More Thoughts on China Techfaith Wireless (CNTF)

Last week we received a comment regarding the weak stock price performance of mobile handset designer China Techfaith Wireless (ticker: CNTF). Since then the stock has continued to fall. A look at some possible explanations for the sharp price drop here (from readers of The China Stock Blog). CNTF's stock price performance:

CNTF chart.

Comments

[jcs_goog:]

Don't forget that CNTF is sitting on $137M of cash. Using Kaufman Brothers target of $15 as a base, that CNTF could put the cash to good use, and aggressively that all investors have overlooked the cash (including Kaufman), I estimate CNTF could be worth $22 to $23 per share. Here's my take on CNTF: schlerplotti.typepad.c...

2005 Oct 02 11:59 AM

[thor2:]

I'm not convinced by your reasoning. According to you, 15$ target is used as baseline. On top of that, assuming people totally overlooked the 137M cash, then the 'invisible' cash should have same earning ability as its enterprise value.

I do not agree because:

1) That cash is not totally overlooked. At least Kaufman's analyst should be aware of it.

2) It's hard to say that the cash itself will have same revenue generating rate as the rest part of the company.

Actually a $22 target looks more reasonable from P/E point of view. I think the $15 target is on the conservative side. A healthy growth company should have more than 20x P/E. However, I just don't buy your approach.

2005 Oct 06 01:02 PM