The Long case for China Growth Development (CGDI)

CGDI is a commercial mall developer and operator of 6 malls (with 2 under major expansion) in the capital city of Taiyuan, Shanxi Province.

This is why I believe the share price will triple to > $1/share by eoy....

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28% Revenue Growth yoy

2007 revenue 12.7M
2008 revenue 16.2M

2007 eps: .14/share
2008 eps: .05/share (The lower eps for 2008 due mostly to SG&A expenses that nearly doubled from $6.7M in 2007 to $10.9M in 2008. Most of this extra $5M in expenses were ONE TIME CHARGES.

"The higher expenses were mainly due to one-time charges incurred in the closing of the reverse acquisition."

See Income Statement 2007 vs. 2008 for more clarity:
http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=6613425-106130-110928&type=sect&dcn=0001213900-09-001283




Most Recent Quarter Results:

Q2 2008 revenue $3.7M
Q2 2009 revenue $4.1M (12% increase)

Net Income with 70% increase
Q2 2008 eps: .02 (net income $608,700)
Q2 2009 eps: .03 (net income $1,034,000)

Shareholders Equity: $44.6M / BV: $1.22

New Revenue Source Going Forward
CGDI announced 100% capacity and nearly $2M in new revenue from a mall expansion project in August:
http://ih.advfn.com/p.php?pid=nmona&cb=1253209832&article=39033833&symbol=NB%5ECGDI




Dilution Unlikely- even with aquisition plans

"The Company currently generates its cash flow through operations which it believes will be sufficient to sustain current level operations for at least the next twelve months. In 2009, we intend to continue to work to expand our presence in the commercial real estate market, including the potential acquisition of another shopping mall.

To the extent we are successful in growing our business, identifying potential acquisition targets and negotiating the terms of such acquisition, and the purchase price includes a cash component, we plan to use our working capital and the proceeds of any financing to finance such acquisition costs."





BUT HERE'S THE REAL BEAUTY OF CHINA GROWTH DEVELOPMENT

CGDI gets it's rent paid in advance for their longer term leases so they don't have an accounts recievable issue.
In fact they have the exact opposite- as of the most recent quarter, they have "non-current deferred revenue" of $32,242,257.

That's about $1/share just waiting to hit the books in future quarters. Apple Computer gets non current deferred revenue from their I-phones- and it's a beautiful thing. I've never seen it in a penny stock though.

Non-Current Deferred Revs. = Conservative Money Management

"CGDI management will continue our financially prudent practice of requiring prepaid rents from our commercial tenants, for the entire term of the leases (typically 5 to 8 years). This method allows for an expeditious return of capital to CGDI, while greatly reducing debt service carried on the properties."




Share Structure favors us Little Guys
Insiders own 31M of the total $34M shares. All 31M of insider/5% holder shares are locked per terms of the reverse merger. INSIDERS CAN NOT SELL until May 2010. I expect they'll have an IR firm on board by then to get the word out and the share price up considerably from current levels.




Pics of current properties:
http://www.chinagrowthdevelopment.com/cgdi_subsidiary.html




Proposed Developments and Land Bank Access
http://www.chinagrowthdevelopment.com/cgdi_proposed.html


Trading in CGDI remains thin and volatile, but I believe the trend will be up as more investors discover the true value here.

With the one time extra $5M in charges form last year gone, and the added $2M in revenues from the property expansion, I think a return to .14/share is easily within reach for the following 4 quarters.