Jade Art Group (PINK:JADA)

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All Research Comments & Business Outlook GeoSpecial Notes

Friday, June 4, 2010

Added to the GeoSpecial list on March 2, 2010 @ 0.38

Catalyst: Stock was selling below book; We postulated that the company should be a direct beneficiary of the housing recovery in China.
Peak performance: Reached a high of $1.09 on April 5 2010
Current Price: $0.43

Current road block: With 80 million shares, the company has well over our preferred maximum share count of 50 million shares; We are not totally convinced that EPS consistency will me maintained; ; could remain out of favor due to negative publicity on the Chinese government's efforts to tame economic expansion; We are slightly perplexed by the contradictory statements in the 2009 year end release and the 201 first quarter just days apart:

Fourth quarter 2009 excerpt:

Commenting on the Company’s financial results for 2009, Hua-Cai Song, Chief Executive Officer of the Company, said, “The inclement weather occurred in China during the year caused conditions unfavorable to mining and transporting Jade Art’s raw materials. Moreover, we feel that the global economic downturn has temporarily reduced the demand of luxury goods, which directly impacted the Company’s commercial and residential construction material markets and the high-end jade jewelry market. Although we have not yet seen a rebound in the luxury goods market, we are well positioned to take advantage of opportunities when economic conditions improve.”

2010 First quarter Excerpt:

“Our improved first quarter performance was primarily driven by the sales growth realized during the quarter,” said Mr. Hua-Cai Song, Chief Executive Officer of the Company. “This growth in sales from our existing customers reflects the improvement on the economic environment which has had a positive impact on the activity in the high-end commercial and residential construction markets and the jade jewelry market.”

Remains on the GeoSpecial list. JADA has now quietly reported three consecutive straight quarters of EPS growth. Despite this, the stock is still selling below its book value per share of $1.00.

The company needs to:

Execute a reverse split to improve investor psychology
Provide guidance
Express an opinion on whether the Chinese government’s attempt to tame the real estate expansion may effect near-term growth prospects.
Finally, JADA needs to attract new customers and if possible solidify contracts commitments:

"The Company has continued to receive orders from, and make sales to, its existing customers through the quarter ended March 31, 2010. However, the Company has not obtained new customers since the second quarter ended June 30, 2008. The Company and its existing customers agreed to have future sales orders based on verbal contracts."

This stock is likely only suited for risk tolerant investors.

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