Growth at Jamba Inc. (Nasdaq: JMBA) should juice up revenues and profits

• BUY JMBA near $10.02

Jamba, Inc. operates a chain of smoothie shops focusing on fresh fruit smoothies with optional vitamin and protein supplements. Operating under the Jamba Juice brand name, Jamba has about 600 locations including full size stores and on-site kiosks. Jamba differentiates itself from other beverage and fast food outlets by focusing on fresh and healthy drinks and food products.

Jamba, Inc. has a market cap of about $530 million, cash of about $67 million and no significant long term debt.

On June 11^th Jamba announced earnings for the first quarter of 2007 of $11.9 million or 20 cents per share versus a year ago loss of $81.5 million or -$3.88 per share. Although these first quarter results included a pre-tax gain of $15.2 million, after backing out this gain the results still handily beat analyst expectations. Revenues increased 22% year over year coming in at $89.4 million.

Jamba opened 26 new stores in the first quarter of 2007. Although Jamba is already expanding at a brisk pace, the long term goal for Jamba is to open over 5,000 stores worldwide. Jamba says that this number can be reached without cannibalizing existing stores by expanding to new areas with residential density of 15,000+ within one mile, average household incomes over $50,000, and strong vehicular and pedestrian traffic counts. Fueled by these expansion plans and increasing same store sales, Jamba is forecasting revenues of at least $600 million a year by 2010.

We think that yesterday’s weak market conditions helped create a rather subdued movement in shares of Jamba after the company reported excellent results for the first quarter. At this point, shares of Jamba are only about 0.5% higher than they were before the first quarter results were announced even though Jamba beat top line expectations by 30% and it appears that Jamba’s growth is accelerating faster than expected.

Currently, 42% of Jamba’s revenues come from “light” users. These light users visit Jamba Juice stores 1 or 2 times a month. If Jamba can entice these light users to visit Jamba Juice 1 more time per month, total company revenues would rise by 10%.

In order to increase the frequency of customer visits, Jamba is implementing various new initiatives designed to compliment Jamba’s core competency of healthy, fun, and on-the-go product offerings. A healthy version of a stuffed pocket breakfast product will be offered at select locations starting this summer. A ready to drink bottled product is also in development and should be ready in the second half of 2007.

One of the Jamba Juice stores located in the Bahamas recently started selling salads and other pre-packaged healthy food options. Jamba has reported that sales at this location have been brisk and that the additional food offerings have helped increase customer retention rates and customer visit frequency. Jamba is currently evaluating options for including similar healthy food options in at many Jamba Juice locations.

On the marketing front, Jamba recently partnered with Nike to promote Jamba Juice at marathons and other sporting events. This cross promotion with Nike is typical of Jamba Juice marketing which tends to shun traditional media outlets in favor of grass roots campaigns and viral marketing opportunities.

Jamba hopes to become the world’s leading brand focusing on what the company calls “healthy energy”. The core of the healthy energy concept revolves around fresh fruit high in antioxidants, vitamins, minerals, natural sugars, and fiber. Consumers in the US are increasingly health conscious and although fast food chains have attempted to increase healthy food options, Jamba Juice is well positioned to become the market leader for healthy drinks, snacks, and light meals. Jamba does not have to reposition itself to appeal to the health conscious consumer, healthy drinks and food are part of the core concept of the Jamba Juice brand.

Recently companies like Chipotle (NYSE: CMG) and Buffalo Wild Wings (Nasdaq: BWLD) have seen their stock prices soar due to increasing revenues and profits largely fueled by aggressive expansion plans. Jamba Inc. could be poised to follow in the footsteps of these companies. Revenues jumped in the first quarter of 2007 and analysts expect Jamba to become profitable (without one time gains) in the seasonally strong second quarter.

At Wall Street Mayhem we think that the risk/reward ratio for shares of Jamba is excellent at this point. Jamba’s growth should continue to accelerate due to expansion and recent initiatives designed to drive customer frequency rates. Additionally, over 30% of Jamba shares are held short. As seen by the recent moves in Wall Street Mayhem picks Cree (Nasdaq: CREE) and Taser (Nasdaq: TASR), high short percentages can create quick surges in share price when companies receive positive news or increased investor attention.

Jamba is poised to report an excellent 2^nd quarter for 2007. Revenues exploded in the first quarter and traditionally the 2^nd quarter is much stronger for Jamba Juice due to favorable weather conditions. Now is a good time to buy shares of Jamba Juice before the second quarter results and before the short covering starts to accelerate.

