72765 (OTC:CGPI)

On May 13, 2011, the registrant’s Board of Directors appointed Yiyou Ran as co-Chief Financial Officer with Michael He until Mr. He’s resignation as Chief Financial Officer becomes effective and, thereafter, as sole Interim Chief Financial Officer and principal financial and accounting officer until the registrant appoints a permanent replacement for the CFO position. Mr. Ran concurrently serves as the registrant’s President and Chief Executive Officer and is the Chairman of the Board.

There is a new article that was published on April 15 (last Fri.) regarding the cemetery business in Changshou District Chognqing, where CGPI is located. 

Source:  Workers Daily (a national newspaper based on Beijing).  

http://www.chinanews.com/gn/2011/04-15/2975360.shtml

This article referenced the business of CGPI, especially the cemetery license issue of CGPI.

In this article, one manager (the manager’s name is not disclosed) of CGPI (Chongqing Guiyuan) told the reporter that:

”we are attracted to Changshou District to start cemetery business since 2003.  Totally, we invested dozens of millions RMB.  However, we still do not have all required approvals” … "we want to be a legal operation, but it is really hard to be…"  "in the past several years, we processed more than 30 government approvals and finally have the quotas to nationalize the land.  Then, we asked Civil Affairs Bureau of Changshou District to seal the Application for Construction Land of Changshou District with the chop of the Funeral House of Changshou District.  However, Civil Affairs Bureau of Changshou District has not sealed the application for more than 400 days.  This means  the nationalization process of the land cannot continue..."

A GeoTeam investigator also called Civil Affairs Bureau of Changshou District in the morning of April 25, 2011.  The officer confirmed that CGPI did not have the required cemetery business license for the land issue.   The GeoTeam believes that CGPI has an obligation to address this issue, which we have brought up on several occasions, even if it is in the process of being resolved.

GeoInvesting Rebuttal to the Shareholder Letter published by CGPI

On March 15, 2011 CGPI published a letter to its shareholders. In this letter, CGPI summarized key issues raised by GeoInvesting and gave "facts" regarding those issues. In addition to its letter to shareholders, CGPI also sent GeoInvesting a "Cease & Desist Demand" letter via its attorney at the law firm of Richardson & Patel, LLP. In this letter, CGPI demanded through its attorney that GeoInvesting immediately and forever take down a grossly inaccurate and misleading report located on the GeoInvesting web site. What follows are (1) issues and "facts" (CGPI Response) summarized in CGPI's letter to shareholders, (2) our responses, (3) a written transcript (see supplement 1) of a conversation our assigned person had with the officers at the Funeral House and Cemetery Management Center of Chongqing Civil Affairs Bureau on March 3, 2011 and (4) an additional written transcript of a second conversation on March 25, 2011 (See Supplement 2) with the officers at the Funeral House and Cemetery Management Center of Civil Affairs Bureau including a recording of the conversation.

Please read full rebuttal here

See our original 19 page internal report 

The GeoTeam has raised serious concerns regarding China Redstone.  Please review our CGPI introduction below and use the hyper-link at the bottom of our introduction to see a full report as well as supporting documents.

Introduction:

In December 2010, we were contacted by a private investor who asked us to take a look at the CGPI story.  Specifically, he was seeking clarity on rumors circulating around whether or not CGPI possessed necessary land use rights to operate its cemetery business.  We asked our attorney, Bob, to delve into this story not knowing he would open Pandora’s Box.  Bob, along with our new on-the-ground due diligence team, have performed extensive due diligence on CGPI operations. What follows is a brief summary of our findings.  It is supported by a 19 page internal report and 52 pages of supplemental documents. We have maps, pictures, documents including land use rights and lease agreements and conversation notes with government contacts to back up our findings.  At first, the CGPI story appeared complicated, but after numerous conversations with Bob, we have been able to simplify our analysis. Our original goal was to summarize Bob’s conclusions on our focused China Due Diligence Board, “Ask Bob – GEO’s PRC Attorney”, at GeoInvesting.com, as we worked with CGPI and its IR firm to hopefully resolve open issues. They were cooperative.

