Friday, November 25, 2005
China Finance Online (JRJC) vs China Finance, Inc (CHFI)
China Finance Online has CIK #1297830. They do the web portal stuff. The ticker symbol is JRJC on NASDAQ.
JRJC has US$63 million in cash with $2.8 million total liabilities. They have 100 million shares diluted and earned about 1.2 cents diluted with 1/3 from interest, 1/3 from exchange rate, and 1/3 from operations. They have the Tao of Wealth. JRJC is trading at $6.13 which is expensive. Here's their Q3 conference call transcript. I think it was probably a good idea to drop them as an investment. It's a short term trading type focus.
CHFI has two business segments: 1) Surety Guarantee (agreeing to be responsible for the debts or obligations of another) for small and medium sized private Chinese businesses seeking to do reverse mergers. 2) Loan Gaurantee for the same businesses and individuals seeking short term loans from Chinese banks for business operations or personal use. The borrower will generally put up collateral.
The first surety transaction was with China Digital Communication Group (CHID covered here earlier) where CHFI was paid entirely with 2,171,573 shares of CHID stock which was 4% of the business. The stock price has slowly deflated since then and CHFI sold a bunch of it in Q3 2005. This was nearly all of the revenue for 2004. There was almost no revenue so far in 2005.
20 employees. Unqualified audit opinion. Rotenberg & Co. Extremely solid balance sheet (mostly cash and CHID stock with almost no liabilities). 58 million shares at end of 2004. They issued stock worth $507K for services.
Q3 2005: As of Sept 30, 2005, they had $611K worth of CHID stock remaining, which would be about 1.3 million shares. So CHFI has about $11.7 million cash, $247 loan receivable, 1.3 million shares of CHID (now worth 44 cents each), and $22.8K of liabilities. They have 57.7 million shares outstanding. So today the CHFI stock is worth 21.7 cents per share. The bid is 33 cents and the ask is 51 cents.
This stock is really not worth following unless something interesting happens to CHID and there's an arbitrage opportunity (which is unlikely).