Month: November 2006

Categories
Saint Louis

80 20 Rule

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Last Updated on November 29, 2006 by stlplace

I heard about this 80-20 rule from a friend a while ago. It says “we spend 20% of our effort to accomplish 80% of the things; and then we spend remaining 80% of the time & effort to complete the remaining 20%…” I think that pretty well summerize what I was doing at my work lately. I think I want to add more here: the second half is more tough sometimes. Because it seems just never ending.

OK, enough about whining. I am going to do something meaningful: read some SEC filings for the companies I am interested. I have not forget writing about Chinese software companies, will resume soon…

Categories
IPO

Interactive Brokers’ Dutch Auction IPO

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Last Updated on December 20, 2007 by stlplace

Normally as individual investors we don’t have access to the IPOs, as they are usually handled by the big investment bankers (Goldman Sachs, Merril Lynch,…), and the IPO stocks usually are sold to the institutions (a.k.a, rich people) and they can make the easy money.

This has changed by the Google IPO in August 2004, at the time the founders (Larry and Sergin) decided to try the Dutch auction so that individual investors can get a piece. The IPO was not well received because of the not-so-good market condition at the time and confusion over Dutch auction process. This time, Interactive Brokers, will follow the path of Google for its $500 m public offering. They filed the S1 prospectus to SEC today. Here is an introduction regarding how to bid.

Recently the exchange stocks are very hot. NMX (New York Mercantile Exchange) IPO was well received.

Be aware IPO stocks are usually a bit volatile, though.

Categories
China Stocks

Checked in Home Inns Again

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Last Updated on November 24, 2006 by stlplace

I mean the stock (HMIN), not the motel because I am in the US now. I know it was a little speculative, but I think it’s ok to put 20% of my “mad money” into this even after the amazing run from $22 to as high as $34. I think there are many reasons account for this.

1) It has more than 100% year to year revenue growth; it’s opening new hotels like crazy. Initially I was a bit concerned with this kind of growth in China and I talked to a friend in 2nd tier city in China. My worry is the affordbility of RMB 180 room rate in 2nd tier or inland cities because the wages in coast cities are much higher than inland cities. It seems not a big problem. On the other hand, I think they (Rujia) got better rate for real estate and labor in those cities; in other words, I believe they can maintain the profit margin.

2) The analogy of China/US top chain hotel market share: top 10 US hotel chains have 60% US market share; currently top 10 China hotel chains have 6% of the China market share. This got many people excited about its potential growth. I noticed from Yahoo Finance that there are two articles on WSJ on this lately (although I have not read it). I heard about the following rule to spot the top of a stock: when a company (and its founders/CEO) is mentioned in all these business magzines, it may be at peak. But I think Home Inns is not there yet. Hotel is pretty boring concept in the US. Wall Street analysts just started to get excited on this.

3) From consumer point of view, I think it’s attracting people who used to stay at 3-star hotels (high end) and Zhao Dai Shuo (low end). 3-star hotels in China used to cost RMB400, but with promotion now you can get it for little more than 200. The Zhao Dai Shuo cost less than 150, but they don’t get private bathroom, free Internet…I think Home Inns got a lot business travellers from both of them.

In summary, I know I made a mistake by selling it too early, but it’s not too late to buy HMIN at its current price (32.50 to 33). Yes, from traditional valuation point of view, it’s insane to buy a stock with PE of 160 . But remember at one point, was Google a stock like that? The most important is, they need to deliver the growth as expected.

Categories
Saint Louis

Happy Thanksgiving !!!

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Last Updated on November 23, 2006 by stlplace

I am watching the annual Thanksgiving parade in downtown St. Louis (from TV). The weather here is great. I went to Panera Bread and the newspaper is already gone (hint: people are gettting the newspaper ad. and do research about tomorrow’s shopping deals now). Of course you can get the electronic version from dealsea.com nowadays.

