ChineseInvestors.com, Inc. (
OTCQB: CIIX, “CIIX”) is a
relatively undiscovered specialized investment services
company with several intriguing business lines high growth
potential and a compelling valuation based on previous peak
cycle earnings. With headquarters in Los Angeles, CA, CIIX offers a
range of intriguing consulting services, information products,
and web-based tools for investor education, including real
time market commentary, analysis and education in Chinese
language character sets. The company demonstrated impressive
profit in 2014, and we believe the earnings power displayed at
the top of the cycle is a fact largely overlooked on Wall
Street. Recently, CIIX has made several announcements
highlighting growth potential from its investments in the
global cannabis industry, a new a quickly growing market with
large potential. These include the recent launch of
what management called “world's first Cannabidiol (CBD)
health products online store in the Chinese Language,” as well
as a Chinese language Yelp-style mobile application that will
contain a location-enabled database of recreational and
medical marijuana dispensaries, as well as a platform to
review and discuss various cannabis products.
Investment Highlights
Several catalysts ahead as CIIX gains cannabis
exposure
In addition to value available from CIIX’s core financial
information and consulting services for Chinese-speaking
investors in the U.S. and China, CIIX appears to have taken
significant strides to increase its exposure to the burgeoning
global cannabis industry. As we have noted throughout our
coverage, CIIX was able to gain early exposure to the rise in
cannabis stocks and evolving trend towards legalization with
its stake in publicly traded Medicine Man Technologies, Inc.
(
OTCQB: MDCL). Medicine Man
Technologies, provides consulting services related to
cultivation, production, and dispensary operations to 19
clients in eleven US states and Puerto Rico, with a market
capitalization of $28.3mn as of January 17, 2017. According to
SEC filings, CIIX generated $2.3mn in proceeds from stock
sales of Medicine Man during calendar 2016. We estimate that
the company has nearly exited this position, and that any
remaining shares have been held debt collateral. CIIX
has addressed short term liquidity needs, however, with the
issuance of $4.7mn in Series C Preferred Stock, as disclosed
in its 10-Q filed on January 23, 2017.
CIIX launches first Cannabidiol (CBD) health products
online store in the Chinese Language
In February, CIIX launched what it has described as the
first cannabidoil (CBD) health products online store in the
Chinese language. The web site,
www.ChineseCBDoil.com, is intended to be a retail
destination for nutritional supplements containing CBD to the
Asian market through both online and in-store sales.
The announcement follows CIIX’s plan to launch a Chinese
language Yelp-style mobile app for locating dispensaries and
discussing cannabis products in the US, and a December
announcement that it had entered into an alliance with Chinese
private equity firm Shenzhen Yuanrong PE Capital seek out
opportunities in medical and recreational cannabis.
Price target moves to $3.75
We are increasing our price target to $3.75 at this
time, reflecting potential from the company’s legal
cannabis initiatives. CIIX remains in the early stages of
penetrating this market, however, the increased market
opportunity and CIIX’s prior success in the cannabis industry with
its investment in Medicine Man should support the view that it
can capitalize on a unique approach to broad cannabis industry
growth.
CIIX to enter cannabis market with online store, mobile
app
•
CIIX launches www.ChineseCBDoil.com:
On January 12, 2017, CIIX CEO Warren Wang announced that
the company would be launching what it has described as the
first Cannabidiol (CBD) health products online store in the
Chinese language.
• The site,
www.ChineseCBDoil.com, launched in February and
is intended be a retail destination for
nutritional supplements containing CBD to the Asian market
through both online and in-store sales.
ChineseCBDoil.com targets a large opportunity, as it aims to
benefit from growing acceptance of the medicinal properties of CBD
oil, a nontoxic and nonaddictive concentrate extracted from
cannabis that has shown potential for treatment of
anxiety, stress, Alzheimer’s disease, epilepsy, and cirrhosis
of the liver.
• Headquarters for ChineseCBDoil.com are located in Shanghai, with
a new wholly owned subsidiary in the Shanghai Free Trade Area
to focus exclusively on the wholesale and retail business of
supplying CBD oil health products to Chinese people all over
the world. ChineseCBDoil.com sells products both through a retail
store as well as online.
• The announcement follows CIIX’s plan to launch a Chinese language
“Yelp-style” mobile app for locating dispensaries and
discussing cannabis products in the US, and a December announcement
that it had entered into an alliance with Chinese private
equity firm Shenzhen Yuanrong PE Capital seek out opportunities in
medical and recreational cannabis.
• In press release, Wang noted that the “Yelp-style” mobile
application has completed version 1.0, been submitted to the
Apple store and been approved. the company believes is the first
marijuana social media mobile application designed for Chinese
speakers.
Increasing price target to $3.75
• CIIX shares have appreciated notably since its expansion into
cannabis industry and particularly since the announcement of
its Chinese language mobile app and online store, to be run by a
fully owned subsidiary in Shanghai.
• We are increasing our target to $3.75 for CIIX at this time. If
achieved this would represent significant upside potential
from the recent market price of $1.70 on February 10, 2017.
• The new target reflects growth potential from the company’s
cannabis initiatives. We assumed revenue from the cannabis
business growing from $0.5mn in 2017 to reaching 8-digit sales by
2020E, with continued growth thereafter. CIIX remains in the
early stages of penetrating this large market; however, the
increased market opportunity, as well as CIIX’s demonstrated
knowledge of the cannabis industry as shown by its investment
in Medicine Man, should support the view that it can capitalize on
a unique approach to broad cannabis industry growth.
