Challenging macroeconomic environment - the Chinese government
implemented credit control policies to rein in soaring real estate prices. In
addition, curbs were imposed on second home purchases and FDI flows into real estate investments. This effectively dampened demand for luxury homes. Given that ASA derives about 50% of its revenue from housing development projects, Kelive research management predicts that revenue will continue to drag through FY08.

Further cost-cutting measures implemented - In an attempt to reduce costs, ASA is planning cuts to sales and administrative staff. ASA is also shifting away from branch networks and relying more on distributors to sell its products. Whether these measures will bear fruit remains to be seen. The immediate concern still is that ASP will continue to remain under pressure due to the poor positioning of the company and industry fundamentals.

No compelling value proposition - They forecast FY08 revenues to drop to $60m from $66.5m in FY07 but expect losses to narrow to $17.5m from $33.5m due to the cost-cutting initiatives. Given the lack of visibility on the business outlook, it seems that there is no positive near term
catalyst and thus they have downgraded the stock.