China Tracker - Details for SinoHub (SIHI)

 SinoHub
 Analyst Coverage
2011-05-17Rodman & RenshawReiterationOutperform$5.50
 

At current levels SIHI is trading at a P/E multiple of ~2.5x to our new FY11 earnings estimate. This is significantly below the peer group. We are now revising our price target on SIHI to $5.50 from $7.00 driven by lowered projections for 2011. Our new price target of $5.50 for SIHI translates into P/E multiple of ~10x to our earnings estimates for FY11, still implying a discount compared to a ~22.8x multiple for its peer group listed in China, and ~18x for the US listed comparables. We believe these are very reasonable multiples for an emerging company that is growing its market position, introducing new products and improving its margins. We maintain our Market Outperform rating.

2011-04-06Rodman & RenshawReiterationOutperform$7.00
 

At current levels SIHI is trading at a P/E multiple of ~2.3x to our FY11 earnings estimate. This is significantly below the peer group. We are comfortable maintaining the $7.00 price target for SIHI, which translates into P/E multiple of ~10.5x to our earnings estimates for FY11, still implying a discount compared to a ~22.4x multiple for its peer group listed in China, and ~15.6x for the US listed comparables. We believe these are very reasonable multiples for an emerging company that is growing its market position, introducing new products and improving its margins.

2011-04-01Rodman & RenshawReiterationOutperform$7.00
 

At current levels SIHI is trading at a P/E multiple of ~2.8x to our new FY11 earnings estimate. This is significantly below the peer group. We are comfortable maintaining the $7.00 price target for SIHI, which translates into P/E multiple of ~10.5x to our earnings estimates for FY11, still implying a discount compared to a ~22.1x multiple for its peer group listed in China, and ~18x for the US listed comparables. We believe these are very reasonable multiples for an emerging company that is growing its market position, introducing new products and improving its margins.

2011-03-22Roth CapitalDowngradeSuspendedn/a
2011-03-15Global HunterReiterationBuy$6.00
 

SinoHub Inc. (SIHI) reported Q4 and FY10 earnings on Monday, which beat our estimates and the consensus by a large margin. Revenue increased 37% YoY, as it was the high season for the mobile phone business and there was strong growth in the ICM (Integrated contract manufacturing) business. Gross margins also expanded due to an increased mix of ICM business and higher pricing in the ECSS (Electronic component sales and services) segment. We believe the ICM business was a tremendous success for 2011, which grew from zero to $61MM revenue in its first year of operation to account for 31% of total revenue. For 2011, the company guided for 30% top-line growth, roughly in line with consensus expectations. Management anticipates production of 3MM phones in FY11, versus 1.15MM in FY10, and expects ICM to account for a majority of the business in 2012. We believe management has executed the business very well in the past year and we look for continued growth in 2011. Shares are trading at only 3.9x our FY11 EPS estimate, which we believe is considerably undervalued. We reiterate our Buy rating and $6 price target. which is 8x our FY11 EPS.

2011-03-15CanaccordReiterationBuy$4.00
2011-01-31Rodman & RenshawReiterationOutperform$7.00
 

At current levels SIHI is trading at P/E multiples of ~4.8x and ~3.3x to our FY10 and FY11 earnings estimates. These multiples are below the peer group. We are comfortable maintaining our $7.00 price target for SIHI, which translates into P/E multiples of ~12.0x and ~8.3x to our earnings estimates for FY10 and FY11, still implying a discount compared to ~28x and ~23x multiples for its peer group listed in China, and ~18.2x and ~15.1x for the US listed comparables. We believe these are very reasonable multiples for an emerging company that has substantial growth opportunities ahead, a strong market position and a healthy balance sheet.