History: Foguang was established in Fulin District of Chongqing City in 2002.  Foguang started to apply for the cemetery business and tourism business located in Changshou District.  Jan 2004, the office of Foguang moved to JiangnanTown, ChangshouDistrctChongqingCity.  Feb. 19 2004, Foguang received the land use rights for no consideration, from the Agricultural Machinery Bureau of Changshou District regarding the LongqiaoLake (339,444 m2).  Based on this agreement, Foguang can use the lake for its business. On Aug. 25, 2005, Foguang arranged an agreement to lease the land (570MU, 380,190 m2) surrounding the LongqiaoLake owned by Group 6, LongqiaoVillage with the government of Jiangnan town.  May 25, 2005, Foguang and two individuals establishes Chongqing Guiyuan Cemetery Industrial Co Ltd which obtains a Cemetery Service Business License to operate the cemetery on Aug. 22, 2006. Fonuang has a 51% ownership stake in Chongqing Guiyuan Cemetery Industrial Co until November 7, 2008 when it transfers stake to three individuals. 

In 2010, CGPI went public via a reverse merger, communicating that Foguang, a VIE, operates Guiyuan cemeteries. CGPI claims it has a right to cemetery revenues through contractual agreements between a PRC WFOE (Ran Ji) and Foguang PRC (VIE arrangement).

The underlying themes in our report include: 

• A loose ownership structure between the non-PRC and PRC entities jeopardizes investors’ claims to revenues.
• Misrepresentation of the entity that actually owns and operates cemeteries. We believe we have evidence that all the relevant parties of the cemetery business have not been disclosed in SEC documents.
• We have information leading us to believe hat CGPI license to operate cemetery has been revoked.
• Misrepresentation of land use rights; it appears that developed cemetery plots are situated on a much smaller area of land than CGPI claims. It appears that the only “land” that CGPI owns is a lake.
• Illegal lease of land where cemetery plots have been developed.
• A nominal fine had been levied against cemetery operation helps to suggest that CGPI is operating an illegal cemetery operation; the right to operate cemeteries appears to have been revoked.
• There is real potential for increased competition in the cemetery business.
• The Company’s tourism business plan may be less attractive than portrayed. (since we opened the investigation on CGPI, the company has made a decision to terminate and divest this project entirely)
• Revenues may be overstated, supported by plot counts and receipts from cemetery plots a member of our team purchased.
• Assets may be overstated.

Conclusion: 

The SEC documents of CGPI may not reflect its real business.  We feel there are several significant risks that can adversely influence its business.  We suggest that CGPI should revise its SEC documents and/or make substantial disclosures to clarify these issues.  We also suggest that the investors of CGPI pay attention to the issues summarized out in the attached report.

Please Read Full Report Here

***Disclosure: The GeoTeam is neither long nor short CGPI

Rodman and Renshaw on CGPI                                                    3/04/2011

CGPI – Michael He Installed as Chief Financial Officer

 

WHAT HAPPENED? 

China Redstone Group (OTCBB: CGPI) announced, yesterday morning, the installment of Michael He as its permanent Chief Financial Officer. Mr. He previously worked with Chisen Electric Corp. (OTCBB: CIEC, Not Rated), a China-based motive battery manufacturer, having served as its Chief Financial Officer and President of its U.S. affiliate, Chisen Technology. During 2006-2008, Mr. He was a senior manager in the consumer electronics global sourcing department at Amazon (NASDAQ: AMZN, Not Rated), focusing on private label sourcing and branding. From 2004-2006, Mr. He was a financial analysis and reporting manager at Global Financial Services Division at Capital One (NYSE:COF, Not Rated), the largest monoline specialty finance / credit card lender in the U.S. 