The board of directors and the management at Jamba Juice have made quality strategic decisions and they have an exceptional pedigree. Although Jamba is a small company from a market cap perspective, management has extensive experience in food and beverage retail. CEO Paul Clayton is the former President of Burger King (NYSE: BKC) North America while Board member Craig Foley was the early lead investor in Starbucks (Nasdaq: SBUX) and Costco (Nasdaq: COST) and was on the board of directors at Starbucks for 15 years. Other Jamba board members also serve on the boards of Ebay (Nasdaq: EBAY), Burger King (NYSE: BKC), and P.F. Chang’s (Nasdaq: PFCB).

Jamba Inc. is a growth story in its early stages. Although Jamba must increase customer frequency rates to become a highly profitable company, recent initiatives including pre-packed bottled beverages and healthy food products should open Jamba Juice to a wider range of customers while increasing visit frequency for current customers.

With a market cap of only $530 million, rapid growth, and a healthy brand image, Jamba has the makings of an appealing takeover target. If Starbucks wanted to extend their dominance of the beverage industry while improving their appeal to health conscious consumers, Jamba seems like an excellent fit.

Full disclosure: Wall Street Mayhem is long  JMBA

Update on Cree Inc (Nasdaq: CREE)

• SELL ½ position in CREE near $25.75

Although all of the long term trends are still intact for Cree, the recent run-up has been so strong in such a short period of time that we feel compelled to lock in some profits at this point. New legislation banning incandescent bulbs continues to gain strength. Therefore, we are holding on to a half position in Cree, but with a 35% gain in less than three weeks we think it is prudent to lock in profits at this point.

Update on Dell Inc. (Nasdaq: Dell)

• SELL DELL near $28.15

Dell passed our price target of $28 this morning so we sold our shares. As we hypothesized, Michael Dell has made the changes necessary to revitalize the stock, the most important of these changes being the 10% reduction in workforce announced yesterday. Although Dell appears to be back on track, at current prices Dell shares no longer have the compelling valuation that they did a few months ago.

The Nexxus (Nasdaq: NEXS) of the LED Universe

• BUY NEXS near $4.95

Nexxus Lighting Inc. (formerly Super Vision International) designs, manufactures, and markets light-emitting diodes (LEDs) and fiber optic lighting products. Nexxus products are primarily used for commercial, architectural, and signage applications.

Recently, companies focusing on LED lighting have seen dramatic moves in their stock prices due to legislation banning the use of incandescent bulbs resulting in increased investor attention. Color Kinetics (Nasdaq: CLRK) and Wall Street Mayhem pick Cree Inc. (Nasdaq: CREE) have seen their stock prices jump 30% and 15% respectively in the last two weeks. Although Nexxus is a more speculative pick than Cree or Color Kinetics, Nexxus should also benefit from the growing demand for LED lighting and the recent increased investor attention on the LED sector.

Nexxus manufactures and sells the Savi line of LED bulbs with True White Technology. The Savi line of LED bulbs reduce energy costs by about 75% and they last 15 to 25 times longer than traditional incandescent bulbs. Savi LED light bulbs are designed to last up to 5 years when operated continuously. Unlike fluorescent lighting, the Savi LEDs produce clean white light and they are environmentally friendly because they do not contain mercury and they require no special disposal procedures.

In December of 2006 Nexxus reached a comprehensive settlement with Color Kinetics over patent infringement issues. Nexxus agreed to pay Color Kinetics a settlement fee and Nexxus was granted a royalty bearing license allowing Nexxus to continue manufacturing and selling certain LED lighting systems including the Savi line of LED bulbs. As part of the settlement Nexxus also granted Color Kinetics a royalty free license to the LED patent #4,962,687 owned by Nexxus. Although Nexxus had hoped to emerge from these court proceedings with a clean patent portfolio, the settlement allows Nexxus to continue manufacturing and selling the Savi LED line while paying reasonable royalty rates. In the first quarter, gross margin dropped from 43% to 41% after the company started paying royalties to Color Kinetics.

On March 31, Nexxus released financial results for the first quarter of 2007. Total revenue was down 10% from the first quarter of 2006, but revenues in the commercial lighting division were up 30% due to increased LED sales. The decrease in total quarterly revenue was due to a decrease in sales in the pool and spa market. However, sales of commercial LED lighting systems were strong and the company forecast continued rapid growth in this sector.

