TELESTONE TECHNOL (TSTC) research, news, and more from GeoInvesting

Company description

Thu, 24 Sep 2009 04:00:00 GMT

Telestone provides wireless communications coverage solutions primarily in the PRC. These solutions include system integration with proprietary technology and project implementation with telecom products such as repeaters, antennas, amplifiers and radio accessories that the company develops and manufactures.

Comments & Business Outlook

Mon, 06 Jan 2014 05:00:00 GMT

Summary Consolidated Statements of Operations and Other Comprehensive Income (Unaudited)

Years ended December 31, 2012 and 2011

	Years ended December 31,
	2012			2011
	US$’000			US$’000
Operating revenues:
Net sales of equipment		23,153			39,281
Service income		34,739			69,783

Total operating revenues		57,892			109,064

Cost of operating revenues:
Cost of net sales		14,401			22,277
Cost of service		19,570			38,282

Total cost of operating revenues		33,971			60,559

Gross profit		23,921			48,505

Operating expenses:
Sales and marketing		10,160			10,905
General and administrative		34,096			15,132
Research and development		2,038			2,313
Depreciation and amortization		468			452

Total operating expenses		46,762			28,802

Operating income		(22,841	)		19,703

Interest expense		(1,212	)		(1,124	)
Other income, net		693			899

Income before income taxes		(23,360	)		19,478

Income taxes		(1,085	)		(4,552	)

Net income		(24,445	)		14,926

Other comprehensive income
Foreign currency translation adjustment		(471	)		3,892

Total comprehensive income		(24,916	)		18,818

Earnings per share:

Weighted average number of common stock outstanding
Basic		14,133,264			12,343,127
Effect of dilutive warrants and stock options		-			8,582

Diluted		14,133,264			12,351,709

Net income per share of common stock		*US$*			US$

Basic		(1. 76	)		1.21

Diluted		(1.76	)		1.21

Investor Alert

Thu, 30 May 2013 04:00:00 GMT

BEIJING, May 30, 2013 /PRNewswire-FirstCall/-- Telestone Technologies Corporation (NASDAQ: TSTC) (the "Company"), a leading supplier of local access network solutions for communications networks in China, today announced that it received a Staff Determination Letter (the "Notice") from The NASDAQ Stock Market LLC ("NASDAQ") on May 23, 2013, indicating that NASDAQ has determined to suspend from trading and delist the Company's common stock from the NASDAQ Stock Market, effective the open of business on June 3, 2013.

As previously disclosed, the Company is not in compliance with the continued listing requirements under NASDAQ Listing Rule 5250(c)(1) due to the Company's inability to timely file its annual report on Form 10-K for the year ended December 31, 2012. On May 1, 2013, the Company filed a plan with NASDAQ to regain compliance with continued listing requirements, however NASDAQ did not approve the plan. In addition, the Company also failed to file its quarterly report on Form 10-Q for the period ended March 31, 2013, which constitutes a separate basis for delisting under NASDAQ Listing Rule 5250(c)(1). In the Notice, NASDAQ also cited NASDAQ Listing Rule 5101, which affords NASDAQ "broad discretionary authority over the initial and continued listing of securities in NASDAQ." Specifically, the Notice stated that the Staff of NASDAQ believes that the reasons underlying the Company's filing delinquencies raise significant public interest concerns under Listing Rule 5101. Based on these factors, the Staff made the determination to delist the Company's securities from The NASDAQ Stock Market.

The Company has determined not to appeal NASDAQ's determination. As previously disclosed, the Company has not obtained records from its Sichuan Ruideng subsidiary (the "Subsidiary") that are necessary for the completion of the audit of the Company's financials for the fiscal year ended December 31, 2012. Also, as disclosed in the Company's Form 12b-25 filed May 16, 2013, to date, the prior owners of the Subsidiary, who are also tasked with its management, have refused to deliver the records to the Company headquarters. The Company doubts that the potential remedial measures necessary to obtain such financial records can be completed within 180 days, and, as such, the Company feels the success of an appeal of the delisting determination would be unlikely. Therefore, the Company will not appeal NASDAQ's determination.

After the Company's common stock is delisted by NASDAQ, it may trade on the OTC Markets Group Inc. (the "Pink Sheets") but only if at least one market maker decides to quote the Company's common stock. There can be no assurance that any market maker will decide to quote the Company's common stock immediately following such delisting or at all, and thus there can be no assurance that the Company's common stock would be eligible to trade on the Pink Sheets.

Resolution of Legal Issues

Wed, 01 May 2013 04:00:00 GMT

BEIJING, May 1, 2013 /PRNewswire-FirstCall/ -- Telestone Technologies Corporation (NASDAQ: TSTC) (the "Company"), a leading supplier of local access network solutions for communications networks in China, today announced that the Company has submitted a plan (the "Plan") , which was due by May 1, 2013, to regain compliance with NASDAQ's requirements for continued listing.

On April 17, 2013, the Company received a letter from NASDAQ Stock Market LLC ("NASDAQ") indicating that the Company was not in compliance with the continued listing requirements under NASDAQ Listing Rule 5250(c)(1). This was due to the Company's inability to file its annual report on Form 10-K for the year ended December 31, 2012 with the Securities and Exchange Commission by the extended April 16, 2013 deadline. On April 17, NASDAQ halted trading in Telestone's shares.

The Plan will be reviewed by Nasdaq and, if deemed to be acceptable, the Company would be granted a period of time during which to demonstrate compliance with the NASDAQ Listing Rules

Investor Alert

Fri, 19 Apr 2013 04:00:00 GMT

BEIJING, April 19, 2013 /PRNewswire-FirstCall/ -- Telestone Technologies Corporation (NASDAQ: TSTC) (the "Company"), a leading supplier of local access network solutions for communications networks in China, today announced that on April 17, 2013, the Company received a letter (the "Letter") from NASDAQ Stock Market LLC ("NASDAQ") indicating that it was not in compliance with the continued listing requirements under NASDAQ Listing Rule 5250(c)(1). The Letter, which the Company expected, was issued in accordance with NASDAQ procedures due to the Company's inability to file its annual report on Form 10-K for the year ended December 31, 2012 with the Securities and Exchange Commission by the extended April 16, 2013 deadline.

The Company disclosed on April 16, 2013, that although the Company completed the audit of the parent company's financial records in March 2013, the filing of the 2012 annual report on Form 10-K has been delayed because the Company will require additional time to obtain certain necessary financial records for the year ended December 31, 2012 from its Sichuan Ruideng subsidiary, which are needed to complete the audit of the Company's consolidated financial results. The Company also stated that it is working diligently on this matter and intends to file its annual report on Form 10-K as soon as practicable. On April 17, the NASDAQ halted trading in Telestone's shares.

Pursuant to NASDAQ Listing Rule 5101, NASDAQ has elected to exercise its discretionary authority to expedite the review process and has requested that the Company, if it chooses to do so, submit a plan to regain compliance with NASDAQ's requirements for continued listing no later than May 1, 2013.

If the Company does not submit a plan of compliance, or if the plan is not accepted by NASDAQ, the Company may be subject to delisting procedures as set forth in the NASDAQ Listing Rules.

The Company believes it can provide NASDAQ with a satisfactory plan by May 1, 2013, to show that it will be able to return to compliance with the Listing Rules.

Comments & Business Outlook

Wed, 15 Aug 2012 04:00:00 GMT

Second-Quarter 2012 Highlights:

Revenues were $17.9 million, a decrease of 26.6% as compared to $24.3 million in the year-ago quarter
Gross profit was $6.6 million, as compared to $10.6 million in the year-ago quarter
Net loss was $1.3 million, or $0.09 per diluted share;
non-GAAP net loss was $1.2 million, or $0.08 per diluted share vs earnings of $0.40 in prior year quarter.
A related company received an initial RMB 2.5 million (U.S. $0.4 million) investment from Zhongguancun Development Group (the "Group") for the research, development and commercialization of Telestone Intelligent Premise System (TIPS) technology. This investment is part of a RMB 15 million (U.S. $2.4 million) total commitment awarded in May, which the Group is expected to fulfill over the next three to five years

"Although we reported a loss in the second quarter, which was in line with our expectations, this was largely due to the current weak capital-spending environment and an allowance for doubtful accounts. This year, we have deliberately moderated our top-line growth in order to improve collections so that we can position Telestone for a return to growth and focus on developing our U-DAS (WFDS) and TIPS technologies," commented Mr. Daqing Han, Chairman and CEO of Telestone.

Business Outlook

For the full-year 2012, Telestone continues to expect revenues to increase to approximately $117 million.

"We believe that the current drought of spending is temporary and that the start of the carriers' large-scale 4G network construction, in addition to the development and growth of our U-DAS and TIPS technology-based products, will help Telestone hit its revenue target this year and create a bright future for the company, its employees, and shareholders," concluded Mr. Han

Comments & Business Outlook

Thu, 21 Jun 2012 04:00:00 GMT

BEIJING, June 21, 2012 /PRNewswire-Asia-FirstCall/ -- Telestone Technologies Corporation (NASDAQ: TSTC) (the "Company"), a leading supplier of local access network solutions for communications networks in China, today announced that they recently received RMB 15 million investment from Zhongguancun Development Group (the "Group") for the research, development and commercialization of Telestone Intelligent Premise System (TIPS) technology.

"We are pleased to have gained this important support from the Beijing municipal government. We believe it is a strong validation of our TIPS technology," said Daqing Han, Chairman and Chief Executive Officer of Telestone. "The investment will be primarily oriented towards facilitating research and development and marketing of our TIPS platform. We expect that this additional financial support will help TIPS to gain further momentum this year."

TIPS is a groundbreaking technology based on Telestone's Wireless Fiber-Optic Distribution System (WFDS) technology. The technology unifies telecom, data, Internet, radio and broadcasting, and the Internet of Things using a basic fiber-optic network. The technology has been recognized as a key element of the government's Smart City Initiative because, among other things, it allows domestic telecom operators to share cooperatively deployed infrastructure and facilitates the integration of the three types of networks (voice, data, and video).

Comments & Business Outlook

Tue, 15 May 2012 04:00:00 GMT

First-Quarter 2011 Highlights:

Revenues were $17.1 million, an increase of 18.2% as compared to $14.5 million in the year-ago quarter
Gross profit was $6.5 million, as compared to $6.6 million in the year-ago quarter
Net income was $0.5 million, or $0.03 per diluted share; non-GAAP income was $0.6 million, or $0.05 per diluted share

"We posted solid revenue growth in the first quarter of 2012, which included one full quarter of revenues from Sichuan Ruideng Telecom Corporation that we acquired in November 2011," commented Mr. Daqing Han, Chairman and CEO of Telestone. "We were able to maintain profitability despite some lower-margin business and increased investment in our sales and marketing team. Thus far, 2012 is proving to be challenging year for the telecom-equipment industry, due to a slowdown in 3G investment and a slow start to investment in 4G. Although our business results will be difficult to forecast; we expect business conditions to remain challenging."