OUR TAKE 

Redstone’s announcement of a permanent CFO is expected considering that this has been one of the company’s ongoing initiatives, although we found the quick timing of the transition to be a bit surprising. That said, we are optimistic that this bodes well for the level of importance that the company attaches to its financial reporting and investor relations functions. 

We conversed briefly with Mr. He (based in Seattle, WA), and understand that his vision is to further improve upon transparency and disclosures to help investors better understand Redstone’s strategy, as well as the source of its high margins and returns. He acknowledges the lack of publicly-traded comparables in the U.S. as a challenge, and is seeking to provide a more comprehensive overview of the Chongqing death care services industry and the competitive landscape. In addition, he will be working closely with Thornhill Capital and other members of the management team to tighten up internal controls and financial forecasting methodologies. With his experience at Capital One, a company with a highly data-intensive culture, we believe that Mr. He is qualified to take Redstone’s internal controls to the next level, which would be necessary for the eventual auditor upgrade. 

Maintaining Market Outperform Rating and 12-month PT of $8. Our $8 PT applies nearly 5.5x to our FY2011 EPS estimate of $1.48. Our investment rating and 12-month price target are also based on the key potential catalyst that 1) by the end of March 2011, the company is able to provide proof from the Chongqing Civil Administration Bureau that it is current in its cemetery license, as well as 2) some multiple normalization in the U.S.-listed China small-cap space.


Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Rodman and Renshaw on CGPI                                                 2/25/2011

CGPI: January 2011 ASP appreciation a tad above expectations; Maintaining EPS estimates  

China Redstone Group (OTCBB: CGPI), this morning, reported January 2011 sales of 524 plots, representing a 12.1% decrease from the year-ago period. January average selling prices rose 21.8% YoY to $7,202, a touch above the $7,156 we were expecting. This translates to January cemetery revenues of ~$3.8MM, tracking roughly inline with our $10.1MM revenue estimate for F’4Q11 (ending in March 2011). In terms of product mix, 325 (~62.0%) of plots were sold in the $5,000-$7,000 price range, while the remainder was sold for $7,500 per plot. We note the sales mix shift towards more artist plots from last year, which we believe is contributing to the momentum of ASP growth. 

Looking ahead. Moving into February, we expect modestly lower number of plots sold than last month given the Chinese New Year, and flattish sequential (month-over-month) average selling prices. 

Maintaining EPS estimates. We are maintaining our F’4Q11 EPS of $0.34 (vs. $0.25 LY). 

Maintaining Market Outperform Rating and 12-month PT of $8. Our $8 PT applies nearly 5.5x to our FY2011 EPS estimate of $1.48. Our investment rating and 12-month price target are also based on the key potential catalyst that 1) by the end of March 2011, the company is able to provide proof from the Chongqing Civil Administration Bureau that it is current in its cemetery license, as well as 2) some multiple normalization in the U.S.-listed China small-cap space.

Notice Regarding Privacy and Confidentiality: 

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

 Rodman and Renshaw on CGPI                                                  2/18/2011

 

CGPI: F’3Q11 above expectations; new construction projects bode well for margins 

China Redstone Group (OTCBB: CGPI) reported F’3Q11 (ended on December 31, 2010) EPS of $0.39, which came in 3 pennies above our estimate, driven by a 10-point YoY expansion in the gross margin to 63.2%, while expenses were roughly inline. Previously reported revenues rose 6.0% YoY to $12.1MM, anniversarying the difficult sales comp from the bridge opening last year, and potentially compounded by CGPI’s preference to maintain robust price increases and margin integrity. In FY3Q11, CGPI sold 1,682 plots at an estimated average sales price of ~$7,156 per plot. 

