CMTP.OB)

[Michael]

Hmmmm... I remember I looked at this loooooong time ago when EliteG was hot on the trail.

I liked it then but time pasted .....

Now it is below $1 so I guess I have to do some number crushing.

I am really not good at these momentum stocks. I remember I once promised EliteG that I would just follow his advise. After that he disappeared!

Life is not fair 

[la-onda]

nice pop up today 

[Michael]

When you do the number crunching on these momentum penny stocks you normally end up crunching the stock instead. Not in this case. These 7 guys simply have an outstanding business.

As we all know over the last couple of year's manufactures of electronics products such as mobile phones, PDA's, Digital cameras, MP3 players etc. etc. etc. has moved production to china both to be able to supply the local market and to take advantage of the low cost structure in China.

This has caused an explosion in the suppliers of parts to the electronic industry in China. Very few of them are available for international investors but China Digital Communication group is!

CHID (the name is not pronounced shit!) is producing steel and aluminum shells to batteries. Is that a sexy industry?

Well the growth in Revenue and Gross profit certainly looks sexy to me:



Think about it like this. The world consumes more than 2 billion mobile handsets per year and an increasing part of those are produced in China. Each phone will use 1.8 batteries over its lifetime. That is 3.6 billion batteries. Then add MP3 players, PDA's etc....

CHID's production capacity is 300 000 shells per day. With the strong balance sheet they should be able to finance further expansion without going to the market.

Both the market and CHID's market share are growing rapidly. Hardly surprising that revenue in Q3 increased with 242%

The company is actively looking for acquisitions to add fuel to the organic growth:

Yi Bo Sun, China Digital's Chairman and Chief Executive Officer, stated, "We have an acquisition strategy focused on building our sales, marketing and distribution opportunities in the global electronic power resource industry. In the United States and China, this industry remains highly fragmented and we believe it is now ready for consolidation. With our production facilities in China, we can offer companies the opportunity to significantly grow their business through increased access to capital and research and development. We are focused on those companies that complement our existing competencies, and can be accretive to earnings immediately or within 12 months of joining China Digital."

CHID has become a major player in the Chinese electronic manufacturing during the three years since the company was formed. With the organic growth and earning accretive acquisitions I can see this company continue its rapid growth in the years to come.

There are 54,5 million shares fully diluted outstanding so CHID's market cap is around $30 million with Fridays share price. The Company has a healthy balance sheet with over $1 million in cash and no long-term debt.

After a quick look at the fundamentals on Friday I decided to buy. To be honest I thought it would fall back at the end of the day so my bid was as usual a bit on the low side. I managed to get a few shares. Enough to keep my interest but not enough to keep me satisfied so I will be on the buying side again on Monday.

I am wondering what the h... I was doing when David mentioned this the first time. I am normally not interested in penny stocks unless they provide exceptional value (like BRVO and BPTR) so I am not keen reader of this forum. That might however change from now!

Mike

[la-onda]

nice update Michael; let me give some additional information:
cheers
Oliver

China Digital Communication Group (OTCBB: CHID), through its wholly-owned subsidiary Shenzhen E'Jenie Technology Development Co., Ltd. ("E'Jenie"), is one of the fastest growing providers of power-supply components to China's explosive $2.1 billion battery market. Based in southern China's manufacturing core of Shenzhen, E'Jenie develops, produces, distributes and markets steel and aluminum battery shells (ABS) and related technology for use in electronic products such as mobile phones, digital cameras, camera phones, PDAs and laptop computers in East Asia and beyond.

E'Jenie has been profitable from its inception in 2002, and has consistently grown its revenues and earnings. While the Company is focused on increasing manufacturing capacity at E'Jenie to meet skyrocketing domestic demand, CHID is actively pursuing licenses, joint ventures, mergers and acquisitions, and strategic partnerships that link Chinese manufacturing companies with U.S. distribution networks to achieve greater profitability. Management announced it is on track to achieve $11.4 million in revenues and a net income of $2.6 million, both up 100% year-over-year, at year-end 2005.

With its strong fundamentals and solid prospects for growth, China Digital is a dynamic new issue to the U.S. stock market that is poised to rapidly build shareholder value.