Business Outlook

For the full-year 2012, Telestone continues to expect revenues to increase to approximately $117 million.

"Despite a soft start to the year, we remain optimistic regarding continued growth in 2012. We also expect TIPS to begin to play a meaningful role this year. We will continue to invest in the development of innovative new products and services, while diversifying our geographic and customer mix. We continue to expect 2012 to be successful and significant year," concluded Mr. Han.

Comments & Business Outlook

Fri, 30 Mar 2012 04:00:00 GMT

Fourth-Quarter 2011 Highlights:

Revenues were $40.6 million, as compared to $60.8 million in the year-ago quarter
Gross profit was $18.4 million, as compared to $26.9 million in the year-ago quarter
Net income was $3.5 million, or $0.29 per diluted share; non-GAAP income was $3.8 million, or $0.30per diluted share
Completed the main structure of Phase I of the Telestone Intelligent Premises System (TIPS) Industrial Park project, located in Gu'an County, Hebei province
Acquired 100% of Sichuan Ruideng Telecom Corporation for approximately $2 million in cash and 1.8 million restricted Telestone shares

"We posted fourth-quarter results with solid sequential revenue and gross profit growth, as well as improved gross margin, although our fourth quarter faced a difficult year-on-year comparison," commented Mr. Daqing Han, Chairman and CEO of Telestone. "We are pleased to maintain a solid level of profitability in a challenging year for the telecom-equipment industry, due to a slowdown in 3G investment and a slow start to 4G investment. In 2011, we are proud that we have achieved a number of milestones that augur a promising 2012. Firstly, we continued to see solid momentum of Wireless Fiber-Optic Distribution System (WFDS) products, which has built a track record of proven applications in the international markets. Secondly, our newly launched proprietary TIPS platform continued to contribute to our top line. In addition, Phase I of our TIPS Industrial Park is complete, and we expect the facility to enter trial production in May 2012. Thirdly, we continue to see success in our efforts to diversify customer base, with sales to non-telecom-carrier customers growing to 4.1% of our total tales, compared to 0.5% a year ago. Finally, we acquired Sichuan Ruideng, which is an important strategic move in our business expansion strategy in the southwestern China market. Although visibility may still be a challenge for the next few quarters, we remain confident that we can continue to grow our business over the long term."

Business Outlook

For the full-year 2012, Telestone expects revenues to increase to approximately $117 million.

"Despite a lull in capital spending surrounding a transition in wireless technology from 3G to 4G, we remain optimistic regarding continued growth in 2012. We continue to expect the WFDS business will be our major growth driver, and we expect TIPS to begin to play a meaningful role in 2012. We will continue to invest in the development of innovative new products and services, while diversifying our geographic and customer mix. We expect that 2012 will be a rewarding year for Telestone and our industry," concluded Mr. Han.

Comments & Business Outlook

Sun, 01 Jan 2012 05:00:00 GMT

BEIJING, Dec. 31, 2011 /PRNewswire-Asia-FirstCall/ -- Telestone Technologies Corporation (NASDAQ: TSTC) (the "Company"), a leading supplier of local access network solutions for communications networks in China, today updated its guidance for the business year ending December 31, 2011.

Telestone now expects revenues for the year ending December 31, 2011 to be 15% to 20% lower than in the 2010 fiscal year, or approximately $105.3 to $111.9 million, versus prior guidance of a 30% increase. The Company now expects net income within the range of $16.8 to $22.4 million, reflecting a margin of 16% to 22%, compared with prior guidance of approximately $27.5 million, which was based on 10% net-income growth.

Telestone's updated guidance reflects a change in investment direction among China telecom carriers, who are increasingly focusing their capital spending on next-generation technologies such as 4G wireless, and 2011 represents the last year of 3G deployment. This has delayed the 3G investment designated at the beginning of the year. Although the Company has won an increasing number of bids with the Big-3 carriers, delays in network construction have negatively affected its sales plan for WFDS products. This new guidance is also attributable to uncertainties surrounding auditing issues among the Big-3 carriers, which have complicated the process of doing business and extended payment terms with suppliers. These developments have substantially reduced the Company's visibility during the past few quarters and in the near term. Telestone plans to provide guidance for the 2012 fiscal year when visibility improves.

Company Rebuttal

Sun, 11 Dec 2011 05:00:00 GMT

Telestone Technologies Corporation (the “Company”) has learned that, on September 28, 2011, an entity identifying itself as “Jadestone,” published an article online making various allegations and accusations against the Company. On October 18, 2011, the Company held an investor teleconference to refute those claims. In connenction with the teleconference, the Company has made available the PowerPoint presentation delivered during the conference call. A copy of the PowerPoint presentation is attached hereto as exhibit 99.1.

Comments & Business Outlook

Tue, 15 Nov 2011 05:00:00 GMT

Third Quarter 2011 Results

Revenues were $29.6 million, an increase of 21.7% from the prior quarter
Gross profit was $12.9 million, an increase of 21.1% from the prior quarter and representing a gross margin of 43.5%, roughly flat sequentially
Net income was $5.2 million, or $0.42 per diluted share; non-GAAP income was $5.7 million, or $0.46 per diluted share
Completed the main structure of Phase I of the Telestone Intelligent Premises System (TIPS) Industrial Park project, located in Gu'an County, Hebei province
Entered into a definitive agreement to acquire 100% of Sichuan Ruideng Telecom Corporation for a total value of approximately $18 million

"We posted solid third-quarter results, with good sequential revenue and earnings growth, although our third quarter faced a difficult comparison due to a strong third quarter in 2010," commented Mr. Daqing Han, Chairman and CEO of Telestone. "We are pleased to report several positive developments that we believe will pave a solid foundation for our business growth in 2012. We continued to see solid sales of Wireless Fiber-Optic Distribution System (WFDS) products, of which one important component is our proprietary TIPS platform. As expected, we commercially rolled out the TIPS platform in the third quarter of 2011. Presently, TIPS has been installed in several domestic and international projects and has started to contribute to our revenues. In the third quarter, we generated approximately RMB 16 million (US $2.5 million) of revenue from TIPS. The construction of our TIPS Industrial Park is in full swing and we expect the project to create a broad new platform to support the various functions necessary to further our TIPS program. We saw a modest increase in sales to non-telecom-carrier customers in the third quarter, such as Wuxi Software Park, the Beijing-Shanghai High-Speed Railway, and the Beijing Academy of Forestry. In addition, we recently reached a definitive acquisition agreement with Sichuan Ruideng, which is an important strategic move in our business expansion strategy in the southwestern China market. Although visibility may be a challenge during the next few quarters, we remain confident that we can grow our business over the long term, as we monetize our strong technology and engineering efforts."

Business Outlook

For the full-year 2011, Telestone reaffirms its expectation that revenues will increase by about 30% to approximately $171 million, and that net income will increase by about 10% to approximately $27.5 million or $2.22 per diluted share. The Company continues to expect revenue from WFDS-based products to account for 40% of total revenue in 2011. Telestone is only seeing a modest ramp-up in international sales and is still launching business development efforts, which are expected to demonstrate substantial progress in 2012. For 2012, the Company continues to expect revenues to double to approximately $342 million.

Telestone reiterates that it will remain focused on collections and looks to improve collections this year. However, the Company has faced some uncertainties resulting from auditing issues among the Big-3 carriers, who have extended payment procedures with suppliers. This development has reduced the Company's visibility about meeting its targets of collecting RMB 800 million (approximately $123.1 million) of accounts receivable in 2011 and maintaining DSOs within the range of 360 to 400 days at the end of the year. The Company now expects to collect approximately RMB 500 million (approximately $80.0 million) of accounts receivable in 2011 and maintain DSOs within the range of 360 to 720 days at the end of the year, which is typical for engineering services projects.

"Despite some uncertainties related to ever-changing industry dynamics, we are optimistic about our business for the remainder of 2011. We continue to believe that our WFDS business will be our major growth driver and we are encouraged by recent government initiatives. We remain committed to maintaining our R&D efforts, launching innovative new products and services, and increasing our sales to non-telecom-carrier customers. We will provide an update on our new product developments and our non-telecom-carrier customers in the next few quarters," concluded Mr. Han.

Acquisition Activity

Tue, 15 Nov 2011 05:00:00 GMT

On November 7, 2011, Telestone Technologies Corporation (the “Company”) entered into an agreement to acquire 100% of Sichuan Ruideng Telecom Corporation (the “Agreement”). Under the terms of the Agreement, the Company will pay consideration consisting of cash and stock with a total value of approximately $18,000,000. Sichuan Ruideng Telecom Corporation is a company engaged in telecom network construction and system-integration services. The Company believes that the acquisition will help the Company with its business expansion strategy in the southwestern China market.

Interviews

Mon, 07 Nov 2011 05:00:00 GMT

BEIJING, Nov. 7, 2011 /PRNewswire-Asia-FirstCall/ -- Telestone Technologies Corporation (NASDAQ: TSTC) (the "Company"), a leading supplier of local access network solutions for communications networks in China, today announced that Mr. Daqing Han, Chairman and Chief Executive Officer of Telestone, was recently interviewed by the Economic Observer, a well-known Chinese-language business newspaper, on the Company's business evolution and future strategy. An English translation of the interview is available at: http://ir.telestone.com/announce/121/EN/Telestone%20Road%20to%20Infrastructure%20Upgrades_nhAbeDFD3GHn.pdf

In the interview, Mr. Han explains how Telestone has aligned its research and development efforts in line with ever-evolving industry and technology trends during the 14 years since the Company was founded. Telestone has evolved from a company focused on 2G, and later, 3G wireless coverage technologies, into a technology leader at the forefront of the communications industry, with innovative solutions like the recently announced Telestone Intelligent Premises System (TIPS).

The interview also discusses Mr. Han's rationale for choosing Gu'an, a county in Hebei Province, as the site for Telestone's new TIPS Industrial Park research, development, manufacturing and training facility. He also offers his expectation that the facility will be the catalyst for the Company's next phase of growth.

Comments & Business Outlook

Mon, 15 Aug 2011 04:00:00 GMT

Second-Quarter 2011 Highlights

Revenues increased 46.4% year-over-year to $24.3 million
Gross profit increased 41.8% year-over-year to $10.6 million, with a gross margin of 43.7%
Operating income increased 154.1% to $5.5 million, as compared to $2.2 million in the second quarter of 2010
Net income increased 163.0% to $4.5 million, or $0.37 per diluted share, as compared to $1.7 million, or $0.16 per diluted share in the second quarter of 2010
Non-GAAP income increased 173.4% year-over year to $5.0 million, or $0.40 per diluted share vs. $0.17 in 2010
On May 12, 2011, the Company signed a letter of intent to acquire 100% of Sichuan Ruideng Telecom Corporation.

