China Marine Food (NYSE AMEX:CMFO)

SHISHI, China, June 30, 2011 /PRNewswire-Asia-FirstCall/ -- China Marine Food Group Limited (NYSE Amex: CMFO) ("China Marine" or the "Company"), a China-based manufacturer of Mingxiang® seafood-based snack foods, "Hi-Power" marine algae-based beverages, and distributor of frozen marine catch, today provided an update on its two business segments.

China Marine continues to experience solid growth in its Hi-Power algae-based beverages. Increased marketing activities have resulted in growing brand recognition and repeat orders in Fujian province. To increase geographic penetration, the Company has also expanded into the Zhejiang province through a distributor who services the Wenzhou area. The initial focus has been on stocking restaurants and canteens, with approximately 600 points of sales established to date. The Company has launched various marketing initiatives to build brand awareness and anticipates signing additional distributors in the near term. Management has been encouraged by consumer feedback and sell through has been robust.

Sales of the Company's seafood products have been adversely affected by consumers' perception of safety in relation to the nuclear disaster in Japan. Softness in sales that began in late March has persisted through the second quarter of 2011. While China Marine is confident the seafood it uses to produce Mingxiang® snack foods are safe, it is unclear how long it will take for consumer confidence in seafood products to normalize. Management will provide a detailed update when it reports its second quarter 2011 results.

"The long term fundamentals of our businesses remain strong and we are committed to continually investing behind our brands," stated Chairman and CEO, Mr. Pengfei Liu. "While we believe that these sales disruptions in our seafood products are temporary, we are working diligently to ensure the safety of our products to our customers and distributors. Hi-Power continues to gain traction and the product diversification clearly benefit the shareholders at times such as this."

Financial Summary

"Our first quarter results reflect strong demand for our seafood snacks and 'Hi-Power' beverages," began Mr. Pengfei Liu, Chairman and CEO of China Marine. "We made solid progress by expanding distribution for 'Hi-Power' to 14,000 retail points in total. By penetrating more retail outlets, winning a broad customer base and supporting this expansion with enhanced brand building advertisements and marketing, we expect to maintain strong organic sales growth."

Business Updates:

2011 Guidance

Results for the Year:

• Gross profit was $37.5 million, an increase of 95.8% from $19.1 million in 2009
• Operating income for the twelve months of 2010 was $25.3 million, with operating margin of 20.7%, a 56.8% year-over-year increase from $16.2 million a year ago
• Year-to-date 2010 GAAP net income was $21.1 million, compared to $14.6 million in the prior year's corresponding period, a 45.1% increase. Excluding the non-cash charge of $2.4 million associated to the amortization costs of the "Hi-Power" acquisition,
• adjusted net income for the full year was $23.5 million and exceeded management expectations of $21.5 million in adjusted net income.
• GAAP earnings per weighted average diluted shares were $0.73 based on 29.0 million fully diluted shares, while adjusted non-GAAP earnings per share were $0.81 for the twelve months period ended December 31, 2010

"2010 was a transformational year for China Marine for several reasons," began Mr. Pengfei Liu, Chairman and CEO of China Marine. "First, we entered a new growth business by acquiring 'Hi-Power' beverages in January of 2010. After incorporating improved labeling and packaging, 'Hi-Power' sales exceeded our expectations during its first year where we only penetrated the Fujian market. For the two years leading up to our 'Hi-Power' acquisition, we targeted a complementary marine-based business and this turned out to be the perfect fit. This high margin business will provide further growth in 2011 and remain an important component of our financial results for years to come."

Financial Summary

2011 Guidance

Revenues: $150.0+ million

We believe that after taking into account of our cash position, available bank facilities and cash generated from operating activities, we have adequate working capital to satisfy our current operating expenditures for the next twelve months. From time to time, we may identify new expansion opportunities for which there will be a need to use cash. We manage our cash based on thorough consideration of our corporate strategy as well as the macro economic situation. Factors we take into account when managing our cash include interest rates, foreign currency fluctuation as well as the flexibility in executing our acquisition strategy.

We are currently building the cold storage facilities adjacent to the fishing port with a capacity of approximately 20,000 tons, to take advantage of its proximity to the port where we obtain fresh marine catch to be processed into seafood products. We intend to finance the total estimated $20.0 million in land use rights and construction costs from available funds and expect to run the new facility in the second half of 2011. We have paid approximately $11.6 million in relation to the construction costs as at December 31, 2010 so as to secure the overall construction costs associated with the cold storage facilities.

