LIONAX announced yesterday that it will acquire 51% of Guanhua Cyber Solutions (GCS). To help investors understand this strategic acquisition, James Yang, LIONAX Chairman and CEO offers his opinion to address investor's questions.

“Why do you want to make this acquisition, after LIONAX listed in Euronext for 3 months?”
James: Actually, we have been planning for this acquisition for a while. GCS possesses valuable resources important for LIONAX's future development of Tire Pressure Monitoring System (TPMS) and Digital Pressure Sensor. Before the acquisition, our core strength is limited to automobile industry. With GCS, we can increase our business scope to the broader transportation sector, especially in China. We see good potential of integrating TPMS in the information system of public transportation. We also expect public transportation to be a key area of application of our MEMS sensors in development. Last but not least, GCS by itself is a very profitable business (over 40% net profit margin in 2007) with high growth (over 70% growth in revenue and 150% growth in net profit from 2006 to 2007). Those numbers are based on projection in November 2007 and should be reasonably accurate. Before adjustment for audited 2007 results, we will bepaying €7,659,000 for 51% of GCS, which is about PE multiple of less than 8 times. In my opinion, this is a very good purchase for LIONAX investors since most Chinese stocks are priced with PE over 30 times in major stock exchanges over the world.

Below is the comparison of LIONAX projections before and after the GCS acquisition*:

*Numbers are in thousands Euro, based on management projections

“What about LIONAX standalone business? Are you putting enough resources to grow it?”
James: We are making excellent progress in our TPMS business. 2007 is an important year for TREAD Act implementation. As of now, the total order we received is already more than 100 times that of last year. We announced our cooperation with Yutong Group recently. Some other major good news will be shared very soon, we are very confident in our capacity to deliver and create value for our shareholders. . Our next generation Digital Pressure Sensor development is going well according to our projections. I am satisfied with the progress, and we will communicate on an update soon.

“There is a recent scandal in Euronext related to a foreign stock listed in Paris. Do you have any comment?”
James: We heard about it. For LIONAX, I can assure you that the management and the employeesfocus on growing thebusiness and are determined to create value for investors. We want to make sure that investors understand and trust our business. LIONAX has operations in different countriesand has its financial numbers audited byan international accounting firm. We follow international firms best practice. At the operational level, Kysonix, which is our fully-owned subsidiary and major operation of LIONAX, is audited by the renowned French certification company Bureau Veritas every year for ISO/TS16949 certification (certificate number 206731). Their auditors came to our factory and examine our management practice and test its robustness. We are very honored to have their endorsement.

“GCS does sound like a very exciting opportunity. Can you share more of GCS's potential us?”
Sure. GCS's growth for 2008 will be at least 50% and 3 to 4 times till 2010. What is also good is that GCS already have confirmed order for over 70% of 2008 revenue projection, providing a very good visibility o the business. Not every company can do that. As already mentioned in the acquisition press release, China is still at the beginning stage of building and upgrading public transportation system for the 100 plus cities with population over 1 million. GCS has more than 80% market share in this segment. Another interesting development is that GCS's dominant position in the Public Information System gives it ownership or strong influence over most of the LCD screens in Metro, Light Rail, High-Speed Train stations.This is creating a huge opportunity for us to diversify our activities into advertising. Another company in China named Focus Media has been very successful developing a similar strategy. They own LCD screens in high-end buildings in China and run an advertising business model. It is listed on NASDAQ(symbol: FMCN) and has a market capitalization of over US$6 billion. This is a long term strategic issue we will discuss with GCS team. It represents a huge growth and diversification opportunity that has a real long term potential. Of course, for the time being, we want to make sure we solidify the ground by continuing to grow our existing businesses. I believe the acquisition of GCS offers many commercial synergies that will help us to achieve that.