SOURCE: China Crescent Enterprises, Inc.

China Crescent Enterprises, Inc.

June 12, 2009 09:55 ET

China Crescent Enterprises, Inc. Issues Update on YTD Progress to Increase 2009 Sales, Profit and PPS After Reporting $40 Million 2008 Revenue With $600K in Net Income

DALLAS, TX--(Marketwire - June 12, 2009) - China Crescent Enterprises, Inc. (OTCBB: CCTR) today released a letter to shareholders from Founder and Board Member Philip M. Verges. The letter, included in its entirety below, addresses the Company's year-to-date progress to increase sales, profits and price per share performance. The letter reviews the Company's recent $30 million outsourcing services contract, and includes a discussion on micro-cap investing strategy based on lessons learned and shareholder feedback.

Dear Shareholders --

As a founder and board member of China Crescent, I am passionate about the global small and entrepreneurial business market our Company operates in. We are working on building China Crescent from what is today a small, and still arguably an entrepreneurial business, into a brand name recognized systems integration company that also produces a return on investment (ROI) for its shareholders.

Is China Crescent a "Small Business"?

The majority of the world's gross domestic product comes from small and entrepreneurial businesses. Even in the United States, the majority of the gross domestic product comes from small businesses. Most of you reading this letter are likely employed by a company with less than 500 employees. The majority of jobs in the United States are with firms with less than 500 employees.

Many may imagine a mom and pop corner shop when considering the concept of a "small business." On the other hand, if business size were measured by comparing companies to the $10 billion average market capitalization of NYSE listed companies, then what would be considered "small"? Dell, Costco, Kroger, State Farm Insurance, and Berkshire Hathaway all have revenue of over $50 billion. Today, China Crescent's revenue is less than 1% of the revenue of those companies. I believe most of you here are reading about China Crescent in part because it is small enough to have plenty of room for growth, but with $40 million in annual revenue, it doesn't sound small in comparison to the frequent "small business" vision of the mom and pop corner shop.

A China Crescent Update

The purpose of this letter is to provide an update and summary of recent Company events and to communicate the latest in what we have learned about the micro-cap public markets through our experiences managing micro-cap public companies. Those experiences also include what we learn from you as investors. We receive emails and phone calls regularly with your observations, concerns, accolades and grievances. Please keep calling and emailing. We will keep publishing Webcasts and shareholder letters using your feedback. In this way we want to sustain a dialogue that improves the brand name and ROI opportunity for China Crescent and in turn, improves the Company's position in the micro-cap public market.

Global Economy and Operational Performance

Our first job is to build operational success defined by sustainability and growth. Today we have to face the challenges presented by a difficult global economy in addition to the ordinary challenges faced by early stage development companies. The good news is that most of China Crescent's sales come from China and China's economy has continued to grow while most of the world's economic regions have fallen into recession. Nevertheless, China Crescent did see an impact to sales in Q4 2008 and Q1 2009. However, I think the Company has done a good job containing expenses and managing through a dip in sales, shown by an increase in net income (See Financial Performance Webcast).

While the economy remains relatively strong in China, which is good for China Crescent, China's business culture does not generally support strong gross margins for the service business industry. Accordingly, China Crescent needs to make more progress in establishing sales outside of China. In the meantime, the Company has made capital structure improvements and reorganizational enhancements to improve the Company's earnings per share potential (See a recent letter from the Company's CFO for more details on the improvements to increase the earnings per share potential).

Outsourcing Services Strategy and the First $30 Million Client Agreement

As outlined in the CFO's recent letter to shareholders, the Company is making good progress in maturing its operational processes and correspondingly reducing expenses as a percentage of revenue. In addition to the initiative to improve operational process, the Company has launched its outsourcing strategy to increase the rate of organic revenue growth and improve long-term gross margins. (Outsourcing Services Strategy Webcast).

Outsourcing services' target customers are generally larger revenue opportunities and longer term agreements than the Company has historically pursued. Outsourcing contract success will increase the Company's rate of revenue growth and percentage of revenue derived from recurring revenue. An increase in the total number of outsourcing contracts can also improve the Company's resource utilization, and in turn increase gross margins.

China Crescent recently launched its outsourcing services and signed its first client agreement. The agreement is anticipated to generate $30 million in revenue over a three year term. (Corresponding 8-K filing of agreement).

Suggested Fair Value Target PPS of $0.30

The Company was recently recapitalized as part of a comprehensive initiative intended to align the Company's fundamental financial value with the Company's market capitalization. Comparable publicly listed systems integration companies enjoy substantially higher market capitalizations relative to fundamental financial performance (Fair Value Webcast). The recapitalization reduced the number of common shares issued and outstanding at a ratio of 25:1 (see 14C). The recapitalization also reduced the potential issue of additional commons stock from preferred stock through the exchange of a convertible preferred stock for a non-convertible preferred stock.