After the registered direct offering of common stock and repayment of bank loans during 2010, the relative cost of capital resources decreased correspondingly given the increase in the equity financing and reduced level of debt borrowings.

Apart from the expansion plan discussed above and the commitments set out in the section of “Commitments and Contingencies” herein, we do not have any other material commitments for capital expenditures and other expenditures. We believe that the current operating activities would be able to generate adequate cash flows supporting the daily operations. We do not have any further fund raising plan at the moment

Sales of China Marine's "Hi-Power" beverages were $2.5 million and $3.0 million in October and November, respectively, driven by strong re-ordering from current distributors. The Company has focused its sales and marketing efforts on increasing new customer trials and brand awareness in the approximately 12,000 retail locations where "Hi-Power" beverages are sold.

"We are pleased with the results from our focused marketing efforts and effective promotions," began Pengfei Liu, Chairman and CEO of China Marine. "As an emerging beverage company in China, enticing shoppers to make initial purchases is vital to building a loyal consumer base. Such promotions have been successfully deployed with our distributors since we re-launched "Hi-Power" with new packaging and positioning as a healthy beverage in January of 2010. We have received steady re-orders from our "Hi-Power" distributors over the past two months and also witnessed healthy growth in our snack food business in the fourth quarter. We anticipate a strong finish to 2010," Liu concluded.

Global Hunter on CMFO (Update October 20, 2010)

Summary:

China Marine Food Group (CMFO) announced that it generated $2MM in sales of Hi-Power beverage for the month of September and raised its FY10 guidance for the drink to $23MM-$25MM from the prior $20MM, which we view as achievable. We attended the company’s Investor Day on 9/30 and came away with a positive impression of its operations and marketing campaigns. Following our visit and the company's announcement today, we are adjusting our estimates to reflect higher sales of Hi-Power beverage, higher marine catch trade expected in Q4, as well as increased marketing expenses. We continue to expect the company to deliver strong growth in the next two years given the consumer demand and distribution network expansion. Shares are trading at 7.6x and 6.0x our FY10 and FY11 EPS, respectively. We reiterate our Buy rating and $10 price target.

Highlights

Hi-Power beverage FY10 guidance raised. CMFO announced Wednesday morning that it expected the sales of its algae-based health drink, "Hi-Power", to be in the range of $23MM-$25MM for FY10, up from the prior guidance of $20MM. In the meantime, the company reported sales of $2.0MM from Hi-Power beverage during the month of September, which brought total Hi-Power sales to $6.7MM in Q3 and $17.3MM for the first nine months. As Q4 is typically a strong season for CMFO when consumers start their holiday shopping, we view the raised guidance as achievable. Hi-Power retail locations now total 12,000 retail points in Fujian. As a result of an aggressive campaign to promote its beverage products, we believe CMFO has incurred increased sales and marketing expense in Q3 versus the previous quarter.

Our recent visit to the company. We attended CMFO's Investor Day held in Xiamen and Shishi on 9/30. We visited several large retail stores such as Wal-mart and Tesco and several convenience stores in Xiamen, where Hi-Power products are displayed together with well known brands such as Redbull and Wanglaoji. We also visited a Hi-Power bottling factory and the company’s seafood snack facility. We were impressed with the company's production operation and its comprehensive marketing campaign.

Updating our FY10 outlook. Following our visit to CMFO, we are further convinced that there is sustainable growth in the company's seafood snack and Hi-power drink business. For FY10, we expect seafood snack to grow at a 30% rate and Hi-Power beverage to continue its strong momentum into Q4. We believe the company has used extra cash on hand to purchase a large amount of marine catch in Q3 and we expect a significant increase in marine catch revenue in Q4. We note that marine catch has a ~10% gross margin, versus 32-35% for seafood snack and ~40% for Hi-power drink products.

Adjusting estimates. We now anticipate higher revenues for FY10 due to a better outlook for Hi-Power beverage and significantly higher revenue expected for marine catch. We are increasing our FY10 revenue to $118MM from the prior estimate of $104MM. However, considering the company's aggressive marketing campaign for Hi-power drink, we are also substantially increasing our estimates for sales and marketing expenses. We now expect a total of $5MM in sales & market expenses in '10, versus $2.9MM we estimated previously. As a result, we are lowering our FY10 non-GAAP EPS to $0.83 from $0.90 previously. For FY11, we are raising our revenue projection from the prior $140MM to $150MM, reflecting assumptions of 25% growth for seafood snacks, 60% growth for Hi-Power drink, and roughly $25MM contribution from marine catch. Our FY11 non-GAAP EPS estimate is lowered to $1.06, from $1.08 previously, since we are also increasing sales & marketing expenses for '11 as we expect the company to expand its Hi-Power distribution to other provinces.

