China Direct Inc. (CDII)

Company: China Direct Inc. (CDII)

Current Price: $1.20

Company Website:  http://www.chinadirectinc.com

The company is located in the world's fastest growing economy-China!

CDII is a rapidly growing holding company operating in two segments, Magnesium and Basic Materials. CDII also manufactures and distributes zinc concentrate; processes and distributes concentrated zinc and lead; and engages in the sale and distribution of steel, non ferrous metals, and lumber products. Furthermore, CDII provides various consulting services that include advisory services, such as business consulting services, translation services, coordination of professional resources, business development support, alliances/partnerships, and capital markets services.

Magnesium is the third most commonly used structural metal, following steel and aluminum, and is used in the production of alloys used in aircraft and automobile parts. Magnesium is the lightest of all structural metals; it is one fourth the weight of steel and two thirds the weight of aluminum. Various forms of magnesium are also used in the manufacturing of electronic equipment, such as computers, cell phones, and cameras. Due to its unique light weight and high strength properties, magnesium's demand is on the rise and we feel the price will follow.

Just recently, CDII announced that it had purchased a total of 1,589,520 shares of common stock through its share buyback plan accounting for 6.3% of the total outstanding shares! These shares will be cancelled. Additionally, in a private transaction unrelated to the company's buyback, Yuwei Huang, Executive V.P. of Magnesium operations and director of the company purchased 500,000 shares of CDII common stock! In my opinion, both of these events are strong bullish indications that the company is extremely confident that the company is undervalued with big upside potential. By the company doing a buyback and cancelling a percentage of the outstanding shares they are increasing shareholder value as well as the company's valuation.

Of course what I love most about CDII is the company's fundamentals! In my opinion, CDII is extremely undervalued at the current PPS. CDII is currently trading for only $1.20 with a market cap of $29 Million. CDII currently has over $261.5 Million in revenue; total assets were $107.4 Million in 2008 compared to $88.3 Million in 2007, and 45% quarterly revenue growth! CDII has net income of $17.7 Million compared to $12.5 Million in 2007 and quarterly earnings growth of 97.5%, has $28.4 Million in cash, and only $2.09 Million in debt! Right now, CDII is trading under book value, less than 1 times sales, and has a P/E of only 1.8!!! This is unbelievable!

CDII has already started to show a new bullish trend and has gone from $0.91 to as high as $1.37 yesterday. I have been waiting for a little pull back for a good entry and it seems that we are starting to see just that. In my opinion, anything around the current levels ($1.00-$1.25) is a great entry. This is a long-term play.

I think CDII will become a huge winner for us in 2009 and highly suggest you start researching the company as soon as possible.

 

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