Development of 7,000 plots slated for completion by FY1Q12. CGPI began developing an additional 7,000 plots, occupying roughly 11 acres (~44,515 sq. m’s), during F’2Q11 (Q ended September 2010). Total capex for these plots approximate $19.6MM, of which $18.2MM has already been paid and recorded as capex at the end of December 2010. These 7,000 plots are slated for completion by FY1Q12 (end of June 2011). Interestingly, because all 7,000 plots were planned for construction in one batch, instead of in smaller batches of 500 plots, construction costs were reduced by ~5%. The completion of these additional plots would bring the total available plots for sale to ~10,500, up from 3,500 currently. As a point of reference, recall that CGPI’s sales target for FY2011 was 7,000 plots; therefore, 10,500 plots would imply over a year’s worth of inventory, even after factoring for a potential acceleration in plots sold next year. Of note, the more desirable location of the new plots (with better views of the lake) implies a better fengshui and higher average retail prices, which should bode well for CGPI’s GM. In addition, the inventory shift towards higher-end artist plots (57% YoY increase in $ terms vs. 20% YoY decline overall), would also suggest that a greater proportion of growth will likely originate from ASP and margin increases rather than the number of plots sold, which we would view as high quality topline growth. 

Guanying Temple to carry $75MM sales potential. Guanying Temple, which began construction in November 2010, is scheduled for grand opening in September 2011. Guanying Temple is anticipated to house ~120k urn slots, and is estimated to command roughly ~$750 per slot. Initial prices will start on the low end, rising over time as the landscaping surrounding the temple improves and as the area more closely resembles a weekend day-trip destination. The building itself is budgeted at ~$3.6MM, of which $1.5MM has been recorded as capex as of year-end CY2010. We note that the actual investment for the project will be more, given the significant landscaping and maintenance needed to increase the attractiveness of the temple's surroundings. Due to the density of the urns within the temple, we believe that this burial option will carry significantly higher margins than the current cemetery plots. 

Refocusing on the cemetery business and leveraging outside vendors to manage certain tourist development aspects. It was noted on the call and the F’3Q11 10-Q that as of December 31, 2010, CGPI has decided to terminate the entertainment boat project in order to focus on its cemetery operations. The vast majority of the $8.7MM cash prepayment is expected to return to the balance sheet by July 2011. [continued on page 2-->]
Notice Regarding Privacy and Confidentiality: .

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

We believe that cash and cash equivalents currently on hand and cash flows from operations will be sufficient to continue our operations and to pursue our growth strategy for the next eighteen months. Our future capital requirements will depend on many factors, including the rate of our revenue growth; the timing and extent of spending to enhance our advertising and marketing programs; investing in our sales force; the levels of the inventory we carry; and other factors relating to our business. We will require additional financing in the future in order to execute our operating and growth plans and we may not be able to obtain such financing. We cannot predict whether this additional financing will be in the form of equity, debt, or a combination of debt and equity. There are no assurances that our plans will be successful, or even be implemented.

SUMMARY FINANCIALS

Rodman & Renshaw on CGPI              02/14/2011

CGPI – Satisfactory defense to recent credibility concerns; Maintaining MO Rating; $8 PT 
 

We are satisfied with China Redstone Group’s (OTCBB: CGPI) response to its recent share price drop from $4.05 on January 18^th to its current level of $3.00, reflecting concerns raised in a January 19^th GeoInvesting posting. The author questioned the company’s ownership structure, the validity of the cemetery license, and the viability of the longer-term tourism aspect of the business model. Redstone then issued a press release on January 26^th, followed by a call on January 28^th, responding in detail to most of the concerns. 

We find the responses to be on the whole satisfactory. While it is difficult to dispel every doubt, Redstone provided ample evidence of the legality of its cemetery business, in our view. According to an article published in the Chongqing Law Review on June 1, 2007, (which followed the initial accusatory Xinhua News report published on May 16, 2007), Chongqing Foguang Tourism Development Co. submitted 23 applications to various government agencies in Chongqing (and have received approval for cemetery development) over three years. The company posted, for public viewing, the most critical approval documents online, which includes the land lease approvals, land use permits, and a map of the location of its cemetery, Guiyuan. In addition, Redstone has agreed to secure a letter from the Chongqing Civil Administration Bureau validating the active status of its license, and post a corporate video showcasing its cemetery by March 2011. 