Although Nexxus is a small company that is currently not profitable, it is well positioned to benefit from increasing demand for LED lighting solutions. In late March, Nexxus moved to a larger more cost effective manufacturing facility and the Nexxus Savi line is one of the first complete lines of LED light bulbs that can be used in existing lighting systems as well as new construction.

Legislation banning incandescent light bulbs is picking up steam sending shares of Color Kinetics and Cree significantly higher. Although Color Kinetics and Cree are the obvious investment choices to take advantage of the growing demand for LED lighting, as investors continue to focus on environmentally friendly LED lighting solutions, shares of Nexxus have the potential to realize gains similar to those recently seen in Color Kinetics and Cree.

Nexxus is a risky investment, but the current media and investor attention focused on LEDs could propel shares higher. For investors that are new to LED companies, Cree and Color Kinetics are safer investments, but for those investors that have already profited from Cree and Color Kinetics, we recommend taking some profits on CREE and CLRK and moving the proceeds into Nexxus.

Full disclosure: Wall Street Mayhem is long NEXS, CREE, and CLRK 

Update on Ninetowns (Nasdaq: NINE)

Yesterday Ninetowns announced that it has been selected as a winning bidder by the State Administration for Quality Supervision and Inspection of the People’s Republic of China (PRC) for servicing the free import/export e-filing software provided by the PRC.

Although it was expected that Ninetowns would be chosen to provide service for this software since Ninetowns created the software used by the PRC, this is still a significant milestone for Ninetowns. The ability to service the PRC’s free import/export software should allow the import/export software and service segment of Ninetowns to get back into the black.

The real growth for Ninetowns is still tied to the B2B initiatives recently started by the company including TooToo.com. However, the new servicing contract should allow Ninetowns to make a small profit on the import/export software side and create cross-selling opportunities for Ninetowns B2B platform.

This new contract win has made Ninetowns current valuation even more compelling. The company is sitting on about $115 million in cash, it has zero long term debt and a market cap of only $141 million. Ninetowns should now have some breathing room to fully develop B2B search initiatives without depleting cash reserves.

Can Cree Inc. (Nasdaq: CREE) help light up your portfolio?

• BUY CREE near $18.85, set stop loss at $17.50

Cree, Inc. (Nasdaq: CREE) develops and manufactures semiconductor materials and devices focused on light emitting diodes (LEDs). Cree has a market cap of about $1.6 billion, $265 million in cash, and no significant long term debt. The trailing P/E is about 22 and about 12% of the outstanding shares are held short.

It appears that the incandescent light bulb is on its way out. Although incandescent light bulbs are inexpensive, they use energy in a non-efficient manner and environmentalists think they have made a major contribution to global warming. Consequently, lawmakers in the US and abroad are talking about banning incandescent bulbs.

California and Canada are banning the use of incandescent bulbs by 2012 while Australia has announced plans to ban incandescents by 2010. Energy conservation and strategies to overcome global warming are becoming increasingly important political and social issues. Banning incandescent light bulbs is a relatively easy way to make a significant contribution to energy conservation. Therefore, the death of the incandescent bulb in the US and many developed countries is only a few years away.

Cree has the potential to be a major beneficiary of new legislation banning incandescent light bulbs. Cree’s white light LEDs have a longer life and use less energy than incandescent light bulbs. In the US lighting accounts for 22% of all electricity consumption. According to the US department of energy, widespread use of LED lighting could cut energy consumption due to lighting in half.

LEDs and compact fluorescents are the primary alternatives to the aging incandescent light bulb. Although compact fluorescents are currently less expensive than their LED counterparts, the price to produce white light LEDs is dropping rapidly. Compact fluorescents have been widely available for the last decade, but consumer adoption rates of compact fluorescents have been low. The light quality of compact fluorescents is typically poor and there is a significant delay when compact fluorescents are turned on. LEDs can provide a higher quality light, with no delay, and they should last about five times longer than compact fluorescents.

Although it will be a few years before LED prices will come down enough for the average consumer to purchase LED lighting solutions, businesses are already implementing LED lighting. Energy conservation and eco-friendly policies have become important issues for many large US businesses and LED lighting is another way for these companies to help conserve energy and show consumers that they are not heartless giants.

