China Crescent Enterprises, Inc. (OTCBB: CCTR) today released a
letter to shareholders from board member and founder Philip Verges.
The letter reviews 2009 challenges and successes and previews the
evolving strategy for 2010 to be presented at the upcoming Virtual
Town Hall scheduled for January 22, 2010. The Virtual Town Hall
agenda includes a presentation on management's plan to reach for
$100 million in revenue in 2010. The letter to shareholders
announced today is included in its entirety below.
Dear Shareholders -
The global economy certainly presented some challenges this
year. At the same time, the worldwide financial crisis also created
new opportunities. In all, I believe we have absorbed the
challenges well and seized opportunities where presented. As the
year draws to a close, I wanted to take a moment to review
highlights of both our challenges and opportunities. Management is
internally reviewing the 2009 challenges and opportunities as we
tune our strategy for 2010. Within the upcoming Virtual Town Hall
scheduled for January 22, 2010, we plan to present our strategy
updates resulting from our internal review of the 2009 challenges
and opportunities. We expect the plan we present on January 22nd to
include some substantial changes. At this moment, I anticipate
shareholders and interested investors are reviewing their
investment strategies as we review our growth strategies, and in
that regard I hope this letter today may contribute to the
consideration of your 2010 investment strategy.
China Crescent is part of a comprehensive agenda to build a
global emerging market technology service capability. Since the
initiation of that agenda in 1997, the agenda has expanded to
include addressing the challenges of the start-up, early stage and
small business capital markets. China Crescent has evolved from a
business founded by my family with the help of an angel investor.
China Crescent remains part of the NewMarket Technology, Inc.
family of companies today. The upcoming Virtual Town Hall will
include all of the NewMarket family of companies. A growing and
recurring theme to be included in the Town Hall presentations
entails the increasing initiative stemming from the NewMarket
experience to improve the small business investment markets for
both entrepreneurs and investors. We believe this initiative is
important to the NewMarket family of companies. We also want to
make a contribution to improving the overall global small business
opportunity for all entrepreneurs and investors. Again, tune into
our January 22nd Virtual Town Hall to learn more. You can find a
preview of Town Hall topics in a recent letter to NewMarket
shareholders here:
http://www.marketwire.com/press-release/Newmarket-Technology-Inc-1095836.html.
Sales Rebound from Financial Crisis and Stand to Get Better with
Improved Margin Potential
China Crescent's return on investment potential depends on the
Company's long-term operational success. China Crescent has not
only had to deal with the ordinary start-up hurdles since its
inception approximately three years ago, but also with the
extraordinary issues surrounding a global financial crisis. After
experiencing a sales slow down at the onset of 2009 that we
attribute to the global financial crisis, we have seen sales pick
up to levels commensurate to last year before the financial crisis
was a prevalent factor. In spite of the global financial crisis,
our net income has been better this year than ever. I believe this
is a result of both long-term initiatives we have had underway to
improve operating margins and as a result of measures we took
specifically in reaction to the global financial crisis to bolster
against the unexpected. We introduced technology outsourcing
services this year. As a result, we stand to potentially realize
more revenue in 2009 than in the previous years. Our initial
outsourcing services efforts could possibly make a meaningful
contribution to the fourth quarter revenue anticipated from our
customary customer contracts.
Improved Staying Power Bolstering Against Further Potential
Economic Fall-Out
In addition to measures driven by the global financial crisis to
improve margins, we have also worked to further bolster against the
unexpected by reducing debt. Earlier in 2009, we reduced the number
of issued and outstanding shares by executing a 1 for 25 reverse
split. At the same time, we increased the authorized. The reduction
of issued and outstanding and increase in authorized was intended
in part to improve the Company's capital structure and enhance the
value of the stock as a resource for reducing debt. We have since
engaged in transactions to reduce debt that resulted in the issue
of stock and the corresponding increase of the issued and
outstanding. We have reduced the Company's debt and as such, I
believe improved the Company's staying power. While I hope we have
seen the worst of the possible impacts from the global financial
crisis, I believe it is prudent to remain vigilant against further
possible unexpected ramifications.
Milestone Return on Investment Potential
Those of you that have been tuned into China Crescent's
shareholder communications for more than a couple of weeks have
probably heard us talk about milestone investing. We are somewhat
outspoken at China Crescent about what we believe is an
over-the-counter market wide disconnect between operational
performance and share price market values. We believe
over-the-counter share price values are determined more by
qualitative considerations than quantitative considerations. While
national exchange listed share prices frequently reflect business
sector consistencies in terms of book value and revenue
correlations, over-the-counter share price business sector
consistencies and operational performance correlations are hard to
find. Share prices of over-the-counter companies often fluctuate
dramatically. We believe those fluctuations are driven by
qualitative reactions to milestone events. A new contract, for
instance, announced by an over-the-counter listed company may be
received by the investment community as an indication of the
company's potential long-term success and increased purchasing of
that company's stock may ensue. The single milestone will likely
only sustain increased buying for a short period of time and the
share price will likely come back down again. Based on our
perception of the over-the-counter share price dynamics we
frequently discuss supplementing any long-term investment strategy
with a milestone investment strategy that entails buying small
positions in anticipation of milestone events and taking profits by
selling when a milestone event drives an increased share price. We
anticipate China Crescent to have a high potential of delivering
milestone returns in addition to maintaining long-term
potential.
