Tuesday, August 31, 2010


LongCheer: FYJun10 results. Revenue +51% yoy to RMB 4.3bn, driven by both growth in exports and domestic demand. Shipment volume more than doubled to 27.5m units, from 11.8m yoy, largely from increased exports of 2.5G phones to India. But tepid net profit growth of 13% yoy to RMB 200m was disappointing, as gross margins continued to decline, halving on a yoy basis...

Nevertheless, final div of S 2cts brings total div to S 4cts (+33% yoy), translates to 5.6% yield. Mgt positive on outlook, intends to continue with business expansion plans in China and emerging markets, and expects to be profitable next FY…

Separately, Company also acquired 20% in Mentech for US$6.1m. Mentech provides EMS services for mobile handsets in China, and accounted for ~30% of the PCBA produced by the Group in FY10. While financial impact is small, the acquisition allows for vertical integration, and lets LongCheer have greater control over the upstream process.

Stock trades at 8x PE. Prior to results, Street mostly rated as Buy with targets ranging $0.85-1.22.

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