Strongly Favorable Market

With China becoming the world's manufacturing hub for cell phones and other digital mobile devices, E'Jenie is strategically positioned to supply vast numbers of battery shells for lithium-ion batteries, an industry standard in today's digital world.
Large & Growing Cell Phone Market: China's domestic mobile phone battery market is expected to expand in 2005 to 570 million units, up from 450 million in 2003. The worldwide market for mobile phone batteries is projected to see a two-year rise to 2.52 billion from 2.16 billion units. Domestic battery sales in China are expected to rise to $2.1 billion in 2005, up from $264 million, or more than 14%, from 2004. China will experience a 50% increase in demand of the lithium ion batteries in 2005 (Source: China Statistics). E'Jenie now recognized as a leading provider of ABS shells for lithium ion batteries.
Not only are more Chinese consumers buying mobile phones, but current users are also constantly upgrading their equipment as rapid advances in technology bring about new cell phones which are eagerly accepted into the marketplace. This trend also opens up the market for rechargeable batteries, which is valued at $500 million and growing 20% annually. A mobile phone battery has a typical usage life of 300 to 500 recharges, which translates to a ratio of 1.8 batteries in service life of each phone (source: Chinese Statistics). Moreover, battery replacement demand grows faster than this when consumers turn in their phones for new models before the normal life of the battery is over. A short product life, combined with an accelerated product innovation cycle, have created rapid product turnover and tremendous, ongoing demand for battery shell makers such as China Digital.
China's Move to Capitalism & the Appreciation of Chinese Currency: The Company is also poised to benefit from China's booming manufacturing sector. Makers of batteries and electronic products are direct customers for CHID's components, and their growth – fueled by exports as well as rising domestic demand – can translate into higher sales for CHID. China's entry into the World Trade Organization and the continued privatization of its industrial base will continue to fuel this expansion. State-owned enterprises are continually being reborn as private firms, creating demand for CHID to supply parts and materials to a new crop of manufacturers. In tandem with a move toward capitalism, the Chinese economy is benefiting from a stronger currency. Financial analysts predict the Yuan will continue to appreciate to a greater degree against U.S. currency. This trend favorably impacts the CHID's projected revenues and asset valuation.

Expansion Capacity:
CHID's key acquisition E'Jenie operates a new 65,000 sq.ft. manufacturing facility with over 110 pieces of manufacturing and test equipment in the Xinglian industrial zone of Shenzhen, China. E'Jenie brings expertise in the research and development, manufacture and distribution of battery shells and related technology. Its main products are steel and aluminum battery shells, aluminum battery caps and lithium batteries. Its primary market consists of battery manufacturers selling to the mobile-phone industry.
E'Jenie was founded less than three years ago with one steel-shell production line. It quickly took advantage of China's skyrocketing demand for mobile phones, adding three more production lines before the end of its first year. By the end of 2003, it had 14 steel-shell production lines. In 2004, it bought five aluminum-shell production lines, adding to a pair of battery-cap lines purchased earlier. With its scalable manufacturing capacity, E'Jenie quickly became a major supplier to the Chinese electronics manufacturing sector. The facility now employees more than 550 skilled workers with a daily production capacity of 300,000 steel shells; 150,000 aluminum shells; and 150,000 aluminum caps.
E'Jenie also stands out as the first manufacturer to establish technical and quality production standards in the lithium ion battery industry. These guidelines solidify E'Jenie's position as a leading supplier in the lithium ion battery industry in China, while addressing increasing demands from consumers to deliver technical and quality standards for lithium ion battery shells.

Key Contract:

E'Jenie recently signed a contract with Wuhan Jie Xin Communication Development Co., Ltd, one of the largest lithium ion battery manufacturers in China. The contract calls for E'Jenie to supply 9.4 million steel and aluminum battery shells and sell them to Wuhan Jie Xin over a 12-month period for a purchase price of $667,053. As a result, E'Jenie has met its goal of obtaining at least 25% of Wuhan Jie Xin's annual ordering capacity for steel and aluminum battery shell products and lithium ion batteries. This is a significant accomplishment for E'Jenie, earning it a larger portion of China's electronic power supply market.

Multifold Growth Strategy:

With the E'Jenie acquisition, CHID is now a major presence in the booming Chinese electronics manufacturing sector, and is poised to leverage its strengths to reach new global markets, including the U.S.
Aluminum battery shells (ABS) is at the center of China Digital's growth strategy. Battery makers are demanding aluminum shells and caps for a number of reasons. ABS components give batteries better electric conductivity; are lighter than steel; allow for greater capacity; and appear to be safer. In reports of battery explosions and other accidents, China Digital reports that ABS are linked to low injury rates when compared to steel components. ABS also has a cost advantage over steel. Though ABS products are sold at prices close to those of competing steel items, their raw material costs are much lower. Profit margins of ABS products remain above 30%.
E'Jenie's manufacturing capacity to produce ABS for lithium-ion batteries include multiple consumer product applications, including such mobile devices as digital cameras, MP3 players, cellular phones, notebook computers and PDAs. While increasing sales within this primary electronics market, CHID also has potential to expand to new and emerging markets, including the automotive market.
Overall, E'Jenie is currently holding 10% of the market in China and is now seeking to gain a presence beyond domestic sales. CHID is currently surveying the landscape of battery distribution networks in the U.S. to gain access to lucrative overseas markets. The Company's mid-term strategy is to use licenses, joint ventures, mergers and acquisitions to successfully bring together Chinese manufacturing companies with U.S. distribution networks. As the Chinese currency appreciates, CHID stands to significantly increase margins as it begins importing activities in the U.S.

