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We find unique and undervalued situations in companies who trade publicly in the U.S. Capital Markets. We focus on growth, new or disruptive technologies, mergers and acquisitions, and near term catalysts that may not yet be fully reflective in the share prices of those companies.
  • Zhaopin Reports Record Earnings... Should Investors Climb Aboard? 0 comments
    Aug 20, 2014 2:30 PM | about stocks: ZPIN

    Zhaopin (NYSE:ZPIN) means "You're Hired" in Chinese... It may also mean big profits in English. Who is this small and relatively unknown company with virtually no Wall Street coverage?

    Well, they happen to be the leading career platform in China. They listed recently on the NYSE on June 12th in a successful IPO, raising $75 million U.S. to fund rather ambitious growth plans.

    Last night the company released their Q4 2014 earnings report, and they certainly did not disappoint. Revenues rose 18.8% yoy to $45.7mm U.S, and profits easily topped expectations, rising 45% yoy to $8mm for the quarter.

    In a world of bloated valuations and promises of profits tomorrow, its refreshing to see a small grower with a healthy balance sheet that's profitable out of the gate. Gross margins were an awesome 92.6% this quarter, versus 92.7% in Q4 2013. That is definitely a net positive that gross margins have sustained that level over a year time period.

    It is quite the opposite of what a recent blogger wrote in one of his articles bashing ZPIN, in which he stated that he felt profit margins would shrink drastically yoy, and that was his basis for putting a $12 price target on shares, while hyping his own idea 51 Jobs (NASDAQ:JOBS) which had its initial run up post IPO, and now trades at a ridiculous 57x earnings.

    For the record, I'd just like to say thank you to that guy publicly, because the stock was trading anemic volume when his hit piece came out and at least short term, he enjoyed basking in his manipulation for a week or so.

    However, gravity took over, and soon after common sense prevailed. At $12.50, which was the 2014 low, ZPIN had earnings per share of .75 and a PE ratio of 14X earnings. I couldn't resist. I built a large position in the name since and am truly thankful to our blogger for the gift of an entry point.

    Now lets talk facts, not fiction. ZPIN is growing and growing fast. They have $160mm in the bank with no debt. They're solidly profitable, trading with a PE of 18xs earnings.

    Tiger Fund, which is one of the best in finding under the radar Chinese gems owns a 7.8% stake in the company. James Packer, the Australian Casino Billionaire and Co-founder of Seek Intl, which is Aussies' largest media company, owns a whopping 67% of Zhaopin.

    Even more exciting was the news on August 18th that never did hit the U.S news wires... Zhaopin announced an integration and rollout plan of a new, educational themed service through the Zhaopin portal over the next 12-16 months. That is just huge news.

    Education goes hand in hand with job placement in China, as there is fierce competition for high end jobs and there isn't a one stop shop service out there... until now.

    We believe Zhaopin shares represent a huge opportunity, a wildly compelling investment in China, and see the company becoming fairly valued at around $2 BB U.S, which would be roughly $46 per share.

    So, to answer my own question, yes, I believe investors should not only climb aboard, but yell "You're Hired!" as the train leaves the station.

    Disclosure: The author is long ZPIN.

    Stocks: ZPIN
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