Seriously, I want to thank my family, friends and coworkers for the past year. Life is not easy from time to time, but with your support, I enjoyed a lot memorable moments and got more strength…    

Categories
Stocks

A Closer Look at Oralce of Omaha

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Last Updated on November 21, 2006 by stlplace

If you read my blog for a while, you know I am a fan of Warren Buffett. Not just because he is the second richest man in the world; it has more to do with his investment philosophy and the way he lives his life. Last night CNBC’s had an one hour show in which the reporter spend one day with Warren and I liked it very much; and I gurantee it’s much more insightful than Jim Cramer’s Mad Money show. One of the question people usually ask is “why does not Warren live in New York, the financial center of the world; and instead live in Omaha, a small boring city in Mid-west”. I know the answer because I heard it from my friend before. But Warren’s answer still left deep impression on me. He said “if I stayed in New York, I would get 100 good ideas (and get distracted). While in Omaha I can focus on one great idea”.

I think this “focus” thing is very important, be it in stock market, business, career or personal life. While I talked a lot about the mistakes I made in stock market in my “Stock Lessons” series, I think “lose the focus” is the main reason.

Continue reading “A Closer Look at Oralce of Omaha”
Categories
Stocks Web

RedHat is moving to NYSE

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Last Updated on November 19, 2006 by stlplace

It’s not news any more. There are many discussions on the Yahoo message board. Basically Redhat, which is traded on NASDAQ under “RHAT”, is applying the move to NYSE, the good old New York Stock Exchange, under ticker symbol “RHT” on Dec 12. I think it’s a proactive and smart move from RedHat management. Generally NASDAQ is a more volatile market than NYSE; and it’s especially true for RedHat stocks lately because of all these news. This move won’t get rid of all the day traders or short sellers, but it should help.

Of course, the most important things of all, is continue to provide the product and service the customers want. Here is a survey of CIOs and RedHat ranked No. 1 overall.

You can see the news here.

Disclosure: I do own RedHat stocks.

Categories
China Stocks

More about Home Inns and Mindray

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Last Updated on November 18, 2006 by stlplace

Home Inns (HMIN) and Mindray (MR) both reported their Q3 earning last week. I listened to both the conference calls. HMIN obviously did better with revenue growth: RMB 160.4 m, 106.3% year over year growth. Mindray’s revenue growth was 21.6% because of the anti-corruption campaign in Chinese hospitals. I think that growth factor determined the stock PE ratio at this time, HMIN is 162, MR is 51.

Personally I think one quarter’s number could be misleading. So let’s look at the first 9 months number. Mindray revenue growth is 41.4%; Home Inns is 125% (from RMB 176 m to RMB 396 m). So once again HMIN is the winner here. The reason again is HMIN is growing like crazy these days. They opened 25 new hotels in Q3 and have 56 hotels in development. But I still have some doubts in its growth.

1) Home Inns room rate RMB 180 is not expensive in China coastal area (where it got started), it could be a bit expensive in central and western part of the China, when we consider the wage difference here.

2) Competition: it’s heating up. Besides Jinjiang Star, Motel 168, Super 8, Home Inns’s founder Ji Qi started another chain called Hanting, which is slightly expensive than Rujia (Home Inns), and targeted business travellers.

So the question is: will HMIN’s growth be sustained for a while? My bet is their brand will help them grow for a while, but like anything else in business, nothing can grow 100% forever 🙂 

Continue reading “More about Home Inns and Mindray”
Categories
China Technology

China Software Companies II

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Last Updated on May 28, 2009 by stlplace

A commond question about China software industry is: while China leads India on hardware, manufacturing and many other aspects, why is she behind India on software? After all, Chinese are smart people too. Well, the main reason, I think, is China has domestic demand for software, while India has to compete with the western developed countries (US, UK) for the projects. Or put it in another way, when Chinese companies enjoyed the relatively “easy money” for relatively simple domestic projects, Indian companies are swimming in the ocean, fighting with bigger fish such as IBM to get the food. The result? 20 years later, when Chinese companies are still swimming in the Eastern China sea, their Indian counterparts already landed in New York, LA, and London. This is not to dismiss the effort of Chinese software companies’ growth, which I will talk about later. Let me talk a little about Chinese domestic demand for now.

