China Techfaith Wireless Comm. Tech. Ltd - 500 Beiträge pro Seite

[Revelo]

Hab vor kurzem bei seekingalpha diese Meldung gelesen:
http://seekingalpha.com/article/282614-china-techfaith-an-ou…

I last reported on China Techfaith's (CNTF) emergence into motion gaming and how I thought it was time to get involved before institutional money was set in motion. The stock had a phenomenal run from $4.20 - $6.90 per share on massive volume based on the Seeking Alpha outreach and the company announcing a licensing deal with a content house. Since that run, we have had a 35% pullback in the shares along with the overall market correction in China small cap.

In the past few months, many small cap Chinese companies which became public through a reverse merger such as DEER, YONG, GURE, SKBI, and CHNG have been put in the crosshairs by short sellers for committing fraud. Unfortunately, many investors have lost their money and their faith in Chinese companies due to this reverse merger madness. Through the carnage this created, a diamond in the rough has presented itself.

China Techfaith Wireless (NASDAQ: CNTF - $4.20). Techfaith is a China-based company with global operations focused on opportunities in mobile phones and the fast growing PC and online gaming markets. The company became public via a $141 million IPO (not a reverse merger) led by Merrill Lynch in May of 2005. Since that time the company has maintained the same auditor in Deloitte and Touche LLP, the same legal counsel in Skadden Arps LLP and the same CEO in Defu Dong an ex top salesman at Motorola (MMI).

Here's why I am buying China Techfaith:

CASH
Cash is king! The company had $214 million in cash on the balance sheet as of 03/31/11. I expect cash to be over $220 million when they report Q2 on August 16, 2011. Approximately $80 million of the cash stands from the $141 million IPO in 2005. They also received a $20 million investment from IDGVC Capital Partners and Infiniti Capital. As you can see, CNTF has $100 million of very traceable cash. Of the remaining cash, $25 million came from the Qigi acquisition and the balance was generated over the past three years. I believe Deloitte and Touche has been proactive and highly diligent in confirming the cash balances and has physically visited each bank branch over the past audited quarter. Furthermore, the company has made numerous expansion moves since 2005, spending cash on physical assets such as land and buildings which can easily be traced back.

Cash stands at $4.06 per share (53 million shares outstanding) and it should reach $4.20 per share when they report on August 16th.

The company should conservatively generate over $50 million in cash this calendar year. Last quarter, the company generated $16 million in cash and I see the cash balance between $4.75 - $5.00 per share by year end.

SPECIAL ONE TIME DIVIDEND
I believe the management of Techfaith is seriously considering paying shareholders a one time special dividend, similar to what Microsoft (MSFT) did a few years back. This dividend could come as early as August as the company has been letting shareholders get hit by ADR fees every August for the past few years. The CEO owns approximately 17 million shares and IDG owns 5.2 million shares, so the company paying $0.50 - $1.00 per share dividend would greatly benefit these two parties as well as existing and new shareholders. I believe this move is a must for the company and it would give management immediate credibility with all bulls and bears in the stock.

INSIDER BUYING
Investors view insider buying as one of the strongest buy indicators in the market. The CEO made three insider purchases in the past 3 quarters. In December he purchased 143,000 shares, in March he purchased another 120,000 shares, and in June he purchased (.pdf) a further 100,000 shares, all in the $4 range. On the company's last conference call the CEO committed to buying more shares in the next window (Aug-Sept). The CEO has purchased 363,000 shares in the past 6 months spending approximately $1.4 million. I cannot think of any better reason than these purchases to own this company. This is by far the strongest BUY signal.

Just as impressive, employees and management invested $7 million into their gaming subsidiary in October, 2010. The gaming company was valued at $100 million at that time and it aligned employees with shareholders. Since this investment the company has grown quarterly gaming sales from $1.5 million to $9.9 million. A strong indication that employees are benefiting from their hard work and investment.

REVENUE
During Global Hunter's China Conference last week in San Francisco, the CEO updated (.pdf) financial targets. In addition, last month the company reiterated their Q2, 2011 revenue guidance of $82-84 million.

Historically, Techfaith is a second half story company as handset sales get stronger into the holiday season. I see this year being no different; in fact, the company could be benefiting from their Disney (DIS) relationship as the companies open their first of many stores in China. In addition, Techfaith is pushing their international sales with the release of new product offerings. I believe institutions will be buying CNTF shares as their international sales increase.

