SOURCE: China Crescent Enterprises, Inc.

China Crescent Enterprises, Inc.

December 28, 2009 12:21 ET

China Crescent Enterprises, Inc. Announces New Year's Letter to Shareholders Previewing 2010 Substantial Strategic Updates to Pursue $100 Million Revenue Target

DALLAS, TX--(Marketwire - December 28, 2009) - China Crescent Enterprises, Inc. (OTCBB: CCTR) today released a letter to shareholders from board member and founder Philip Verges. The letter reviews 2009 challenges and successes and previews the evolving strategy for 2010 to be presented at the upcoming Virtual Town Hall scheduled for January 22, 2010. The Virtual Town Hall agenda includes a presentation on management's plan to reach for $100 million in revenue in 2010. The letter to shareholders announced today is included in its entirety below.

Dear Shareholders -

The global economy certainly presented some challenges this year. At the same time, the worldwide financial crisis also created new opportunities. In all, I believe we have absorbed the challenges well and seized opportunities where presented. As the year draws to a close, I wanted to take a moment to review highlights of both our challenges and opportunities. Management is internally reviewing the 2009 challenges and opportunities as we tune our strategy for 2010. Within the upcoming Virtual Town Hall scheduled for January 22, 2010, we plan to present our strategy updates resulting from our internal review of the 2009 challenges and opportunities. We expect the plan we present on January 22nd to include some substantial changes. At this moment, I anticipate shareholders and interested investors are reviewing their investment strategies as we review our growth strategies, and in that regard I hope this letter today may contribute to the consideration of your 2010 investment strategy.

China Crescent is part of a comprehensive agenda to build a global emerging market technology service capability. Since the initiation of that agenda in 1997, the agenda has expanded to include addressing the challenges of the start-up, early stage and small business capital markets. China Crescent has evolved from a business founded by my family with the help of an angel investor. China Crescent remains part of the NewMarket Technology, Inc. family of companies today. The upcoming Virtual Town Hall will include all of the NewMarket family of companies. A growing and recurring theme to be included in the Town Hall presentations entails the increasing initiative stemming from the NewMarket experience to improve the small business investment markets for both entrepreneurs and investors. We believe this initiative is important to the NewMarket family of companies. We also want to make a contribution to improving the overall global small business opportunity for all entrepreneurs and investors. Again, tune into our January 22nd Virtual Town Hall to learn more. You can find a preview of Town Hall topics in a recent letter to NewMarket shareholders here:

Sales Rebound from Financial Crisis and Stand to Get Better with Improved Margin Potential

China Crescent's return on investment potential depends on the Company's long-term operational success. China Crescent has not only had to deal with the ordinary start-up hurdles since its inception approximately three years ago, but also with the extraordinary issues surrounding a global financial crisis. After experiencing a sales slow down at the onset of 2009 that we attribute to the global financial crisis, we have seen sales pick up to levels commensurate to last year before the financial crisis was a prevalent factor. In spite of the global financial crisis, our net income has been better this year than ever. I believe this is a result of both long-term initiatives we have had underway to improve operating margins and as a result of measures we took specifically in reaction to the global financial crisis to bolster against the unexpected. We introduced technology outsourcing services this year. As a result, we stand to potentially realize more revenue in 2009 than in the previous years. Our initial outsourcing services efforts could possibly make a meaningful contribution to the fourth quarter revenue anticipated from our customary customer contracts.

Improved Staying Power Bolstering Against Further Potential Economic Fall-Out

In addition to measures driven by the global financial crisis to improve margins, we have also worked to further bolster against the unexpected by reducing debt. Earlier in 2009, we reduced the number of issued and outstanding shares by executing a 1 for 25 reverse split. At the same time, we increased the authorized. The reduction of issued and outstanding and increase in authorized was intended in part to improve the Company's capital structure and enhance the value of the stock as a resource for reducing debt. We have since engaged in transactions to reduce debt that resulted in the issue of stock and the corresponding increase of the issued and outstanding. We have reduced the Company's debt and as such, I believe improved the Company's staying power. While I hope we have seen the worst of the possible impacts from the global financial crisis, I believe it is prudent to remain vigilant against further possible unexpected ramifications.

Milestone Return on Investment Potential

Those of you that have been tuned into China Crescent's shareholder communications for more than a couple of weeks have probably heard us talk about milestone investing. We are somewhat outspoken at China Crescent about what we believe is an over-the-counter market wide disconnect between operational performance and share price market values. We believe over-the-counter share price values are determined more by qualitative considerations than quantitative considerations. While national exchange listed share prices frequently reflect business sector consistencies in terms of book value and revenue correlations, over-the-counter share price business sector consistencies and operational performance correlations are hard to find. Share prices of over-the-counter companies often fluctuate dramatically. We believe those fluctuations are driven by qualitative reactions to milestone events. A new contract, for instance, announced by an over-the-counter listed company may be received by the investment community as an indication of the company's potential long-term success and increased purchasing of that company's stock may ensue. The single milestone will likely only sustain increased buying for a short period of time and the share price will likely come back down again. Based on our perception of the over-the-counter share price dynamics we frequently discuss supplementing any long-term investment strategy with a milestone investment strategy that entails buying small positions in anticipation of milestone events and taking profits by selling when a milestone event drives an increased share price. We anticipate China Crescent to have a high potential of delivering milestone returns in addition to maintaining long-term potential.

