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Speculating on Longtop Financial

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Last night (Oct 24 10 PM, Shanghai time) I bought some Longtop (NYSE:LFT) shares at its IPO debut. I think this is more like “gold rush”, not something a rational investor would usually do. After I bought it at opening ($27), the stock gapped down as low as $23.25 (see the pattern here?). But it reversed its trend in late afternoon and closed at $32.40, which is up 85% from the offering price of $17.50. Its Q2 2007 earning is $0.12, and year 2006 earning is $0.22.

Keep in mind for a growth company like LFT, PE ratio is not as good indicator as revenue growth. Here is what I saw from its prospectus (recent developments):

“We estimate that our total revenues, excluding revenues from FEnet, for the three months ended September 30, 2007 will range from approximately $19 million to $20 million, which is an increase of 42.4% to 49.8% from $13.3 million in the corresponding period in 2006. We estimate that our software development revenues, excluding revenues from FEnet, for the three months ended September 30, 2007 will range from approximately $17.2 to $18.2 million, which is an increase of 62.6% to 72.0% from $10.6 million in the corresponding period in 2006.”

Here is an interesting post at trader168 I read yesterday afternoon.

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LFT是本人目前唯一尚有些动力准备继续跟踪的一家China-Based的IPO上市挂牌公司。

根本原因还是在于,想进一步观察Wall Street机构投资人如何给LFT,以及中国这个巨大经济体下的该新兴行业做Valuation。具体到YTEC,其在此时仅仅是扮演了一个适时出现的中国本土该行业内参照物而已。

若从中长期发展的角度去进行判断,Wall Street的investment bankers在评估逻辑上,他们目前应很有可能是以FISV、INFY去给LFT做估值(同样有意无意地YTEC也在最近的市场表现中出现了很大的投机机会,借了不少光),感觉这应是我们观察LFT、YTEC未来走势的一个非常重要的出发点。

由FA去分析判断目前的LFT和YTEC,他们在所有方面和FISV、INFY相比,可以说应该是倍数的差异。但是,中国、印度的很多相似之处(至少在老美的眼里),更有可能是引起美国机构投资人自然而然更多地关注、投资、投机中国类似行业企业的一个很有说服力的依据。

回到LFT如何使用其此次IPO拿回来的Proceeds这个话题,我觉得这有点像是本土管理层(亦或是Underwriter出的主意)不甚成熟所做出决策中的一个小瑕疵。在目前市场略显狂热的心态下,应该可以忽略不计其可能带来的负面影响。
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I decided to buy the stock not because of this, but it did confirmed some of my thinking. BTW, I have seen other good analysis about Chinese ADRs, from the author jade_guanyin.

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