Screen shot Capital Week published on Dec. 1, 2007
Anthony Bolton is the legendary fund manager for Fidelity (the mutual fund company Peter Lynch made his name). He visited China lately and answered investing questions from reporter of Capital Weekly.
First a little background. Longtop did its high profile IPO on Oct. 24, a short month ago at NYSE (think how much market sentiment has changed since then). As the first Chinese software company listed in NYSE, Longtop is in the sweet spot in terms of the customers they serve: the Chinese banks. Chinese banks, both the big 4 and the (smaller) city commercial banks, have lots of money to spend lately, after raising tons of cash through IPO in recent years.
On the serious side, the banks do need to improve the workflow and upgrade their IT system, so that their customers don’t have to wait one hour for over the counter service, or wait half an hour for ATM machine. The banks are also targeting the newly minted middle class for personal banking, credit card and other services. After all, it IS a competitive environment. China opened up RMB services to foreign banks early this year. If people can not get the services at domestic banks, they may go to foreign banks.
Here are two common questions for Longtop.
1) The usage of the IPO proceeds.
According to its F1 prospectus, the company plan to use the net proceeds of this offering as follows:
Week in progress 11/25 to 12/01/07
1) Panera to buy back up to USD 75 millions (worth) of shares from a broker (see the news here). The is in contrast to Crocs panic buy back announced on Nov. 1, amid the sharp fall of its stock price after it announced Q3 result. Last I looked at its 10Q at SEC: “On November 7, 2007, the Company repurchased approximately 524,000 shares for a total of approximately $25.0 million”. That is $47.70 per share (currently CROX traded just under $40). Good shoes maker, not so good stock traders?
2) iPhone delayed in China. The main problem is Apple and China Mobile can not agree on the how big a pie each will get, according to NanFangdaily (Chinese). American expatriate entrepreneur (in Beijing) Billsdue predicted the outcome before hand.
3) J. Crew reported a good quarter. Here is a link to its conference call (webcast). I found its CEO Millard Drexler had good insights about fashion and fashion business.
4) China Ping An Insurance (sh601318) paid 1.3 b Euro for 4% stake in Fortis, a Belgo-Dutch financial group.
I read some interesting Chinese posts from soufun today. I just put the links here: thought we may get a better picture of Shanghai housing market by reading them all.
Pudong new housing one day tour 浦东看房一日游.
Songjiang overview 松江新城高品质公寓 (the author appears to be biased toward Poly since he/she is Poly West Bay 保利西子湾 owner); also post about lastest price at 保利西子湾.
Vanke housing buying experience 谈谈买房经历和体验 (this one is funny, in progress); another guy one month house hunting journey 一个月火速抢房日记.
Note I have not toured any of those properties, so use the reviews as your reference…
Since the economy is so bad, I am going to give away some gift certificates for restaurants.com. Just do my part to boost the US economy 🙂
Seriously, I am going to give away up to Four $25 gift certificates (valid in the US only), to the loyal supporters and friendly commentators of this wonderful stlplace. Note “this blog looks nice” etc. does not count. Tell me what you really think: you will likely to receive the certificate that way. Also note I do not decide this solely on the number of comments (you left). Or if you would like to give some practical advice regarding this blog, I will appreciate it very much too. You can find my email address at the right side bar under author.
This runs from now until Christmas Dec. 25. All the friends are encouraged to participate, but not family members. Note this is mostly for fun and my token of appreciation, as you can buy a $25 certificate for under $5 from eBay. Also some restrictions from restaurants apply.
For participating restautants in your area, click here.
(Updated) I used the revenue number from company report and calculated the growth rate, using google spreadsheet. Revenue, in thousand of $, the following columns may not align right, click the G speadsheet above if you like.
FY ending
3/31/2007 3/31/2008 growth rate 3/31/2009 growth rate
Q1 9238 11530 24.81% ?
Q2 11204 20200 80.29% ?
Q3 11581 15500 33.84% ?
Q4 7750 10770 38.97% ?