Careful not to confuse normal business execution risk with fraud allegations. We believe the key risks in the CGPI investment thesis lies in certain execution risks rather than ones of blatant fraud or misrepresentation. These risks include CGPI’s ability to satisfy its license to operate Guiyuan as a tree-burial focused cemetery, its ability to relocate the remaining villagers (10+ households vs. 30+ at the beginning of the project), and whether CGPI can successfully obtain the letter from the Chongqing Civil Administration Bureau confirming the current status of its license, including a clear statement that Foguang is allowed to utilize 491 mu’s, agricultural/timber land or otherwise, for tomb construction. 

Raising EPS estimates on back of higher than expected price increases YTD. FY’11 YTD average selling price per plot of $6,958 is trending significantly above Redstone’s $5,250-$6,250 guidance for FY 2011. With three quarters of revenues in the bag and no signs of a slowdown in price appreciation near-term, we are raising our F’3Q11 and 2011EPS estimates to $0.36 and $1.45, respectively, from $0.35 and $1.40 previously. Our 2012 EPS estimate remains at $1.73 for now. 

Maintaining Market Outperform Rating and $8 PT. We are maintaining our 12-month price target of $8, which applies 5.5x to our 2011 EPS estimate of $1.45. Our price target is based on our expectation that 1) by March 31, 2011, the company will provide proof from the local government authorities in Chongqing that it is current in its cemetery license 2) and some multiple normalization in the Chinese RTO space. We believe that these concerns have always been in the minds of investors who have been close to the story. Having these doubts raised in a public forum has given the company an opportunity to openly prove its legality. While this leads to stock price volatility near-term, we believe that longer-term, the company’s active attempts to resolve these doubts will win over more believers than disbelievers.


Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Fiscal SecondQuarter 2011Results (unaudited)
	Q2 2011	Q2 2010	CHANGE
Net Sales	$11.6 million	$6.7 million	+71.7%
Gross Profit	$7.1 million	$3.9 million	+83.0%
GAAP Net Income Adjusted Non-GAAP Net Income	$4.7 million $4.9million (1)	$2.7 million $2.7 million	+72.7% +80.1%
GAAP EPS (Diluted) Adjusted Non-GAAP EPS (Diluted)	$0.37 $0.39(1)	$0.36 $0.36	+2.8% +8.3%
Weighted Average Shares	12.7 million	8.8 million	+44.0%

"We are pleased with our positive operating results which are the result of timely execution of our growth plan," stated Mr. Yivou Ran, Chairman and Chief Executive Officer of China Redstone. "We continue to experience robust growth in our cemetery business, which showed measured gains in revenues, number of plots sold and average sales price. As one of the few private cemetery companies in Chongqing with a large inventory of desirable plots, we are uniquely positioned to benefit from the secular growth in this industry."

Fiscal 2011 Guidance

Based on the strong results recorded in the first six months of fiscal 2011, Management reaffirms guidance of sales of $40 million and net income of $19.5 million with EPS of $1.45 for the fiscal year ending March 31, 2011. Guidance assumes 7,000 plots sold at an average sales price of $5,000 to $6,250.

"Momentum in our business is reflective of the strong secular growth drivers and underlying fundamentals in the death care industry. We own the largest cemetery in Chongqing which is located in a peaceful, convenient location with recognized "Feng Shui" and are becoming a natural choice for many families making advance purchase decisions for multiple plots. Our marketing efforts have further strengthened our brand image, which we expect to lead to further pricing power, and we are confident in surpassing 7,000 cemetery plots sold this year. With 16.47 acres under development and 136.74 acres for future development, equating to more than 200,000 standard plots and 300,000 – 400,000 wall tomb and inside room tomb, we are in a position to grow organically for years to come without the need to acquire more property."

Rodman & Renshaw on China Redstone

We are initiating coverage on China Redstone Group (OTCBB: CGPI, $50.0MM mkt cap) with a Market Outperform Rating and a 12-month Price Target of $8. 