Regulation SHO Security Threshold List

Regulation SHO is intended to provide a regulatory framework governing short selling of securities. Regulation SHO is designed, in part, to fulfill several objectives, to include establishing uniform locate and delivery requirements in order to address problems associated with failures to deliver and potentially abusive "naked" short selling (for more details on Regulation SHO and the impact to China Crescent see Webcast).

Following the recent recapitalization, China Crescent was listed on the Regulation SHO Threshold Security List because a number of stock sales had been transacted, but the actual shares had not been delivered. The Company remained on the Regulation SHO Threshold Security list until this week. Following China Crescent's listing on the Regulation SHO Threshold security list, the PPS increased nearly 70% between May 14th and May 28th on higher than average trading volume. Management believes that a buy-in to cover naked short sales may have contributed to this increase. Since May 28th, the share price has come back down to the range where it traded prior to the Regulation SHO Threshold Security listing. Management is not entirely surprised by the PPS volatility and remains optimistic that the suggested Fair Value Target PPS $0.30 objective can be realized.

OTC, OTCBB and Share Price Volatility

OTC and OTCBB listed companies are primarily early stage small and entrepreneurial companies. Some have no revenue. Some have revenue and no profit. Some have inconsistent revenues and profits. Most have listed publicly for the specific purpose of raising capital to execute a business plan. Because of the periodic share price increase potential such as the recent 70% increase demonstrated by China Crescent, micro-cap public companies can produce a dramatic ROI. On the other hand, early stage companies also have a high degree of risk.

I mentioned above that management was not entirely surprised by the decrease in share price that followed the steep increase in share price. From our experience as managers of OTC and OTCBB companies, and most likely from your experience as an investor in micro-cap public companies, we historically have seen share price volatility in OTC and OTCBB share prices. (For more information on this volatility and what I refer to as the milestone investment strategy see the Investor Overview Webcast). While not all micro-cap public companies will succeed in reaching operational sustainability, most will at least achieve some milestone successes along the way. Those milestone successes can generate buying that in turn drives a sudden increased share price. However, sudden increased share prices can attract short selling that in turn drives share prices back down.

Milestone Investing -- Short Term and Long Term ROI

China Crescent has recently announced a milestone success -- the Company's first outsourcing contract. The PPS has increased dramatically and subsequently decreased. While OTC and OTCBB companies experience price per share volatility, the longer term trend can be either up or down. For instance, if China Crescent's share price reaches the Suggested Value Target of $0.30, the share price course will likely be two steps forward, one step back. Investors can profit on the short term milestone ups and downs regardless of the longer term trend. A longer term upward trend provides investors with the opportunity to profit from both the short term milestone ups and downs, as well as the longer term upward trend. Likewise, a longer term downward trend provides a short seller the opportunity to profit from both the short term milestone ups and downs as well as the longer term downward trend.

If a Company has a limited number of issued and outstanding shares, supporting an upward long term trend is more likely to be possible. A limited number of issued and outstanding shares limits the overall supply of shares and reduces the required demand necessary to overcome the available supply and drive a share price increase. With the 100 most actively traded companies on the OTCBB having on average of over one billion shares issued and outstanding, any OTCBB company with less than 100 million shares issued and outstanding can be considered to have a limited issued and outstanding.

China Crescent and the Milestone Investment Opportunity

The China Crescent issued and outstanding is only a fraction of what would be considered limited by OTCBB standards. Furthermore, with the recent exchange of a convertible preferred stock to non-convertible, the potential issue of more common stock from that preferred stock has been further limited. Management is optimistic that the current issued and outstanding can support a long-term upward trend. However, management expects the recent share price volatility to continue.

Research and Stock Message Boards

Investors looking to profit from milestone increases and long term upward trends are likely to encounter nerve testing short selling strategies from time to time. Investors that are optimistic about the future prospects of a company may encourage optimism with others in an effort to influence more demand for the stock of a company. Such an investor might disseminate his version of the future prospects of a company on a stock message board. Likewise, a short seller that wants to profit on a declining share price might similarly disseminate his version of a future demise. Don't do your investment research on stock message boards. The good news is biased and so is the bad news, and in most cases the news is provided by anonymous posters. China Crescent reports are available free of charge on the SEC website at www.sec.gov and the Company issues frequent updates.

In Conclusion

I am committed to the brand name and ROI objective for China Crescent, as is the rest of our board and management team. We are all optimistic about the future prospects of China Crescent and thank you for sharing our vision for the future of China Crescent.

Best Regards,

Philip M. Verges
Founder and Board Member
China Crescent Enterprises, Inc.

Corporate E-mail Updates

To be added to China Crescent's e-mail database to receive company updates or to obtain more information on the Company, please send an e-mail to ir@chinacrescent.com or call 214-722-3065.

About China Crescent Enterprises, Inc. (http://www.chinacrescent.com/)

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.

"SAFE HARBOR STATEMENT" UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

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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