Xunlei: Too Cheap To Ignore

Aug. 20, 2019 12:47 PM ETXunlei Limited (XNET)25 Comments
George Kesarios profile picture
George Kesarios
12K Followers

Summary

  • Xunlei had a great quarter, with revenue increasing 15.7% sequentially.
  • Cloud computing and other IVAS were up 40.6% sequentially, on the back of new clients such as Baidu Inc.
  • The company has one of the best balance sheets I have ever seen, and its market cap trades for less than its current cash position.

Xunlei's (NASDAQ:XNET) Q2'19 results were much better than I expected. Total revenues for the quarter were $47.8M, a sequential increase of 15.7%.

Net loss for Q2 was $2M vs. $8.6M for the previous quarter, and Non-GAAP net loss was $0.7M, compared to $7.2M for Q1. In EPS terms, the company lost $0.03 per share for the current quarter vs. $0.13 in the previous quarter. The company realized a gain of $6.7M for the quarter after disposing of its LinkToken operations.

Research and development expenses for Q2 were $17.8M, representing 37.3% of total revenues, compared to $18.8M or 45.6% of total revenues sequentially. The interesting thing is that the decrease was mainly attributed to reduced employee compensation costs.

Sales and Marketing Expenses for the current quarter were also lower, registering $6.8M vs. $7.6M for the previous quarter, representing 14.3% vs. 18.4% of total revenues respectively.

General and Administrative Expenses came in a bit higher at $10.2M for the quarter vs $9.4M sequentially, but were down when measuring against total revenue, which was 21.4% vs. 22.6% sequentially.

Investors are being paid to buy XNET shares

If we look at the balance sheet, the company has no debt, with total liabilities (current and long term) of only $117M, and current liabilities of $340M.

If we subtract total liabilities from current assets, the figure comes out to $223M. In other words, each share of the company's shares is equivalent to $3.30 as per the company's net liquidity position. If we do the same calculation for cash and equivalents, each share is worth about $4.40 per share.

In other words, investors are being paid to buy XNET shares, and are getting the business as a bonus.

So why are shares so cheap? My guess is because no one follows the company. There are no analysts following the

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This article was written by

George Kesarios profile picture
12K Followers
I only look at stocks that have the possibility to double over a twelve month period and stocks in which the risk/reward ratio payout is high. In addition I focus on swing trade opportunities. I focus more on valuations and risk/reward metrics as opposed to what make companies tick. I have been a professional investor for over 20 years and during the past several years an economics analyst and financial writer for capital.gr, the biggest economic news portal in Greece. I have managed money from time to time and have also done some seed venture capital projects in the past.

Disclosure: I am/we are long XNET. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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