Xinhua Finance Media: Why I Took a Chance on this Chinese IPO

I originally thought I should wait some time before jumping in on Xinhua Finance Media (XFML). Well, I did wait, but not for long. Around 3:00 pm yesterday when I saw the stock lost almost two dollars to around $11 per share from its open price, I placed an order and bought 360 shares XFML at $11.10, not exactly the lowest point of the day, but not far from it either. The stock eventually close at $11.35, slightly higher than the price I paid.

So far I have bought two Chinese IPO stocks. China Life (LFC) is spectacular while GreenTech (GRRF) is a disappointment. For Xinhua Finance Media, I had a mixed feeling. Being the first finance media company listed here in US, the stock will certainly attract investors who hope to make profits from XFML’s unique position and broad reach (its financial TV program has more than 210 millions viewers). On the other hand, XFML relies heavily on traditional media (TV, radio, and print) to generate advertisement revenue. While the business is well diversified, the growth rate could be moderate. In 2006, XFML had a revenue of $59 million and net income of $3.3 million. Thus, I probably won’t see the stock price skyrocket as that of China Life in the past year.

For the last five Chinese IPO stocks, three of them (Canadian Solar Inc. (CSIQ), China GrenTech Corporation Limited (GRRF), New Oriental Education & Tech. Group Inc (EDU) traded flat or lower in the first two months after going public. Even high-fly stocks like LFC and Baidu (BIDU) went down shortly after their IPOs. Thus, if you are interested in XFML, you may want to wait a little bit to find the right entry point.

Comments

[jerry parker:]

dude - your commentary is filled with inaccuracies...i can't believe you'd write all those items before checking the facts. BIDU, LFC, and EDU traded below after the IPO? are you kidding me? these stocks all rose 20%+ on the first day and continued to rise...never falling below the IPO price. the truth is that breaking the IPO price has a very negative psychological impact for investors and the underwriters did a huge disservice by pricing it too high. of course, when the IPO includes selling shareholders like the CEO in xinhua's case, the CEO is trying to price at the highest possible price. from my experience in examining chinese stocks, it's best to invest in high growing co's or really really low p/e companies. xinhua is unfortunately in the middle...and probably not the best china play among investor options.

2007 Mar 12 10:53 AM

[Sun:]

Jerry: If you look at the how BIDU, LFC, and EDU moved after their IPOs, you know what I meant "went down." EDU opened at $25.36 on Sept. 15, 2006 and stayed around $25 until Nov. 7, 2006. BIDU opened at $66 on Aug. 5, 2006 and closed at $122, then went all the way down to $45 on Feb. 6, 2006. As for LFC, it opened at $8.7 on Dec. 17, 2003, traded as high as $13 on Dec. 29, then reached low of $7.5 on May 10, 2004. What I wanted to say was though all these traded higher when they first went public, but subsequently slided in the next several months before eventually started to take off (LFC stayed around $10 for more than one year until July 2005). So the hype of these Chinese stocks are obvious.

2007 Mar 12 04:16 PM

[China Marke...:]

247wallst.blogspot.com...

"New Oriental Education (EDU-NYSE), a TOEFL test prep company in China priced above its estimated range. It priced 7.5 million shares of its ADR's at $15.00, which is above the $11.00 to $13.00 range. "

Everyday retail investors could only get in around $22 USD. i could get in there via Etrade (I did not buy).You can look at Yahoo Finance to see EDU low for the past year.

finance.yahoo.com/q?d=...;s=EDU

Where did you get the $25.56 number and where did you get the Sept. 15th date? I wrote about EDU's IPO on Sept. 21 which said EDU is a great stock but investors must be prepared for volatility.

china.seekingalpha.com...

We all make mistakes -- I have made some.


SR

2007 Mar 12 08:57 PM

[Sun:]

Indeed I made a mistake on the open price and IPO date of EDU (probably the others as well). I used Yahoo Finance to get the data and the first trading day available on Yahoo Finance is Sept. 15 with the open price of $25.36. Apparently I assumed Sept. 15, 2006 was the IPO day of EDU. I checked my record (I don't own the stock) and found the IPO day of EDU was actually Sept. 8, 2006. It was priced at $15, but opened at $22. I don't have records for LFC and BIDU, so I can't verify the open prices of them. But the point I was trying to make was these stocks all traded lower shortly after a strong IPO. But for XFML, the hype wasn't there.

2007 Mar 12 10:00 PM

[Chimin Sang:]

Sun, why don't you tell all the people that the whole purpose of your posting here is to get more people to visit your blog site, and out of many random posts of yours, some people may click on some ads to make you some money to survive each day?

Your approach is outrageously lack of fundamental, and amazingly, of technical at the same time. Many newbies don't understand fundamental, and rely on technical, and that is understandable, but your style, if there is, is called RANDOM PICK.

2007 Mar 13 02:36 PM

[Totally a b...:]

This company is full of crap, a holding company of the parent Xinhua which is again a holding company of some other print company. The CFO of the company is a founder and CEO of his own company SBI something and is also a licensed broker in the US. What is he doing at XFML ? Plus he looks very shrewed, cunning and fishy. As if he is in only for the money. Possibly hired for his English speaking skills just to get the IPO done.

This company looks a lot like NINE where there were so many inter-relations of the CEO with other companies he founded. That fked up stock (NINE) priced at $12 opened at $13 in 2004 and is now trading at $4 something.

And finally remember this equation: Chinese IPO => JP Morgan/Credit Suisse = CRAP, POS, RUN !!!

2007 Mar 13 09:44 PM