I am looking at some internet media stocks eg SINA.
I've been LONG Lining at $17, and added some more today at $20 as it
dropped ~3% with the market.
I've done quite in depth reserch into this stock. It shows very
strong operational leverage, check out the table below i extracted
from my own excel analysis u can see with ~30% top line growth bottom
line grew by ~58%.
Besides, Mr. Li Ning is very smart and he can leverage a lot of
'cheap' R&D resources in HK and US, check out its R&D expense it's
very low vs. revenue because he doesn't do that inhouse. In his HK
office there are about 10 designers (all his inhouse R&D is done in
HK), I estimate the payroll is no more than HK$8M p.a. That probably
is his whole key desinger team, the rest is outsourced.
For most other companies low R&D% is a minus. However, I've a
contrarian view. I dont think people in China really care about the
'technology' of the sports shoes they buy, it's more a fashion than
anything. So I think keeping R&D expense low is a right move.
LiNing outsourced 100% of manufacutring to OEM. This is another thing
I like, by doing that LiNing has stronger bargaining power with OEM
and can force the OEM to absorb part of the increasing material costs
and can gain a few more points of margin.
In short, Lining in fact is a marketing and distribution company. I
like this as it can better sustain its profit margin.
trailing PE is 72, if it can maintain the same grow rate (i think it
can at least from now to 2008 Olympic), 07 PE can easily drops to ~40
and 08 at 25.
it's still not cheap but nothing is cheap especially for this one with
very direct Olympic concept.
Another newly listed is Anta Sports 2020.HK, it's a direct competitor
to Lining but it focuses more on low end products. As always I would
rather stick with the market #1.
If NIKE had its China division spin off and separately listed I would
be the 1st one to buy such stock, in terms of both PRC growth, brand
value and margin it's by far the best sports goods company I
reserached, unfortunatley it will not do such spin off.
Lining is #3, behind Nike (#1) and Adidas (#2) in terms of brand
awareness in China sports goods.
2006 2005 Growth
Revenue 3,180 2,450 29.8%
COS (1,672) (1,324) 26.3%
Gross Profit 1,508 1,126 33.9%
Gross Profit Margin 47% 46% 3.2%
Distribution Cost (901) (683) 31.9%
Admin Cost (235) (204) 14.9%
Other income 30 33 -9.2%
Operating Profit 403 272 48.1%
Operating Profit Margin 12.7% 11.1% 14.1%
Finance Cost/Income (1) 2 -169.7%
PBT 401 274 46.6%
Profit attributable to equity holder 294.8 186.8 57.8%
# of share
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Listed in HK very recently.
I didn't follow this companies after i sold my allotment of IPO
shares. can't keep too many names in my portfolio.
my other Olympic picks are FMCN, SINA, SOHU.
FMCN is currently in trouble for alleged related company trading/
kickback and being investigated by its "internal audit committee" and
also delayed its SEC filing.
I am buying at its recent dropped price as i think it will be fine.
I think those guys can settle the issue in a 'Chinese way' regardless
of whether it really has comitted any faults. I'm not going to
elaborate further what is 'chinese way'. check out who are in its
audit committee and u will have some hint if u know Chinese culture
As long as it can deliver a pretty growth story i don't really care
whats happeing inside.
On its fundamental side it recenlty acquired a comapny called "Allyes"
which is the largest online ad. agency. When u check on SINA's site
u will notice almost all of its advert is referred by Allyes. [just
click on its advert and pay attention to your browser address, u will
see the Allyes address b4 being directed to the advertiser site].
Rumour says it also acquired another company which is the largest in-
game advert agent in China.
It's growing both organically and thru acquisition. I think those
guys are very good at financial engieering and shall able to deliver
good numbers for another few years or so.
This is a speculative bet, anyone reading shall invest at your own