2011-01-20Rodman & RenshawReiterationOutperform$7.00
 

Going into earnings, we are anticipating another strong quarter for Sinohub given the recent positive developments. The company is currently running 4 surface mount lines (for Printed Circuit Based Assemblies, or PCBAs) and 8 assembly lines in Shenzhen facility. We believe a low penetration rate and less intense competition in SE Asia provide favorable growth environment for SIHI. We maintain our 4Q10 projections of $54.3 MM in revenue, $10.2 MM in gross profit, and $4.8 MM in net income, respectively. Diluted EPS is expected to reach $0.17 for 4Q10 and $0.58 for FY10. Given the momentum in VCM sales, we would not be surprised if our numbers proved conservative.

At current levels SIHI is trading at P/E multiples of ~4.9x and ~3.4x to our FY10 and FY11 earnings estimates. These multiples are below the peer group. We are comfortable maintaining our $7.00 price target for SIHI, which translates into P/E multiples of ~12.0x and ~8.3x to our earnings estimates for FY10 and FY11, still implying a discount compared to ~27.9x and ~23.1x multiples for its peer group listed in China, and ~19.2x and ~15.9x for the US listed comparables. We believe these are very reasonable multiples for an emerging company that has substantial growth opportunities ahead, a strong market position and a healthy balance sheet. 

2011-01-07Rodman & RenshawReiterationOutperform$7.00
 

At current levels SIHI is trading at P/E multiples of ~3.9x and ~2.7x to our FY10 and FY11 earnings estimates. These multiples are below the peer group. We are comfortable maintaining our $7.00 price target for SIHI, which translates into P/E multiples of ~12.0x and ~8.3x to our earnings estimates for FY10 and FY11, still implying a discount compared to ~29.4x and ~25.1x multiples for its peer group listed in China, and ~19.0x and ~15.8x for the US listed comparables. We believe these are very reasonable multiples for an emerging company that has substantial growth opportunities ahead, a strong market position and a healthy balance sheet.

2010-11-30Rodman & RenshawReiterationOutperform$7.00
 

HT Mobile Order Driving 2011 Growth: SIHI announced an initial order for two new 2.75G phone models from HT Mobile, with shipments to commence in December 2010. HT Mobile has given indications to SinoHub that it anticipates ordering between 200,000 and 300,000 units of each model during 2011. The company's press release also stated that HT Mobile intends to produce a significant portion of their 2011 volume with SinoHub. Management expects to produce over 1 million phones for HT Mobile during 2011, which approximately equates to SIHI's entire production for all customers during 2010.

Raising Estimates: In line with this development, we are raising our Y-o-Y VCM sales growth expectations for 2011 to 105.4% from 57% earlier (or to $120.6 MM from $92 MM). This results in our net income and EPS estimates for 2011 moving higher to $24.3 MM and $0.85 from $20.9 MM and $0.73 earlier. Please see the table below for changes to our expectations.

Key Takeaways: We remind investors that SIHI is filling an important gap in the electronics and mobile phone supply chain associated with smaller volume orders. There are numerous small players in Asia who do not have the volumes to be able to engage the likes of Foxconn (2038-HKG, Not Rated). SIHI provides strategic one stop shop service that we believe will be valued by smaller players in the market. The company now appears to have sufficiently scaled the learning curve on the VCM side to provide consistent operating results and provide investors with good visibility. We believe headlines surrounding handset sales in China and Asia will continue to support investor interest in the story.

Valuation: At current levels SIHI is trading at P/E multiples of ~4.9x and ~3.4x to our FY10 and FY11 earnings estimates. These multiples are below the peer group. We are comfortable maintaining our $7.00 price target for SIHI, which translates into P/E multiples of ~12.0x and ~8.3x to our earnings estimates for FY10 and FY11, still implying a discount compared to ~25.8x and ~22.3x multiples for its peer group listed in China, and ~20.0x and ~16.4x for the US listed comparables. We believe these are very reasonable multiples for an emerging company that has substantial growth opportunities ahead, a strong market position and a healthy balance sheet.

