March 17, 2010 (Chinavestor) Shares of Chinese fire protection equipment maker, China Fire & Security Group (NASDAQ:CFSG), have been trading in a wide range following 2009 full year and fourth quarter results. Shares of the company fell -8.3% on Tuesday but bounced back up +3.5% after 30 minutes of trading on Wednesday as investors are trying to get a good reading on the latest financial report.Part of the problem is that while revenues and earnings fell for the last quarter, the company issued an extremely bullish forward looking statement by reaffirming ~72% revenue growth for 2010 full-year (FY) and a ~97% net income growth 2010 FY.
Devil is always in the details. The company says most of the decline in revenues and net income is a result of a "delay in the signing and executing of the previously announced $92 million retrofitting contract with Wuhan Iron and Steel (Group) Corporation ("Wuhan Iron and Steel")". If this is the case, the $92 million top line item would certainly make bullish outlook within the reach of the company.
Most of the bottom line weakness, e.g. disappointing net income for the fourth quarter, is explained by the decline in revenues. Should China Fire & Security Group (NASDAQ:CSFG) lock in the contract with Wuhan Iron and Steel and incorporate those revenues into its financial statements, current stock price looks low. But should the deal fell apart expect additional significant losses in stock price of the company. This is a high risk - high return situation at its best.
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