Total 39773 58000 45.83% 80000 37.93%
Couple things:
1) Seasonality: the past quarter (ending Sept. 30) is the strongest. The company did say summer and fall are typical strong quarters. Note the seasonality is quite different from typical US software company, where Q4 (quarter ending Dec 31) is ususally the strongest.
2) Healthy growth overall. The recent boom can be attributed to the boom of Chinese banking industry. The question is can the company can sustain this 40% growth rate?
I went to do my annual eye exam today. I noticed they offer an add-on service named QuantifEye(R), which is a macular degeneration test cost $20 (not covered by insurance). Curious about the test, and because I worked a lot before computers (thought that would make my eyes aging faster than my parents), I did the computer test. The good thing is I got a good result (score 62) which is exceptional good. Interestingly, the test is developed by a St. Louis based company called ZeaVision.
I remember a short while ago, when I visited dentist, they offer a $60 (again not covered by insurance) oral cancer test. Both things made me to think that doctors (at small clinics) increasingly offer those small tests. One thing for sure this is a boom for the test developers (companies). And clinics, the distributors of test developers, can also make some money.
Think that relation smilar to the relation between ETS, Education Test Service, which develops SAT, ACT, TOEFL etc., and Prometric, the administrator of those tests…
The other day, I heard some interesting words on the TV:
If you want to be happy for a day, buy a lottery ticket; if you want to be happy for a week, buy a new car; if you want to be happy for a year, (don’t remember exactly) buy a new house; if you want to be happy for the life, find your soul mate.
While I do not agree everything been said here, I do think house is a very important part of people’s lives. Recently the slowdown of US housing market, and subsequently the sub-prime loan crisis has burned many home buyers and investors. At the same time, I have seen my family member and good friend moving into brand new houses. It may not the perfect or best time in terms of the housing market, but I think the happiness of “owning the home” is not over rated. This is further validated by my mom’s happy voice when she told me the news of “home buying”.
(an open house I visited a while ago)
I heard these UGG shoes (boots more exactly) from my friend Sophie not long ago. Today when I visited the west county mall, I stopped by the Journeys and Nord Strom, and I saw those boots were both displayed on the predominant spots. Not surprisingly, I also saw quite a few people are wearing those funky (fashion) shoes. Being curious about the stock, I looked at company Deckers (DECK) which owns UGG, and attributes its growth mainly to UGG boots lately. Here is the Q3 2007 report. While the recent growth is very impressive, I think:
1) Its sole dependency on UGG for growth could make it more vulnerable to the change of consumer taste;
2) It got majority of revenue from the US market, a slowdown in US economy could spell trouble for them;
I will add more comments if I got time to read its 10Q and 10K.
“For every Focus Media, there are 10 AirMedia or VisionChina Media”.
I took bus and taxi from time to time when I was in Shanghai, because I don’t have my own car. One thing I notice is those LCD screens on bus, metro and taxi. There are news on the bus LCD, the ones in metro and taxi are mostly advertisement. Twice have I seen the NFL (American national football league) stuff on metro. Anyway, I think this LCD advertisement thing should make money, both for the transportation companies and advertisers.
Now one such company, VisionChina Media (proposed ticker:VLSN), is coming to Nasdaq. Here is the excerpt from Pacific Epoch: Out-of-home advertising network VisionChina Media Inc. set the price range for its planned Nasdaq initial public offering at US$9.50 to US$11.50 per share, according to a filing with the US Securities and Exchange Commission. VisionChina plans to sell 13.5 million American Depository Shares in the offering to raise up to US$155 million. Credit Suisse, Merrill Lynch & Co, CIBC World Markets, and Piper Jaffray are underwriting the IPO. VisionChina generated net income of US$3.7 million in the first nine months of 2007. VisionChina uses real-time mobile digital TV broadcasts to provide content and advertising on mass transit systems in China. The company began operations on April 8, 2005. VisionChina plans to trade under the ticker “VISN”.
A thousand words 