Is China Media Express Still a Buy?

New Finance submits:

A couple weeks ago, I mentioned China Media Express (CCME) in an article on undervalued Chinese investment opportunities. Take into consideration that the title has buy at your own risk in it, and hopefully you can see that I understand the risks with this company. This company, as is the case with many in China, is high risk but also high reward. CCME seemed worth the risk.

From a valuation standpoint, they were and are a screaming buy. Their revenues are solid and their margins seem appropriate. According to their records, cash on hand is healthy and they are growing very quickly. Starr is convinced they are legitimate and they are audited by Deloitte. Taking everything at face value, along with reaching out to some of my contacts in China, it seems like a good story. So, I added them to my list of cheap China picks. I did this knowing full well the risks inherent not only in CCME, but in Chinese ADRs as a whole. Recently, however, there has been some negative press that needs to be sorted out before I regain confidence in the stock. Last week, claims were made by a few research firms that CCME had grossly overstated their revenues, lied about certain crucial aspects of their business and made other egregious errors typical of a pump-and-dump scheme.

Normally I have no time for research advice from shorts. Their spin is self-serving and their views on companies as investments can be hacked at best. Also,

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