Reiterate Buy. We are encouraged by the execution and growth momentum of CMFO's business. We continue to expect strong growth this year and the coming year, driven by domestic demand and distribution channel expansion. Shares are trading at 7.6x our updated FY10 non-GAAP EPS and 6.0x our FY11 EPS, which we believe are undervalued. We reiterate our Buy rating and $10 price target, which is 9.4x our FY11 non-GAAP EPS estimate of $1.06.

Rodman & Renshaw on CMFO

We are assuming coverage of China Marine Food (AMEX: CMFO, $156.1MM mkt cap) with a Market Outperform / Speculative Risk Rating and 12-month Price Target of $9. 

Investment Thesis 

We view the risk/reward as hugely attractive at the current level and see little long-term downside risk. Both Mingxiang seafood snacks and Hi-Power are, by now, proven brands capable of developing a consumer following in some of the most competitive regions such as Fujian and Zhejiang. We believe that the expansion of CMFO’s footprint into other provinces for both products is a matter of time and bandwidth rather than capability. We also favor the company’s focused approach of signing up distributors on a region-by-region basis as opposed to a less focused sprawl into multiple localities. This approach enables management to focus on strengthening local distributor bonds, incorporating feedback one region at a time, and also more efficiently leverages marketing expenditures. 

With the announcement of BDO China as its independent auditor, China Marine Food has largely put to rest investors’ concerns over its financial integrity. Furthermore, CMFO has vaccinated itself from additional scrutiny by demonstrating the ability to quickly and effectively respond to such allegations. On the business front, CMFO is simultaneously executing upon topline and margin opportunities across its seafood processing and Hi-Power (海宝) beverage line, leading to our estimate of 27.1% and 20.7% EPS growth, respectively, in 2010 and 2011. CMFO has very conservatively guided towards 43.7% revenue growth to $100MM in 2010, driven by a 23-$25MM contribution from the Hi-Power beverage line, with the remainder attributed to sales increase in dried and frozen processed seafood, and significantly higher marine catch trading revenues. Our estimate and the Street consensus reflect significant upside from the company’s guidance.

Much investor attention had centered on CMFO’s entry into the beverage market with the acquisition of Xianghe and its product Hi-Power. Monitoring reorders, channel inventory, and distributor feedback on end-consumer reception has been key in achieving success for this brand, in our view. 4Q10 should be an important checkpoint for Hi-Power, from which the effectiveness of its recent mass marketing program can be gauged. The introduction of follow-up formulations (such as a low-calorie version) and obtainment of the “Green Food” certification (which garners the product a ~5%-10% premium in ASP) present further growth and margin opportunities for the Hi-Power brand.

Market Outperform Rating and 12-Month Price Target of $9. CMFO shares are trading at 6.0x its 12-month rolling forward consensus P/E and 5.9x our 2011 EPS estimate of $0.92. This compares with the historically traded range of 5.4x – 7.9x its 12-month rolling forward P/E, averaging 6.6x. In addition, before the company’s accounting integrity was called into question in June 2010, CMFO shares, on average, traded at 7.4x its 12-month rolling forward P/E.

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"We are pleased to announce record third quarter results, which benefitted from 31.0% organic growth in seafood snack food products line. We added an additional 100 retail points to our network and experienced year over year growth in the majority of the sales territories for our core product line," began Mr. Pengfei Liu, Chairman and CEO of China Marine. "Sales of our beverage line, 'Hi-Power', exceeded our expectations as we experienced continued demand across our home province of Fujian and gained a solid understanding of the caliber of beverage distributors needed to obtain the same level of success in other markets. We also began a robust marketing campaign to foster distributor loyalty, boost brand awareness and drive new sales.  Accordingly, we increased the number of 'Hi-Power' sales and marketing staffs from 23 at the beginning of the year to 205 as of September 30, 2010. We expect continued sales growth in the fourth quarter and have increased our revenue guidance for "Hi-Power" to $23.0-$25.0 million for the year."  

We believe that after taking into account of our cash position, available bank facilities and cash generated from operating activities, we have adequate working capital to satisfy our current operating expenditures for the next twelve months. From time to time, we may identify new expansion opportunities for which there will be a need to use cash. We manage our cash based on thorough consideration of our corporate strategy as well as the macro economic situation. Factors we take into account when managing our cash include interest rates, foreign currency fluctuation as well as the flexibility in executing our acquisition strategy.

We believe that the current operating activities would be able to generate adequate cash flows supporting the daily operations. We do not currently have any plans for additional fund raising.

Including the $2.0 million September sales, year-to-date sales of Hi-Power beverages were $17.3 million as of September 30, 2010.

Based on projections for the fourth quarter of 2010, China Marine has increased its revenue guidance on Hi-Power beverage sales to $23.0 to $25.0 million for the 2010 year. Hi-Power retail locations now total 12,000 retail points throughout Fujian province, an increase of 20% since the Company last reported retail end-point count.

"Sales of Hi-Power were strong the summer since consumers typically drink more liquids in these hot months," began Pengfei Liu, Chairman and CEO of China Marine.  "As we move into winter, distribution and customer base expansion is our goal for Hi-Power and our Mingxiang®-branded foods. Cost-effective promotions, when managed in coordination with distributors, have proven to be an effective method to build our brand, expand our customer network, maintain distributor loyalty and drive sales.  We were pleased to see the results of this promotion increase our end-user network and achieve consumer recognition from our collective sponsorship of marketing campaigns during the third quarter.  We are confident in our revised revenue guidance for the year."

Second Quarter 2010 Highlights:

• Revenue was $27.6 million, up 86.8% from Q2 2009.
  
• The Company expanded its retail footprint for seafood snack food  products by 400 sales points to 2,900 and sales grew 36.1% year over year.
  
• Retail locations for "Hi-Power", the Company's marine algae-based beverage, crested over 10,000 retail points by the close of the second quarter 2010 while quarterly revenues grew 183.6% sequentially to $7.8 million.
  
• Gross margins expanded by 379 basis points to 37.0% with operating margins of 29.0% for the quarter.
  
• GAAP net income was $6.8 million, up 83.1% from Q2 2009
  
• Adjusted net income was $7.4 million.
  
• Earnings per diluted share were $0.26 based on 26.4 million shares; Adjusted EPS was $0.28.

"We are very pleased with our second quarter results, which was driven by 36.1% organic growth in seafood snack food products line. We added an additional 400 retail points to our network and experienced year over year growth in every sales territory for our core product line," began Mr. Pengfei Liu, Chairman and CEO of China Marine. "Sales of our new beverage line, "Hi-Power", exceeded our expectations, as we experienced strong demand across our home province of Fujian. We expect continued sales growth for our beverage segment in the second half of the year. Accordingly, we increased the number of "Hi-Power" sales and marketing staff from 23 at the beginning of the year to 188 currently as of June 30, 2010. In our recruiting effort, we have also retained top marketing talent from well-known international beverage brands to enable us a competitive edge in this fast-growing sector. "

"Based on the Company's second quarter and year-to-date performance, China Marine is confident it will exceed its revenue guidance of $20.0 million in "Hi-Power" sales for 2010 and will update investors with an increased guidance number after it consolidates its forecasts for the second half of the year."

China Marine Food issue a release confirming our alert on July 6, 2010.

On July 2 and July 8, China Marine filed two separate SEC Form 4 documents detailing Chairman Liu's share purchases of a total of 245,500 shares between at average of $3.91 and $4.34. SEC Form 4 documents must be filed with the SEC when any 10% or greater shareholder purchases or sells shares. The number of shares and price of shares are detailed on each Form 4 in addition to the name and address of the shareholder. As a result of the Chairman's purchase of shares, Mr. Liu's ownership in the Company increased from 41.4% to 42.3%.

"I am very confident in the long-term growth of our Company and firmly believe that our Company's shares are always an excellent investment," Pengfei Liu, Chairman and CEO of China Marine stated. "I am confident that equity markets in the US will improve over time while our business will also grow at a very fast rate this year and next. We have forecasted revenues from our seafood snack food business will increase more than 30% in 2010. The organic growth of our snack food segment will be accompanied by meaningful revenues and earnings contributions from our algae-based beverage, 'Hi-Power'. In the first couple of weeks of July, we have been informed that the pace of our distributors re-orders has continued into the third quarter. Our CFO and I have made a commitment to update our investors on a regular basis and look forward to detailing our upcoming orders for our beverage segment and the expansion of our distributor network in the near future."

