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China Architectural Engineering: Building Blocks for Success

Post Time:Jun 11,2008Classify:Industry NewsView:499

Multifaceted glass surfaces reflect rays of light at onlookers, dazzling the eyes and the senses. While the buildings look as though they have stepped directly out of the pages of a sci-fi book, they are in fact the very real, very modern creations of a company called China Architectural Engineering, Inc. (AMEX: RCH) (“CAE”).

CAE is not an especially new company, as they have been in operations since 1992, but they are still relatively novel to American investors. Specializing in the design, engineering and installation of high-end specialty curtain wall systems, including glass curtain walls, stone curtain walls, metal curtain walls, roofing systems and related products, CAE’s projects can be found not only throughout China, but also in places like Dubai, Vietnam and, most recently, the United States. After entering the US stock market in late September of 2007, CAE saw an enormous jump in stock valuation, hitting their 52-week high of $27.25 after a mere four trading days. Since then the stock has been steadily losing ground and was trading at near IPO levels in mid-May. Fortunately for CAE, and investors holding their stock, the Company developed a resurgence of momentum after they announced their earnings for the first quarter ended March 31, 2008. Significant gains in revenues and earnings served as a catalyst for CAE’s stock price and volume, generating a near 40% increase in value and a near 2000% increase in trading volume. In the week following the release of the first quarter numbers, CAE witnessed phenomenal gains and exceptional volume. While the Company’s numbers settled down slightly after their huge spike, they are once again on the climb, this time at a steady yet impressive rate.

CAE has experienced massive achievements since its arrival on the US market, and these triumphs will surely continue, especially considering the Company’s move this week from AMEX to NASDAQ. This jump after only nine months on the Street is one of many indicators that CAE stands to undergo tremendous gains in the very near future.


What exactly was in CAE’s earnings report that triggered such an interest in their stock? CAE reported substantial growth in net income, gross margins, revenues and earnings per share. One glance at the numbers is enough to convince most that CAE is doing something right. Net income for the first quarter of 2008 was $5.17 million, or $0.09 per fully diluted share, representing a 205% increase from the first quarter of 2007; gross margin rose to 33% in the latest quarter from 20% a year earlier; revenues shot up 76% from the year before; gross profit experienced a 190% increase from $2.90 million in the first quarter of 2007 to $8.45 million in the same period in 2008. The Company attributes such considerable growth to their expansion into higher-margin markets outside of China.

Coinciding with the very favorable earnings release was the announcement that CAE acquired its first contract in the United States. The multi-million dollar contract to build a 21-story luxury condominium facility in New York City not only helped boost the Company’s revenues but also served to lend some credibility to CAE with American investors, because lets face it, many Americans are wary of companies that operate only in foreign countries. This contract has taken some of the alien aspects out of CAE, and one can anticipate many more U.S contracts to follow.

Yet another achievement for CAE (yes the list does seem to go on and on) comes in the form of a new CFO for the Company. Ms. Xinyue Jasmine Geffner, CFO, contributes extensive knowledge of both the Chinese and the American aspects of the company. Born in mainland China and educated in the United States, Ms. Geffner can effortlessly convey CAE’s story to Wall Street. Ms. Geffner’s versatility will also serve to boost the Company’s communication with shareholders as well as help facilitate overall communication with the investment community.

The final feather in CAE’s cap is the Company’s plans to move the listing of its common stock from the American Stock Exchange to the NASDAQ Stock Market. Effective June 9, 2008, according to a press release published by CAE, the Company will trade on the NADAQ Global Select Market under the ticker symbol “CAEI”. This move is huge for CAE as they anticipate gaining added exposure and liquidity to its investors. The Company has already begun to realize the benefits of this move as reflected in their strong gains in both value and volume over the past week. Recently the Company has been realizing trading volume numbers in the millions, numbers they have rarely reached since their IPO. Add to the mix that CAE has been repeatedly been turning up on movers and shakers lists and one cannot help but feel there are great things in store for the Company.

On the whole, when considering recent developments within CAE, one cannot deny the extreme potential the Company possesses. From extraordinary first quarter earnings to superior additions to their management team; from contracts within higher-margin markets, such as the United States to the Company’s move to NASDAQ, it becomes evident that CAE stands to gain and maintain much in the way of value in a very short amount of time. The Company’s move to NASDAQ alone should serve as an indicator that CAE is on the rise, and when considering all the other points of achievement, the indicators turn to glaring signs screaming invest now!

All in all, CAE has spent the last nine months building a solid foundation for their investors, and now they are beginning to build the company upwards. Just like the facilities CAE constructs, the Company looks like a glistening gem, enticing investors to add it to their portfolio.

Disclosure: Author holds a long position in RCH

Source: seekingalpha.comAuthor: admin

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