Seeking Alpha
, Google+ (438 clicks)
Long/short equity, special situations, momentum, event-driven
Profile| Send Message|
( followers)  

Sungy Mobile Ltd (NASDAQ:GOMO), a global provider of mobile internet products and services with a focus on applications and mobile platform development, plans to raise $73.5 million in its upcoming IPO this week. The Guangzhou, China-based firm will offer 7.0 million shares at an expected price range of $9.50-$11.50 per share. If the IPO can find the midpoint of that range at $10.50 per share, GOMO will command a market value of $365 million.

F-1 Form

GOMO filed on October 22, 2013.
Lead Underwriters: Credit Suisse Securities LLC, J.P. Morgan Securities LLC
Underwriters: China Renaissance Securities (Hong Kong) Limited, Oppenheimer and Co. Inc

Summary
Sungy Mobile is a leading global mobile app and mobile platform development firm. The App Annie Intelligence Report ranked GOMO among the top three publishers on Google Play as measured by number of downloads in the Applications category for the nine months ended September 30, 2013.

GOMO's platform GO Launcher EX manages apps, widgets and functions for Android phones and serves as its users' first entry point into their phones, and was the most downloaded product in the Personalization category on Google play for both 2012 and the nine months ended September 30, 2013. The platform has garnered some 239 million users in over 200 countries and regions, and reached 42 million average monthly active users in Q3 of 2013.

GOMO has constructed a portfolio of GO series products around the highly successful launcher, which in aggregate have attracted some 325 million users worldwide and reached 87 million average monthly active users in Q3 of 2013.

Valuation
GOMO offers the following figures in its F-1 balance sheet for the nine months ending September 30, 2013:

Revenue: $37,580,553
Net Income: $9,964,072
Total Assets: $38,443,642
Total Liabilities: $8,883,309
Stockholders' Equity: ($48,851,941)

GOMO has seen explosive revenue growth in the past two years, with total revenues growing from RMB96.6 million in 2011 to RMB185.2 million (US$30.3 million) in 2012, representing a 91.7% growth, and from RMB124.7 million for the nine months ended September 30, 2012 to RMB230.0 million (US$37.6 million) in the same period in 2013, representing an 84.4% growth.

The firm has been profitable since 2012, posting a net income of RMB15.2 million (US$2.5 million) in calendar 2012 and RMB61.0 million (US$10.0 million) for the nine months ended September 30, 2013.

Business
Although GOMO has created a high barrier to entry for competitors through the popularity of its GO series products, it still must face a pair of titans producing similar products: Google (NASDAQ:GOOG) and Facebook (NASDAQ:FB). Both of those competitors have capitalization, resources, and name recognition superior to GOMO. There is no guarantee that other major web firms will not attempt to produce competing products in the future, given the proliferation of Android phones and the profits that current players have generated.

Management
GOMO was co-founded by Yuqiang Deng and Xiangdong Zhang in 2003; Mr. Deng has since served as CEO, while Mr. Zhang has since served as president. Mr. Deng previously worked as an engineer with China Telecom and China Mobile. He holds a bachelor's degree in information science from Peking University. Mr. Zhang previouly served as a manager at E-commerce China Dangdang Inc. He also holds a bachelor's degree in information science from Peking University.

Conclusion
We're positive on the GOMO IPO and rate it a buy in the $9.50 to 11.50 proposed price range. We are hearing the deal is solidly oversubscribed.

The firm has made deep inroads with the Android user base, and has also established itself on the right side of profitability. The fact that the firm has handled its massively increased revenue gracefully and converted it into increased income speaks to quality executive and management performance.

Though there is always some concern in investing in Chinese firms that rely on the internet to deliver their products, given the Chinese regime's history of questionable and arbitrary behavior related to the internet, GOMO's highly international customer base (70% of GO series users are outside of China) somewhat alleviates the issue.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GOMO over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Sungy Mobile IPO Is A Go Mo