It's hard to believe it was only eight days ago the equity market began to completely melt down, and only five days ago its regulation started to be completely redefined. Along the way we saw Lehman fall, we watched Merrill merge, and AIG made it to the edge of a cliff before getting reeled in. Morgan and Goldman were overhauled over this weekend as well. Yep, it's been an amazing eight days. 

Here's the problem - there was more going on last week than just the beginning of a new era for financial markets. We can't help but wonder if all the noise was a distraction from something else... like China Energy Recovery (OTCBB: CGYV). 

We were planning on continual coverage anyway, so a follow-up today was on tap. Given the situation though, a brief re-introduction may help tell this enticing story. 
 

Quick Recap

The best way to dissect this investment opportunity is simply to revisit our original coverage and make your own conclusions with all the relevant information. That includes taking about ten minutes to review the video, which supplies some information we didn't look at in the initial write-up.

If you're just interested in the thumbnail sketch (which is fine) here goes... 

China Energy Recovery - or CER - makes a power plant or factory more efficient by getting better use out of what would otherwise be wasted heat energy. 

Electricity is frequently generated by heating steam that turns a turbine. Unfortunately, only about 1/3 of the heat created is actually used. The other 2/3 is wasted. China Energy Recovery designs and builds equipment that uses wasted heat to make more steam to spin another turbine. The technology is so efficient, the process uses a full 90% of the heat created rather than just 30%. 

The end result is simply that a facility can get the same level of electrical power using only about 1/3 the amount of fuel (usually coal) currently being consumed. That lowers energy expenses in addition to reducing the amount of pollution created. 

Best of all, the equipment can pay for itself - via energy savings - usually in 9 to 18 months. 

The reason it's such a big deal in China? The state's government has mandated more power plant efficiency and cleaner power generation. The mandates aren't hollow threats either - the government has already shut down factories and plants that were found to be out of compliance with the new standards. 

Almost needless to say, the demand for this kind of technology swells each time energy commodities like oil and coal move to outrageous prices (like yesterday). With the price of these commodities not likely to ever get back to levels from yesteryear, China Energy Recovery is well-positioned for long-term growth. 
 

The Latest

Normally the high-profile staff and management of a company doesn't get a great deal of our interest; every company has impressive people steering the ship. In China Energy Recovery's case though, it really is worth highlighting. 

The most recent additions to the team are two new board members - Mr. Fred Krupica, and Ms. Mengjiao Jiang. Krupica is currently the CFO of LegalZoom.com, but has served as CFO for a wide variety of successful companies. Jiang is the Managing Director of ARC Investment Partners. Prior to ARC, Ms. Jiang was an Associate Director at Business Development Asia - a cross border M&A firm. 

He's got a ton of fund-raising experience; she's got a ton of merger and acquisitions experience. So, both should have an impact even as board members, which are typically an arms length away from actually running the company. We believe the real value they bring to the table is their extensive network of contacts. 

Last week, however, may have been the biggest personnel victory in a while. China Energy Recovery named Roger Ballentine to the board of directors. You may not know the name, but when you find out what Ballentine formerly did, you'll understand why it's such a big deal. 

Roger Ballentine was President Clinton's Chairman of the White House Climate Change Task Force, and the Deputy Assistant to the President for Environmental Initiatives. Now he's the President of Green Strategies Inc. - a consulting company that offers investment guidance in the "clean tech" marketplace, helping with marketing and business development strategies. 

Do you think Ballentine might have some clout in the arena? There aren't very many bigger names this particular company could add to the board. 

We're not being unrealistic here - a big name on your board doesn't automatically put dollars in your pocket. It sure doesn't hurt your chances for future growth though. Speaking of future dollars... 
 

The Real Backlog

We kicked off our coverage of CER a couple of weeks ago largely based on a press release regarding their sales backlog for the remainder of 2008. In a nutshell, the company had $16 million worth of business to complete in calendar 2008. Given that they'd done $9.9 million for the first half of the year, it was an impressive increase. However, it was only half the story.

In 2006, China Energy Recovery pulled in $5.5 million in business. In 2007, they did $11.8 million. For 2008, they were on track to do about $26 million. That's an encouraging trend. 

What we didn't tell you, however, was something you would have uncovered by watching the video. The total current backlog is $40 million ... $16 million for the last half of this year, and another $24 million for 2009 or later. Or, to put it another way, they've already got almost as much revenue on tap for 2009 as they'll be able to do in all of 2008 ... and we're still more than three months away from the beginning of 2009. 

While it's difficult to say just how much revenue we should expect in the coming year, we'll also point out two key facts. The first is, they've doubled their revenue in each of the last two years. The second fact is, the whole purpose of the financing they completed in April was to expand their capacity. 

It doesn't take a great deal of conjecture to combine those two factors and conclude 2009 is going to be yet another outstanding year. 

The one key difference this time around is profits. CER turned a profit in the first half of 2008, and we anticipate that those earnings will widen as the top line begins to increase throughout this year and next year. This is the core of the answer to the 'Why now?' question. Chine Energy may prove to be a very rewarding investment as things fall into place for the company. 

In any case, we urge you to revisit the original profile now that the market is settling in again. And, we suggest you view the film - we believe it will be a smart investment of your time. You may well find yourself quite impressed now that the market's smoke is starting to clear. 

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Click Here or go to http://www.microcappress.com/disclosure/ to view our compensation on every company we have ever covered, or visit the following web address: http://www.microcappress.com/disclosure/reports_disclosure.php

Pacific Shores Investments, LLC has been paid a fee of $25,000 in cash and 50,000 shares of China Energy Recovery for coverage of the Company. In addition, the Managing Member of Pacific Shores Investments, LLC has purchased 15,000 shares of China Energy Recovery in the open market with a cost basis of $2.85 per share. All of the aforementioned shares may be sold at any time without notice. Transactions are disclosed and updated weekly on the web site. 

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