Long-Term Return on Investment Potential

Long-term return on investments from over-the-counter companies are a higher risk proposition than return on investments in national exchange-listed companies. The over-the-counter market has a high number of early stage and start-up companies. Start-up companies frequently do not achieve sustainable financial performance within three years. Many of those companies that do not achieve sustainable financial performance will deliver milestone successes along the way and be able to deliver milestone returns. However, long-term success and a long-term return on investment are more elusive. When an over-the-counter listed company achieves sustainable financial performance and can potentially deliver a long-term return on investment, that return is unlikely to be delivered by simple long-term share price appreciation. It is difficult to predict how many shares an over-the-counter company might issue in raising capital and acquiring resources for its business plan. I believe most over-the-counter companies end up issuing more stock than they anticipate. While a company many reach financial sustainability, so many shares may have been issued along the way that a sustainable share price reflecting financial performance is unachievable in the over-the-counter markets. Accordingly, the long-term return on investment may likely have to be delivered via some other method. A sale of the operation to a larger company and a corresponding distribution of the proceeds to the selling shareholders could be one way a long-term return on investment is realized. As a founder and director at China Crescent, I believe in the long-term potential of the Company. However, we are fighting the statistics of early stage companies that frequently do not achieve sustainable financial performance. We are also an over-the-counter listed company and I am telling you that I do not believe a long-term return on investment is likely to be realized by simple share price appreciation in the over-the-counter market. I furthermore do not have a definitive plan as to what alternative means management intends to peruse in the delivery of a long-term return. As 2010 approaches, I hope you will think about our ongoing discussions on milestone investing and carefully consider your long-term investment strategy.

Larger Sales Contracts and Higher Margins

After the first two years of getting our feet on the ground in China, we have launched an effort this year to improve the quality of our offerings. We have initiated a larger and more comprehensive technology service offering. We are endeavoring to provide a total technology solution over a three-year renewable period. We have had some notable initial success this year and anticipate substantial revenue contributions in 2010. With our first new service offering contract experiences, we anticipate more of the same next year at an increased pace. In addition to improving our rate of growth from organic sales, the new service offering also improves our margin potential.

Business Line Diversification

In addition to repositioning our existing resources to introduce a new service offering, we are also looking to diversify our overall business line into multiple lines. Toward this diversification effort, we entered into an acquisition agreement with China Radio Technology, Ltd., establishing a proprietary wireless technology business line. This new business line will be maintained and developed as a subsidiary organization. The delineation of the new business line as a separate business will enable China Crescent a range of options in the future as to how best to monetize our success in the new business line for shareholders or otherwise protect shareholders from performance issues in the new business line.

I hope the summary of what I consider to be major planning considerations for 2010 has been helpful to your own investment considerations for next year. I am bullish on China Crescent's potential and I expect you already knew that. Thank you for your attention here to this communication today and please look for further updates leading up to our town hall meeting in January.

Thank you,
Philip Verges
Board Member
China Crescent Enterprises, Inc.

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About China Crescent Enterprises, Inc. (

China Crescent Enterprises, Inc. reported over $40 million in profitable revenue in 2008. The Company is a technology leader in the rapidly developing Chinese market specializing today in software engineering, high quality software development and digital multimedia outsourcing services delivered to customers globally. At the same time, the firm is a systems integrator and value added reseller of major global hardware brands in the Chinese domestic market.

Headquartered in Dallas with operations in Shanghai and Beijing, China Crescent bridges the gap between Western and Eastern business cultures to assist Western clients in realizing the advantages of the high quality, low cost technology products and services available from China. China Crescent also assists Western clients in localizing products and services to realize the tremendous growth potential available by expanding into the Chinese Market.


This press release contains forward-looking statements that involve risks and uncertainties. The statements in this release are forward-looking statements that are made pursuant to safe harbor provision of the Private Securities Litigation Reform Act of 1995. Actual results, events and performance could vary materially from those contemplated by these forward-looking statements. These statements involve known and unknown risks and uncertainties, which may cause China Crescent's actual results in future periods to differ materially from results expressed or implied by forward-looking statements. These risks and uncertainties include, among other things, product demand and market competition. You should independently investigate and fully understand all risks before making investment decisions.

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