China Tracker - Details for China Intelligent Lighting (CILE)


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 China Intelligent Lighting
 Analyst Coverage
2011-03-30Red ChipDowngradeSuspendedn/a
2011-03-25Rodman & RenshawDowngradeUnder Reviewn/a
 

Trading was halted on China Intelligent Lighting (CIL) on Thursday. It is our belief that the SEC has opened a formal investigation. We believe the basis of this inquiry rests on the Company not providing adequate supporting documentation for its bank transactions to its auditors Malone Bailey LLP. The bank transactions were related to Company's operational accounts, accounts receivable, payables and bank deposits, etc. We are revising our rating on CIL from Market Outperform to Under Review. We are removing our financial projections pending resolution of the outstanding issues.

Related Party Transactions: We also note that there is also a trading halt on NIVS IntelliMedia Technology Group Inc (NIV, Market Outperform) which is controlled by CIL's Chairman and CEO Li Xuemei. We note that CIL has a facility leasing arrangement with NIV's controlling subsidiary, NIVS (HZ) Audio & Video Tech Co. Ltd.

Fundamentals: Our checks indicate that a realistic revenue growth outlook for the Company over the next 2 years is in the mid 20s or below our prior forecast of mid-to-low 30s. Gross margins are also likely to be negatively impacted, 100-200 bps, by wage inflation. Due to higher support cost for more expansive distribution, operating income growth will likely be about half of revenue growth or in the mid-to-low teens. As such we do not expect positive operating cash flow until 2013.

2010-09-14Red ChipInitiationBuy$6.00
2010-07-29Rodman & RenshawInitiationOutperform$3.50
 

In order to tap the growing opportunity in the LED market, CIL has planned to increase its current annual production capacity from 30 million units to 42 million units. We believe CIL is well positioned to take advantage of the outsourcing trend, since it has demonstrated leadership by catering to major players in the lighting industry. We expect revenue growth of ~20% in 2010 to $70.5 million from $59.2 million in 2009. We believe China Intelligent Lighting (CIL) will immensely benefit from the strong demand trends in the LED market, which is currently driven by the LED lighting and backlighting applications. With potential financing from the IPO, the company is strongly positioned to take advantage of this growing LED market. We also anticipate uplift in company revenues and margins benefiting from the OEM and branded businesses.

CILE
Retail/Consumer

COVERAGE SUSPENDED OR TERMINATED
 
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SAFETY/RISK SCORE
EXTREME RISK
DETAILS: Safety/Risk Model for CILE
Current Price:  n/a
Exchange:
Market Capitalization: n/a
Total Shares: 13.68 mill
Float: n/a
Avg Volume: n/a
Last Quarter: 2010-09-30
Revenue (MRQ): 20.25 mill
Net Income (MRQ): 2.35 mill
Op. Cash Flow (MRQ): 0.15 mill
all financial data provided without warranty