Financial results at Cree have been disappointing for the last few years. Although CREE has appeared poised for rapid growth for many years, results have often disappointed. In Cree’s most recent quarter, the company basically broke even, although the company officially posted earnings of $0.27 per share, the majority of these profits were due to a tax benefit. Over the past year investors have often expected faster growth and higher profits than Cree has been able to produce and shares of Cree have dropped from about $35 to $19. Although prior results have failed to live up to expectations, the growing demand for environmentally friendly LED ambient lighting solutions could transform Cree back into the growth stock it once was.

Recently, shares of Color Kinetics (Nasdaq: CLRK) have been on a tear. It appears that the rally in Color Kinetics is directly related to increased news about incandescent bulb legislation efforts. In the last four trading days shares of Color Kinetics have jumped from about $21 to $25.50. Although Color Kinetics should also be a beneficiary to the LED trend, at this point in time we feel that Cree has a more compelling valuation. As news about legislation banning incandescent bulbs continues and big businesses start to advertise their environmentally friendly efforts to switch to LED lighting, Cree has the potential for rapid appreciation similar to that recently seen in shares of Color Kinetics.

Cree has the added bonus of a relatively high percentage of shares held short. Considering the recent strength in the overall market, these short shares could help propel CREE higher with any positive news. Last months Wall Street Mayhem pick Gmarket surged 18% after earnings despite missing estimates on the top line. We believe this move was largely due to short covering. If the trend started by Color Kinetics this week continues, both Cree and Color Kinetics could benefit from short covering as news about LED lighting continues to grab the attention of the investing public.

The recent surge by Color Kinetics could be the start of increased investor interest in all things LED. Energy conservation is a trend that is showing no signs of slowing down. Solar companies like Trina Solar (NYSE: TSL) have been flying recently and we believe companies focusing on LEDs could be the next environmentally friendly energy conservation sector to receive serious investor interest.

Full Disclosure: Wall Street Mayhem is long CREE and CLRK

Update on Electro Opitcal Engineering (Nasdaq: EXFO)

• SELL EXFO near $6.48

Although Electro Optical Engineering appears to be out selling JDS Uniphase in optical test and measurement equipment based on JDS Uniphase’s latest quarterly report, there is too much carnage in this industry for us to be comfortable holding Electro Optical Engineering. We will look to get back in Electro Optical Engineering after the dust settles on JDS Uniphase.

Will Gmarket (Nasdaq: GMKT) be the next Nasdaq short squeeze?

• BUY GMKT near $16.90, set stop loss at $15.00

Gmarket operates a retail e-commerce marketplace in South Korea. Often referred to as the Korean Ebay, Gmarket would be better described as a mix between Ebay and Amazon. Gmarket sells products in both auction and fixed priced formats and the selling format caters to small to mid-sized businesses. Transaction fees account for about 60% of Gmarket’s revenue, while advertising and other non-transaction revenues account for the remaining 40%.

Gmarket has a market cap of about $820 million, a P/E of 42, and a forward P/E of 19. Gmarket has a strong balance sheet with $187 million in cash and zero long term debt.

The recent move in Amazon shares is mind boggling and it has changed the investing environment for at least the short term. Although the Amazon surge was helped by short covering, it appears that investors are once again willing to pay premium prices for companies with rapid growth. Yesterday, Bidu joined in on the fun and gained over 20% in after hours trading after the company raised guidance and reported slightly higher than expected earnings.

At Wall Street Mayhem we believe that Gmarket’s valuation compares favorably to other internet companies with similar growth potential. Despite Bidu’s blowout quarter, revenue for the first quarter came in at just $35.7 million. Analysts expect Gmarket to have first quarter revenues of $53.43 million. Bidu’s market cap weighs in at a hefty $4.5 billion, while Gmarket’s market cap seems reasonable at about $820 million.

Bidu bulls will argue that Bidu enjoys higher margins than Gmarket and Bidu has greater growth potential due to the rapid growth of the Chinese economy. Although this argument has merit, Gmarket has the potential to expand into the Chinese and Japanese markets which could rapidly accelerate revenue and earnings growth. Gmarket has previously stated plans for international expansion and fellow Wall Street Mayhem pick Ebay has struggled to grow in Asian markets leaving the door wide open for Gmarket to step in and gain market share.

The huge gains enjoyed by Amazon and Bidu were fueled in part by short covering. We think this short squeeze trend is likely to continue for the near term making companies with high short interest and high growth potential attractive. Amazon had short interest that totaled 15% of the float before earnings, while Bidu’s short interest represented about 10% of the float. Gmarket shares have short interest totaling about 16% of the float.

