Business

Guest · Posted: Thu May 10, 2007 9:09 am Post subject: CHND.OB : Undervalued Newcomer

Written by :Cameron Fous
Owner and Portfolio manager of TheTechnicalTrader.net

About China Direct, Inc.

China Direct, Inc. (OTC Bulletin Board: CHND - News) maintains active,
majority stakes in a diversified portfolio of Chinese companies as
well as offering consulting services for both private and publicly
traded Chinese entities. China Direct provides a platform to develop
and nurture these entities as they expand their businesses globally.
As your direct link to China, our Company serves as a vehicle to allow
investors to directly participate in the rapid growth of Chinese
economy in a diversified and balanced way. For more information about
China Direct, please visit http://www.cdii.net.

CHND is relatively new to the OTCBB market debuting in november 2006
trading on relatively low volume. Today CHND released there Q1
earnings report with some impressive #'s after they have made some
promising aquisitions they made in October 2006. Revenues increased
from $206k in Q1 06' to $30m this quarter "The increase in revenues
was mainly attributable to the three companies acquired in China since
October 2006, Chang Magnesium, Lang Chemical and CDI Wanda Alternative
Energy, as well as a strong performance from its consulting division,"
said CHND.OB in their conference call. Income increased to $1.8m and .
14 eps compared to $156k in Q1 06' . Now this growth is quite
extensive but take into consideration that this quarter had their 3
new acquisitions included and didn't previously. Though looking at Q4
06's results there is large sequential growth here as well with $13m
in revenues and $156k net income compared to the $30m and $1.8m Q1
07'.

Looking forward CHND gave 2007 full year guidance of $120m in
revenues, recently raised from $100m. And Net income of $6m raised
from $5m. Now looking at the forward ratios CHND looks very cheap at
its current levels with much room to run into the future in light of
catching up with its growth.

At todays closing price 3.50 CHND is a very small company at $46m with
a low float of just $13.2m shares O/S giving CHND the ability to
become very volatile. At just $46m market cap CHND is expecting almost
3 times this amount in revenues for 2007 giving it a very attractive
forward price to sales ratio of .38.

The forward P/E of CHND.OB looks very attractive as well,given that
CHND doesn't issue more shares through dilution, they are expecting to
have .45eps for full year 2007 placing their forward Price to earnings
ratio at a low 7.77 making CHND look very cheap from this perspective
being that the management services industry average P/E ratio is 344%
higher at 34.5x earnings

Technically todays breakout on the companies record volume with a very
healthy 20% rally to breakout out a bullish trading channel off of its
all time lows signifies the beginning of a possible very bullish new
trend to come in the future.

All in all CHND looks cheap to me at these prices and in conjunction
with its recent bullish activity technically this is a combination for
cash in the pocket.