China Growth Stocks

[GorillaGorilla]

EDS I've scanned 460 pages, I can't say read , of the filing document [1]

They have 1000's of stores...
They have 3% of the sports market in China
As FanPaw noted they could not anywhere as big a brand as suggested on sohu pole

Looking at F-36 they did RMB 151,135,000 in first half of 2008 vs 111,925,000 in first half of 2009. They are claiming they had inventory issues (couldnt' get things to market due to weather) and that sales were tougher in China in 2009 vs 2008 though I thought spending was meant to be up in China?

I'm using 28 Million shares on the basis of [2] and taking $16,378,000 profits after tax (note the tax looks very low, $85,000 and surely that has to change).. that gives 58 cents a share. In 2008 the second half of the year was weaker than the first (granted this was an unusual year)... but if we take a simple double that $1.16.

Net profits in 2008 were affected by aborted IPO charge once this is removed they did $32 million. They are projecting 38 million according to presentation [3] which would be 18% growth but as I say since they are not matching first half of the years 2008 sales I'm unconvinced. The presentation is calling this 54% growth btw but that's because of the one time charges in 2008 taking net income down.

Cash has confused me... they are share redemptions going on and the cash is in trust fund.. there's 68million and I don't know if the access it or not or if it's escrow (sigh) but were not talking more than $1 to $2 a share.

They are are also losening the credit terms I think from 60 to 120 days... so cash flow is going to take a hit.

Anyway, it's a 460 page doc.. I've done my best.. I can't see without knowing how much cash and how it's going to be used, in particular how many stores they are opening/ have opened, and how this will boost their flagging 2009 revenues and flatish income. They have lots of pretty projections for store openings in the presentation but I haven't found the details.

I don't think I will spend any more time looking at this company. Drexions Warrant arbitration play looks more interesting than the common with my level of understanding.

With my understanding it's worth $12 - $13 and so seems fairly valued (given 20% movement in a day I could well be wrong!) If I can understand the growth plan it's worth more to me up to $20 but I don't as yet.Given new management, untested, and low upsides doesn't feel Emerging Caps stuff. Am I missing anything?

rich


[1] http://www.sec.gov/Archives/edgar/data/1396016/000114420409051615/v162041_424b3.htm

[2] http://finance.yahoo.com/news/Exceed-Company-Ltd-Announces-iw-3241740844.html?x=0&.v=1

[3] http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=6712695-390673-436924&type=sect&dcn=0001144204-09-038890