NIVS IntelliMedia Technology Group (NIV) develops, produces and sells audio and video equipment and set-top box products. The company has developed an established brand name in China with a customer base that of wholesalers and distributors of electronic products on a brand name as well as an original equipment manufacturer ("OEM") basis. Their products are distributed on a global basis, with China and Asia currently their largest markets.
NIV products include digital audio systems, televisions, digital video broadcasting (DVB) set-top boxes and DVD players as well as peripheral products and accessories including remote controls, headphones and portable entertainment devices such as MP3 players. The Company categorizes their products into "standard/traditional" and "intelligent" audio and video product segments, with a product line-up that includes about 250 standard products and 30 intelligent products.
Standard products include mid-and high-end audio products including premium home theater systems, speakers, shelf-stereo systems, televisions, DVD players, DVB set-top boxes and portable digital players, among others. The growth of this segment has been driven primarily by increased consumer demand for flat screen digital televisions and for audio and visual products that complement those flat screen televisions. Emerging markets such as China, Russia and India, as well as additional geographies, have been key drivers for growth in this segment, as well as online.
Intelligent products incorporate the company's Chinese interactive voice recognition speech technology into their traditional audio and video products, and permit users to control these products through spoken commands. The market for intelligent products is newer and less developed than that for standard products, and the market for Chinese intelligent products is less developed than that for products based on Western languages.
The company has devoted considerable efforts to R&D efforts on their Chinese voice recognition technology, which they believe will aid the company in diversifying their product line as well as generating higher profit margin products. The company is pursuing partnerships and strategic alliances in a variety of settings in order to capitalize on their technology which they feel is applicable to a host of devices including mobile phones, entertainment devices and GPS devices.
The company believes that the technology will be useful for entering SMS messages, mobile instant messages and mobile email instead of using keypad entry as well as additional uses for voice-activated calling, among numerous other potential applications. The company's customer/distribution base consists of wholesalers and distributors of electronic products, including resellers, specialty retailers, international and regional chains and mass merchants, selling the company's products on a brand name as well as an original equipment manufacturer ("OEM") basis.
Wal-Mart (NYSE:WMT) is a distributor, among many others. China and Asia are their largest markets, however their products are sold on a global basis including Europe and North and South America. On a geographic basis, for the first three quarters of 2008, the company's revenues were derived from China/Hong Kong: 51%, Other Asia: 29%, North America: 10%, South America: 6% and Europe: 3%.
For the first three quarters of 2008, OEM sales accounted for approximately 65% of the company's revenues and self-branded products accounted for approximately 35%. Over the past few years the company's revenues have been increasingly coming from self-branded products as the company has been focusing its strategy and marketing efforts. The company's outsourced solutions for OEMs include engineering, design, assembly, testing, distribution and after-market services.
The company's OEM customers include Samsung (OTC:SSNLF) and Hyundai, among many others. China is currently the second largest consumer market for electronic products in the world. There are several advantages to manufacturing in China including low labor costs, access to raw materials and access to an active electronics supply chain.
In early March, NIV issued preliminary 2008 year-end results, including expected FY08 revenue of $143.6M vs. $77.6M for 2007, up 85% year-to-year. The Company anticipates FY08 net income of about $13M compared to $8.5M for 2007 (up 53% year-to-year). Sales growth was driven by a variety of factors including a greater number of product offerings, especially digital equipment and LCD products, televisions and intelligent audio and video equipment, increased manufacturing capacity and distribution capabilities, and price increases, especially on their standard audio and video products.
As of year-end and as reflected in the Company's preliminary FY08 results, NIV had cash/equivalents of about $0.5M, but will be receiving $1.2-$1.4M from recently completed public offering, which will be included in their 1Q09 results. As of 3Q08, NIV had about $3.1M in cash/equivalents, $64.7M in total debt, and $18.2M in additional liabilities.
The high debt levels will be reduced by about $7.8M after the public offering due to an exchange for stock. NIV's debt/equity ratio was approximately 178% and their debt/total capitalization ratio was approximately 64%, however adjusted for the public offering these figures should be approximately 125% and 55%, respectively.
The current market cap for NIV is about $140M or 1X preliminary 2008 revenue and 0.75X the Company's annual revenue run-rate. NIV has exhibited significant revenue growth, increasing from $1.8M in 2003 to $38M in 2006, $78M in 2007 and a preliminary reported amount of $143.M for 2008. The Company's current quarterly run-rate is $45-$50M, equating to a current annual run-rate of $190-$200M.
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