JADE ART GROUP: Q1 UPDATE
China's Economic Slowdown Plays A Role
In Company's Sales Pipeline
Click here to download the report.
Summary and Recommendation
We are pleased to learn that the previously reported operational problems at the company’s massive jade mine have been resolved. But the company now faces severe revenue challenges due to a lack of new contracts and the postponement of present sales contracts related to the economic slowdown in China’s consumer economy. This poses serious financial risks that could even lead to discontinued operations.
On a brighter side, the exclusive mine contract leaves the company in a favorable position in terms of the long term availability of low priced jade. But in a scarce demand scenario, the company’s financial situation is fragile. On the other hand, an improvement in economic conditions could play an important role in rebounding jade demand.
Key Points
Jade Art reported revenues of $4.97 million, down 53% over the corresponding quarter of FY ’08 due to delayed sales contracts.
Net income declined 59% to $2.45 million or $0.03 EPS on a year over year basis.
The company settled over $23 million in debt, highlighting improved liquidity and healthy cash flow.
A lack of new contracts or agreement in the past three quarters has left the company with a bleak near term outlook for top-line growth.
A rebounding economic scenario coupled with improving retail sales numbers should support long term demand for jade.
|