• We view CIIX as a high-risk/high-reward investment opportunity in
the microcap space, with potential for upside if the company
can generate renewed traction with its high margin investor
relations services business and execute on the new cannabis
initiatives.
CIIX FY2Q17 Results
• Recent Results: CIIX reported revenue of $510,944 in FY2Q17, up
from $341,324 during the August quarter, which was its first
fiscal quarter of 2017. Revenues rose by 133% YoY from a small
base, versus $219,263 in FY2Q16.
• Investor relations revenues rise: Revenues in FY2Q17 were led by
$278,850 in investor relations revenues, which was well ahead
of $90,312 in the prior quarter and $107,965 in the year-ago
quarter.
• Subscriber revenues remain at elevated levels. FY2Q17
subscription revenue came in at $232,094, showing the company
was able to maintain elevated subscription levels experienced in
1Q17. For the first six months of the fiscal year,
subscription revenues were $481,323, versus $200,903 in the
comparable year-ago period.
• Gross margins increased to 55.8.9% as the company benefitted from
higher revenues and lower costs in China.
• CIIX’s 10-Q noted that CIIX was continuing to focus on growing
its investor relations business – a move which is clear from
recent announcements by the company in the cannabis industry. We
look forward to viewing more news to determine whether CIIX
has been able to continue this momentum into calendar 2017.
• Balance Sheet and Cash Flow Review: CIIX ended the November
quarter with cash on hand of $646,866, and current assets of
$1.4mn, with $1,070,000 in debt. CIIX had shareholder’s equity of
$(936,345), and used cash of $1.7mn in its operating
activities during the first two quarters of fiscal 2017.
• We believe CIIX is seeking to raise additional capital to improve
its balance sheet and ease liquidity pressures,. A footnote in
the company’s 10-Q, filed January 23, 2017, indicated that the
company had raised $4.7mn in a recent Series C Preferred Stock
offering.
Management Team
Warren Wang, Chief Executive Officer
Warren Wang founded the Company in late 1999. Warren was born in
1968, in Shanghai, China. He studied finance at St. John’s
University in New York. Mr. Wang has served as Chief Executive
Officer, Chairman of the Board, and Director
of Chineseinvestors.com, Inc. since its inception with the
exception of March, 2002 through August of 2003 when James
S. Toreson served as the Company’s Chief Executive Officer as
a condition of the Hollingsworth LLC investment. He
was previously the Vice President of Investments for Tradeway
Securities Group, a Senior Financial Consultant for Waldron
& Co., and a Senior Account Executive for Donald & Co.
Securities. Mr. Wang has over 15 years of experience in
the financial markets industry and has extensive experience in
management, project development, sales, marketing, accounting,
and administration. Mr. Wang is Chartered Financial Analyst (CFA)
Candidate as well as a member of the Market Technicians
Association (MTA).
Quoqi Deng, Chief Financial Officer
Quoqi Deng was elected a direct in 2016. Mr. Deng studied
engineering at Shenyang University of Technologies in 1979 and
an EMBA from Dalian University of Technology in 1981. Mr. Deng has
served as the General Manger of Win-more Precious Metal
Management Co., Ltd. And Tianyi Gold Precious Metal Management Co.,
Ltd since June of 2009. Prior to that he worked in the real
estate and construction field with Rongchang Group in various
capacities from 2004 to 2009. Prior to that he worked with the
Shenyang Technological Development Zone from 1992 to 2004 where he
introduced
billions of overseas capital from Japan, Singapore and the United
States to fund major construction project in China. Mr. Deng
is fluent in Mandarin Chinese and the English language.
Paul Dickman, Director
Paul Dickman is the founder and principal of Breakwater Corporate
Finance, which is a consulting firm that provides corporate
finance, capital markets and governance consulting to emerging
companies, with an emphasis in start-up and micro-cap public
companies. Mr. Dickman has served as the Chief Financial Officer
for companies in a variety of industries, both domestically
and abroad. He has successfully taken numerous companies through
multiple fund raising transactions, including private
placements of debt and equity and initial public offerings. Prior
to establishing Breakwater Corporate Finance, he worked as an
auditor with two large regional accounting firms, with an emphasis
in auditing small publicly traded companies. He was employed
for several years with a private equity investment firm in various
capacities. Mr. Dickman received a Bachelor of Science degree
in finance and accounting, and has been a licensed CPA since 2005.
In addition, Mr. Dickman is a Fellow of the National
Association of Corporate Directors, a member of the National
Association of Corporate Secretaries, and serves on the board
of multiple non-profit, civic and for-profit organizations.
About ChineseInvestors.com, Inc.
ChineseInvestors.com, Inc. ('
CIIX'), founded in 1999
endeavors to be an innovative company; providing (a)
real-time market commentary, analysis, and educational related
services in Chinese language character sets (traditional and
simplified), (b) support services to our various partners, (c)
consultative services to smaller private companies
considering becoming a public company, (d) advertising and
public relation related support services, and (e) other services we
may identify having the potential to create value or
partnership opportunity with our existing services.
Chinesefn.com
Contact
Amit Tandon
SeeThruEquity
www.seethruequity.com
(646) 495-0939
info@seethruequity.com
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