(this is the fourth post in a series.  read earlier posts about my purchases of Secured Digital Applications (SDGL.OB), NetSol Technologies (NTWK) and Art’s Way (ARTW))

#4: China 3C Group (OTCBB:CHCG)

Description: China 3C Group is a wholesale distributor and retailer of computers, mobile phones and other communication products, and consumer electronics in Eastern China.   It focuses on mini-stores that operate within Chinese department store chains.

Market cap.: $53.2 million (as of close 10/17/08)

Revenue outlook: For the quarter ending June 30, 2008, China 3C Group reported a 22% increase in revenues to $78.5 million.   That was a nice recovery for the company, which disappointed in the first quarter of 2008.  For the remaining two quarters of 2008, CHCG projects a mid-single digit increase in year-over-year quarterly revenue growth (but if I am crunching the #s correctly a sequential decline over this quarter’s figure).  Could there be a little more upside for the third quarter from the Summer Olympics?

Earnings outlook: CHCG posted $.11 per share in the first quarter and $.14 per share in the second quarter of 2008.   In 2007, China 3C Group posted slightly lower #s for the second half of the year than it did in the first half ($.21 versus $.23).  The company said that it should enjoy slightly higher gross margins than last year and may have a lower tax rate.  In this environment, I’m not expecting a blowout.  But even if the last two quarters are just breakeven, the stock is trading at only 4x earnings.  Any second quarter earnings — and I expect some — would be gravy.

Balance sheet: At the end of the second quarter, China 3C Group had nearly $26 million in cash and no long-term debt.

DISCLOSURE: Long CHCG.OB.  I bought Friday, 10/10/08, at $.90.

Related posts:

1. Stock-picking contest update
2. Tucows (TCX) is too good to ignore
3. Rentech (RTK) blows away estimates