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IPO

Emdeon: reading its IPO prospectus

Reading Time: 8 minutes

(Update 16Sept09) Brean Murry is out with a selling rating with Emdeon (source: StreetInsider). Quote:

While investors may be focusing on the potential benefit from healthcare reform, we view the benefit as a potential one-time boost to the growth rate in claims that will revert back to the low-single digits after the anniversary of enrollment…We apply a 13x multiple to our 2010 cash EPS estimate, which we believe may prove overly generous, to arrive at a fair value of $13 per share.

(Original) First heard about Emdeon (NYSE:EM) from Cramer on Mad Money before its IPO. I watch Mad Money from time to time, mostly for entertainment (not for ideas or education). But this healthcare bill processor IPO sounds interesting especially at this time. And to make it more interesting, the stock did not get huge pop post IPO. Hm. So I went ahead and looked at its IPO Prospectus.

Emdeon logo pic

Categories
earning IPO

Wuxi Apptec WX Q1 2009 update

Reading Time: 3 minutes

(Update 2, May 20) Bought it back, looks like it has more room to run 🙂

(Update May 19) Sold out my WX positions. I had a second thought on the stock.

(Original) Formerly Wuxi Pharma Tech, the name change was to reflect the US based Apptec acquisition a year ago.

I have bought and sold WX a few times since its IPO in 2007 (Wuxi Pharma Tech looking good; Got some WX again; Wuxi Pharma continues to drop). I sold out my WX position last Sept. (shortly before Lehman’s fall). I decided to got back some WX again about 10 days ago. A few things have changed since last update:

1) Since Wuxi cancelled the secondary offering last May, the selling shareholder UOB sold shares to private equity firm Warburg Pincus.

2) WX had to wrote down a large portion of good will because buying Apptec at the wrong time (pulled trigger too earlier).

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IPO

Rosetta Stone, learning foreign language

Reading Time: 2 minutes

First saw Rosetta Stone at the mall couple years ago (the kiosk). More recently saw its Ads on the TV. Today comes a monumental day for the company (bloomberg news, IPOHome, Yahoo Finance), the IPO (as old Warren says IPO stands for its probably overpriced).

Fun and emotion aside, I think this language thing may stick. Before Rosetta Stone, the other public company does language training I know of is New Oriental (NYSE: EDU). New Oriental has harnessed the Chinese market in a very unique way, and it’s now the un-disputed leader in English test training in China. The main reason? Basically without the training from New Oriental, normal Chinese students can not score high in the TOEFL and GRE (notice I said normal, certainly I understand there are some exceptional Chinese students, and I happened to meet a few back in college). At the time I took TOEFL and GRE, New Oriental school has not existed in my city, so I took training from the best alternative: Qianjing college. Anyway, they serve similar purposes.

I have not used Rosetta Stone service yet. Nor do I plan to learn another foreign language (English is hard enough for me). But I know there is huge demand in this area. Chinese (mandarin) and Spanish are two popular ones. As matter of fact, my wife has been teaching madarin to some college students and little kids, and she has been enthusiatically studying Spanish and Cantonese these days. I joked with her why not learn Cantonese while at Hongkong (she studied there for one year).

Categories
IPO

Got milk?

Reading Time: 3 minutes

Bought some Mead Johnson Nutrition (NYSE: MJN) shares last week. I wrote about it couple months ago before its IPO. This is one of my defensive plays in this downturn. It appears to me people will not stop making babies in the recession, from my very limited observation. More importantly, after China milk powder incident last year, Mead Johnson’s Enfamil is likely to get more market share in China. Yes, China economy growth slowed quite a bit due to the slowdown of export. Yes, people are losing jobs overthere. Yes, Chinese people are cutting back on discretionary spending. But one thing won’t get cut is baby’s formula. Same argument could be made for India, and Brazil…

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IPO

Mead Johnson going IPO

Reading Time: < 1 minute

I remember reading this last year, this morning I read it from Yahoo Finance. Here is the prospectus at SEC, and here is a glimpse at IPOHome. It looks like they are going to IPO on Feb 10 (from the roadshow, again from IPOHome).

enfamil infant formula pic

I think most people heard about their product enfamil (Amazon, Wiki), the infant formula, whether one has kids or not. For instance, I don’t have kids now, but I bought some enfamil for my friends back in China last year. On first glance, this is a good IPO. If they trade around the $21 to $24 range (the IPO price range), I may get some. In this recessionary environment, I think most parents still feed their infants with best formula (if possible). This is especially true back in China.

Mead Johnson was a division of Bristol Myers Squibb before this IPO. Some background about this spinoff from the deal. The company plans to pay 20 cents quartly dividend. Like the EMC/VMWare spinoff, the parent company is only selling a minority stake (12.5%, according to Reuters). I think this combined with current market condition, is the reasons why this IPO did not receive much attention lately.

Snapshot: offering 25 million shares, range $21 to $24, expected date week of Feb 9. Dividend (proposed): 80 cents per year.

Categories
IPO

Coca Cola bought Huiyuan Juice

Reading Time: < 1 minute

(Update Sept 5) It seems there are anti-trust concern about this acquisition. Some source says if this merge approved, Coca Cola will have 40% of juice market share in China. Another concern is, like many Chinese companies (Sohu, Netease), Huiyuan is actually registered in Cayman Island, theoritically it is M&A between two foreign companies. It seems the recently approved Chinese Anti-trust law did not say clearly how to treat such cases. Maybe my wife (China licensed attorney) will know.