Here are my revenue estimates, I see Techfaith beating the Q2 estimate of $84 million with full year 2011 revenues coming in at $345-350 million. I see the gaming business generating $10.5-11 million in revenues for Q2, and $45-50 million for full year 2011.

VALUATION:
Management guided Q2 revenues to $82-84 million vs. the $78.7 million they achieved in Q1 and the $65.5 million they reported in Q2, 2010. The revenue growth rate will be over 30% if it comes in at $82 million for Q2. I have EPS for Q2 at 27 cents vs. the 24 cents in Q1 and the 13 cents they reported in Q2, 2010. The EPS growth rate will be 100% if it comes in at 27 cents. The company should be trading at 10 times the $1.05 EPS estimate this year or $10 per share.

The company trades at a $220 million market capitalization. At this level you're buying a $330 million revenue company with $1.00 in EPS and $50 million in cash generation for FREE.

The sum of the parts on a bare bones valuation is $8.00 per share: cash - $4.06, phone business - $2.00 ($280mm / .50(1/2 x revenues), gaming - $2.00 ($40mm x 3 x revenues). I see the shares trading to $10 plus by year end.

X-FACTOR:
IDGVC Capital Partners owns 5.2 million shares (9.81% holder) at $1.45. I believe that they have not sold their shares since they were freed up in September 2010. IDG has invested in Baidu (BIDU), Ctrip (CTRP), Dangdang (DANG), Sohu (SOHU), KongZhong Corp (KONG) and Qihoo 360 Technology (QIHU) and the fact they haven't sold a share amidst the reverse merger fraud while having a return of 200% - 500% tells me that CNTF is potentially the next Baidu. Also, Techfaith management has become much more vocal on their relationship with IDG over the past 2 to 3 months. The relationship is stronger than ever, this may be indicative of a special one time dividend coming. So anyone that wants to bet against a company trading at cash with a shareholder like IDG, good luck.

The short position on CNTF stands at 700,000 shares on a 53 million share count. That's only 1.3% of the outstanding shares and 1.95% of the float. A small percentage compared to other Chinese small cap companies for example, Fushi Copperweld Inc. (FSIN) 16.2%, China Marine Food Group Ltd (CMFO) 10.8% and Lihua International Inc. (LIWA) 10.3%. Shares of CNTF spiked from $4.20 - $6.90 in 30-45 days on only 70k shares short just this last May. I can tell you nothing has changed except CNTF has executed much stronger than I expected. I think having these shares short at cash levels will add the initial fuel to the fire in the days ahead.

I continue to view China Techfaith as an outstanding risk/reward opportunity with its strong cash position and the excitement of a potential gaming spinoff in the quarters ahead. It's a matter of weeks before analysts begin initiating coverage on the company as gaming gets in motion. I believe the Chinajoy 2011 trade show in Shanghai this week will bring many hedge funds, industry heads and gamers into Techfaith's living room. If the product is half as good as I believe this stock will jump to $8 per share in the next 30-60 days on strong volume and hold. I will update you on any new findings on this diamond in the rough.

[Revelo]

This is from today's news (8/5/11) out of China...
(Construction has begun!!)...

(translated)

"According to reports, construction of one hundred billion mobile phone industry clusters, as well as Shenyang is to accelerate the optimization and upgrading of industrial structure in our province is an important measure for the provincial government Jiaoji Shenyang Shenbei an important task. Since 2010, Shenbei efforts to develop new industry-focused phone, the phone industry, the rapid rise in Shenbei Shen, New Hope has been the introduction of Gyor, in the buildings phone, Qi Feng Electronics, Tektronix flying rocks (TechFaith, TecFace, CNTF), the Japanese vine warehouse flexible circuit board, jade crystal optical camera, the morning of molding, mobile testing centers and other machine production, parts production and testing enterprise 28, planning the annual production capacity of mobile phones exceeded 100 million.

