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abh3vt

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abh3vt

Re: None

Monday, 01/15/2007 9:13:27 AM

Monday, January 15, 2007 9:13:27 AM

Post# of 585
CSCT.ob DD
=====================

Name: China Security and Surveillance

Biz: manufacturing, distributing, installing and maintaining security and surveillance systems. Our customers are located throughout China.

Customers: mainly government entities (customs agencies, courts, public security bureaus and prisons), non-profit organizations (including schools, museums, sports arenas and libraries) and commercial entities (including airports, hotels, real estate, banks, mines, railways, supermarkets, hospitals and entertainment venues), which account for approximately 40%, 20% and 40% of sales revenues, respectively.

Catalysts for growth: Regulations promulgated by governmental agencies in China relating to security and surveillance often create opportunities for us. Currently, there are a number of formal and planned regulatory drivers which we believe offer significant growth opportunities. These include the estimated $6 billion to $12 billion that the Chinese government expects to spend for security infrastructure in preparation for the 2008 Olympics, along with the planned investment by Shanghai for the 2010 World’s Fair. In addition, several ordinances have been passed by the Chinese government which require security surveillance systems to be installed in: (1) 660 cities throughout China for street surveillance; (2) all entertainment locations; (3) all Justice Departments and Courts; and (4) all coal mines in China by the end of 2008 (currently estimated to be 28,000).

Make good provisions:
In connection with the private placement, Mr. Tu Guo Shen, the Company's Chairman, has agreed to place a percentage of his shares in China Security and Surveillance, in an escrow account as part of a make good provision until such time as the Company has achieved its projected net income for 2006 and 2007 of $17.49 and $34.1 million, respectively.
(NOTE: there have been a couple of acquisitions of profitable companies since this pledge that have not been factored into these provisions)

FDS (est): 32-35MM

Recent trends of order activity:
Q2 06: 32 new contracts; $23MM value
Q3 06: 51 new contracts; $32MM value
Q4 06: 58 new contracts; $43MM value

Seasonality:
Our sales are affected by seasonality. Our revenue is usually higher in the second half of the year than in the first half of the year because fewer projects are undertaken during and around the Chinese spring festival.

Analyst estimates:
http://finance.yahoo.com/q/ae?s=CSCT.OB

Website: http://www.goldengroup.cn/

Other items of note:
This is one of very few companies to have a factoring arrangement with a Chinese bank:

China Security and Surveillance Technology Inc. Secures New Factoring Facility With China Construction Bank to Capitalize on Safe City Projects
Tuesday October 3, 9:15 am ET

This facility will provide financing of up to 80 percent of the total contract amount for projects which qualify under this initiative, while government customers will pay the difference to China Security throughout the implementation process.

As part of this agreement, China Security will make periodic deposits with China Construction Bank, which, depending upon the specific project, will provide a maximum factoring capacity of five to ten times the amount deposited.

The Safe City Project is a nationwide initiative to enhance general security in China's cities, which include the implementation of new surveillance cameras in highly trafficked areas throughout a total of approximately 660 cities.
China Security has previously signed several smaller contracts related to initial trial projects, but the majority of the projects are expected to begin in 2007 and continue to ramp into 2008 in preparation for the Beijing Summer Olympics.

Additionally, by having the access to these funds, China Security can differentiate itself in the competitive market place versus other undercapitalized competitors.

--------------------

To sum, CSCT has multiple opportunities for growth. It is starting to build momentum and differentiate itself from its competitors. China has mandated security regulations that will keep this company busy, as well as other major events like the Olympics and the World's Fair. I think the orders will continue to grow throughout 2007 and i like the strong, sustainable organic growth. This is a stock that can appeal to both growth and value investors, and may even attract the attention of the momentum crowd as well....(perhaps it already has given that it is up 225% from its low point of 4 over the summer.)
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