(Update Sept 3) More analysis at 21cbh in Chinese. Coke paid about a PE of 42 for Huiyuan, not surprisingly high considering the huge potential in Chinese juice market.

(Original) It was not too long ago Huiyuan Juice, one of the largest juice producer in China, went public in Hongkong Stock Exchange. Now Coca Cola (NYSE: KO) is buying it for 17.9 billion HKD, at more 200% premium of the stock closing price (4.14 HKD) as of August 29. Coke is paying 12.20 HKD per share.

Chinese story at 21cbh. English story at Bloomberg.

Huiyuan Juice factory pic
(source: the standard)

The ticker symbol for Huiyuan is 1886.HK.

Categories
IPO

Spreadtrum account receivable problem

Reading Time: < 1 minute

SPRD_AR_inv_2Q08
(Spreadtrum A/R and inventory from 4Q 06 to 2Q 08, click to enlarge)

As shown in the picture above, their A/R (account receivable) jumped from $1.4 m on Mar 31 to 17.4 m June 30; inventory did not reduced much. This is also evident from its reduced cash postion. Read more details from its earning release if you are interested.

Source: my google spreadsheet, data from SPRD investor relation and SEC filings.

Categories
IPO

Time to cut Spreadtrum SPRD loose

Reading Time: 2 minutes

I felt lucky I did sell some Spreadtrum (Nasdaq:SPRD) shares a short while ago when it exceeded $6 (a quick pop). But I don’t know why I bought some back couple days ago at $4.48. I did not bet on earning these days, but this one had dropped quite a bit from the pop, and the expectation is low. So I thought I am relatively safe. Remember margin of safety.

Well, it turns out semi-conductor stock has no MoF. Remember a while ago the star player nVidia (NVDA) fall out from the graphics chip quality problem? My small speculation player SPRD also fell off cliff. Here is the results.

To be honest, I think 2Q results was OK, but the 3Q forecast is disaster. Quote press release: Spreadtrum currently expects revenue in the third quarter to be approximately US$20 million, which represents a sequential decrease of approximately 50% from the US$40.2 million in the second quarter of 2008.

I am not going to do any fundamental or valuation analysis. It seems to me the management (that means Dr. Wu Ping and his associates) blew up badly on this one. The business itself probablly still has some value, but I lost a lot (blind) trust on management team. So I am going to sell all my shares tomorrow morning. Take a loss 🙁

Categories
IPO

Why CROX failed?

Reading Time: 2 minutes

By now it’s no secret that CROX stock failed. After it issued horrendous 2Q 08 preliminary results and full year guidance yesterday afternoon (refer to MarketWatch for more details). I don’t want to dive into the numbers and add salt to injury. I traded the stock last year until this Feb. when I realized it was time to sell. Besides my doubts on its financial and fashion, I could not understand why a company claims its success from logistics got “inventory” problem. For fashion retailers excessive inventory is a common problem but it’s also the worst. There are many factors account for the quick bust of CROX, some will argue those kinds of stocks always fail. Over the years I have seen Travel Zoo, OverStock, Hansen (drink), Jones Soda, Heelys. I think fundamental reason is that their business is not sustainable, because of its fickle fashion nature, or flawed business model.

Catalyst for the fall
The short sellers, esp. the naked short sellers. Short sellers have been bashing this baby since its IPO in early 2006. They have been losing money until Nov. 1 2007 when CROX 3Q 07 missed street expectation. After that it’s obvious there is not much risk, esp. considering SEC recently started banning naked shorting on Fannie/Freddie and 19 primary brokers. In other words, SEC was saying go naked shorting oil, coal, retailers,…we will not prosecute you.

How often do you mark to market?

Categories
IPO

Notes reading SPRD annual report

Reading Time: 3 minutes

(Update July 8) More about the value of SPRD. Last month Datang sold its 32.1% stake in TD chip maker T3G, for 122 m CNY. This values T3G at (122m) / 32.1% = 380 m CNY. That’s $54.3 m (assume $1 = 7 CNY), and I will use that number for the TD business of SPRD. From the outcome of two rounds of China Mobile TD handset bidding, we can say SPRD TD biz is about the size of T3G. As of March 31 2008 SPRD has $97 m in cash, minus total current liabilities $28 m, that’s a net cash of $69 m. As of July 8 the market cap is $199.85 m ($4.63 per share), that values the 2.5G/2.75G business of SPRD at $76.55 m (=199.85 – 54.3 – 69). Note the revenue of last 12 months is $158.80 m, and the company was profitable.

(Original) First, on the book value. According to Yahoo Finance and company Q1 2008 financials, its book value (equity) is $257.5 m (4.858 per ADR/share), market cap as of July 3rd is $192.94 m ($4.47 per share). So the price book ratio is 0.92 (=4.47/4.858).

Now some interesting stuff I read from its annual report:

1) Page 39, Customers: For 2006, one customer accounted for 14.5% of our revenue, and no other single customer accounted for 10.0% or more of our revenue. For 2007, two customers each accounted for more than 10.0% of our revenue: 37.1% and 10.6% respectively. As our business expands, we expect our overall customer composition as well as the identity and concentration of our top customers to change from period to period.