdong province in China. Purchases from Yin Si Qi include steel and aluminum shells and caps, and are valued to add $2.5 million to China Digital's revenues in 2006."


I didn´t find any reason on their website...

David,

I am in but need more information about the slide from $ 1.60.
The volume now does not correlate to the price.

Do not know enough information to add here.

Awaiting a return call from the company and Investor Relations.

Thoughts on the slide even with good news ?

-Jeff-

The entire day was spent on CHID in order to catch up on the history.

Several calls were made.  A new Investor Relations firm was hired that has more experience in getting the word out to investors.  Below is the contact information for the new Investor Relations firm.

Peter H. Clark, VP Marketing
National Financial Communications Corp.
300 Chestnut St, Suite 200
Needham, MA 02492
781-444-6100 ext 629
781-444-6101 fax
508-633-3606 cell
website: www.nationalfc.com, www.otcfn.com, and www.nfnonline.com
email: [email protected]


Roy Teng is based out of the Los Angeles office.  Roy is with the company and NOT the IR firm.

* Roy is who you want to call with any questions as he knows the company well.

He was extremely receptive to the call and provided valuable insight.
Speaking with both IR and Roy confirmed the facts below.

May I suggest contacting Roy to gather more information than is provided below.

For further information, contact:
     At the Company:
     China Digital Communication Group
     Roy Teng
     310-461-1322
     E-mail: [email protected]
     http://www.chinadigitalgroup.com

Roy verified the following numbers:
SHARE STRUCTURE

AS 140 million
OS 54 million
Public Float 13 million
% held by insiders: 76%

Cash: $ 2,000,000
Long Term Debt: $0
CHID is Profitable and Growing Quickly

-  Roy said the insiders are restricted and have not sold any shares.  Roy stated the insiders feel the company is undervalued and want to hold all shares.

-  No reverse split is ever discussed.

-  The goal is AMEX for CHID and they feel great about being able to qualify moving forward.

-  Roy said the anticipated acquisition would qualify them for the goal of AMEX this year.

-  They currently account for 10 % of all Chinese business in this arena.
   
-  Management expects the number to jump to 15-20 % this year.

-  100% of the revenue was China so the USA, middle east & others can exponentially grow the Revenues.  Very exciting if they get the major USA retail account.

-  Roy said they set up offices to the USA to penetrate the market and gain exposure to USA investors.

-  They are in trials with a Major USA Retailer at this time, more news to come.

-  They produce the case.

-  Roy said they are looking at a major acquisition that can get them into producing more than just the casing.  This may happen this year.

-  It costs 8-10 cents per case and the Profit Margin is 20-21 %.

-  With an acquisition, a battery would cost around $ 1 and Profit margin 15 %.

-  They currently employ 591 people.

-  Cost per employee per day is roughly $ 10.

-  They have patents on the products.  Roy said it would be hard for another company to penetrate their area as they have such a head start.

-  The financing was originally with 7 investors, 30 million shares.  No further financing is needed.  They are debt free and solid moving forward with the cash.

-  Roy expects a push to gain exposure for CHID near term.

-  This will be huge for the share price if the above plan is executed.

* Please feel free to correct and/or add any information above.

APPLAUDE!

I appreciate your leg work.

Nice pic.

Great gap. Your continuous work is greatly appreciated!

Thanks.

I bought in yesterday.

Quote from: fill_the_gap on January 10, 2006, 04:30:22 PM

Roy verified the following numbers:
SHARE STRUCTURE

AS 140 million
OS 54 million
Public Float 13 million
% held by insiders: 76%

Cash: $ 2,000,000
Long Term Debt: $0
CHID is Profitable and Growing Quickly

-  Roy said the insiders are restricted and have not sold any shares.  Roy stated the insiders feel the company is undervalued and want to hold all shares.

-  No reverse split is ever discussed.

-  The goal is AMEX for CHID and they feel great about being able to qualify moving forward.

-  Roy said the anticipated acquisition would qualify them for the goal of AMEX this year.

-  They currently account for 10 % of all Chinese business in this arena.
   
-  Management expects the number to jump to 15-20 % this year.

-  100% of the revenue was China so the USA, middle east & others can exponentially grow the Revenues.  Very exciting if they get the major USA retail account.

-  Roy said they set up offices to the USA to penetrate the market and gain exposure to USA investors.

-  They are in trials with a Major USA Retailer at this time, more news to come.

-  They produce the case.

-  Roy said they are looking at a major acquisition that can get them into producing more than just the casing.  This may happen this year.

-  It costs 8-10 cents per case and the Profit Margin is 20-21 %.

-  With an acquisition, a battery would cost around $ 1 and Profit margin 15 %.

-  They currently employ 591 people.

-  Cost per employee per day is roughly $ 10.

-  They have patents on the products.  Roy said it would be hard for another company to penetrate their area as they have such a head start.

-  The financing was originally with 7 investors, 30 million shares.  No further financing is needed.  They are debt free and solid moving forward with the cash.

-  Roy expects a push to gain exposure for CHID near term.

-  This will be huge for the share price if the above plan is executed.

* Please feel free to correct and/or add any information above.

great work as always fill_the_gap;  applaud 

Applause gap - I am in too

76% held by insiders-

On the surface it would seem a good thing for insiders to own such a high percentage.