"We are pleased to report another quarter with strong growth in revenue and stellar growth in net income," stated Mr. Daqing Han, Chairman and Chief Executive Officer of Telestone. "We continued to see solid sales of our Wireless Fiber-Optic Distribution System ("WFDS") products and we increased our sales to non-telecom-carrier customers in the second quarter. In addition, we reached a preliminary acquisition agreement with Sichuan Ruideng, which is an important strategic move in our business expansion strategy in the southwestern China market. We remain optimistic about our business growth for the remainder of 2011, while remaining committed to improving operational efficiency and collections."

Business Outlook

For the full-year 2011, Telestone reaffirms its expectation that revenues will increase by about 30% to approximately $171 million, and net income will increase by about 10% to approximately $27.5 million or $2.22 per diluted share. The Company continues to expect revenue from WFDS-based products to account for 40% of its total revenue in 2011 and also continues to expect revenue from international customers to account for 3% of total revenue in 2011.

The Company has broadened its family of WFDS products to include its proprietary Telestone Intelligent Premises System ("TIPS"), which is designed to unify fixed telecom networks, 2G/3G/4G mobile networks, Internet, cable TV and the Internet of Things with an integrated multi-service model on an all-inclusive network. While still under development, TIPS is expected to be commercially rolled out in the second half of 2011.

For 2012, the Company continues to expect revenues to double to approximately $342 million.

Telestone reiterates that the Company will remain focused on collections and the Company is on track to collect RMB 800 million (approximately $123.1 million) of accounts receivable in 2011 and maintain DSOs within the range of 360 and 400 days at the end of the year.

"Although we face some uncertainties resulting from the direction of 3G investment and auditing issues among the Big 3 carriers, we have demonstrated our ability to execute on our business strategy for continuous growth. We are committed to expanding our business portfolio with innovative products and services, diversifying our customer base, and we are encouraged by our initial success in improving collections. We are confident that our operational agility will build a solid foundation for our future growth momentum and profitability," concluded Mr. Han.

Acquisitions

Mon, 13 Jun 2011 04:00:00 GMT

BEIJING, June 13, 2011 /PRNewswire-Asia-FirstCall/ -- Telestone Technologies Corporation (NASDAQ: TSTC) ("Telestone" or the "Company"), a leading developer and provider of telecommunications local access networks in China, today announced that it has signed a letter of intent (the "LOI") to acquire 100% of Sichuan Ruideng Telecom Corporation ("Sichuan Ruideng" or "SR"). The LOI was signed on May 12, 2011.

Under the term of LOI, Telestone will use a combination of cash and Telestone common stock to fund the acquisition, whose terms are still being finalized. Telestone expects to sign a definitive acquisition agreement with Sichuan Ruideng soon.

Located in Chengdu in Sichuan province, Sichuan Ruideng specializes in telecom network construction and system-integration services. SR was founded in 1993 with registered capital of RMB 32.0 million (approximately $4.9 million). Today, Sichuan Ruideng is one of the largest provides of telecom network engineering services in Sichuan province and southwestern China, which has over 300 employees and about $20 million of average annual revenue in the past several years. Its business mainly covers regions of Sichuan, Yunnan, Guizhou, Hubei, and Qinghai provinces.

Comments & Business Outlook

Mon, 16 May 2011 04:00:00 GMT

First Quarter Results:

Revenues increased 30.0% year-over-year to $14.5 million
Gross profit increased 33.6% year-over-year to $6.6 million, with gross margin of 45.6%
Operating income increased to $2.1 million, as compared to operating loss of $1.0 million in the first quarter of 2010
Net income increased to $1.6 million, or $0.13 per diluted share, as compared to net loss of $1.1 million in the first quarter of 2010
Non-GAAP income increased 40.8% year-over year to $2.1 million, or $0.17 per diluted share

"We are off to a good start in 2011 with solid growth in revenue and net income," stated Mr. Daqing Han, Chairman and Chief Executive Officer of Telestone. "We saw several positive developments in the first quarter of 2011, which is normally seasonally slow for the telecommunications-equipment industry and also included the Chinese New Year holiday. Our Wireless Fiber-Optic Distribution System (WFDS) technology based product and solutions continues to gain recognition in the market, demonstrated by the recent $10 million contract award for the Beijing-Shanghai high speed rail project. We continue to expect strong growth in 2011, while Telestone expands its focus on operations and collections to prepare for a stellar 2012."

For the full-year 2011, Telestone expects revenues to increase by about 30% to approximately $171 million. The Company expects full-year 2011 net income to increase by about 10% to approximately $27.5 million or $2.22 per diluted share. The relatively lower expected growth in net income is due to planned investment in expanding sales and marketing activities in order to achieve the Company's goals for international expansion and sales to non-telecom carrier customers, and this EPS figure also reflects a higher share count due to the November 2010 secondary offering. Telestone continues to expect revenue from WFDS-based products to account for 40% of the company's total revenue in 2011 and also continues to expect revenue from international customers to account for 3% of total revenue in 2011.

In 2012, the company also expects revenues to double to approximately $342 million.

Notable Share Transactions

Fri, 29 Apr 2011 04:00:00 GMT

BEIJING, April 29, 2011 /PRNewswire-Asia-FirstCall/ -- Telestone Technologies Corporation (NASDAQ: TSTC) ("Telestone" or the "Company"), a leading developer and provider of telecommunications local-access networks in China, today announced that Mr. Daqing Han, Telestone's Chairman and Chief Executive Officer, has completed an initial purchase of 100,000 shares under his Rule 10b5-1 plan. In accordance with the plan, Mr. Han purchased 100,000 shares at an average price under $6.00 during this week.

On February 9, 2011, Telestone announced that its Chairman had adopted a plan under which he could purchase up to $5 million of the Company's stock during the following 12 months. The purchases are subject to restrictions on price, volume, timing, applicable legal requirements and other factors. Transactions under this plan will be disclosed publicly through filings with the Securities and Exchange Commission. As of March 28, 2011, Mr. Han beneficially owned approximately 3.2 million shares of common stock of the Company, representing aggregate ownership of 26.4% of the outstanding common stock.

"I continue to believe that Telestone's shares are attractively valued and have put my own money to work in support of my belief," commented Mr. Han. "I have strong confidence in the future of Telestone and our long-term commitment to increasing shareholder value and I am pleased with my initial, additional investment in Telestone shares."

Investor Alert

Thu, 31 Mar 2011 04:00:00 GMT

Investors should be aware that the 2010 10K did not contain the following passage that was included in its 2010 third quarter 10Q

We believe that the combination of present capital resources and unused financing sources are more than adequate to meet cash requirements for 2010 and the following years. We intend to meet our liquidity requirements, including capital expenditures related to market expansion, research and development for new products and technology, through cash flow provided by operations and additional funds raised by short-term loan. We are an enterprise with good credit and our relationships with these banks are in good standing. We believe that adequate cash flow will be available to fund our operations and additional needs in the future.

Comments & Business Outlook

Mon, 28 Mar 2011 04:00:00 GMT

Fourth Quarter 2010 Highlights

Revenue increased 84.5% year-over-year to $60.8 million
WFDS^™ contributed $12.8 million, or approximately 21.1% of revenues
Gross profit increased 126.9% year-over-year to $26.9 million, with gross margin of 44.3%
Operating income rose 149.5% year-over-year to $16.0 million
Operating margin increased to 26.3% from 19.5%
GAAP net income increased 137.9% year-over-year to $12.3 million, or $1.10 per diluted share
Non-GAAP income increased 184.8% year-over year to $14.8 million, or $1.33 per diluted share
Raised $18.9 million in net proceeds through a public offering of 1,675,000 shares of the common stock, at a price of $12 per share, in November 2010

Full-Year 2010 Highlights

Revenue increased 83.2% to $131.7 million
WFDS™ contributed $30.2 million, or 22.9% of total revenues
Gross profit increased 93.2% to $58.9 million with gross margin of 44.7%
Operating income increased 98.0% to $31.2 million
GAAP net income increased 99.0% to $25.0 million, or $2.33 per diluted share
Non-GAAP net income increased 140.0% to $30.1 million, or $2.82 per diluted share

"We are pleased to report record fourth-quarter as well as full-year 2010 results with remarkable revenue and earnings per share growth," said Mr. Daqing Han, Chairman and Chief Executive Officer of Telestone. "During the course of 2010, our Wireless Fiber-Optic Distribution System (WFDS™) technology based system has received much market recognition and made a significant contribution to our Telestone's growth. The Houston hospital WFDS™ project also represented an important milestone for our international market-expansion strategy. With the recent award of the Beijing-Shanghai high speed railway project, we feel confident that our WFDS™ platform will remain a major element of Telestone's growth strategy," he continued.

"In addition, Telestone successfully expanded its footprint in the domestic market in 2010 with the opening of four new regional branches. We are also developing a new facility in Hebei province for manufacturing, R&D and training, which will improve our profitability even further and help us continue to develop innovative, industry-leading products," continued Mr. Han.

Business Outlook

"As a leading integrated equipment and engineering services supplier for 2G, 3G, and potentially, 4G-based systems in China, we maintain our positive view of the need to integrate telecom, TV and radio broadcasting and internet access networks during the next several years. Based on the rapid growth of our commercialized WFDS™ technology and applications in 2010, Telestone believes that the WFDS™ based solutions will receive even greater acceptance by China's telecom carriers in the future. We are on track to gradually deploy more customized WFDS™-focused products and network designs, which include WFDS™-UOINS (Unified Office Information Network System), WFDS™-UPCMS (Unified Premises Control & Management System), and WFDS™-UPINS (Unified Premises Information Network System), during the next two years.

"In 2011, we expect over 40% of revenues from the sales of WFDS™ products. We are also committed to significantly increase our sales to international customers in 2011. Our goal is to continue expanding our business in the U.S., and take advantage of other commercial opportunities in Europe, Southeast Asia, Africa, and Middle East. Our primary goal is to continue to expand our business and provide an attractive return for our shareholders," concluded Mr. Han.

GeoTeam Note:

Although 2011 EPS growth is expected to be negative, three out of the next 4 quarters are expected to grow at least around 20%. Account receivable standing will continue to be an issue. The company did not issue any meaningful guidance, which could weigh on the stock.

