Added more longtop

Reading Time: < 1 minute

longtop logo
This morning when two stocks are traded at about same price, I sold remaining Starbucks (SBUX) , and got some more Longtop Financial (LFT). I still like the long term prospect of Starbucks, especially its international expansion. But at this time SBUX is still a slow growth US company, and it will remain so for a while.

Meanwhile, Longtop, the first Chinese IT/software company listed in NYSE, is enjoying healthy growth in the sweet spot in China: financial industry. My recent trip to China confirmed my belief of the long term growth of Chinese banks. Banks will get more sophiscated, i.e., they will use more software and IT services to improve efficiency, to figure out what customer wants, to serve customer better (shorter waiting line, maybe?)…

Here some interesting things I got when googling “东南融通”, longtop Chinese name (1 and 2, both in Chinese).

The article one mentioned the FENet buy. From what I read from prospectus (recent developments), the area FENet works on (Business intelligence), is growing very fast in Chinese banks.


  1. I think the housing market in China will grow faster than GDP growth. Both banks and leading home builders will benifit from this. I like Vanke (000002.SZ) in particular.

    Chinese stock market is seeing no cool down either. I like Citic Securities (600030.SH) in this arena.

    From my observation, health care and medical device are in greater demand due to:

    1) Aging population;
    2) People work harder in general, thus more stress, and more health care needs;
    3) As people earn more, they can spend more on discretionary health care. Cosmetic (plastic) surgery is one example.

    Currently I have Mindray (NYSE:MR). And if 慈铭体检 go public one day, I will grab its share as many as possible.

    There are many other oppertunities, as China is growing so fast lately. But I will only buy company stocks that I understand its business, and its business is sustainable.

  2. For those investing in Longtop, you really should look a bit deeper before investing. And I quote from their own listing, “Use proceeds to purchase a building, pay a previous dividend and other corporate activities”. Uh, pay a ‘previous dividend’?

    Also, you need to dive a bit further into the components that they are not telling you about. I heard that they hid behind the curtains their N. American operation as well as a recent Indian servicing acquistion due to under-performance.

  3. Yes. I did read its prospectus and am aware of both things you mentioned.

    I think it IS ok (not unusual) for them to pay off dividend to the shareholders before IPO, some of them maybe preferred shares. Those shareholders invested their money (or time), at an early stage of the company. In other words, they had bigger risk and if the business is successful, they should be rewarded.

    Hide things behind curtain. They di-invested the outsourcing division, Longtop Intl, on July 1. See Related party transactions in prospectus:

    “In February 2006, Longtop International Holdings Limited, or LTI, was set up by our subsidiary Longtop BVI and three other shareholders, Shuangjian Chen, Yufeng Liang and Neil Fitzgerald, or collectively the LTI US Founders. In January 2007, the LTI US Founders sold all their LTI shares to Longtop BVI. In March 2007, LTI acquired Minecode LLC, or Minecode, from all of the former Minecode members, or Former Minecode Members. In July 2007, pursuant to a distribution agreement with our shareholders, we disposed of LTI, and its subsidiaries (including Minecode), when we distributed LTI’s shares to our shareholders by way of a pro rata dividend…”

    They said the main reason for the divest is the profit margin for outsourcing is much lower than their main business: software dev and IT service for Chinese banks. This seems quite reasonable to me.

Leave a comment

Your email address will not be published. Required fields are marked *