Gmarket reported fourth quarter earnings on March 8^th and although net income rose 78% to $6.8 million and revenue jumped 67% to $51.6 million, Gmarket shares dropped 20% because these numbers missed analyst expectations.

First quarter earning are scheduled to be released on May 9^th and we think this is a great time to go long Gmarket before the earnings release. Considering the reasonable P/E, strong balance sheet, high short interest, and recent big moves by Amazon and Bidu, we think Gmarket shares are poised to surge after first quarter earnings.

Analysts expect Gmarket to report first quarter revenues of $53.43 million and earnings per share of 0.13. Wall Street Mayhem thinks that Gmarket will beat these numbers. On April 9^th Gmarket reported that gross merchandise value for the first quarter came in at $771.59 million representing a 54% year over year increase and a 6% sequential increase. Therefore, if Gmarket’s revenues can match the 6% sequential gain seen in gross merchandise value revenues will come in at $54.69 million. Although the revenue as a percentage of gross merchandise value will have to increase from .0699 to .0708 in order to increase revenues to $54.69 million, we think this increase in revenues as a percentage of gross merchandise value is likely due to the recent increases in non-transaction related revenue. With growth in the subscriber base and growth in monthly page views, Gmarket’s non-transaction related revenue should help the company beat first quarter expectations.

Over 68% of the South Korean population uses the Internet and broadband penetration is over 25%. The South Korean economy is the 11^th largest in the world and Gmarket holds a dominant position in e-commerce transactions in South Korea. Even without Asian expansion, Gmarket should continue to rapidly grow profits and revenues. However, with the help of 10% beneficial owner Yahoo, Gmarket could easily become a large player in e-commerce throughout Asia. After Yahoo made an investment in Gmarket in June of 2006, Yahoo stated, “we look forward to working with Gmarket to leverage their e-commerce expertise to further expand Yahoo’s leading position in e-commerce in Asia.” Gmarket stated that the Yahoo investment enhanced Gmarket’s strategy to improve growth opportunities abroad and that Gmarket has agreed with Yahoo to implement various strategic initiatives internationally.

Gmarket shares represent a compelling value at current prices and Wall Street Mayhem believes that even a small bump in second quarter guidance could result in a large gain in Gmarket’s stock. Gmarket’s stock could also jump with an official announcement of the expansion to an additional Asian market. Either of these events, combined with a short covering panic, could double the value of Gmarket.

Full Disclosure: Wall Street Mayhem is long GMKT

Update on MGIC (NYSE: MTG) and PMI Group (NYSE: PMI)

• Buy to Cover MTG near $61.90

• Buy to Cover PMI near $46.80

Last week MGIC reported first quarter earnings and as we expected they missed estimates by a mile. The average analyst estimate was $1.71 per share, MGIC earned $1.12 a share. What we did not expect was the stock to rally after such a horrendous quarter.

The same analysts that were busy upgrading the stock in the previous weeks were off by over 35% on their quarterly profit estimates. Clearly these analysts do not have a good understanding of this stock with estimates that missed by such a large percentage.

Although we still think the mortgage insurance group is headed for trouble, we are throwing in the towel today as Cramer is out this morning hyping MTG as a short squeeze candidate. We ended up roughly break even on these trades due to the previous half position cover for a profit. It is tempting to wait for a drop in MTG and PMI, but we are worried that Cramer will announce his short squeeze theory on Mad Money tonight which would really send the shares flying.

Ninetowns (Nasdaq: NINE) transforms into a B2B company

• BUY NINE near $4

Ninetowns Internet Technology Group Company Limited (Nasdaq: NINE) provides enterprise software designed to streamline the import/export process in China. Ninetowns’ software allows its customers to complete import/export documentation over the internet. The company first introduced this software in 1995 and it gained a first mover advantage enabling the company to steadily grow revenues and profits until 2005.

Ninetowns has a market cap of $140 million, cash of $116 million and no significant long term debt. The trailing P/E is about 24 and the one analyst that follows Ninetowns predicts a loss of $0.02 per share in fiscal year 2007.

In August of 2005 the business outlook for Ninetowns changed dramatically when the State Administration for Quality Supervision and Inspection of the People’s Republic of China (PRC Inspections Administration) decided to create a free e-filing software package to facilitate the import/export process in China. Although the PRC Inspection Administration hired Ninetowns to provide the new software, the PRC Inspection Administration paid Ninetowns a paltry 400K for their services and Ninetowns was forced to offer a scaled down version of their core software product for free.