Currently, the industrial park in Shenyang phone R & D has started construction of the park area, living area, complete processing zones and high-end residential projects, started construction in August this year, a project, plans to invest about 10 billion yuan, covers an area of ??395 acres; " two vertical and three horizontal "trunk road network, and the supporting pipe network, the park plaza and municipal greening projects now under construction, electricity, telecommunications and other ancillary works have started construction. According to the Mobile Phone Industry Park Administrative Committee of Shenyang, director Li Ying, Shenyang Industrial Park will strive to use the phone about three years time, the introduction of mobile phones and over 300 supporting businesses to achieve annual output of 100 million mobile phones, the output value reached 100 billion yuan, build a set of mobile machine manufacturing, parts manufacturing, software development and product design, sales of mobile phone industry clusters, become an important production base. Each company according to the park to accommodate 2,000 to 1 million people in employment terms, three years, the park will have 10 million jobs."
(Guo Wei)
http://translate.google.com/translate?js...

[Revelo]

Not sure how many people realize just how much TechFaith is expanding. Over the next couple years they are building 3 new facilities, mainly for the development of smart phones, and smart phones will be their slowest growing division. Also, notice in slide #25 from CNTF's July presentation that TechFaith is looking for strategic acquisitions of motion gaming developers...
http://www.techfaithwireless.com/english...

Add up TechFaith's costs listed below and it amounts to over $70M (and does not include all construction costs). It's no wonder they've been stockpiling cash (over $200M on hand w/ little to no debt). TechFaith has HUGE HUGE growth plans, especially when you add in 17Vee and the "cloud" (cloud computing)...

April 7, 2011

It was announced today that China TechFaith Wireless Technology Limited (NASDAQ: CNTF) ("TechFaith" or the "Company") has received approval from the Beijing Daxing Government for the acquisition of approximately 140,000 square meters (approximately 34.5 acres) of land in XiHong Men, Daxing County for industrial purpose. The total value of the contract is value at approximately RMB 54 million (approximately US$8.25 million).

Mr. Defu Dong, Chairman and CEO of TechFaith, said, "Securing this additional tract of land gives us the flexibility needed to add to our state-of-the-art research and development capabilities, along with new trial production lines, and a sales and marketing center. These expanded capabilities will help support the continued growth in our business as we continue to build TechFaith into a much larger company both domestically and internationally."
http://ir.techfaithwireless.com/phoenix....

May 16, 2011

TechFaith and BEIID to Establish Joint Venture Company For Development of Production Line in Beijing

For this joint venture, TechFaith will invest RMB 300 million and BEIID will invest RMB 200 million for their previously announced the development of a 10 million-unit capacity smart phone production line in Beijing. TechFaith shall hold 60% of the shares and BEIID will hold the remaining 40% for the joint venture.
http://ir.techfaithwireless.com/phoenix....

Dec. 15, 2010

TechFaith and PuHe Announce RMB 240 Million Joint Venture, TecFace Sport Mobile Limited, With a New Integrated R&D, Sales, and Distribution Center

As part of the joint venture, TechFaith has undertaken to invest RMB 100 million in each of the years 2011 and 2012, while PuHe has undertaken to invest RMB 20 million in each of the years 2011 and 2012. In addition, PuHe has also agreed to provide up to RMB 10 million to TechFaith as an investment incentive.

"PuHe will have a 16.7% ownership interest in the joint venture, with TechFaith holding the remaining 83.3%."

TecFace represents a major capacity and capability expansion for TechFaith's sports mobile phone brand; its operations will be housed within a planned business complex in Shenyang that is scheduled to begin construction in 2011. (Side Note: Construction began in August). The TecFace business complex is expected to contain an integrated state-of-the-art research & development, sales and distribution center along with testing labs to ensure adherence to China's national development standards.

Mr. Defu Dong, Chairman and CEO of TechFaith said, "It is an important step for our TecFace brand to co-invest with a business partner as supportive as PuHe. Our strategy will be to use the planned full TecFace facilities in Shenyang to accelerate the development of the TecFace brand as we strive to make it a major force in the attractive sports mobile phone segment."
http://ir.techfaithwireless.com/phoenix....

[pkera]

http://www.barchart.com/quotes/stocks/CNTF

http://www.finanznachrichten.de/nachrichten-2011-11/22002195…


http://www.finanznachrichten.de/nachrichten-2011-11/21996827…

http://www.beaconequity.com/smw/18733/China-stocks-heat-up-l…

pkera