Shareholder Letters

Thu, 03 Mar 2011 05:00:00 GMT

On March 3rd, 2011, TSTC issued a letter to shareholders regarding accounting practices, business outlook, and other information in hopes of reaching out to its investors and creating more clarity.

Notable Share Transactions

Wed, 09 Feb 2011 05:00:00 GMT

BEIJING, Feb. 9, 2011 /PRNewswire-Asia/ -- Telestone Technologies Corporation today announced that Mr. Daqing Han, the Company's Chairman and Chief Executive Officer, has adopted a Rule 10b5-1 plan under which he can purchase up to $5 million worth of the Company's shares of Telestone's common stock.

This plan was adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. Under the plan, Mr. Han may purchase up to $5 million of the Company's outstanding shares from time to time over the next 12 months. The share purchases will be made in open-market transactions on the NASDAQ at prevailing market prices, in negotiated transactions off the market, or in block trades.

Investor Alert

Fri, 14 Jan 2011 05:00:00 GMT

BEIJING, Jan. 14, 2011 /PRNewswire-Asia/ -- Telestone Technologies Corporation today released the following statement:

The Company has learned that an entity named The Forensic Factor has published an article on an investor website making various allegations against the Company.

The Company states that the author failed to contact the Company to verify the claims made before publishing the article, which contains many false and inaccurate claims relating to the Company's operations, industry performance, revenue recognition policies, revenues, accounting practices, earnings and financial disclosures, which display an incomplete understanding of the nature of the Company's business. The Company views the article as an unjustified swipe at a reputable and successful Chinese business, and it is based on unsubstantiated and inaccurate statements and conclusions. The Company is currently weighing appropriate legal remedies against article's author.

The Company rejects any allegation that it acted improperly or that its accounting practices are unsound and not in accordance with generally approved accounting practices. Furthermore, the Company rejects any allegation that it provided false or misleading information to investors or shareholders. Telestone remains firmly committed to complying with all applicable rules, laws, and stock-exchange requirements.

Conference Call Notes

Thu, 09 Dec 2010 05:00:00 GMT

Han Daqing, Richard Wu, John Harmon
=======================================
Introduction and Safe Harbor: John Harmon, CCG Investor Relations

Good morning and good evening to everyone in China. Welcome to Telestone Technologies’ investor conference call.

With us today are Telestone Technologies’ Chairman and CEO, Mr. Han Daqing, and VP of Finance, Mr. Richard Wu.

Before I turn the call over to Mr. Han, I would like to remind our listeners that management’s remarks in this call contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the Company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, due to such risks such as, but not limited to, changes in the company’s product and sales & marketing strategy, plans for proceeds from its recent share offering, plans regarding its bank credit facility, targets for accounts receivable and DSOs, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. Although the Company believes that the expectations in such forward-looking statements are reasonable, there is no assurance that such expectations will prove to be correct.

Therefore, the Company claims protection under the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, due to known and unknown risks and uncertainties, including all business uncertainties relating to product development, marketing, customer lists, raw material costs, market acceptance, future capital requirements, competition in general, and other factors that may cause actual results to be materially different from those described herein as “anticipated”, “believed”, “estimated” or “expected”.

In addition, any projections as to the Company’s future performance represent management’s estimates as of today, Thursday, December 9, 2010. Telestone Technologies assumes no obligation to update these projections in the future as market conditions change.

For those of you unable to listen to the entire call at this time, today’s call is also being webcast and an archive will be available for one year. Information on how to access the webcast is available in the press release issued on December 6, 2010.
___________________________________________________________________________

And now it’s my pleasure to turn the call over to Telestone Technologies’ Chairman, Mr. Han.

Opening Remarks: Mr. Han Daqing, Chairman and CEO

Thank you, John.

Welcome everyone, and thank you for joining us today. As many of you are aware, on November 24, we completed a secondary offering of 1.675 million shares, raising approximately $18.9 in net proceeds for the company. There is also a 15% over-allotment that is valid for 30 days. I would like to state clearly that the purpose of the secondary offering was to raise capital primarily for a facilities expansion, which should greatly improve our future margins, rather than to enhance our balance sheet. In our third quarter, we were solidly profitable, with more than $12 million in net income. EBITDA was more than $14 million in Q3, and amounted to nearly $15.5 million in the first nine months of 2010. The offering was priced at a discount to make it attractive to investors and to take expected dilution into account, and our stock is down just 6% from where the offering was priced.

We are holding this conference call today to update our shareholders on our plans and strategy.

The topics we plan to discuss today include the following:
1. Our WFDS strategy and deployment plans;

2. Our plans for the proceeds of our recent share offering;

3. Our intentions for the recently secured bank credit facility;

4. A discussion of our accounts receivable and days’ sales outstanding (DSOs);

5. A reaffirmation of our 2010 guidance; and 6. Our near-term investor-relations strategy.

Afterwards, we will take questions from investors.

First of all, I would like to provide an update on the company’s product strategy. We are very enthusiastic about our Wireless Fiber-optic Distribution System (WFDS) solution, which combines wireless and wireline voice, data, and video within a single fiber-optic cable that runs through large office buildings. Our solution offers huge savings to carriers by eliminating the need for each carrier to install its own cables, repeaters and amplifiers in order to provide a clear cell phone signal in an office building. Now with WFDS, a single set of equipment can be shared among multiple carriers for multiple services.

As the sole provider of WFDS in China, we expect to benefit from the China State Council’s directive in January 2010 to integrate the transmission of telecom, TV, and radio. Moreover, our WFDS-Unified Local Access Network (ULAN) technology has been approved by China’s “Big-3” telecom carriers—China Mobile, China Unicom, and China Telecom. In the third quarter of 2010, WFDS accounted for 23.5% of revenues, with 45-50% gross margins. We expect WFDS to contribute as much as 40% of next year’s revenues.

We are also making progress in selling our WFDS products in international markets. Telestone currently markets its products in 29 countries, and we plan to use our existing sales network to market our WFDS solution. On August 9, we announced a $2.0 million contract to deploy WFDS at a hospital in Houston, Texas, which is being implemented in phases and should be completed by early next year. The installation supports several carriers including AT&T, Sprint, Verizon and T-Mobile, using a total of seven wireless frequency bands. Moreover, installations of wireless equipment are particularly challenging in hospitals, where there are signal transmission challenges and sensitive medical equipment, and we hope that this project opens the door to many similar projects in the future. WFDS installations also drive sales of Telestone wireless repeaters and amplifiers.

Since our WFDS customers are primarily building contractors, rather than telecom carriers, we anticipate speedier payment, and over time, a reduction in our days’ sales outstanding. Richard will give additional details later on. I would also like to remind investors that WFDS represents a technology platform, not just one product, and we have a strong product pipeline, with other versions of our WFDS technology under development. We are currently shipping WFDS-ULAN (for Unified Local-Access Networks in buildings.) In the next six months, we plan to offer WFDS-UOINS for small, medium, and large-size businesses, and within the next 24 months, we plan to launch another version of the technology, WFDS-PINS, for large industrial and commercial zones.

Secondly, I’d like to discuss how we intend to use the proceeds from our recent share offering and our recent bank credit line. First, the share offering: Based on our expectations for the success of our WFDS products, we have decided to bring the assembly and test of some devices in-house. Earlier this year, we purchased 15 acres of land in nearby Hebei province, where we plan to build a manufacturing/assembly facility, an R&D center, and a training center for customers and distributors. This new campus will require approximately $12 million in capital spending. We believe that we could increase gross margins on products that we manufacture in-house to as much as 60% in three years, versus 30% or lower margins today. The remaining proceeds will be used for working capital or for acquisitions. Although it is too early to talk about specific acquisitions, we are looking at a number of companies whose products could complement our WFDS network.

On October 4, we announced that we had secured a five year, RMB 300 million ($44 million) line of credit with the Bank of Beijing. This credit line provides us greater flexibility in funding our working capital needs over the next few years, and I would like to clearly state that the credit line is not earmarked for funding facilities expansion or acquisitions. We are not required to use any part or all of this facility and we will only do so an as needed basis

Now I will turn the call over to our VP of Finance, Richard Wu, who will provide an update on the company’s financials and guidance.

Investor Conference Call—Financials: Richard Wu, VP of Finance

Thank you, Mr. Han.

First, I would like to discuss the schedule of our company’s accounts receivable. Many investors have been concerned with the company’s high level of accounts receivable. For instance, our Q3 accounts receivable amounted to approximately $134 million, which represents 280 days’ sales outstanding. This level of receivables is related to the purchasing patterns of our customers. It takes our customers about three months to approve their budgets for the new calendar year, plus another three months for construction to take place. Once construction is completed, we expect our days’ sales outstanding to average about 180 days, which is typical in China.

Our three largest customers, China Mobile, China Unicom, and China Telecom, are large state-owned entities that clearly have a high degree of creditworthiness. To-date, we have not experienced any significant write-downs or increases in bad-debt provisions.

With the exception of 2008, which was unusual due to the merger of China Unicom and Netcom, our DSOs have declined every year since 2007. In Q3 we recorded DSOs of 280, which was lower than what we recorded annually for 2006-2009. Investors should be aware, though, that due to our customers’ annual purchasing cycles, we anticipate DSOs to rise in Q4. We are targeting DSOs in the range of 300-350 days for the 2011 business year, which would mark an improvement versus the 384 DSOs we recorded in 2009. As the WFDS mix improves, we think our DSOs can decline further.

Our emerging and growing WFDS business has DSOs more in line with industry norms, as builders and international customers typically pay within 90 days. As this business increases as a percentage of sales, we expect our DSOs to approach our long-term target of 120 days. As Mr. Han commented, WFDS accounted for 23.5% of Q3 revenues, and we expect WFDS to represent approximately 40% of our revenues next year. Our WFDS products also require less working capital per unit of revenue than our traditional wireless equipment, and as the WFDS mix increases, we expect our working-capital requirements to decrease.

Now let me provide an update on our outlook

We are reaffirming our prior guidance for the 2010 business year. We still expect revenues of $129.4 million and $22.9 million of net income, which translates to EPS of $2.17. This guidance represents 80% revenue and nearly 80% EPS growth, which would mark a very strong year. The guidance also translates to revenues of approximately $58.5 million, net income of $10.3 million, and EPS of about $0.97 for the fourth quarter. Our guidance implies slightly lower EPS in Q4 than the $1.14 we reported in Q3, despite higher revenues, due to our expectation of a higher mix of equipment, which carries lower margins than services, which were especially strong in Q3. Our backlog as of September 30, 2010 was $61.5 million.

In 2011, we plan to do more to communicate with our shareholders and the market. We appreciate your interest in the company.. If you have any questions, please contact us or CCG, our investor-relations firm for further information.

Q&A was omitted from this transcript.

Deal Flow

Wed, 24 Nov 2010 05:00:00 GMT

Two recent pieces of information had led many investors to believe that TSTC's need to raise funds via an equity raise was minimal.

1. Recent approval of line of credit:

Telestone Technologies Corporation announced today that it has secured a 300 million RMB ($44 million USD) line of credit from Bank of Beijing.

The new bank line for approximately $44 million was entered into on September 27, 2010, which has a five-year term. Telestone is under no obligation to utilize any part or all of the credit line.

"We are pleased Bank of Beijing is providing the Company with a sizable line of credit," stated CEO and Chairman Mr. Daqing Han. "Obtaining funding from an established lender further validates Telestone's strong operating model and attractive growth outlook. We believe this credit line will provide invaluable support for our continuing business expansion and meet our working capital needs over the next several years. With additional financial flexibility from this line and a backlog of $106 million, we remain confident we will achieve our $129.4 million revenue target for the full year 2010."

2. Statement from 2010 third quarter 10Q clearly indicates that an equity raise was not on the table:

Today's news tells a different story; Some may claim a Stone Called Misrepresentation

On November 24, 2010, Telestone Technologies Corporation entered into an underwriting agreement with Roth Capital Partners, LLC and JMP Securities LLC (together, the “Underwriters”), related to a public offering of 1,675,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $12.00 per share less a 6% underwriting commission. Under the terms of the Underwriting Agreement, the Company has granted the Underwriter an option, exercisable for 30 days, to purchase up to an additional 251,250 shares of Common Stock to cover over-allotments, if any.

This financing will result in about 18% dilution, bringing 2011 estimates down to $1.95 from $2.38. Per most recent analyst estimates, quarterly EPS may exhibit lumpier 20% to 30% growth after factoring in dilution:

Prior to offering

Period	2011 EPS Estimate	Growth Rate	2010 EPS	Growth Rate	2009 EPS
March	$0.18	28.6%	$0.14
June	$0.32	100.0%	$0.16
September	$0.71	-37.8%	$1.14
December	$1.17	60.3%	$0.73G	46%	$0.50
Year	$2.38	9.7%	$2.17G	79.3%	$1.21

E- Analyst estimate
G- Company Implied EPS guidance

GeoTeam Post offering Adjustments

Period	2011 EPS Estimate	Growth Rate	2010 EPS
March	$0.15	7%	$0.14
June	$0.32	27.1%	$0.16
September	$0.60	-47.4%	$1.14
December	$0.99	59.7%	$0.62G	24%	$0.50
Year	$1.65	-20%	$2.06G	70.2%	$1.21

Note that TSTC blew away 2010 third quarter estimates. We are not sure if this was a pure beat or just a "make up" from the soft 2010 second quarter results. We will await analyst updates in order to gain further clarity.

Comments & Business Outlook

Mon, 15 Nov 2010 05:00:00 GMT

Summary Financials

Third Quarter 2010 Results
	3Q 2010	3Q 2009	CHANGE
Net Sales	$ 43.1 million	$ 18.9 million	+ 128.2 %
Gross Profit	$ 19.5 million	$8.9 million	+ 119.2 %
Net Income	$ 12.1 million	$ 4.2 million	+ 184.0 %
EPS (Diluted)	$1.14	$0.41	+ 178.0 %

Period Ended September 30, 2010
	9M2010	9M2009	CHANGE
Net Sales	$ 70.9 million	$ 38.9 million	+ 82.1 %
Gross Profit	$ 32.0 million	$18.6 million	+ 71.7 %
GAAP Net Income	$ 12.6 million	$7.4 million	+ 71.7 %
GAAP EPS (Diluted)	$1.20	$0.71	+ 69.0 %
Adjusted Net Income*	$ 15.2 million	$ 7.4 million	+ 105.4 %
Adjusted EPS (Diluted)*	$1.43	$0.71	+ 101.4 %

* Adjusted net income reported by the Company in the first nine months of 2010 excludes a non-cash stock-based compensation charge of $2.1 million related to the issuance of stocks to certain directors of Shandong Guolian Telecommunications Technology, and a one-time noncash stock-based compensation charge of $0.5 million for professional services rendered.

"Our performance in the third quarter showed a marked acceleration in our business and is consistent with our growth expectations for the year," began Han Daqing, CEO and Chairman of Telestone. "Investments in sales and marketing earlier this year helped ensure our WFDS systems were chosen as the last mile network of choice at targeted installation sites and we have seen a dramatic pickup in our installations year long. Having secured a solid backlog of both 3/G and WFDS™ contracts and installations, we are confident in achieving our full year guidance of $129.4 million in revenues and $22.9 million in net income."

Liquidity Requirements

Mon, 15 Nov 2010 05:00:00 GMT

Deal Flow

Mon, 04 Oct 2010 04:00:00 GMT

Investors may view the following news as positive, as it could minimize the need for an equity offering. It also adds legitimacy to the company.

Telestone Technologies Corporation announced today that it has secured a 300 million RMB ($44 million USD) line of credit from Bank of Beijing.

The new bank line for approximately $44 million was entered into on September 27, 2010, which has a five-year term. Telestone is under no obligation to utilize any part or all of the credit line.

Investor Presentations

Thu, 16 Sep 2010 04:00:00 GMT

On September 14, 2010, Telestone Technologies Corporation started to hold one-on-one meetings at the Rodman & Renshaw Global Investment Conference held September 13-15 at the New York Palace Hotel in New York City.

Conference Call Notes

Mon, 06 Sep 2010 04:00:00 GMT

Telestone Technologies Corporation (NASDAQ: TSTC)
Date: Friday, August 13, 2010
Time: 9:00 am Eastern

Executives:
Han Daqing, Chairman and CEO of Telestone
Ms. Xiaoli Yu – CFO
Ms. Liping Zhang – Board Secretary
John Mattio – SVP, HC International

Mr. Han

I would like to welcome our current and prospective shareholders to this call and thank you for your interest in Telestone Technologies. Based on what we have seen in aftermarket trading yesterday in our Company’s stock, I would like to restate that we are 100% confident we will meet our guided revenue target of $129.4 million and $22.9 million in net income by the end of the year. For those of you who have been following us for some time, you are familiar that our Company experiences strong seasonality by the end of the year when we book most of our sales. Our sales teams have reported to us approximately $106 million in back log estimates of projects we are confident to bill out in the third and fourth quarter of this year, and, as we have focused on higher-margin 3/G and WFDS sales this year, I am pleased to report that we have met our gross margin targets of 42% for the quarter and six months. We are equally confident the investments we made in marketing this quarter will pay off in Q3 and Q4. Contrary to news of slowdown in the telecom space in China, access network installations are peaking in demand and cell phone subscribers grow daily in China. We believe we are uniquely positioned to benefit from this ongoing growth as the total number of cell phone subscribers in China approach 1 billion by 2011. We appreciate your support and look forward to speaking to you again soon or hosting you at our facilities in Beijing”

John

Thank you Chairman Han. This is John Mattio again. Before I begin, I would like to provide our prospective investors and current investors joining us for the first time with an overview of Telestone’s business.

Telestone Technologies has been operating since 1997 when if first began network installations of what are now called 1G and 2G local access networks for cellular services. Telestone went public in 2004 and in 2005 began trading on the NASDAQ. Telestone Technologies is a project Company that is awarded ‘last mile’ local access network installation contracts from the "Big 3" telecommunication companies in China. These companies are: China Mobile, China Unicom and China Telecom. Based on its network design for a particular building site, Telestone procures telecommunications hardware and utilizes local contractors to install current 3/G and WFDS™ fiber optic local access networks for carriers. A majority of the Company’s project revenue is generated from its engineering and network design solutions for first-time installations or network upgrades. Telestone’s projects in turn generate a combination of equipment and professional service revenues. To a lesser extent, the Company generates revenue from equipment-only sales or services-only sales. There have been a number of favorable trends in the industry as of late which lend itself to Telestone’s proprietary network system, WFDS™. As cell phone users increase, traditional booster antennae systems can not handle the load of signals and thus local access networks must be installed in buildings to provide sufficient signals strength. As major telecoms compete for customers plus Beijing’s support for more telecom competition, certain coverage areas once serviced by a single telecom must now open up their markets to equal competition from all Chinese telecoms thus increasing the bandwidth demands on systems. As a result, more buildings must install local access networks. Lastly, Beijing is encouraging a convergence of all three cellular signals in China and would also like to see other voice, data and media services consolidate as part of its five year plan. Fiber optics is one of the few systems that can support these drivers in the market and Telestone is leading such installations with its wireless fiber optic distribution system, know as W F D S.

Skip to Q&A:

1. How much revenue comes from WFDS in your second quarter?

Answer: It is 21% of the revenue in second quarter.

2. the net equipment sales is year over year decrease, looking back to your last 4 quarters, you had over 50% at least, so what happened in your net sales of equipment?

Answer: The first and second quarter are the tender season of the carriers, and they make fewer equipment purchase compared to the second half of year when they finished the tender. And in the first half year, the carriers still have the equipment which they purchased last year to use.

3. What is the split between equipment and service in the 2010 guidance of revenue?

Answer: Normally, because we are project-based for the revenue, roughly, the equipment sales and professional services sales are half and half.

4. If you have half and half of revenue in the equipment and services, according to your guidance and portion, you only did 20% of equipment revenue in the first half of year, versus over 35% of equipment sales in 2007, 2008, 2009 in the first half year, why there is such a downturn in 2010?
Answer: normally in a project, the revenues from equipment and services are half and half. But in some projects, the price of equipment is extremely low and we can not make profit from that. Therefore, sometimes we give up such kind equipment’s bidding from the carriers. And also in recent years, the margin of services sales is growing and becoming higher than the margin of equipment sales, which is the change of the business.

5. The overall revenue of the first half year 2010 is 21% of the guidance, versus 28% in 2009 and 35% in 2008, so you have significant growth in the second half of year in order to meet your guidance, where you see the growth, if you think WFDS will grow significantly. Given WFDS has higher margin, do you expect your margin will improve largely? Can we see that in the second half year?

Answer: Yes. We can confirm that. Compared to the traditional technology, WFDS has higher margin. Second quarter is the bidding season, we have taken most of shares in the provincial level, and that is why we are confident to reach the 2010 guidance. Importantly, due to the success of trials we made on WFDS last year, we have gained greater market shares from the carriers compared to the last one or two years. .

6. So you are confident that your gross margin will improve significantly in the second half 2010?

Answer: Yes. And the gross margin of WFDS is much higher than the traditional technology.

