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Biotech / Medical : CHDX--US China Industrial Exchange -- Ignore unavailable to you. Want to Upgrade?

To: Bill Bishop who wrote (18)	2/19/1998 6:14:00 PM
From: WWS	Read Replies (1) \| Respond to of 77

Now PDL systems; next Imatron (IMAT)? Many ties between PDL systems and IMAT, although I think I remember reading (when I held IMAT shares) that they already had sold one or two fast CT heart scanners in China. Once again I continue to be impressed by the status of corporate partners that seek out the distribution services of CHDX. This makes me content to wait for market to recognize these continuing and positive corporate developments.

To: Bill Bishop who wrote (18)	2/26/1998 11:24:00 PM
From: Ron Conty	Read Replies (1) \| Respond to of 77

Can someone please enlighten me on how to analyze this stock? The information available appear to be as follows: 1. The company in its 2nd round of public financing, which took place in 1996, raised about $10 MM. It burned through about 50% of that up to this point. There is no sign that it would return to profitability any time soon. 2. What is the chance that institutions will be interested in the stock? Management owns 100% of the Class B shares, which carries 6 votes per share. Regular common stock was sold to the public (1 vote per share). Even if one were to buy up 100% of the (non-Class B) common, you still would not have any say in the management of the company. 3. The company regularly announces making agreements with various suppliers. But when was the last time the public was informed about the termination or expiration of these contracts? Certainly that would have a significant impact on the future performance of the company. 4. Does CHINDEX have long term sales contracts with the 1,000 Chinese hospitals that it claims to supply? Given what I know about China, it is quite likely that these sales were done under the ageis of a small number of administrative agencies (instead of selling directly to the 1,000 hospitals). What is the expiration date on these purchase contracts or commitments, if any, by the Chinese entities? Have they expired already? 5. The recent quarterly report talked about Chinese competitors which are also acting as agents, but did not really elaborate on how serious the situation is. Does anybody know? My understanding is that CHINDEX used to be No. 1 at least in hospital equipment. What is their market ranking now? 6. The recent disclosure by the company indicates that there are plans to distribute drugs into China. My understanding is that getting pharmaceuticals approved for distribution into China is a very costly proposition - testing and approval of EACH product can cost upwards of six figures. Where is the money going to come from? 7. What is the company's focus? The company seems to be doing 16 different things (figuratively speaking) at the same time, each of which CAN be a viable business. But can the whole be viable if the total sales is spread amongst so many different product lines? Do the product lines complement each other? Does management work on filling the holes in each line, or are the efforts historically spent on opening up new lines? How can expertise be economically developed in any given niche, if the company takes such a shotgun approach? 8. Much of the money raised in the last round of financing was spent on funding the clinic(s). Are there any returns in sight? What has been the usage rate of the millions of dollars in equipment? In a country where relatively "safe" investments, such as power utilities, are generating 18% annual returns and up, what are the chances that these clinics will pay for themselves in the forseeable future? Are any of the clinics turning a profit? From the disclosure it was really not clear whether the medical personnel (e.g. doctors and nurses) are from China or the U.S. If they are, as I suspect, mostly from China, then the question is "what is the cache or perceived exclusivity"? Presuming the clinic charges much more than the heavily government subsidized Chinese clinics (per visit charge as low as $1 under the Chinese medical insurance system, including prescriptions), what exactly does the CHINDEX clinic offer to attract the well-off locals? Or is the market limited to only expats? 9. What are the products that the company stocks and sells out of its Tianjin facilities? Are they the consumables (machine parts and replacements, etc.), or it the company taking serious chances (of either technology or market obsolescence) by stocking expensive machines? For example, if it stocks coal excavators but were not able to sell them in the current year, do the machines depreciate just as quickly as a new car of last year's model? 10. What does the company actually do to get the "local sales" (e.g. from the Tianjin warehouse, or even from the clinics) converted into U.S. dollars? The Chinese Yuan is still not convertible, unless the company has exports. Does the company make use of other than the official channels of currency exchange? What are the legal ramifications, if any, in China? in the U.S.? 11. The company has never shown a great ability to generate lots of profits. Historically it has made money one year and loses the next. This is not a high tech company in its initial cycle of developing the technology, which later on hopefully will bring in a lot of cash. This is basically a trading company, that has to generate profits on each sale, sufficient to cover expenses and hopefully have money left over. Moreover, there does not seem to be much consistency in terms of repeated sales. Even a very good year does not portend more good years to come (e.g. the profits made in the year just before the $10 MM public offering did not repeat itself in 1997). How much of the 1996 profits were due to accounting discretion? 12. If the company does not turn profitable shortly, what is going to happen after it burns through the balance of the cash on hand? There is no proprietary technology per se. There is fierce competition in almost all of the fields it is engaged in. Would another round of financing be viable after so many investors have lost money? Perhaps I am missing crucial information which would make the future of the company look rosy. 13. What, if any, checks and balances are there to make sure that senior management persons are "busting their chops" to attend to the business of the company? Ms. Lipson and Ms. Silverberg together hold 1.7 million of the 2 million Class B common, and thus appear to have absolute control over CHINDEX. Giving credit where credit is due, both are to be respected and admired, having built up this substantial business since their 20's. But given the performance of the company (or lack thereof) in recent years, is the absolute control detrimental to change and profitability? 14. Many of the postings seem to reflect a warm and fuzzy feeling towards both senior management and the company, despite the demonstrable results. What am I missing? Your input please.