China Marketing Media (OTC BB:CMKM)

On May 24, 2010 China Marketng Media reported its 2010 first quarter financial results and continues to make operational strides.

First Quarter 2010 Financial Performance Highlights

• Revenues were $8.80 million for the first quarter of 2010, an increase of 98.95% from $4.42 million for the same quarter last year.
  
• Gross margin was 31.75% for the first quarter of 2010, as compared to 31.82% for the same period in 2009.
  
• Operating profit was $1.26 million for the first quarter of 2010, an increase of 2,587.22% from $0.05 million for the same period last year.
  
• Net Income attributable to China Marketing Media Holdings, Inc.: Net income was $1.20 million for the first quarter of 2010, an increase of 1,730.20% from $0.07 million for the same period last year.
  
• Fully diluted tax adjusted earnings per share was $0.03 for the first quarter of 2010, as compared to $0.00 for the same period in 2009.

We were impressed that the company experienced a 159.71 increase in sales from its adverting segment, which sells add space in CMKM's magazines. In 2009 this revenue stream actually declined.

"The Chinese economy started recovering during 2009 and many enterprises raised their marketing and advertising budget in this year, which resulted in the increase of our revenue in an amount of approximately $1.4 million from advertising sales." (Page 2 of the filing).

We still need to be mindful of a possible dilutive event if the company desires to expand its magazine business.

China Marketing Media continues to make strides and maintains profitability for its 2009 fourth quarter and full year.

 Again the challenge is that even though  their new focus on online electronics retailing is taking revenue to new heights, the associated margins for this business are rather small:

Management's comment on margins:

Due to the nature of the wholesale business, our electronic products have a lower profit margin of 6% as compared to a profit margin of 35% for our other products.

We will continue to track the CMKM story. The company is still teetering on profitability and now needs to make significant bottom line strides to hold our attention.