Pink Sheets

Q1 10-Q
8/5/2005 8-K increased authorized share count (for split), also ameded by-laws for AMEX rule
7/25/2005 8-K moving to AMEX
7/22/2005 8-K insanely confusing 5-for-4 stock split (why frickin bother?)
2004 proxy
2004 10-K

Get a load of the ownership chart near the beginning of the 10-K. Zillions of subsidiaries within subsidiaries.

1996 reverse merger.

The foundation of the group of companies... was laid in the early 1980's when Cheng Chung Hing, Ricky formed Man Sang Trading Hong, a freshwater pearl trading company, and Cheng Tai Po formed Peking Pearls Company, a Japanese cultured pearl trading company. As the business of the Group developed, Man Sang Jewellery Company Limited ("MSJ") and Peking Pearls Company Limited were formed in Hong Kong in 1988 and 1991, respectively, to continue the trading operations of the Group.

Subsequently, the Group expanded its operations to include pearl processing with the establishment of Man Hing Industry Development (Shenzhen) Co., Ltd. ("Man Hing") in 1992 to process and assemble freshwater pearls and Chinese cultured pearls, and Damei Pearls Jewellery Goods (Shenzhen) Co., Ltd. ("Damei") in 1995 to assume and expand the Chinese cultured pearl processing operations of Man Hing. In view of the continuous expansion of Chinese cultured pearls business, in December 1996 the Group set up a subsidiary, Tangzhu Jewellery Goods (Shenzhen) Co., Ltd. ("Tangzhu") in the PRC to specialize in purchasing and processing Chinese cultured pearls of larger sizes with diameter from 6mm and above and, to a lesser extent, in processing other cultured pearls. As a result, Damei started to concentrate on the purchasing and processing of cultured pearls of smaller size with diameter below 6mm. The business of purchasing and processing of Chinese freshwater pearls was also transferred from Man Hing to Tangzhu whilst Man Hing started to concentrate on the pearl jewelry assembling business.

Ya got that?

An insane number of changes happened over the years. But let's skip to the pearl industry discussion.

Pearls

• freshwater, PRC big supplier: small 5-7mm low margin pearls, larger high margin pearls
  
• saltwater cultured, Japanese (losing market share due to poor harvests)
  
• saltwater cultured, Chinese emerging as a major supplier, improving quality
  
• saltwater cultured, Tahitian and South Seas: more expensive category by itself
  

Seven product lines:

1. Freshwater (US$2 to US$1,000 per 16 inch strand)
   
2. Chinese cultured (US$10 to US$400)
   
3. Japanese cultured (US$100 to US$2,000)
   
4. South Sea (US$300 to US$70,000)
   
5. Tahitian (US$150 to $15,000)
   
6. Pearl jewelry
   
7. Other jewelry products

Company buys pearls from pearl farms with full-time staff working with farms. No long term purchase contracts. Top 5 suppliers accounted for 53.5% of sales, largest is 14%.

Let's stop here and look ahead at the rough numbers....

They earned about US$0.38 in 2005 (excluding a huge gain on sale of real estate), making them perhaps worth $5.70. The stock is selling for $5.60 Yahoo lists them as having a P/E of 10, although it's really probably closer to 15. But I don't know about the weird stock split.

Looking at their Q1 balance sheet, it's very strong. They earned 9 cents diluted in Q1, but cash flow from ops is terrible due to the usual suspects.

This one is worth following.