Investment Thesis 

The company is a cemetery operator in Chongqing city, owns 722k m² of land, and has rights to purchase an additional 1,144k m² at a locked-in price of ~$45/m² with no expiration date. With a simple business model, generally inelastic demand, an oligopolistic market structure sustained by the difficulty of receiving land approvals, and ability to control the amount of inventory to develop and sell based on pricing trends, we believe that Redstone should enjoy long-term visibility into sales and net income growth. An aging population and mandatory cremations in urban areas further support demand for Redstone’s products. Meanwhile, Redstone plans to diversify its product options to include tower tombs (which house urns) and underground burial sites, which will position the company as the first in Chongqing to offer choice to families. We are expecting completion of a monastery by mid-2012, which will likely house ~120,000 urns. Based on our rough calculations, this project carries a 9.6x return on investment. In addition to organic growth, Redstone is seeking roll-up opportunities on a selective basis, such as its planned $29.3MM acquisition of Shenzhen Huaqiao Cemetery in 2013. Finally, after meeting with the management team in September, we have developed confidence in their knowledge of the Chongqing cemetery market and their demonstrated capability to execute upon their dual-track organic and roll-up growth strategy. Note that management has already successfully sold 20,000 cemetery plots across its Guiyuan I (sold out) and Guiyuan II cemeteries. 

Market Outperform Rating and 12-month Price Target of $8. At $4.00, we believe China Redstone remains significantly undervalued. CGPI shares are currently trading at 2.9x our FY2011 EPS estimate of $1.40. By our very rough back-of-the-envelope calculations, the combination of 200k plots (~$6,500 ASP) and 200k-400k urn depositories (~$4,000 ASP) would imply a total long-term revenue opportunity of $2.5BN[1]. We believe that the low multiple being assigned to such a visible earnings stream reflects: 1) the difficulty U.S. investors have in visualizing the concept that a botanical garden-equivalent park built around a cemetery can bring traffic and spending power, 2) a lack of publicly-traded comparable companies; and finally, 3) the credibility overhang from the recent barrage of negative press on small-cap Chinese companies. Recall that the company stated on its 2Q10 earnings conference call that they do not intend to raise equity capital at the current depressed levels. We believe that the management has the capability to deliver on the promise given its almost negligible level of existing debt ($2MM) and the tangibility of its $42MM net asset base (i.e., land), which can be collateralized for additional loans. 

[1] Not discounted for time value of money, and assuming zero appreciation in ASPs.

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

See new investor presentation.

CGPI reported its 2010 year number this morning via a 10K filing.

2010 vs 2009 Revenues:  $35.6 Million vs. $18.3 Million
2010 vs 2009 Net Income:  $12.3 vs. $5.5
2010 vs 2009 EPS:  $1.33 vs. $0.62
2010 vs 2009 Fully Diluted Shares:  9.3 million vs. 8.8 million

Filing Excerpts:

"For the year ended March 31, 2010, cemetery revenues increased by $18,851,184 or 106.8%. The significant increase in revenues was mainly attributable to the development of new cemetery which led to an increase of sales of cemetery plots. The total number of cemetery plots sold increased from 4,051 in fiscal 2009 to 6,730 in fiscal 2010. In addition, the average sales price increased by approximately US$1,000 per cemetery plot. The increase in cemetery revenues was also attributable to better marketing as Foguang started to focus its advertising costs on television advertisements in targeted areas and increased incentives for its sales agents and hired additional agents to better promote and sell its services and products. Also, the opening of the Changshou Bridge shortened the driving distance between Foguang’s cemetery and the downtown area of Changshou from two hours to 12 minutes, which brought Foguang more customers who used to limit their choices of cemetery products and services to the downtown area for transportation reasons. The overall improvement of local economic conditions in Chongqing also contributed to the increase of economic value of Foguang’s cemetery and increased the number of cemeteries sold. The local economic environment experienced overall improvement in fiscal 2010 due to the assistance of large-scale state-owned enterprises and their projects in the Chongqing area."