Overall, this is a positive development (stock buyback) in the Chinahybrid space, and we need to see more of this for investors to gain confidence in Chinese stocks.

Added to the GeoBargain list on May 15,2009 @ $2.70

Peak performance: Reached a high of $8.63 on January 6, 2010.
Current Price: $4.80

CMFO shares are weak today. We are speculating that this may have something to do with investor uncertainty regarding an article questioning the accuracy of CMFO reported sales numbers in the United States vs. those reported in China.  We feel it is prudent to remove CMFO from the GeoBargain list until we gather more information on this matter.  Also, 2010 analyst estimates indicate that EPS will grow less than 30%.   This is a difficult decision, but we can always revisit the story again once the dust settles.

We are working with individuals who will discuss this matter in more detail as it relates to the entire ChinaHybrid space.

"Our acquisition of Xianghe complements our product line and gives us entry into new markets. Xianghe's "Hi-Power" algae-based drink is popular among health conscious consumers, a growing market segment in China," said Mr. Liu. "China Marine management will take over and manage Xianghe, and we intend to develop additional sales of "Hi-Power" algae-based drink through our Mingxiang(R) existing and expanding distribution network," Liu concluded.

After acquiring Xianghe, the Company increased its fiscal year 2010 guidance to $100.0 million in revenues and $21.5 million in net income. These guidance numbers are subject to change and before any non-cash amortization charges associated with intangible assets generated from the Xianghe acquisition.

Source: PR Newswire (March 22, 2010)

China Marine Food Group is in negotiations to purchase the algae-based beverage company Xianghe Food Science and Technology.

"Similar to China Marine, Xianghe has developed a network of distributors in the Fujian, Zhejiang, Guangdong and Hunan provinces which sell its branded product to stores, restaurant food supply dealers and the hospitality industry.

Preliminary 2010 estimates of revenues from Xianghe are over $20 million with net profit margins anticipated at 20%.  Through integrating the product into China Marine's distribution network and expanding distribution to untapped provinces in China, management expects revenues can accelerate significantly during 2010 and beyond."

We are not sure how much this positive development will add to earnings per share figures.  Much of it depends on whether or not the Company will use existing cash balances or raise equity. We have calculated that in a worst case scenario, if China Marine raised all the proceeds via an offering at $6, the transaction would be slightly accretive.

The use of existing cash balances would be the best case scenario, one in which we have calculated that the transaction will add $0.17 to EPS.  In this scenario we feel that investors may push shares to a range of $7.95 to $8.80, an increase of $1.70 to $2.55 from yesterday's levels.  Investors also need to consider the eventual synergies from this transaction due to opportunities to push respective products trough new distribution channels.

The purchase price to complete this deal is $27.8 million which the Company anticipates will be recovered in 4 years.  This implies that Xianghe could experience exceptional growth in net income in subsequent years. (With no growth in net income the pay back would be about seven years).

China Marine commented that contributions of the potential acquisition are not included in its current 2010 guidance of $80 million in revenues and $18 million in net income, giving us room for upside.

Source: PR Newswire (December 2, 2009)

Valuation Scenarios

Added to Geo Bargain List on May 15, 2009. ($2.70). 

Data Inputs:

Fiscal Year Ends in December
2008 Tax-Adjusted Earning Per Share: $0.37

"We believe that the current operating activities would be able to generate adequate cash flows supporting the daily operations. We do not have any fund raising plan at the moment."

It should be noted that the company does have 2 million outstanding warrants with an exercise price of $4.20.  This could come into play if the stock gains momentum.

Short-Term Valuation Scenarios

^a For valuation purposes the GeoTeam® prefers to adjust EPS to reflect a standard United States rate.

China Marine Food reported its 2009 second quarter financial results last week.

Highlights

• Revenues increased by 12.9% to $14.8 million
• Earnings per share increased by 14% % to $0.13 million

The GeoTeam® was hoping for a slightly better EPS performance.  However, the company maintained its previously issued financial guidance of revenues in excess of $60.0 million and net income in excess of $14.3 million.  Guidance implies a 2009 EPS growth rate of ~30%, which still qualifies the stock as a GeoBargain.