2010-11-15Roth CapitalReiterationBuy$4.00
 

Results beat on higher handset sales - Revenue equaled $55.8mm, ahead our estimate of $48.6, attributed to higher handset sales. SIHI sold 320K handsets vs est. 290K. In addition, its motherboard segment contributed approx. $6M revenue vs our $3.7M estimate. EPS was $0.19, 5 cents better than our expectation, benefiting from lower SG&A costs and ECP GM improvement. The margin expansion was helped by some high profit orders, which are not expected in the future.

Guidance seems conservative – 4Q10 guidance calls for revenue of $53.8mm, inline with our previous estimate. We believe the guidance seems overly conservative given strong performance of handset and motherboard segments, as well as stable ECP sales. The guidance is based on 1M handset sales while SIHI already finished 78% in the first nine months and Q4 should be another strong qtr with sales similar to this qtr.

Early VCM growth encouraging; Intense competition expected in 2011 – We are encouraged by the fast growth of VCM segment and expect continued demand for low cost white-box phones in Southeast Asia and other emerging markets. However, we expect increasing competition in those markets from both Chinese competitors and top international brands. Over-capacity Chinese white-box mobile phone manufacturers are expanding aggressively into emerging markets and established brands are fighting back with adjusted strategies for low end products and in the smart phone segment. As such, we conservatively model SIHI's VCM sales in 2011. While the company added 33% handset annual capacity from 3.2M units to 4.3M units in Q3, we only anticipate 1.8M handset sales in 2011, up from previous of 1.5M (company guidance). We are looking for upside opportunity with better visibility and a longer operating track record.

Raising estimates – For Q4 and 2011, we increase our revenue estimates reflecting higher handset sales, but maintain our EPS projections, with upside offset by higher depreciation expense, interest costs, and tax rate. We maintain our BUY rating and $4.00 PT based on 6.5x multiple to our 2011 EPS estimate. We expect multiple expansion as visibility improves for mobile phone manufacturing over the coming quarters.

2010-11-15Rodman & RenshawReiterationOutperform$7.00
 

SIHI reported 3Q10 revenue and net income of $55.8 MM and $5.5 MM, with diluted EPS of $0.19, beating our expectations of $52.3 MM, $4.7 MM, and $0.16, respectively. Total revenue grew by 54.1% Y-o-Y from $36.2 MM in 3Q09 and 27.1% sequentially from $43.9 MM in 2Q10. The company generated gross profit of $10.2 MM, representing a gross margin of 18.3%, compared to $6.4 MM or 17.8% in 3Q09 and $7.6 MM or 17.3% in 2Q10. Operating profit reached $7.5 MM or 13.4% in EBIT margin, compared to 13.0% and 9.9% for 3Q09 and 2Q10, respectively. Net income rose by 55.3% Y-o-Y to $5.5 MM, implying a net margin of 9.9% for the quarter. The company ended the quarter with a total of $5.4 MM in cash, $46.3 MM of accounts receivable, $8.7 MM of inventory, and $16.4 MM of bank borrowing.

VCM Business Continues To Drive Top-Line Growth: By business segments, ECP, VCM and SCM business each contributed $35.3 MM, $19.0 MM, and $1.5 MM in revenue, accounting for 63.3%, 34.1%, and 2.6% of total sales for the quarter. VCM business continues to be the major growth driver for SIHI's top-line growth, given that ECP and SCM only grew by 2.9% and a minus (23.6%) Y-o-Y. VCM segment grew by 43.0% sequentially from $13.3 MM in 2Q10. Total production volume of handsets reached 320,000 units in 3Q10, compared to 250,000 units in 2Q10, aided by the strong order flows from emerging Asian including Indonesia and India. We also expect the company to start shipping smart phones to the local distributors in those markets, which should help improving the gross margin.

Key Takeaways: We remind investors that SIHI is filling an important gap in the electronics and mobile phone supply chain associated with smaller volume orders. There are numerous small players in Asia who do not have the volumes to be able to engage the likes of Foxconn (2038-HKG, Not Rated). SIHI provides strategic one stop shop service that we believe will be valued by smaller players in the market. The company now appears to have sufficiently scaled the learning curve on the VCM side to provide consistent operating results and provide investors with good visibility. We believe headlines surrounding handset sales in China and Asia will continue to support investor interest in the story.