Long-Term Return on Investment Potential
Long-term return on investments from over-the-counter companies
are a higher risk proposition than return on investments in
national exchange-listed companies. The over-the-counter market has
a high number of early stage and start-up companies. Start-up
companies frequently do not achieve sustainable financial
performance within three years. Many of those companies that do not
achieve sustainable financial performance will deliver milestone
successes along the way and be able to deliver milestone returns.
However, long-term success and a long-term return on investment are
more elusive. When an over-the-counter listed company achieves
sustainable financial performance and can potentially deliver a
long-term return on investment, that return is unlikely to be
delivered by simple long-term share price appreciation. It is
difficult to predict how many shares an over-the-counter company
might issue in raising capital and acquiring resources for its
business plan. I believe most over-the-counter companies end up
issuing more stock than they anticipate. While a company many reach
financial sustainability, so many shares may have been issued along
the way that a sustainable share price reflecting financial
performance is unachievable in the over-the-counter markets.
Accordingly, the long-term return on investment may likely have to
be delivered via some other method. A sale of the operation to a
larger company and a corresponding distribution of the proceeds to
the selling shareholders could be one way a long-term return on
investment is realized. As a founder and director at China
Crescent, I believe in the long-term potential of the Company.
However, we are fighting the statistics of early stage companies
that frequently do not achieve sustainable financial performance.
We are also an over-the-counter listed company and I am telling you
that I do not believe a long-term return on investment is likely to
be realized by simple share price appreciation in the
over-the-counter market. I furthermore do not have a definitive
plan as to what alternative means management intends to peruse in
the delivery of a long-term return. As 2010 approaches, I hope you
will think about our ongoing discussions on milestone investing and
carefully consider your long-term investment strategy.
Larger Sales Contracts and Higher Margins
After the first two years of getting our feet on the ground in
China, we have launched an effort this year to improve the quality
of our offerings. We have initiated a larger and more comprehensive
technology service offering. We are endeavoring to provide a total
technology solution over a three-year renewable period. We have had
some notable initial success this year and anticipate substantial
revenue contributions in 2010. With our first new service offering
contract experiences, we anticipate more of the same next year at
an increased pace. In addition to improving our rate of growth from
organic sales, the new service offering also improves our margin
potential.
Business Line Diversification
In addition to repositioning our existing resources to introduce
a new service offering, we are also looking to diversify our
overall business line into multiple lines. Toward this
diversification effort, we entered into an acquisition agreement
with China Radio Technology, Ltd., establishing a proprietary
wireless technology business line. This new business line will be
maintained and developed as a subsidiary organization. The
delineation of the new business line as a separate business will
enable China Crescent a range of options in the future as to how
best to monetize our success in the new business line for
shareholders or otherwise protect shareholders from performance
issues in the new business line.
I hope the summary of what I consider to be major planning
considerations for 2010 has been helpful to your own investment
considerations for next year. I am bullish on China Crescent's
potential and I expect you already knew that. Thank you for your
attention here to this communication today and please look for
further updates leading up to our town hall meeting in January.
Thank you,
Philip Verges
Board Member
China Crescent Enterprises, Inc.
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About China Crescent Enterprises, Inc.
(www.chinacrescent.com)
China Crescent Enterprises, Inc. reported over $40 million in
profitable revenue in 2008. The Company is a technology leader in
the rapidly developing Chinese market specializing today in
software engineering, high quality software development and digital
multimedia outsourcing services delivered to customers globally. At
the same time, the firm is a systems integrator and value added
reseller of major global hardware brands in the Chinese domestic
market.
Headquartered in Dallas with operations in Shanghai and Beijing,
China Crescent bridges the gap between Western and Eastern business
cultures to assist Western clients in realizing the advantages of
the high quality, low cost technology products and services
available from China. China Crescent also assists Western clients
in localizing products and services to realize the tremendous
growth potential available by expanding into the Chinese
Market.
"SAFE HARBOR STATEMENT" UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
This press release contains forward-looking statements that
involve risks and uncertainties. The statements in this release are
forward-looking statements that are made pursuant to safe harbor
provision of the Private Securities Litigation Reform Act of 1995.
Actual results, events and performance could vary materially from
those contemplated by these forward-looking statements. These
statements involve known and unknown risks and uncertainties, which
may cause China Crescent's actual results in future periods to
differ materially from results expressed or implied by
forward-looking statements. These risks and uncertainties include,
among other things, product demand and market competition. You
should independently investigate and fully understand all risks
before making investment decisions.
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Contact: China Crescent Enterprises, Inc. ir@chinacrescent.com
214-722-3060
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