Longcheer

Longcheer: Chinese mobile handset maker, Longcheer has been climbing to new 52-week highs, likely riding on the investment theme of increasing smartphone penetration in China, as well as on improved sentiment following its recent partnership with Microsoft. With the exclusive appeal of Samsung and Apple branded smartphones starting to taper, other major smartphone brands are sensing an opportunity to increase their presence in key markets like China, to grab share from the current market leaders. A Wall Street Journal article noted that China has nearly 1b mobile phone users, of which ~40% are smartphone users. The potential for replacement demand market in China huge, and handset makers like Longcheer are well positioned to benefit. Longcheer’s clients include household names like Lenovo, Alcatel, Haier, as well as the three largest telcos in China. Separately, Microsoft recently added several new hardware partners in Asia, including Longcheer, ZTE, Gionee, and Xolo. This not only allows Longcheer to manufacture handsets that work on a Windows operating system, but also represents a vote of confidence by the US tech giant. Underpinned by the continued growth in demand for 3G smartphones, Longcheer reported 2QFYJun14 net profit that expanded 86% y/y to Rmb36.4m, in tandem with the 89% growth in revenue to Rmb1.9b. Outlook for the group remains positive. At $0.33, Longcheer trades at 5.9x trailing P/E, compared to its regional peer average of 36x.