I am in another stock with insiders owning more than 50% and would expect they would have a vested interest in seeing the company perform, on the other hand wouldn't insiders selling be a huge red flag.

Would the common shareholder even have a chance to exit without taking a large loss?

CHID is confusing.

Boatguy.
You are correct.  The insiders would have to file for a sale as the shares are restricted.

A few concerns to bring to light.

-  The 7 individuals that provided the financing:

A.  How many shares do they have ?
B.  Think they got in around 5 cents, 30 million shares, raising 1.5 million dollars
(this needs to be verified, but came in the notes with the Roy call)
C.  Are these people selling as they are in the money ?

Another theory.
The volume is shares being transferred between accounts.
The shares have to hit the ticker, yet are being shifted around.
This was the theory of the past IR person (Zack) today in a call.

This would throw out TA research because the volume is deceiving.

But the main concern is the selling terms of the private investors.

Any thoughts ?

Quote-  The financing was originally with 7 investors, 30 million shares.  No further financing is needed.  They are debt free and solid moving forward with the cash.

Well, the company didn't sold any shares at least since April 2005, on every 10-Q since then it always says: the company has 54,460,626 shares outstanding. Knowing OTCBB companies like we do, this is a major positive.

If the company doesn't seek to get money from investors it means it doesn't need it and it wants to protect shareholder value, not dilute it. From this point we can make fundamental assessments - if they improve, without a doubt over time the stock price will also rise.

Why the 73% fall from July to August 2004? I don't know. But why the previous 277% rise, also in just 2 months? Not a clue:



They're even buying their factory:

«The Company entered into a factory purchase agreement with the landlord
         after  the end of the  lease for  approximately  $1,000,000.  Since the
         landlord   could  not  obtain  the   relevant   Property   Registration
         Certificate  from the PRC Government by September 15, 2005 the landlord
         has agreed to provide  three (3) months  free rent to the  Company.  If
         after  December 15, 2005 the  agreement can not be completed due to the
         Governmental filings, the landlord and the Company will renegotiate the
         lease.»

Here are the 7 investors:

«On March 17, 2004, we sold 30,000,000  shares or approximately 62% of our issued
and common stock at a per share  purchase  price of $0.05 to seven  unaffiliated
individuals in a private  placement,  which yielded  aggregate gross proceeds of
$1,500,000 (the "Private Placement").»

They have an 8 fold profit at this point. It doesn't mean they're selling, but if they are, I believe they're making a mistake, fundamentals are outstanding now !

What they do:

«Through  E'Jenie,  we  manufacture  and  distribute  lithium  battery shells and
related products primarily in China. Based upon  specifications  from customers,
E'Jenie  develops,  customizes  and produces  steel,  aluminum  battery  shells,
aluminum caps, and lithium batteries for mobile phones,  PDAs and MP3s and other
small electronic consumer products.»

Intense revenue growth:

«Net sales for the nine  months  ended  September  30,  2005  totaled  $9,629,077
compared to $2,761,992 for the nine months ended September 30, 2004, an increase
of $6,867,085 or approximately 248.63%. »

Intense profit growth:

«Income  (loss) from  operations  for the nine months  ended  September  30, 2005
totaled $2,318,322 compared to income from operations of ($291,945) for the nine
months ended September 30, 2004, an increase of $2,610,267. The increase was due
to the strong growth in company's revenue in 2005.»

They have cash and working capital:

«Cash and cash equivalents were $2,155,531
at September  30, 2005 and current  assets  totaled  $4,438,375 at September 30,
2005. The Company's total current  liabilities  were $1,537,966 at September 30,
2005. Working capital at September 30, 2005 was $2,900,409.  We believe that the
funds available to us are adequate to meet our operating needs for 2005.  During
the nine months ended  September  30, 2005 and 2004,  net cash provided by (used
in) operating activities was $2,037,285 and ($1,496,306), respectively.»

More info: «A GROUP OF SEVEN INVESTORS  BENEFICIALLY OWN 62.53% OF OUR COMMON STOCK. We sold
30,000,000 shares of common stock to seven individuals in a private placement in
March of 2004.  As a result of such  offering,  such  investors  as a group will
beneficially own  approximately  62.53% of the issued and outstanding  shares of
common  stock.  The  investors  have granted Yi Bo Sun an  irrevocable  proxy to
direct the voting of their shares of common  stock,  which  expires May 1, 2006.
Upon the  expiration  of these  proxies (and  assuming that such proxies are not
extended),  the  investors as a group will be able to exercise  control over any
matters  requiring  the vote of  stockholders,  including  the  approval  of any
business   acquisition  and  the  election  of  directors  assuming  no  further
issuances.  This  could  delay or  prevent a change in  control  of our board of
directors. This may have the effect of precluding or delaying the opportunity of
minority stockholders to sell their common stock to interested purchasers or may
significantly reduce the offering price in any such transaction.»

This is a $21M market cap company and earnings in 2005 are going to something like $2.89M, so the earnings multiple is 7.26, coupled with a 248% revenue growth.

I understand that a few people control the stock, and they're sitting on a 8 fold profit in just about 18 months, but ... the stock is undervalued and ultimately the market will reflect that.

David,

I found out today from Roy that the 7 investors are Restricted from selling until March.  They are free to sell the shares they got at 5 cents then.  So how can the volume and descending trend be explained ?  I am holding shares but have to say the entire trading pattern is a mystery to me.   

Jeff