Some of the shine at top U.S. jewelers such as Fred Meyer Jewelers and Helzberg Diamonds; at specialty stores Zales (ZLC) and Kay Jewelers; and at Wal-Mart (WMT) and Macy's (FD) comes from little-known LJ International (JADE), a maker of quality jewels in Hong Kong. Its stock, which trades on the NASDAQ with ticker symbol JADE, has shot straight up from 4.20 in mid-December to 11.03 on Feb. 21. With its retail and wholesale business growing fast, LJ International plans to increase the number of stores in China to at least 100 before the 2008 Olympics opens, says Chairman and CEO Yu Chuan Yih. Right now it has 45 outlets in China, Hong Kong, and Macau, and it uses a variety of designers in China. Albert Lee of Maxim Group, who rates LJ International a buy, raised his earnings estimates and 12-month target price to 12 after posting better-than-expected fourth-quarter results. "My 12 target may still be inexpensive," he says, based on his 2007 earnings forecast of 57 cents a share on sales of $154.7 million, compared with 2006's 33 cents on $123 million. For 2008, he expects to see 84 cents on $192 million. Gordon McBean of Roth Capital Partners says LJI's wholesale and retail business present "solid growth prospects as more U.S. and European retailers look to low-cost, high-quality makers overseas." LJI is positioned to benefit from the strong, growing demand in China, he adds.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial