JADE LJ International, Inc. (MM)

Dutton Associates continues its coverage of LJ International Inc. (Nasdaq:JADE) with an update report maintaining its rating at Strong Speculative Buy and a $4.80 target price. The updated initial report by Dutton senior analyst Sally L. Wallick, CFA is available at www.jmdutton.com as well as from First Call, Bloomberg, Zacks, Reuters, Knobias, and other leading financial portals. Hong Kong-based LJ International, Inc. (LJI) designs, manufactures, distributes and markets a full range of fine jewelry. In addition, it operates a rapidly growing chain of retail jewelry stores in China. We reiterate our Strong Speculative Buy rating on LJI's shares, based on what we view as the Company's above-average long-term revenue and earnings growth prospects. We believe that LJI's vertically integrated structure, extensive product line, and diversified customer base provide significant competitive advantages, while its expansion into the retail jewelry business in China represents an exceptional growth opportunity with the potential to contribute substantial incremental revenue and earnings long-term. LJI's first quarter revenue increased 39% year over year to $24.2 million, while diluted earnings were flat year over year at $0.02 per share. Revenue growth, gross margin expansion and expense leverage contributed to a 29% increase in net income year over year, but a higher diluted share count resulted in diluted earnings per share even with year-ago results. We continue to project full-year 2006 diluted earnings for LJI of $0.25 per share. In 2007, when we expect the ENZO division to turn profitable, we project earnings of $0.33 per share. About Dutton Associates Dutton Associates is one of the largest independent investment research firms in the U.S. Its 31 senior analysts are primarily CFAs, and have expertise in many industries. Dutton Associates provides continuing analyst coverage of over 140 enrolled companies, and its research, estimates, and ratings are carried in all the major databases serving institutions and online investors. Our annual research coverage, which currently costs US $35,000 prepaid, is 4 Research Reports, typically published quarterly, and requisite Research Notes. Dutton Associates received $85,000 from the Company (for renewal) and Investor Relations International for 12 Research Reports with coverage commencing on 10/23/2003. We do not accept payment of our fees in company stock. Our principals and analysts are prohibited from owning or trading in securities of covered companies. The views expressed in this research report accurately reflect the analyst's personal views about the subject securities or issuer. Neither the analyst's compensation nor the compensation received by us is in any way related to the specific ratings or views contained in this research report or note. Please read full disclosures and analyst background at www.jmdutton.com before investing.