7. What is your backlog so far?

Answer: That depends on our business process. First, we need to get shares from our carriers in each province: we get projects and contact with building owners, and we sign agreements with them on behalf of the carriers. And we will hand over all the agreements to the carriers’ provincial branch and wait for the approval and budget from their headquarters. When we get approval, we will start engineering, and when we finish the project at the end of the year, the carriers will do the inspection and acceptance, then we can book revenue and waiting for the payment, which is the process.

8. What is the dollar amount of projects are in your hand now?

Answer: I have mentioned that in my speech, the backlog at this moment is at least 106 million.

9. How soon do you think you can recognize that backlog?

Answer: That is the process we need to follow as I mentioned above.

10. How long the process will take?

Answer: all our projects will be verified in Q3 and Q4 before the end of the year 2010.

11. Where is your capital resource, which will support about 100 million revenue growth in second half of 2010?

Answer: Though we have a comparably long DSO, all the revenue will be collected in 12 months. Based on this, we get more credit from china banks, we can get short-term loan once we need working capital. So this is not a big problem to the company.

12. About WFDS project, you signed a contract in the US. How much revenue you expect will generate from the US market?

Answer: It is hard to estimate at this moment. But we think in next 2 or 3 years, 1/3 of the revenue will be generated from the US market and also from the South American market.

13. Where you are on the relation to with other international sales and sales opportunities as the sort of relations you have in the US? Can you further flash the detail on any relationships you’re building with companies in other countries like the Quell relationship?

Answer: Besides the relations we have in the US, we also set up relationships in South America, like Brazil, Mexico and Columbia. We developed local partners and work together with them, which is very efficient. In the next half year, we will set up sales offices in Europe.

14. What is your DSO in Brazil and Columbia if it is equipment sales?

Answer: There is no DSO in the equipment sales. Now we need to give them technical support, and we believe we will gain more market shares in the future.

15. Can you please address the discount you may have to offer in your sales of equipment to Quell and the related profit margins for those sales that compared to similar sales on mainland China?

Answer: I would like to tell you about the profit margin. In the US, the equipment-only sales’ profit margin is about 50%. We are half price of the project competitors in the US. In China, the margin of WFDS, both product sales and equipment sales make the margin go well.

16. You had significant SG&A cost related to the training for your sales agent for WFDS in the second quarter; do you anticipate the same kind of expenses going forward or fall significantly?

Answer: At the beginning of our development of the market, the cost may be high. Once we runs well, the sales cost will not be so high as that of the beginning.

Comments & Business Outlook

Thu, 12 Aug 2010 04:00:00 GMT

Total revenues in the second quarter ended June 30, 2010 were $16.6 million, an increase of 37.0% from $12.1 millionin the same period of prior year. Equipment sales of $7.1 million were driven by the Company's sales of 3G and WFDS(TM) local access network equipment used in installations. Additionally, $9.6 million in service revenues for project design and installation costs were achieved in the second quarter of 2010 compared to that of $5.0 millionin the second quarter of 2009, representing a 91.6% increase. Revenues generated during the fiscal year are concentrated in the third and fourth quarter, when most of the "Big 3's" projects are completed and subsequently billed. Due to this seasonality, the Company normally records approximately 25% of its 2010 estimated revenues in the third quarter and approximately 50% of its 2010 estimated revenues in the fourth quarter for the year ending on December 31, 2010.
For the three months ended June 30, 2010, net income was $1.7 million, representing a decrease of 12.8% from the same period in 2009. Based on 10.5 million shares, earnings per weighted average diluted share were $0.16 per share for the quarter, compared to $0.19in the same period of 2009.

"We recorded 37% growth during the quarter as we significantly increased our orders and prepared for the ramp in new 3G and WFDS(TM) installations for the second half of the year," began Han Daqing, CEO and Chairman of Telestone. "We have made a conscious decision to focus our efforts on higher value, high-margin WFDS(TM) projects and have concentrated our sales team on this Company-wide goal. This focus requires an investment to market the benefits and cost savings of WFDS(TM) fiber optic installations to local branch offices of the 'Big 3' and building owners as well. Because our equipment allows carriers to generate incremental revenues from new services and reduces the operating costs of running multiple systems, we believe our WFDS products offer a compelling return for carriers, building owners and consumers alike. Our sales teams based at our 30 branch offices continue to make good progress, having collectively secured a solid backlog of both 3G and WFDS(TM) contracts and installations with the majority to be realized during the third and fourth quarter of 2010. Thus, we remain confident in meeting our revenue guidance of $129.4 million and $22.9 million in net income for the year."

GeoTeam Note®:

TSTC's financial performance was clearly not up to investor expectations. This is a scenario we had brought up in our recent research notes on TSTC. On the bright side:

It appears that the company invested funds in preparation for the remainder of the year.
The company has still maintained guidance which implies that it will report EPS of about $1.85 for the last half of the 2010 year. TSTC reported EPS of $0.91 in the back half of 2009.

The stock is set to significantly pull back in the morning. We may look for a trading opportunity if the confernce call goes well.

Research

Mon, 09 Aug 2010 04:00:00 GMT

This morning Telestone Technologies, announced its first U.S. contract:

"its Wireless Fiber Optic Distribution System (WFDS(TM)) has been selected as the local access network technology application for installation at a Houston hospital. The project will be installed by a U.S. firm, Quell Corporation, who won the contract after successfully demonstrating Telestone's WFDS(TM) functionality to the hospital and other major U.S. telecommunication companies."

This development is significant, as it indicates that the company is having success penetrating the U.S. market, which is a key element of its business plan.

TSTC is one of the few ChinaHybrids stocks that has performed nicely over the past few weeks. The company is currently on our "Tier Two" stock selection list

Research

Sat, 17 Jul 2010 04:00:00 GMT

Just three days after our research update on TSTC, the company issued a release updating guidance, it addressed one of our highlighted road blocks:

No net income guidance.

TSTC, maybe a response to our update, has now issued net income guidance of $22.9 million. This works out to EPS of $2.17 if we apply the 2010 first quarter fully diluted share count 10.5 million shares. 2010 analyst estimates are currently calling for EPS of $1.70. The company also reaffirmed 2010 revenue guidance of $129.4 million.

"Demand for our proprietary, high-margin WFDS(TM) product line has accelerated as a result of Beijing's January directives to unify the delivery of telecommunication networks, TV networks, broadband data and internet access systems," stated Han Daqing. "The installation process for our WFDS(TM) business is more efficient than our traditional projects and requires less resources and working capital. We expect this to be a catalyst for both growth and margin expansion in the second half of this year and estimate that WFDS(TM) will represent at least 30% of total revenues for 2010. As a result of strong orders and improved visibility, we are reaffirming our revenue guidance of $129.4 million for 2010 and our previously stated gross margin guidance of 42%."

Since this development occurred after the conclusion of the 2010 second quarter, it may also bode well for the 2010 second quarter EPS results. Please note that since TSTC did not issue EPS guidance it could still be implied that the company may plan to entertain a financing before years end.

Research

Tue, 13 Jul 2010 04:00:00 GMT

¹Added to the GeoBargain list on September 24, 2009 @ $6.42
Removed from the GeoBargain list on January 6, 2010 @ $24.40
²Added to the GeoBargain list on February 8, 2010@ $15.36

Catalyst: Strong EPS growth was on the horizon; Account receivable position was improving; Bullish guidance.

¹Peak performance: Reached a high of $24.94 on January 1, 2010

²Peak performance: Reached a high of $22.20 on February 23, 2010

Current Price: $9.06

Current road block: Internal control issues; Weak account receivable position; Cash and operating cash flow position do not cover current liabilities; Dilution door is open; No net income or EPS guidance; Short investors have "attacked" TSTC.

TSTC shares have been on a wild ride within the last 12 months, eclipsing $20.00 in January 2010 and once again in February 2010 after a brief pull back. We are happy to see that TSTC has finally received analyst coverage from Roth Capital who is forecasting EPS to grow 41.1% to $1.70 in 2010 followed by 51.2% to $2.57 in 2011.

Investors must be keenly aware of some issues:

1. Dilution: In March 2010, TSTC filed a form s-3 leaving the door open for an offering. This will weigh on investors minds and likely limit TSTC appreciation potential until more clarity on this issue is received. The fact that Roth Capital has picked up coverage also could lead some to believe that a raise may be imminent.

2. The high accounts receivable position is still present. Part of the reason for the stock's initial rise was probably due to an improved AR position and comments from management of expectations of continued improvement. Management has informed investors that a high AR position is the nature of its business, where payment terms are determined by a few major customers:

"We experience a longer accounts receivable turnover period than our main competitors due to our revenue being generated from a higher mix of system integration projects, which are typically billed in phases throughout the life of the project. We believe that our main competitors are more focused on equipment sales, which tend to have shorter receivable turnover periods. Generally, we and our main competitors have traditionally experienced a longer receivable turnover period due to the fact that our main customers are the three state-owned telecommunications carriers, which tend to make payments slower. Additionally, approximately 10% of our professional services revenue are settled after 24 months of our warranty period. We have not experienced any significant bad debts in the past."

"The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of the Renminbi may materially and adversely affect our cash flows, revenues and financial condition. For example, to the extent that we need to convert U.S. dollars we receive from this offering of our common stock into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar could have a material adverse effect on our business, financial condition and results of operations. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our common shares or for other business purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of the Renminbi we convert would be reduced. Any significant devaluation of Renminbi may reduce our operation costs in U.S. dollars but may also reduce our earnings in U.S. dollars. In addition, the depreciation of significant U.S. dollar denominated assets could result in a charge to our income statement and a reduction in the value of these assets."

4. We have followed the TSTC story for sometime and have witnessed that the company has missed guidance in the past. This is possibly why the company may have stopped issuing net income guidance.

Riskier investors may be able to contend with the above issues, given the company’s low valuation. Investors need to inquire if the company is generating enough cash flow to satisfy an “increase in sizeable orders for new projects using our WFDS(TM) solutions, notably for two major installations in Inner Mongolia and Sichuan.”

"We will need to increase our investment in our technology infrastructure, facilities and other areas of operations, in particular our product development, in order to facilitate our growth. If we are unable to manage our growth and expansion effectively, the quality of our products and services, and in turn, our customer support, could deteriorate and our business and results of operations may suffer."

Liquidity:

We are unsure of TSTC's plan to tap the equity market as it did not adequately address capital needs in the 2010 first quarter filing. (Liquidity and Capital Resources section was scant). We find this unacceptable. Liquidity sections typically include a statement of the adequacy of the company's capital position for the next twelve months. We are speculating that the need to raise money may be a priority for the company.

Although its cash balance stands at $10.0 million, its cash flow from operations for the 2010 first quarter was negative $1.1 million. In order to derive a final conclusion on liquidity needs investors would need to gain clarity on TSTC's 2010 and 2011 capital expenditure plans.

