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Summary

  • Beijing-based Cheetah Mobile plans to raise $162.0 million in its upcoming IPO.
  • Cheetah Mobile is a mobile app developer focused on increasing mobile optimization and mitigating security threats.
  • With impressive, consistent revenues and rising demand, we suggest investors strongly consider buying into this IPO.

Cheetah Mobile Inc. (NYSE:CMCM), a Chinese mobile app developer with principal offices in Beijing, China, plans to raise $162.0 million in its upcoming IPO.

The firm will offer 12.0 million shares at an expected price range of $12.50-$14.50 per share. If the IPO can reach the midpoint of that range, at $13.50 per share, CMCM will command a market value of $2.1 billion.

CMCM filed on April 2, 2014.
Lead Underwriters: Credit Suisse Securities LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. International plc
Underwriters: Macquarie Capital (NYSE:USA) Inc., Oppenheimer and Co. Inc.

Cheetah Mobile's Suite of Apps
CMCM offers a suite of applications designed to optimize internet and mobile performance and to provide protection from security threats. The firm boasted 362.0 million monthly active users across its applications for March of 2014.

CMCM's apps include Clean Master, a file cleaning and memory boosting app; CM Security, an antivirus and security app for the Android platform; Battery Doctor, a battery optimization app; Cheetah Browser, a safe internet browser; and many others. Many of the firm's apps have tens or hundreds of millions of monthly active users.

CMCM is a spin-off of software developer Kingsoft.

Valuation
CMCM offers the following figures in its S-1 balance sheet for the year ended December 31, 2013:

Revenue: $123,876,000.00
Net Income: $10,245,000.00
Total Assets: $150,253,000.00
Total Liabilities: $52,119,000.00
Stockholders' Equity: $25,130,000.00

CMCM achieved significant revenue growth in recent years; the firm's revenues increased from RMB140.1 million in 2011 to RMB287.9 million in 2012, representing a 105.6% growth, and to RMB749.9 million (US$123.9 million) in 2013, representing a 160.5% growth. The firm's income figures have likewise improved; CMCM posted a net income of RMB62.0 million (US$10.2 million) for 2013, a net income of RMB9.8 million in 2012, and a net loss of RMB30.2 million in 2011.

Hot Business For App Developers
CMCM competes with countless other app developers, some of which have created apps that function more or less as CMCM's do. The firm also must compete with other firms engaged in internet security, and specifically cites Qihoo 360 Technology Co. Ltd. as its chief competition in that realm.

Leadership Overview
Sheng Fu has served as CMCM's CEO since November 2010, and has been a senior vice president of Kingsoft Corporation since March 2011. Mr. Fu previously served as the vice president of Matrix Partners China and in various management positions with Qihoo 360. Mr. Fu holds a bachelor's degree in economics from Shandong Institute of Business and Technology.

Conclusion
We are optimistic on this IPO. As mobile internet access becomes more and more popular in China, CMCM should find an ever-growing market for its apps.

Though the firm will more than likely have to contend with new competitors attracted to the same market, CMCM is establishing itself as a powerhouse among Chinese app developers, and should be able to convert its experience and reputation into a strong position and continued profitability.

We also believe that the firm will continue to benefit from its relationship with Kingsoft.

Source: A Race To Profit From Cheetah Mobile's IPO