Related Links
Updated Financial Table
Updated Valuation Scenarios

GeoNuggets® - Quick Check Lists Highlighting Undiscovered Opportunities

China Marine Foods Group Ltd. (OTCBB:CMFO)

Company Description: China Marine Foods is a seafood producer engaged in the processing, distribution and sale of processed seafood products under the "Mingxiang" brand, as well as the sale of marine catch.

Data Ended 5/20/09 (See footnotes a & b)

• Price = $3.15
  
• Trailing EPS = $0.51
  
• Fully-Taxed Trailing EPS = $0.39
  
• Implied Guidance= $0.62
  
• Implied Fully-Taxed EPS Guidance= $0.50
  
• P/E Based on Fully-Taxed Trailing EPS = 8.08

1. The company meets 9 out of 10 GeoBargain® Requirements
   
   

   	Requirement	Comments
   	Recent 52-week High	Must Reach $3.50
   	30% EPS Growth Rate a,b	1st. Qtr. 2009 EPS increased 27%. Full year 2009 guidance implies EPS growth rate of 29%.
   	10% Revenue Growth	1st. Qtr. 2009 Revenue increased 25%. Full year 2009 guidance implies a revenue growth rate of 23%.
   	Strong Balance Sheet
   	Positive Operating Cash Flow	$7 Million as of 1st. Qtr. 2009
   	Debt to Equity Ratio less than 20%	0%
   	Current Ratio is at least 2:1	7:1
   	Return on Equity is at least 15% for Trailing Four Quarters	19.14%
   	Minimum Pre-tax Operating Margins of 8%	22% as of 1st Qtr. 2009
   	Preferably Under 50 Million Shares Outstanding	23 Million as of 1st Qtr. 2009
   	High Insider Ownership (generally greater than 15%)	51% as of Dec. 2008
   	Limited Institutional Ownership
   	P/E Divided by EPS Growth Rate (PEG Ratio) is Less Than 1.a,b	0.28

   
   
2. As it operates in the food sector, China Marine Foods may have some recession resistant characteristics.  This situation is beneficially magnified because the Company's  revenues from its processed food lines have been mostly from domestic sales, helping to insulate them from the global economic slowdown. China Marine Food's most recent 10-K illustrates that for the past 3 years the domestic market has accounted for between 98 to 99 percent of revenues.
   
   Dried Processed Seafood Products, Years Ended December 31*
   

   	2008 (%)	2007 (%)	2006 (%)
   PRC	99.2	99.3	98.8
   Export Sales	0.8	0.7	1.2

   *Source: 10-K, 2008

   
   
3. The recently initiated guidance implies a 2009 EPS growth rate of 29%. It is important to note that, while the EPS growth rate is just below the GeoTeam® minimum requirement of 30%, the company commented, during its first quarter conference call, that it has been conservative in its assumptions.
   
   
4. China Marine Foods has a wide distribution network, enabling it to maintain its competitive advantage in the industry. The company's 18 distributors allow it to sustain a market infiltration to over 1400 retail points throughout China and other countries. Major supermarkets and retailers such as Wal-Mart and Carrefour are among the end points for China Marine's products.
   
   Additionally, China Marine Foods qualifies its distributors by making sure they follow a prescribed protocol, selecting them based on strong financial backgrounds, networks, reputations and marketing strategies.
   
   
5. The Company has taken the necessary steps to meet industry quality standards.

• China Marine is HAACP (Hazardous Analysis and Critical Control Point) Certified, meaning that it must follow a strict protocol to ensure the best quality of its food. This fact is impressive since HAACP certification is a designation required in the United States and Europe, but not in China.
• China Marine products are Green Food Certified.

Potential Valuation Scenarios if the company can achieve its EPS growth goals

Short-Term Potential value based on fully taxed adjusted trailing EPS ^a

P/E 25 * $0.39 = $9.75
P/E 20 * $0.39 = $7.80

Short-term Potential value based on 2009 fully taxed adjusted Implied EPS Guidance ^a,b

P/E 15 * $0.50 = $7.5

^a CMFO is not paying a full U.S. tax rate. Therefore, all EPS numbers have been adjusted by the GeoTeam® to reflect a U.S. tax rate of 36%.

^b The company issued net income guidance of $14.3 million, but did not provide EPS guidance. The GeoTeam® used the2008 year ending outstanding share count of 23,010,842 to calculate an implied EPS figure. Commentary in the company's March 31 10Q, page 58 infers that dilution from capital raises may not be an issue:

"We believe that the current operating activities would be able to generate adequate cash flows supporting the daily operations. We do not have any fund raising plan at the moment."