Why NIVS IntelliMedia Is Undervalued

|
Includes: CHA, CHL, CHU, NIVS
by: Dutch Trader

NIVS IntelliMedia Technology Group, Inc.(NIV), was listed on the NYSE Amex in March 2009 (IPO price $3.50). The company, through its wholly subsidiary NIVS Holding Company Limited, designs, manufactures, sells and markets audio and video consumer products.

The company predominantly operates in China but also sells and ships its products to diverse markets in Europe, Southeast Asia and North America. The two primary products lines offered by NIVS include 250 “standard/traditional” products (including theater systems, speakers, shelf-stereo systems, DVD players, DVB set-top boxes, televisions, portable digital players and related products) and 30 “intelligent” audio and video products (including various standard products with integrated speech-controlled interface technology comprising speech-controlled home theater systems, televisions, DVD players, set-top boxes and shelf stereo systems). In addition, the Company offers an array of peripheral and accessory products consisting of remote controls, headphones sets and portable entertainment devices such as MP3/ MP4 players.

NIVS sells its products under its own brand name “NIVS” as well as to original equipment manufacturers (OEMs). The company has a distribution network in more than 60 countries including wholesalers, distributors (both provincial and regional), resellers, independent vendors, value-added resellers and hardware vendors. The company has a 2.7 million-square-foot facility in China, including a 1.1 millionsquare- foot production area and more than 1,400 full-time employees.

The company has shown impressive earnings growth year-to-date and a good relative financial position because of the stock offering in April. Despite this, the stock price lags the last week's overall sector and market indices.

NIV achieved solid second quarter results backed by sales of intelligent audio and visual products, OEM cell phone sales, and the remainder of the order from China Telecom (NYSE:CHA). EPS grew 27% year-over-year to a second quarter record of $.14, despite the dilutive effects of the added shares from the stock offering completed this quarter. Revenues increased 90% YoY to an all time high of $77.6 million. Mobile phone sales were a significant contributor to revenues this year compared to last year, a trend expected to continue going forward. The company's core business, intelligent audio and visual products, offered a sizable contribution to revenues as well. As NIV is able to provide additional brand name phones to China Telecom and presumably China Mobile (NYSE:CHL) and China Unicom (NYSE:CHU) in the future, growth is secured for the future.

The valuation is very attractive with a book value of $2.36 and an EPS expectation of $0.60 this year. Therefore the stock price of $2.23 doesn't reflect the promising future. In Q4 the IT spending cycle should be fueled by continuing electronic demand in the consumer area. Christmas should also play an important role, with high smartphone demand.

Disclosure: Long NIV