Since the introduction of the free e-filing software, Ninetowns has struggled financially. Revenues and profits have dropped consistently including in a recently reported loss in the fourth quarter of 2006. Although Ninetowns has been able to increase the number of service contracts and premium services sold, this increase has not offset the revenue lost due to the free software option now available.

With the B2G business at Ninetowns struggling, the company has been looking for other business opportunities. Considering Ninetowns current customer base of over 130,000 businesses involved in import/export transactions in China, a B2B business that leveraged this customer base was the obvious choice. In September of 2006, Ninetowns acquired a 16.25% interest in Global Market Group Limited, a Chinese B2B trade facilitator. Although this was a positive sign, this investment did not show investors that Ninetowns was fully committed to a strategy change to the B2B market place.

In late 2006, Ninetowns launched tootoo.com, its first full featured entry into the B2B marketplace. Although financial results have yet to be reported for tootoo.com, a look at the Alexa ranking shows that tootoo.com is experiencing significant traffic. Tootoo.com has a current Alexa rank of 2,045 compared to a rank of 2,098 for competitor Global Sources, 374 for MadeinChina.com, and 97 for Alibaba.com.

Although a high Alexa rank doesn’t necessarily translate into revenues and profits, the quick jump in traffic at tootoo.com does show that Ninetowns has the ability to leverage their current customer base.

A few weeks ago Ninetowns announced the next step in its B2B strategy. By acquiring Baichuan, a leading Chinese vertical search engine, Ninetowns plans to offer industry specific web search for suppliers and buyers engaged in Chinese international trade. In order to enhance the quality and relevancy of search results, Ninetowns plans to use the supplier verification technology from its existing iDeclare and iProcess service platforms.

The Baichuan acquisition allows Ninetowns to merge tootoo.com with Baichuan’s yaphon.com. Baichuan has entered into alliances with more than 30 Chinese B2B portals with access to 400,000 suppliers and 1.5 million products. Baichuan also introduced the Total Quality Sourcing (TQS) ranking algorithm to improve search result relevancy and quality. By combining TQS and Ninetowns supplier verification system, Ninetowns hopes to gain a competitive advantage over the competition by focusing its search results on companies that have passed multiple quality standards.

Although Ninetowns core software has been hurt significantly by the introduction of the free alternative, the fourth quarter results have finally stopped the downward spiral of revenues. On a year over year basis, the fourth quarter of 2006 had a significant decline compared to fourth quarter 2005 results, but revenues actually increased from the third quarter of 2006. This increase was due in large part to increased sequential sales of iDeclare packages (+300) and iDeclare service contracts (+5,500). The net loss reported for the fourth quarter was largely due to increased spending on R&D for the new B2B platforms (+$779K).

Although there is no guarantee that the new B2B strategy at Ninetowns will be successful, Ninetowns has some unique advantages in this field. By leveraging its current customer base and utilizing the only Chinese developed vertical B2B search platform, Ninetowns can rapidly grow internet traffic while having a better understanding of local business customs than the foreign competition.

On March 22, 2006, SEC from SC 13G was filed for Ninetowns showing that Netease, founder and CEO Lei Ding purchased 3,070,028 shares in Ninetowns representing about 9% of total shares outstanding. This shows that at least one prominent investor, knowledgeable in Chinese on-line businesses, has confidence in Ninetowns.

The core B2G import/export software business at Ninetowns appears to have stabilized and with increased premium services, this business should make a small profit or at least break even going forward, but the real potential in Ninetowns is in B2B. Although revenue projections are impossible at this stage, competitor Global Sources (Nasdaq: GSOL) has had rapid growth in profits and revenues recently. Although Global Sources relies heavily on sourcing fairs to facilitate transactions, Ninetowns has the potential to succeed without sourcing fairs if its search results can accurately provide quality import/export leads.

At Wall Street Mayhem we think Ninetowns has a compelling valuation at current prices. After backing out the cash, Ninetowns has an enterprise value of only $24 million. Considering the strategic B2B advantages Ninetowns enjoys due to its extensive customer base and its ability to integrate quality measures into B2B search results, Ninetowns has the potential to make a significant impact on the B2B market place in China.

Full disclosure: Wall Street Mayhem is long NINE