Strong Upside Potential:
For the fiscal year 2004, China Digital recorded pro forma sales of $5.18 million, nearly all of which was revenue acquired through E'Jenie. The Company also reported a sharp rise in revenue from sales of its new aluminum battery shell (ABS) line, which first went on the market in October 2004. For the first two quarters of 2005, China Digital posted revenues of more than $6.2 million, representing an explosive 528% increase from $991,541 in the same periods in 2004, and a net income after tax of $1,426,596, up 433% increase from a loss of ($428,087) in the same periods in 2004. China Digital expects its trend of record sales and profitability to continue through 2005.
Operating in a highly-fragmented global industry, E'Jenie's manufacturing strengths, experienced management team and established customer base provide CHID with unique advantages to attract acquisition targets. Combined with increasing business in E'Jenie, CHID is poised to rapidly build revenues and earnings. Management projects 2005 revenues of $11.4 million and net income of $2.6 million, both representing increases of 100% year-over-year. The Company also has a healthy balance sheet with over $1 million in cash, no long-term debt and is self-financed. Within the micro-cap sector, CHID represents a solid, long-term upside opportunity for investors to benefit from the fast-growing market of electronic components, both within China and overseas.

Experienced Leadership:

Yi Bo Sun, Chairman and CEO - Mr. Sun assumed the leadership post at CHID when it acquired E'Jenie, where he had been chief executive officer and president since February 2004. Previously, he was president of Shenzhen Jing Kong Chao Ying Electronic Industrial Corp.; marketing director of Shenzhen Heng Tian Communication Equipment Co., Ltd.; and executive president assistant of Shenzhen Te Fa Tong Cheng Industrial Inc. He holds a Bachelor of Science degree from Jilin University.

Yao Miao, Chief Financial Officer - Mr. Yao Miao has served as the chief financial officer of CHID since February 2004. Before assuming this role, he was the chief financial officer of Shenzhen Southern Heng Ye Industrial Co., Ltd.; the auditing manger of the accounting department at Shenzhen Run Ze Universal Development Co., Ltd.; and accounting department director at Golden Butterfly International Software Co., Ltd. He has a Bachelor of Science degree in economics from Hubei University, and is a Certified Public Accountant.

Mei Bin Jin, Secretary - Ms. Jin has been on the Board of Directors of CHID since February 2004. Before that, she was the executive general manager of Shenzhen E'Jenie Science and Technology Development Co., Ltd. She is a graduate of Hubei Province Huaangshi City Professional Institute.

MARKET OPPORTUNITY:

The key to China Digital's growth lies in the soaring demand for mobile digital products and power sources. The record of its E'Jenie subsidiary shows how fast this market is expanding.
E'Jenie was founded less than three years ago - in May 2002 -- with one steel-shell production line. It quickly took advantage of China's rocketing demand for mobile phones, adding three more production lines before the end of its first year. By the end of 2003, it had 14 steel-shell production lines. In 2004, the year of its acquisition by CHID, it bought five aluminum-shell production lines, added to a pair of battery-cap lines purchased earlier. The upshot of all this is a projected manufacturing volume of 100 million product units in 2005.
Why such rapid growth? The answer can be found in the sharply rising demand for new mobile phones in China. Not only are more Chinese consumers buying the phones, but current users are also constantly upgrading as new phones with new features are introduced into the market. A mobile-phone battery has a typical usage life of 300 to 500 recharges, which translates to a ratio of 1.8 batteries in service life of each phone, according to official Chinese statistics. However, battery replacement demand is faster than this when consumers turn in their phones for new models before the normal life of the battery is over. A short product life combines with a short product innovation cycle to create rapid product turnover - and plenty of business for battery shell makers.
All told, China's domestic mobile phone battery market is expected to expand in 2005 to 570 million units, up from 450 million in 2003. The worldwide market will see a two-year rise to 2.52 billion from 2.16 billion. In dollar terms - more meaningful for CHID investors - domestic battery sales in China are expected to rise to $2.1 billion in 2005, up $264 million, or more than 14%, from 2004.
CHID is profiting from another boom, that of China's manufacturing sector. Makers of batteries and electronic products are direct customers for components made by CHID's E'Jenie unit. Their own growth - fueled by exports as well as rising domestic demand -- translates into higher sales for CHID. China's entry into the World Trade Organization and the continued privatization of its industrial base will continue to fuel this expansion. State-owned enterprises are continually being reborn as private firms, adding to the market for companies, such as CHID, that supply parts and materials to manufacturers. While these firms have been mismanaged in the past, they also retain strong connections to government buyers, which give them a leg up as they venture into capitalism. CHID expects to be supplying more and more of these companies in coming months and years.