Our intent over the short-term is to build a check list to assess the risk position of firms in the ChinaHybrid space. For the time being this will consist of the following: (this list is likely to grow substantially)

- Is the company's auditor ranked in the top 100?
- Is the auditor located in the U.S.A? If located in China the PCAOB (Public Company Oversight Board) may be denied access to investigate the practices of the auditing firm. Short sellers have been using this information as a tool to validate their opinions.
- Are the company's internal controls satisfactory?
- Are their any outstanding legal issues?
- Do the company's top ten customers represent less than 10% of revenues?
- Annualized Operating cash flow divided by current liabilities is greater than one. The higher the better. (We will adjust current liabilities for non-cash items).
- Cash divided by current liabilities is greater than one. This is the most conservative liquidity ratio. The higher the better.
- Is the company buying back stock?

Criteria	Meets Criteria	Notes
Top 100 Auditor	Yes	Mazars CPA Limited (member of the Praxity alliance which ranks among the top 10 of international accounting firms)
Auditor located in the U.S.A	No	Hong Kong
Satisfactory Internal Controls	No	Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective due to the fact that the material weaknesses in the Company’s internal control over financial reporting described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 have not been remediated as of Evaluation Date, although steps have been taken toward remediation during the quarter ended March 31, 2010.
No Legal issues	Yes	None Found
Customer Concentration	No	2 customers accounted for 90% of the Company’s total operating revenues as the 2010 first quarter. All of our agreements with our customers are for short term projects or sales of equipment.
Cash Flow Ration is Greater than 1	No	Negative
Cash Ratio is Greater than 1	No	0.20
Buying Back Stock/Insider Buying	No	n/a

GeoTeam Note:

Short term and risk adverse investors should be aware of the quality issues currently present in the ChinaHybrid Space, questioning the validity of what seem like solid fundamental stories. It is beginning to get ugly so be cautious and understand that more pain may have to be endured, as ChinaHybrids are easy prey for short investors. The broad stereotype that is being applied to these stocks appears unfair, but we can’t ignore the psychological impact this can have on investors’ portfolio decisions. If history is our guide, fear will eventually create an immense opportunity to invest in the companies that prove they can meet quality litmus tests and enact shareholder friendly moves. Credibility can also be restored if independent legal/SEC opinions validate accounting practices currently in question.

***Important GeoTeam Note: We have yet to verify if the Chinese filings for ChinaHybrid stocks we monitor match respective SEC filings. We are in the process of completing this task. Conservative investors may want to limit exposure or buy put options on stocks, that have this availability, as insurance against long positions, until we publish our findings. Odds are we will identify some promising companies that will fail this litmus test.

GeoBargain Notes

Mon, 05 Jul 2010 04:00:00 GMT

¹Added to the GeoBargain list on September 24, 2009 @ $6.42
Removed from the GeoBargain list on January 6, 2010 @ $24.40
²Added to the GeoBargain list on February 8, 2010@ $15.36

Catalyst: Strong EPS growth was on the horizon; Account receivable position was improving; Bullish guidance.

¹Peak performance: Reached a high of $24.94 on January 1, 2010

²Peak performance: Reached a high of $22.20 on February 23, 2010

Current Price: $8.00

Current road block: Internal control issues; Weak account receivable position; Cash and operating cash flow position do not cover current liabilities; Dilution door is open; No net income or EPS guidance; Short investors have "attacked" TSTC.

Investors must be keenly aware of a few issues:

1. Dilution: In March 2010, TSTC filed a form s-3 leaving the door open for an offering. This will weigh on investors minds and likely limit TSTC appreciation potential until more clarity on this issue is received. The fact that Roth Capital has picked up coverage also could lead some to believe that a raise may be imminent.

2. The high account receivable position is still present. Part of the reason for the stock's initial rise was probably due to an improved AR position and comments from management of expectations of continued improvement. Management has informed investors that a high AR position is the nature of its business, where payment terms are determined by a few major customers:

Still, a high AR standing is a psychological barrier for investors and could increase the need for a capital raise since it could be postulated that money would not be available in a timely manner to expand operations.

3. "The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of the Renminbi may materially and adversely affect our cash flows, revenues and financial condition. For example, to the extent that we need to convert U.S. dollars we receive from this offering of our common stock into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar could have a material adverse effect on our business, financial condition and results of operations. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our common shares or for other business purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of the Renminbi we convert would be reduced. Any significant devaluation of Renminbi may reduce our operation costs in U.S. dollars but may also reduce our earnings in U.S. dollars. In addition, the depreciation of significant U.S. dollar denominated assets could result in a charge to our income statement and a reduction in the value of these assets."

4. We have followed the TSTC story for sometime and have witnessed that the company has missed guidance in the past. This is possibly why the company may have stopped issuing net income guidance.

Liquidity:

We are unsure of TSTC's plan to tap the equity market as it did not adequately address capital needs in the 2010 first quarter filing. (Liquidity and Capital Resources section was scant). We find this unacceptable. Liquidity sections typically include a statement stating if the the company's capital position is adequate for the next twelve months. We are speculating that the need to raise money may be a priority for the company.

- Cash divided by current liabilities is greater than one. This is the most conservative liquidity ratio. The higher the better.

- Is the company buying back stock?

Criteria	Meets Criteria	Notes
Top 100 Auditor	YES; member of the Praxity alliance which ranks among the top 10 of international accounting firms	Mazars CPA Limited
Auditor located in the U.S.A	NO	Hong Kong
Satisfactory Internal Controls	No	Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective due to the fact that the material weaknesses in the Company’s internal control over financial reporting described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 have not been remediated as of Evaluation Date, although steps have been taken toward remediation during the quarter ended March 31, 2010.
No Legal issues	Yes	None Found
Customer Concentration	No	2 customers accounted for 90% of the Company’s total operating revenues as the 2010 first quarter. All of our agreements with our customers are for short term projects or sales of equipment.
Cash Flow Ration is Greater than 1	NO	Negative
Cash Ratio is Greater than 1	NO	.20
Buying Back Stock/Insider Buying	NO	n/a

GeoTeam Note:

Short term and risk adverse investors should be aware of the quality issues currently present in the ChinaHybrid Space, questioning the validity of what seem like solid fundamental stories. It is beginning to get ugly so be cautious and understand that more pain may have to be endured, as ChinaHybrids are easy prey for short investors. The broad brush that is being applied to theses stocks appears unfair, but we can’t ignore the psychological impact this can have on investors’ portfolio decisions. If history is our guide, fear will eventually create an immense opportunity to invest in the companies that prove they can meet quality litmus tests enact shareholder friendly moves. Credibility can also be restored if independent legal/SEC opinions validate accounting practices currently in question.

Comments & Business Outlook

Fri, 14 May 2010 04:00:00 GMT

Based on the revenue Telestone expects to generate from its four new branches and updated business outlook, the Company is revising its 2010 Revenue Guidance from $118.0 million to $129.4 million, representing an 80.0% growth YOY. The Company expects to generate gross margins of at least 42.0%. Guidance is based on the following assumptions.

"We are pleased to have delivered significant growth in the first quarter of 2010," said Han Daqing, Chairman and CEO of Telestone. The first quarter is typically a time when we secure new contracts while billing out projects we finished in the previous year. During this first quarter, we saw an increase in sizeable orders for new projects using our WFDS(TM) solutions, notably for two major installations in Inner Mongolia and Sichuan. China Mobile, China Unicom and China Telecom, the "Big 3" carriers in China, continue to invest heavily in China's 3G network build-out and general telecom infrastructure as China's economy continues to grow. We believe the Big 3's focus on enhancing networks to support 3G and eventually 4G transmissions will continue to drive strong demand for our network services and WFDS(TM) solutions throughout 2010 and beyond, which is also supported by favorable government policies."

GeoBargain Notes

Fri, 14 May 2010 04:00:00 GMT

Telestone Technologies reported improved first 2010 quarter financial results yesterday evening.

	Q1 2010	Q1 2009	% Change
Net Sales	$11.1 M	$7.9 M	41.0%
Gross Profit	$4.9 M	$4.7 M	5.10%
GAAP Net Income	-$1.1 M	$1.1 M	-199%
Non-GAAP Adjusted Net Income	$1.5 M	$1.1 M	28.3%
Non-GAAP Adjusted EPS	$0.14	$0.11	26.6%

The company exceeded analyst EPS estimates of $0.12.

The bad news is that the DSO (Days Sales Outstanding, or receivables still not collected expressed in days) figure of 673 days might appear out of control to many investors. Part of the attractiveness of the TSTC story had been that management was bringing the DSO number down. The company also had negative a cash flow position for the first quarter.

We feel that this situation increases the possibly of yet another equity raise in the China space.

Add to this, the company's guidance includes a laundry list of assumptions that may not ease investors' minds.

Continued ability to sign contracts and complete installations in a timely manner
A favorable macroeconomic environment in China
The Company's expectation that integration of telecommunications, TV & radio broadcasting and internet access networks in China will begin in 2010 and the government will continue to support these measures
The Company's belief that its advanced technology and production capabilities along with strong R&D capability will provide a clear differentiation in a competitive market
The Company's ability to increase sales of it higher margin WFDS(TM) system throughout the year
Sales execution from the four new branch sales offices
Successful strategic marketing cooperation with Huawei Technologies Corp will continue to build a solid foundation for future market expansion, especially for overseas market development, and domestic market expansion

We don't want to be short sighted, but in the current market environment conservative investors may want to take extra care when considering an investment in TSTC. Quality is of the prime importance right now.

We will maintain the the GeoBargain code due to strong analyst EPS estimates of $1.93, but conservative investors may want to look elsewhere until the picture becomes clearer. Also, please note that the estimates likely do not include dilution from an equity raise.

TSTC has been on the GeoBargain list twice:

Thursday, September 24, 2009 - GeoTeam completes interview with Telestone Technologies (NASDAQ:TSTC). Company coded as a GeoBargain at $6.42.

Reached a high of $24.94 on January 26, 2010
Removed from the GeoBargain list on Wednesday, January 6, 2010 @ 24.94

After January's market pull back we added TSTC back to the GeoBargain list.

Monday, February 8, 2010 - GeoTeam places Telestone Technologies (NASDAQ:TSTC) back on the GeoBargain list at $15.36 due to recent pullback, guidance reaffirmations and improvements in accounts receivable issues.

