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Summary

  • ChinaCache reported Q214 earnings.
  • Stock remains a Strong Buy despite stock gains since coverage initiation.
  • The fast growth of the last year was anticipated, but the ongoing lack of investor attention remains a frustration.

After a period of high spending in order to capture market share, ChinaCache (NASDAQ:CCIH) is back to reporting solid bottom line numbers. The leading provider of CDN and application delivery services in China reported that Q214 revenue surged 34% over the prior year period to reach $55.8 million. The numbers slightly exceeded guidance for the high end to reach $55.5 million. Guidance was for revenue to surge another roughly 9% sequentially to the range of $60.4 to $61.3 million for Q3.

The really positive news is ChinaCache saw Q214 adjusted EBITDA surge 134.6% over the number last year. In order to grab market share in the fast growing CDN market in China, the company has spent the last year focused more on the top line. The company was able to keep operating expense growth in check to allow the expansion in the bottom line. The improvement in adjusted EBITDA led to a solid profit of $0.07 per share.

The investment thesis from the article "ChinaCache: China Internet On The Cheap" remains intact and is further enhanced with the company producing revenue growth at the same rate of the stock gains in the last year. The stock was absurdly cheap back at the time of the previous research and based on the new revenue runrate of $240 million, ChinaCache actually still trades at 1x EV. Remember, the company has cash of around $100 million with a market cap of roughly $330 million. The majority of the high quality tech stocks from China that performed IPOs a few years back trade at much higher multiples of EV providing lots of upside for this stock.

Source: Update: ChinaCache Q2 '14 Earnings

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