CGPI exceeded EPS guidance mainly due to a higher share assumption in its previously issued guidance

Fiscal Year 2010 Guidance

• Revenues of $31.7 million
• Net income of $12.1 million
  
  Based on 13.5 million shares outstanding, this would represent $0.90 in earnings per share. As a key component of this guidance, management expects to sell approximately 5,600 cemetery sites with average selling prices ranging from $5,200 to $5,400. The Company plans to make approximately $14.5 million in capital expenditures for the year.

Fiscal Year 2011 Guidance

• Revenues of $36.9 million
• Net income of $15.9 million

This would represent $1.20 in earnings per share, based on 13.5 million shares outstanding. As a key component of this guidance, management expects to sell approximately 6,500 cemetery sites with average selling prices ranging from $6,200 to $6,400. The Company plans to make approximately $29.0 million in capital expenditures for the year.

     We have various short term loans of approximately $2.5 million that are due and payable by March 2011. We plan to use all the funds from the Transaction to develop the Gui Yuan II project. In 2010, we plan to complete the first phase of land acquisition and the construction of the cemetery and supporting facilities within the acquired land. We plan to develop 5,000 external tombs and 2,000 internal tombs. After the Gui Yuan II project is completed, our next focus will be the development of the Longqiao Lake project. In 2011, we plan to develop tourism, leisure, entertainment, dining accommodation, transportation and other comprehensive services and facilities. We plan to expand our seedling base in the Longqiao Lake area. Management believes that the funds for such short-term developments can be obtained through the sale of securities or issuance of debt instruments in addition to our retained earnings. Foguang’s projected income is approximately US$12 and US$16 million in 2011 and 2012, respectively, so Foguang expects to have enough funds for its short term development projects.

     Our long term development includes acquisition and merger with cemeteries locally or in other cities. We plan to acquire Shenzhen Huaqiao Public Cemetery in 2013. The funds needed for this acquisition is approximately US$29.33 million.

     We believe that cash and cash equivalents currently on hand and cash flows from operations will be sufficient to continue our operations and to pursue our growth strategy for the foreseeable future. Our future capital requirements will depend on many factors, including the rate of our revenue growth; the timing and extent of spending to enhance our advertising and marketing programs; investing in our sales force; the levels of the inventory we carry; and other factors relating to our business. We will require additional financing in the future in order to execute our operating and growth plans and we may not be able to obtain such financing. We cannot predict whether this additional financing will be in the form of equity, debt, or a combination of debt and equity. There are no assurances that our plans will be successful, or even be implemented.

China Redstone Group goes public via a reverse merger on February 12, 2010.

Company Snap Shot:

A private cemetery developer and provider of cemetery products and services in Chongqing, China. All of the plots of its first cemetery development project, the 66,660 square meter Chongqing Guiyuan Cemetery I, have been sold, and it is currently developing the Chongqing Guiyuan Cemetery II on over 666,000 square meters of land.

Financial Snap Shot: Reference 8k Filing which include forecast out to 2011.

• For the nine months ended December 2009, net revenues reached approximately $24.1 million with net income of $9.2 million. (ProForma EPS= $0.70)
  
• For the year ended March 30, 2009, APBY reported net revenues of approximately $18.3 million and net income of $5.49 million. (ProForma EPS= $0.42)
• 2010 net income guidance is $13.1 million (ProForma EPS= $0.99)
• 2011 net income guidance is $15.9 million (ProForma EPS= $1.20)

Post Merger Share Calculation:

• 13,075,000: Pre reverse merger outstanding shares
• 10,875,000: Shares cancelled as part of the Share Exchange
•   8,800,000: Newly issued shares of Common Stock
•   1,402,262: Shares associated with private placement
•     701,126 : Shares from warrants associated with private placement
•       70,114 : Shares from warrants issued to private placement agents.

GeoTeam® best effort calculation of total post reverse merger outstanding shares assuming full conversions:  13,173,502