Reached a high of $22.20 on February 23, 2010
Current price: $10.75

GeoBargain Notes

Mon, 12 Apr 2010 04:00:00 GMT

It has been a wild ride for Telestone Technologies over the last few months. We initially coded the stock as a GeoBargain on September 29, 2009 @ $7.00. Three months later the stock eclipsed $24.00, where we decided to remove it form the GeoBargain list as it attained a premium P/E. As January 2010 rolled in, TSTC shares tumbled along with the rest of the market. So, we decided to double dip and place the stock back on the GeoBargain list at $15.36, after which shares briefly rallied over $20.00. The stock is now back below $15.36, despite posting a strong finish to the 2009 year and EPS numbers that exceeded our target in GeoInvesting's initial TSTC article.

December Year	Fully Year 2009	Fully Year 2008	Period Change
GAAP Revenue	$71.9 million	$35.3 million	103.7%
GAAP EPS	$1.21	$0.68	77.9%
Fully Diluted Shares	10,404,550	10,436,128	0.0%

Source: 2010 10K Filing

Possible Reasons for weakness:

Investors may have been expecting a larger EPS number, although we are not sure why (We are speculating that investors used pre-tax margins instead of net margins to back out a net income figure from 2009 revenue guidance).
The company guidance was bullish, but non specific with regards to net income, despite being well into the first quarter.
A pessimistic investor was on the conference call.
An equity offering is likely looming on the horizon.

We may nibble down here, but investors need to be aware that this company has had a history of choppy quarters, which has stung the GeoTeam on several occasions.

Comments & Business Outlook

Wed, 31 Mar 2010 04:00:00 GMT

Telestone has provided 2010 Revenue Guidance of at least $108.0 million in revenues, 50% growth year over year.

Guidance is based on the following assumptions.

the Company's performance in 2009, where our gross revenues increased over 100% from 2008 revenues,
the favorable macroeconomic environment in China
the Company's expectation that the integration of telecommunications, TV & radio broadcasting and internet access networks in China will begin implementation in 2010
the Company's belief that it has advanced technology and production capabilities and strong R&D capability.

"We expect to significantly increase our income for the year 2010," stated Chairman Daqing Han. "We also anticipate that a higher percentage of systems installed by Telestone will be WFDS(TM) systems which command higher margins, and therefore, our annual gross margin will be at least same as or higher for 2010 than our annual gross margin for 2009, which is around 42%. With more than 900 million cell phone subscribers forecasted by 2013 in China, the requirement to upgrade networks to 3G creates a tremendous opportunity for the telecom providers and is our first priority. While we recognize China will be the principal growth driver for our business in the immediate future, we are also excited about growth opportunities in international markets," Han concluded.

Source: PR Newswire (March 31, 2010)

GeoBargain Notes

Wed, 07 Oct 2009 04:00:00 GMT

On Thursday, Sept 24, 2009 the GeoTeam took a "field trip" to Center City Philadelphia to meet the Management of Telestone Technologies Corporation (NASDAQ:TSTC). We left the meeting feeling good about increasing our position of the stock in our portfolio. The meeting prompted us to label the stock a GeoBargain that day at a price of $6.42.

Telestone provides 2G and 3G wireless communication access coverage solutions to telecom companies such as China Mobile (NYSE:CHL), China Telecom (NYSE:CHA) and China Unicom (NYSE:CHU) through its branch offices in China across 26 provinces. In general, the Company:

Develops wireless, IP, CATV access network unification solutions technologies (WFDS^TM) that are proprietary for carriers or building owners for their local information access network
Designs and manufactures telecommunication equipment used in its access network systems or sold directly to other telecom vendors.
Implements its access solutions by installing the network systems at client sites through its nationwide branch offices.

Key Considerations:

The Chinese government will spend $70 billion over next 3 years on 3G initiatives. This creates both visibility and acceleration in TSTC's business.
TSTC has aggressive goals over the next two and a half years to increase its domestic market share from 5% to 33%, indicating that it intends to capture a good deal of government-allotted spending with its new WFDS^TM technology.
International business accounts for less than 5% of TSTC revenues. TSTC plans to expand its operations in the US and other developed markets with its WFDS^TM technologies, while serving those that are underdeveloped and behind the technology curve with its mature 2G technology to extend the life cycle of its 2G products.
TSTC has issued 2009 guidance of $70 million in revenues, up 100% YOY. Based on its 2009 first half performance we assume TSTC can minimally maintain 17% net-margins, implying an EPS figure of $1.14. (15% tax rate assumption). Our EPS assumption is likely conservative as Telestone's annual after tax margins are typically around 20%.

New Proprietary Technology Could Become the Industry Standard

Telestone can address a multitude of wireless and all types fixed cable lines needs including those associated with security, phone, TV and computer applications with this new technology. Before 2009, these needs were addressed with separate solutions resulting in higher costs and less efficiency, exacerbated by architectural constraints.

The Company tackled this dilemma in 2008 and 2009 when it launched its WFDS^TM technology.

"As an all-optic network, WFDS^TM combines the technologies of ROF (radio over fiber) and its proprietary system components to transmit all kinds of information feeds into a building. This system supports all mobile telecom networks and a variety of other networks including WLAN, FTTH, telephone networks, and video surveillance systems. The benefits of the technology are substantial cost savings over old technologies, low loss in information transmission, easy and quick installation, low intrusion to the construction and minimal maintenance."

In simple terms, the WFDS^TM platform allows all aspects of a client's wireless and wired needs to be addressed as one comprehensive solution. WFDS^TM has become more significant since China began granting third generation (3G) licenses during the first half of 2009. 3G systems put greater technical demands on the communication networks in buildings due to signal strength and frequency- demands that WFDS^TM can handle much more effectively than traditional wired and wireless methods.

WFDS^TM Gaining Traction

Currently, TSTC is the only Chinese company offering a WFDS^TM type platform. Even as competition enters the market, Telestone has a significant advantage because customers will likely be hesitant to switch to another provider with unproven reliability.
Telestone believes that customers will gravitate to its services as the advantages it offers have the huge potential to save time and money;

Telestone's Hurdles

As we followed the Telestone story for a couple of years, we witnessed the stock's peaks and valleys. However, it appears that the Company finally has an opportunity to take a nice leap to the next level of growth - an opportunity which we feel was hampered by the delayed launch of 3G in China, ultimately forcing customers to postpone spending.

With the 3G launch out of the way, it appears that one more hurdle is impeding Telestone's progress. The Company has been experiencing accounts receivable collection delays as a result of multiple factors including timing of CAPEX and effective live network dates in addition to massive industry consolidation which occurred during the past year to create the Big 3 Providers of today. However, the company anticipates that this situation will improve going forward:

"During the 2009 2nd quarter reporting period account receivable turnover has improved by nearly 30% when compared to the 1st quarter of 2009."

"While we believe having a good long-term relationship with our clients is very important, we will spend additional efforts on collecting accounts receivables, and expect to perform well in the next half of 2009."

With the formal launch of 3G and an improving accounts receivable outlook, investors may begin take notice of TSTC, especially since the stock is selling at only 7 times our implied 2009 conservative EPS guidance, has no long-term debt and sports a book value per share of $5.35.

Associated Investment Risks

Apart from the nature of the business which may lend to inconsistent quarterly results, there are a few issues that you should consider when investing in TSTC.

As discussed above, Telestone's accounts receivable position continues to be an issue, and even more so when combined with the Company's high accounts payable standing. The problem is exacerbated if accounts payable becomes due prior to the Company's ability to collect cash from operations or ability to collect receivables. As the company accelerates growth it will need working capital.

Per Telestone's 2009 2nd quarter filing operating cash flow is negative, although it balances annually. We are hopeful that increasing sales and improved collections will resolve this issue.
Investors should also be aware that there is a certain level of business risk when dealing with Telestone's integration of its business plan into international markets.
Finally, Telestone needs annual certification in order to bid on new business, albeit a requirement that has never posed a problem for the Company.

Disclosure: The GeoTeam is Long TSTC

Liquidity Requirements

Fri, 21 Aug 2009 04:00:00 GMT

We believe the Chinese government's investment in the construction of the 3G system, which will cost approximately $60 billion over three years, presents an excellent opportunity for our business development. With our technology, close relationships with the telecom operators in China and experienced management team, we believe that we will continue to demonstrate increasingly impressive growth in the future.

Source: PR Newswire (August 13, 2009)

Liquidity Requirements

Wed, 24 Jun 2009 04:00:00 GMT

Telestone Collects Overdue Accounts Receivable.

Telestone believes that due to its current collection management, accounts receivable turnover is improving steadily. As compared with the previous fiscal quarter, Telestone anticipates that accounts receivable turnover of the current quarter would improve by approximately 30 percent.

The CEO of Telestone states, 'We have been taking a variety of measures to collect accounts receivable. It is of great importance to our company to effectively utilize capital and, therefore, improve the earning capacity of the company's assets. Telestone anticipates that it will continue to speed up the turnover of accounts receivable to improve our performance in the second fiscal quarter and the 2009 fiscal year.'

Source: PR Newswire (June 24, 2009)

GeoSpecial Notes

Sat, 23 May 2009 04:00:00 GMT

Investors should be aware that Telestone did not provide a financial update to its previous guidance comments from February 23, 2009.

Comments & Business Outlook

Sat, 28 Feb 2009 05:00:00 GMT

Guidance Report:

On July 10, 2008, Telestone projected an annual growth of net and gross profit of approximately 20% for 2008 as compared with 2007. At 2008 fiscal year end, the Company had not reached its projections in its guidance for 2008. Aside from the influence of Beijing's hosting of the 2008 Olympic Games in the middle of the year and the reorganization of operators in the end of the year, the failure to reach its projected profit was mainly due to the delay in execution of a large contract from Shandong Mobile.

''We expected large increases in the income for the year 2008, but due to the above factors, we did not reach our projected profits in our guidance. I, however, believe that our growth will increase in 2009. With the recent issuance of 3G licenses, we believe that China Mobile, China Telecom and China Unicom will invest approximately $41 billion in total for the construction of their own 3G networks. Telestone will benefit greatly from its advantages in technology and production. We are confident to reach our guidance for 2009.''

Source: PR Newswire (February 23, 2009)

GeoSpecial Notes

Wed, 07 Jan 2009 05:00:00 GMT

TSTC has been inching up lately. The GeoTeam™ is speculating that this may be due to the recent passage of the 3G platform in China.

Comments & Business Outlook

Thu, 10 Jul 2008 04:00:00 GMT

"Despite the anticipation of Telestone's domestic business being impacted by the Beijing Olympic Games to be held in August, in light of the Chinese telecom restructuring currently under way and the promotion plan for Telestone's new products, the Company believes that its 2008 full year revenues and net income will grow by at least 20% compared with that of 2007 With the telecom restructuring expected to be complete in 2009, Chinese telecom operators are expected to increase their capital expenditures in indoor coverage network and the Company therefore anticipates 2009 revenue increasing around 100% from that of 2008."