China Marine Foods OTCBB.CMFO) Build on Its Solid Reputation

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China Marine Foods Group Ltd. (OTCBB:CMFO)

Company Description: China Marine Foods is a seafood producer engaged in the processing, distribution and sale of processed seafood products under the "Mingxiang" brand, as well as the sale of marine catch.

Data Ended 5/20/09 (See footnotes a & b)

• Price = $3.15
  
• Trailing EPS = $0.51
  
• Fully-Taxed Trailing EPS = $0.39
  
• Implied Guidance= $0.62
  
• Implied Fully-Taxed EPS Guidance= $0.50
  
• P/E Based on Fully-Taxed Trailing EPS = 8.08

1. The company meets 9 out of 10 GeoBargain® Requirements
   
   

   	Requirement	Comments
   	Recent 52-week High	Must Reach $3.50
   	30% EPS Growth Rate a,b	1st. Qtr. 2009 EPS increased 27%. Full year 2009 guidance implies EPS growth rate of 29%.
   	10% Revenue Growth	1st. Qtr. 2009 Revenue increased 25%. Full year 2009 guidance implies a revenue growth rate of 23%.
   	Strong Balance Sheet
   	Positive Operating Cash Flow	$7 Million as of 1st. Qtr. 2009
   	Debt to Equity Ratio less than 20%	0%
   	Current Ratio is at least 2:1	7:1
   	Return on Equity is at least 15% for Trailing Four Quarters	19.14%
   	Minimum Pre-tax Operating Margins of 8%	22% as of 1st Qtr. 2009
   	Preferably Under 50 Million Shares Outstanding	23 Million as of 1st Qtr. 2009
   	High Insider Ownership (generally greater than 15%)	51% as of Dec. 2008
   	Limited Institutional Ownership
   	P/E Divided by EPS Growth Rate (PEG Ratio) is Less Than 1.a,b	0.28

   
   
2. As it operates in the food sector, China Marine Foods may have some recession resistant characteristics.  This situation is beneficially magnified because the Company's  revenues from its processed food lines have been mostly from domestic sales, helping to insulate them from the global economic slowdown. China Marine Food's most recent 10-K illustrates that for the past 3 years the domestic market has accounted for between 98 to 99 percent of revenues.
   
   Dried Processed Seafood Products, Years Ended December 31*
   

   	2008 (%)	2007 (%)	2006 (%)
   PRC	99.2	99.3	98.8
   Export Sales	0.8	0.7	1.2

   *Source: 10-K, 2008

   
   
3. The recently initiated guidance implies a 2009 EPS growth rate of 29%. It is important to note that, while the EPS growth rate is just below the GeoTeam® minimum requirement of 30%, the company commented, during its first quarter conference call, that it has been conservative in its assumptions.
   
   
4. China Marine Foods has a wide distribution network, enabling it to maintain its competitive advantage in the industry. The company's 18 distributors allow it to sustain a market infiltration to over 1400 retail points throughout China and other countries. Major supermarkets and retailers such as Wal-Mart and Carrefour are among the end points for China Marine's products.
   
   Additionally, China Marine Foods qualifies its distributors by making sure they follow a prescribed protocol, selecting them based on strong financial backgrounds, networks, reputations and marketing strategies.
   
   
5. The Company has taken the necessary steps to meet industry quality standards.

• China Marine is HAACP (Hazardous Analysis and Critical Control Point) Certified, meaning that it must follow a strict protocol to ensure the best quality of its food. This fact is impressive since HAACP certification is a designation required in the United States and Europe, but not in China.
• China Marine products are Green Food Certified.

Potential Valuation Scenarios if the company can achieve its EPS growth goals

Short-Term Potential value based on fully taxed adjusted trailing EPS ^a

P/E 25 * $0.39 = $9.75
P/E 20 * $0.39 = $7.80

Short-term Potential value based on 2009 fully taxed adjusted Implied EPS Guidance ^a,b

P/E 15 * $0.50 = $7.5

^a CMFO is not paying a full U.S. tax rate. Therefore, all EPS numbers have been adjusted by the GeoTeam® to reflect a U.S. tax rate of 36%.

^b The company issued net income guidance of $14.3 million, but did not provide EPS guidance. The GeoTeam® used the2008 year ending outstanding share count of 23,010,842 to calculate an implied EPS figure. Commentary in the company's March 31 10Q, page 58 infers that dilution from capital raises may not be an issue:

"We believe that the current operating activities would be able to generate adequate cash flows supporting the daily operations. We do not have any fund raising plan at the moment."