China Security (NYSE:CSR)

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Friday, May 29, 2009

Valuation Scenarios

Data Inputs:

Fiscal Year Ends in December

Date	05/29/09
Price	$7.96
12 Months Trailing EPS ^a,b	$1.05
Published 2009 EPS Guidance ^a,b	$1.55
Future EPS Growth Based on 2009 Average Guidance	34.78%
Trailing P/E Ratio ^a,b	7.58
PEG Ratio (P/E divided by growth rate) ^a,b	0.22

^a CSR is not paying a full U.S. tax rate. Therefore, all EPS numbers have been adjusted by the GeoTeam® to reflect a standard U.S. tax rate of 36%. All EPS numbers are non-GAAP.

^bPlease note that the GeoTeam® non-GAAP calculation differs from the company's. The company adds back depreciation and amortization along with other non-cash items and subtracts one time gains to net income to derive a non-GAAP net income figure. The GeoTeam® generally prefers not to add back depreciation and amortization to derive a non-GAAP net income figure.

Short-Term Valuation Scenarios

Date	05/29/09
Price Based on P/E of 15 on Four Quarters Trailing EPS ^c	$15.75
Price Based on P/E of 10 on Four Quarters Trailing EPS ^c	$10.50
Price Based on P/E of 5 on 2009 EPS Guidance ^c	$7.75

Long-Term (12 Months Forward) Valuation Scenarios

Date	05/29/09
Price Based on P/E of 15 on 2009 EPS Guidance ^c	$23.25
Price Based on P/E of 10 on 2009 EPS Guidance ^c	$15.50

Peg Ratio Analysis - Common rule of thumb that PEG ratio should be less than 1.0

PEG Ratio Less than 1?

YES

^c The GeoTeam® used P/E ratios that are less than our usual assumptions due to the company's high Debt to Equity ratio of 50%.

These scenarios are not investment advice, but are scenarios based on some commonly used investment guidelines. They are provided to aid investors in making their own investment decisions.

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