In the late 80s, there were need for companies and goverment agencies in the accounting area. The companies wanted to use computer to keep track of things. The goverment wanted to standarize things so that their life will be easier (collect tax etc). Two guys (incidentally, both accounting major) started developing the software: Wang Wenjing founded UFSoft in Beijing and Xu Shaochun founded Kingdee in Shenzhen. Later on they both evolved into ERP software vendor. It’s a natural extension from accounting to ERP, because “accounting” covers a great deal of the business: from planning, budgeting, to sales, revenue and cost. Today both companies are leaders among domestic ERP vendors; and UFSoft is bigger than Kingdee. But foreign vendors such as SAP and Orcale are getting the high end of the markets, due to their product strength and better relationship with multinational companies.

We know ERP certainlly is not the only game in the town, but China software companies essentially did start on this application. Some other companies such as Hangzhou’s Sunyard developed software for the banks; Dong Ruan (NeuSoft) started software outsourcing in Shenyang and Dalian. They both grow into big players. Meanwhile, there are many smaller shops which has 20 to 100 people and they develop custom software and provide consulting services for specific industries.            

Categories
China Technology

China Software Companies I

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Last Updated on May 28, 2009 by stlplace

I thought about this topic for a while; I decided to start it after seeing the recent hypes on E-future stock. E-future claims it is the first Chinese software company listed in the NASDAQ Capital Market. This is correct but it is a bit misleading. There are two markets in NASDAQ: National Market and Capital Market. Capital market is for small capital companies; and most Chinese companies such as Netease and Home Inns (Ru Jia) are listed in the National Market. The reason I mentioned this is there are at least two Chinese software companies in the NASDAQ right now: China.com (CDC Corp) and Ninetowns. You may say many Internet companies such as Baidu, Sina, Netease and Sohu are also developing software, why don’t I categorize them as software companies?

Well, in this discussion I define software companies as the companies that develop software and sell them to the end users (mainly enterprises), by licensing (Microsoft) or sell them as a service (Salesforce); and sometimes they derive majority of revenue from support and service (RedHat). In other words, as much as we like Google and Baidu, and their fantastic technology, they are not considered as enterprise software companies. In addition to companies that develop software (and have intellictual property), I will also discuss some software outsourcing companies in China. Because they also do enterprise software development or customization for companies like Microsoft or Oracle; and they provide consulting services for the end users sometime.

When I talk to people about enterprise software in China, the most frequent word I heard is “ERP”, or enterprise resourcing planning. It seems to many people that ERP is the only thing in enterprise software world. This is obviously not true. But on the other hand, I think it is also the first area computer (software) is used in the Chinese companies. UFSoft (Yong You), one of the largest software company in China, got started in Accounting and ERP software about 15 years ago. Interestingly, about 12 years ago I wrote a foxBase program to manage the cost accounting for my first employer in Shanghai. To be continued…

UFSoft

Categories
Stocks

It’s deja vu all over again

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Last Updated on November 15, 2006 by stlplace

E-future, a not well known Chinese company, set a record for Chinese stocks traded in the US. Its stock went from $10 to $43 in 4 days. In another words, in 4 days it “accomplished” what Google’s stock accomplished in 2 years: from $100 to $400. It seems like I missed a golden opportunity to get rich fast. But on the serious side, I think there are lots of bubbles involved. I looked at the price of 3 well known Chinese IPO stocks, the New Oriental (EDU), Mindray (MR) and Home Inns (HMIN), they are all trading at about PE 50 (ttm) now. Note HMIN and MR will report tomorrow and Thursday, we’ll see the stock get a reality check after that: if it beats, it will go to the moon; otherwise it will go back to the earth 🙂

I am also looking at the NyMex, New York Mercantile Exchange’s IPO this Friday, should be as hot as today’s Google. I bought NyMex’s competitor, Interconntinental Exchange (ICE), on Nov 17 2005 (and sold it the next day), the ICE has been gone from $38 to $97 in about a year 🙁  

PS, the SEC filing of E-future can be found here.