Qiao Xing Universal Telephone: The Cheapest Chinese ADR Around?

Qiao Xing Universal Telephone (XING), a Chinese company that operates in mainland China, is engaged in the hot hyper-growing market of telecommunication terminals and equipment, including the production and sale of mobile phones and accessories.

For the second quarter of 2007, the company reported total revenues of $129.7M and a net income of $116.5M, or $3.3 per share. Excluding a one time $96M gain, XING earned $20.5M, or $0.58 per share in this quarter.

Excluding that one-time gain for the second quarter, first quarter numbers are pretty much the same. Generally speaking, the company earns $80M to $100M a year on a total of $450M-$550M in revenue, and it's growing fast. On Tuesday, November 27, Mr. Wu Rui Lin, the company's chairman said: "Firstly, we will continue to take steps to ensure growth of at least 20- 30% per annum in the next five years..."

Let’s assume a 'normal' growth of only 10% per year for the company for a second. The company makes $80M per year in net income. What is the 'normal' pricing for such a company? Let's be fair and take earnings-multiplier of 15. What do we get?

We get 15 X $80M = $1.2B

The company's market cap is currently... $295M !! That's right only 1/4 of my modest calculation. Next year the company is expected to report more than $100M in net income, and if you'll allow me to take a more realistic earnings-multiplier for such a 20%-growing company, the calculation should be:

30 X $100M = $3B or $85 a share.

That's right, 10 times yesterday's closing price.

And that, my friends, will be my target for the end of 2008.

Disclosure: Author has a long position in XING

Comments

[ChinaMart:]

XING is a stock that has earned a low PE through their non-investor friendly habits of repeated late filings, poorly worded press releases with incorrect English, surprises losses due to derivatives, a terrible IR department, plans to change direction and aquire interest in a mining company, etc.

This is NOT how a REAL Nasdaq company operates to attract investors- both individual and institutional.

XING is worth what the market is paying for it now, and not much more IMO. XING will only see $85/share after a 8:1 reverse split.

2007 Dec 19 11:31 AM

[TechnoSurfer:]

Although I agree with parts of ChinaMart's comments, I definitely believe that XING's shares are going to move to 40-50$ per share range in maximun 12-18 months. There are big names in institutional ownership list like Credit Suisse Asset Management, Merill Lynch & Company and Morgan Stanley & Co.

ChinaMart, I hope you won't miss the train !

2007 Dec 19 03:55 PM

[ChinaMart:]

XING isn't a train, it's a train WRECK.

"earnings" just announced show they lost .04/share in the last Q (which should have been filed over a month ago).

XING is a $5 stock, at best.

2007 Dec 20 11:47 AM

[rxdx:]

Not sure what to think about XING. But two facts are disturbing: 1. The majority of shares are controlled by one family whose claim to telecom expertise is dubious. 2. The company keeps dilluting their shares. Hopefully this will be the last disappointment XING has delivered. It is a stock that is highly volatile and can make you a lot of money as fast as it can lose it (like, say, LDK) but LDK is far better managed.

2007 Dec 20 04:30 PM

[theteacher:]

why xing is in Global select market which include big names like intc aapl,
other chineas company are in global market or CAPITAL MARKET.
also, what is impact on xing result from new production capacity, is it cheaper than outsourcing.

2008 Jan 16 05:18 AM