12-06-2007 QXM - Qiao Xing Mobile Communication Co
CURRENT PRICE: $8.72
TYPE OF PLAY: VALUE/SECTOR MOMENTUM/GROWTH
As the China sector begins to build strength yet again, QXM presents a very compelling opportunity. The stock is trading well off its highs yet the company has maintained a Q3 EPS of $.34 (excluding extraordinary items), increased sales by 28.3% year over year to $111 million for the quarter, and expanded gross margins to 26.4%, compared to 23.3% in the third quarter of 2006. They also set a record with handset shipments of approximately 1.15 million units, an increase of 116% from the third quarter of 2006 and up 8.6% sequentially. The timing here is also extremely key as electronics retailers are rapidly preparing for the coming sales ramp-up into the Christmas and Chinese New Year seasons.
In preparation for this high demand, QXM is rolling out a lineup of new, higher-margin phones:
-W100 watch phone, which has seen excellent sales so far, is offered at a price point approximately 4 times higher than last quarters average phone (from last earnings release). This of course, represents a significant improvement to margins per unit.
-C7000A is a mobile phone that will be equipped with a monitor/cardiograph, which can send patient condition directly to doctors via MMS (Multimedia Messaging Service). The phone is launching this month and is targeted to the over 60 million people in China who have heart problems.
-Additionally, they are developing a new luxury series. These handsets will offer discerning consumers in China a high-end mobile phone that features top-of- the-line components and materials. The first model in this series is planned for release towards the end of the first quarter of 2008. This consumer class within china has grown significantly over the last few years.
In addition to the company's growing business and perfect placement within the fastest growing economy in the world, QXM maintains a stellar balance sheet with over $170 million in net cash (around $3.20 per share). We believe there is an excellent risk versus reward metric at this level.
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Links for further reading:
QXM homepage
SEC filings for QXM
General QXM statistics
