China Direct president: Market overlooks robust growth

Management and consulting company China Direct (AMEX:CDS) has had a full week of news, including the report of strong fourth-quarter and fiscal 2007 results on Monday, raising 2008 guidance on Tuesday and news on Wednesday that the company will now trade on the Nasdaq Stock Exchange. However, the stock is only up 2% this week. To gain some insight into the latest events and their implications for the Deerfield Beach, Fla.-based company, SmallCapInvestor.com spoke with China Direct’s president Marc Siegel. 

I spoke with China Direct’s executive vice president, Rich Galterio, at the Roth Capital Conference in February and he told me that the market would get a clearer picture of what the company has accomplished once fourth-quarter results were disclosed. Do you think the market is beginning to see the real picture now?

“I still don’t think that the value that’s being attributed to China Direct is still a fair value. Here’s the reality of the situation: we did $14 million in revenue in 2006 and we did $174 million in 2007. We did $169,000 in net income in 2006 and we did $11.8 million in earnings in 2007. We earned a penny in 2006 and we earned $0.67 in 2007 per share. Our assets went from $20.8 million to $88.3 million. As the president of this company and as the guy who’s given his blood and guts to doing this, I have a hard time believing the growth rate that we’ve achieved. I can’t even imagine because of what people have seen with the CXTIs [China Expert Technology, Inc.] of the world and other Chinese companies who maybe didn’t do their accounting properly, didn’t report properly, or who didn’t record contracts properly, that people believe that growth is what it really is.”

Why do you think the market is missing this?

“It’s a hard story to understand. We’re still new to the market. The reason Rich told you that the Street would get a better picture at the end of 2007 is that this is the first full year that we’ve owned Lang Chemical, Chang Magnesium and the other Chinese companies. We only raised our money in October and November of 2006 and recently raised $13 million in February of 2007. We really haven’t . . .

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