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Wednesday, April 12, 2006

China Expert Technology (CXTI) Wins Next Phases

CXTI issued this press release today. They won two more contracts for the Dehua project, phase 3 and 4. If you look at the table on the 2005 10-K, you see phase 1 and 2.

Phase 1 started April 2004 and ends August 2006. The total phase 1 contract is $15.6 million.

Phase 2 started January 2005 and ended November 2005. The total phase 2 contract is $11.8 million.

Phase 3 is for $10 million and it started in Jan 2006 and finishes June 2007.

Phase 4 is for $12 million and started in March 2006 and finishes in December.

We can see from the 2005 10-K chart that CXTI had recognized about half of the revenue for phase 3 of the Jinjiang project, so they have experience with doing the work.

The Shishi contract shows the various phases of what I assume is a similar project.

Phase 1 is the security platform, application platform, unified admin approval, portal website, coordinated office system, geography information system, and emergency commending system.

Phase 2 is the auxiliary decision system, social medical security info system, and one card communication system.

Phase 3 is the information resource library and e-commerce system.

I don't think it had a phase 4. The dollar amounts of Shishi seem to match Dehua reasonably well.

With around 1.2 billion people, give or take the population of the US, and a lot of government control, it seems to me that China needs a great deal of this kind of IT system work done. My advice to CXTI would be to think of itself as a training company as much as a systems integration company. Much of their competitive skills will be in training a lot of people how to do these projects.

But these two phases should add about $18 million in revenue to 2005 and maybe $3 million in net income (or about 6 more cents per fully diluted share for the year). I'm thinking they might need to raise more cash to fund these projects, unfortunately.

UPDATE 11:43 AM, 4/15/06: Welcome people from TheStreet.Com.

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