China Metro-Rural (NYSE AMEX:CNR)

This morning, in an effort to expand its real estate division,  Man Sang announced a merger transaction with China Metro. The Man Sang Group is principally engaged in the purchasing, processing, assembling, merchandising and wholesale distribution of pearls, pearl jewelry and other jewelry products. We have never been too crazy about Man Sang:

• Recent profitability and EPS growth has been inconsistent which MHJ attributed to a downturn of property markets in Hong Kong and the People's Republic of China.
• Liquidity problems existed.
• We generally don't focus on the real estate sector.

Silver Lining?

• China real estate market has recovered.
• Liquidity problems may have been resolved.
• The stock is trading under its book value per share of over $8.00.

We found it odd that MHJ will be issuing 57.4 million shares to China Metro at $5.00, substantially above its current  market price of $2.45.  We are not sure what to make of this. Is the move a vote of confidence from China Metro or just an attempt to reverse the stock's major down trend since November?  The move certainly adds a ton of shares to Man Sang's  current share primary count of 6.4 million.  Complicating matters, the company has yet to issue financial information on China Metro.  We threw some funds Man Sang's just for fun, in case the investor rumor mill goes into motion.  

Note:

• The chart has been in a serious decline since November.
• We still need to confirm shares outstanding pre-merger.