SUBSIDIARY:

Shenzhen E'Jenie
Shenzhen E'Jenie Development Co., Ltd. was formed in May 2002 as a privately held company specializing in manufacturing and distribution of square battery shells (steel and aluminum) and aluminum battery caps for lithium-Ion batteries, the power source of today's ubiquitous digital mobile devices such as camera, MP3 players, cell phones, laptop computers and PDAs.

E'Jenie has continued to expand its operations following its November, 2004, acquisition by CHID. It has recently announced a move to new factory of 6,000 square meters (64,580 square feet), a 50% increase in production space. It now uses over 100 pieces of testing equipment and production machinery, and its highly skilled workforce now numbers over 500. The company owns its own research and development arm, which has just recently developed a proprietary technology of preventing air leaks on aluminum battery caps.

Product Lines and Capacities:
Variety of Shells/Number of Lines/Models/Sizes/Production Capacity
Square Battery Shells (Steel)/14/10/30/300,000 units/day
Square Battery Shells (Aluminum)/5/10/20/200,000 units/day
Aluminum Battery Caps/2/10/20/200,000 units/day

CHID PRODUCTS:

[shipman]

I had to get in.  Wish I had set a limit buy at .44 like I should have. didn't though, chased it, filled at .55.   Nice end of the day action.  Thanks for the heads up on this one Dave.  I don't think I could got in this one without your reccomendation.  Flame on.  Waiting for the afterburners to kick in.

[fill_the_gap]

David, nice call, applaud !

[tokyopua]

The candlestick below on 2 million shares traded at this time of the day will make many people notice CHID.OB over the weekend. When they see the kind of fundamentals this company has, they'll push it higher more than 100% next week.

This is my believe, hold on to those shares.

David, excellent pick!  I was getting a little worried and impatient with this stock (my bad). I am very glad now I didnt sell it, and glad I bought it when you said to!  :-)

Now I havent traded penny stocks very much, so I would like to ask your clarification on what you mean by "higher more than 100% next week"?  Are you thinking it may double from its current price, or that the gain since you first bought it will reach 100%? 

In either case I will hang on to my current shares, but am wondering if its worth putting in some more capital to work on this bad boy

[la-onda]

hi Michael,

[Terliso]

Applaud David for this call... applaud a lot, you are the Angel of 3SOF.. are you? ha, ha, ha CHID is definitely on fire

The best time to use a trend-following method is when ADX is rising and is above the lower directional line. Those are two signs of dynamic trends

The second chart below is an example of a Dynamic Trends. This is what we would like to see on a chart, this is the best signal of the directional system comes after ADX falls below both directional lines. It "rings a bell" on a new trend...
Like what happening now on CHID.OB

GIGM also an example
FYI this is also happened on DIET

[Michael]

Hmmmmm...... I guess I am not the only one who are waiting for comments about the opening this morning so let me break the silence 

I have to say that I had expected to open up after the strong performance on Friday. Instead we opened down.

The day is still young (at least in US) and I would expect there is a lot of traders that are waiting to see where the bottom is before they buy. I at least was ready to buy at higher prices than Friday but after the weak opening I have decided to sit on the sideline for the time being.

I am not a great momentum trader (EliteG are you out there!) but fundamentally this stock is worth a lot more than it is trading now so I will sit on the shares I bought on Friday and supply later when I think the profit taking is over.

Mike

[eagerlearner]

Hi Michael, I am also waiting to buy the other half of my position after reading your post over the weekend. thanks a lot for your analysis! applaud!
looks like 0.50 is providing support. i already asked the wizard G  , let's see what he says.

Good luck!

[422fwhp]

Sitting on .48

This is on Scottrades restriction list so I was unable to purchase at .50


Good luck to the holders.

[Michael]

Well it seems like 0.48 is a solid bottom. As I am already in I have put my bid in at 0.48.

As said in my first post in this thread I normally don't invest in penny stocks but sometimes there are penny stocks that I wouldn't mind to own long term.

I am happy with my investment in CHID (be carefull when pronouncing this - only chinese could have choosen a ticker like that  ). This is going to contribute to my retirement but I might not retire today!

Mike

[eliteG]

Hey Eags and Mike, CHID looks fine to me, especially since you have David backing up the fundamentals  .  Remember that the market is weak today.  In fact the market looks ready to dive but CHID is holding above 50 cents.  Would like it to close above 50cents to show short-term strength.  The market diving might actually be good for CHID.  Traders flock to pennies when things are souring in the markets.  I am not in but I'll watch and learn.  I'm looking for higher lows in the next few days

-g

[keepsavi]

Looks good to me, I think I will buy tomorrow