Guidance Raised: Management raised its 2010 revenue guidance to $192 MM from $180 MM, based on the strong momentum in VCM business. Now for 4Q10 we are expecting revenue and net income of $54.3 MM and $4.8 MM, with diluted EPS of $0.17. This implies a full year revenue, net income, and EPS of $192.5 MM, $16.7 MM, and $0.58, respectively. For FY11, our estimates are $230.7 MM, $20.9 MM, and $0.73.

Valuation: At current levels SIHI is trading at P/E multiples of ~4.5x and ~3.6x to our new FY10 and FY11 earnings estimates. These multiples are below the peer group. We are comfortable maintaining the $7.00 price target for SIHI, which translates into P/E multiples of ~12.0x and ~9.6x to our earnings estimates for FY10 and FY11.

2010-11-15Global HunterReiterationBuy$6.00
2010-10-25Global HunterReiterationBuy$6.00
2010-10-21Rodman & RenshawReiterationOutperform$7.00
 

We are adjusting our 3Q10 estimates for SIHI higher after our visit to the company's facilities in Shenzhen today. Our higher estimates for 3Q10 are driven by a faster than expected ramp in the VCM business. We are now expecting 3Q10 revenues and EPS of $52.3 MM and $0.16 compared to our prior estimates of $45.6 MM and $0.13. Given the ramp in the VCM business we are also increasing our Y-o-Y revenue growth forecast to 21.6% for 2011 vs. 17.7% earlier.

In line with our higher estimates for 2010 and 2011, we are raising our price target on SIHI from $4.00 to $7.00. We believe the recent selling pressure on the stock came from an investor who was raising cash for personal reasons rather than from any weakness in the company's fundamentals. We believe the seller is out and the stock should begin trading on its fundamentals. Our higher price target and higher estimates for 2011 are partly driven by expectations of expansion efforts that may come into play in the near term.

2010-08-30Rodman & RenshawInitiationOutperform$4.00
 

At current levels SIHI is trading at P/E multiples of ~3.7x and ~2.9x to our FY10 and FY11 earnings estimates. These multiples are below the peer group. We are comfortable assigning SIHI a $4.00 price target, which translates into P/E multiples of ~8x and ~6x to our earnings estimates for FY10 and FY11, still implying a discount compared to ~29x and ~24x multiple for its peer group listed in China, and ~18x and ~14x for the US listed comparables. We believe these are very reasonable multiples for an emerging company that has substantial growth opportunities ahead, a strong market position and a healthy balance sheet.

2010-08-20Roth CapitalInitiationBuy$4.00
 

The market for private label (white box, or "Shanzai" in China) phones is sizable and growing rapidly. We estimate handset sales in emerging markets (ex-China) will increase to 1 billion units by 2014 from 616 million in 2009 (11% CAGR). Given cost is a primary factor in emerging markets, we believe the low-priced segment holds significant opportunity. Our $4.00 price target is based on a 6.5x multiple to 2011 EPS of $0.62. Shares currently trade for 4.3x our 2010 EPS estimate, a significant discount to peers trading in the U.S. (8.5x) and China (27.6x). We believe the current valuation places the mobile phone manufacturing initiative in the high risk category and we expect execution on this strategy over the coming quarters will help reduce the risk premium.

2010-08-13CanaccordReiterationBuy$4.00
2009-12-07CanaccordInitiationBuy$6.00
 

SinoHub is well positioned to capitalize on China’s strong growth for electronics manufacturing and domestic electronics consumption, especially for mobile phones. The company has captured considerable market share through an early development of proprietary SCM software and is poised to grow the dollar volume of components it touches through a meaningful expansion of warehouse capacity.

SIHI
Electronics
SCORE
8
UNDER REVIEW
READ: Score Cards Explained
SAFETY/RISK SCORE
HIGH RISK
DETAILS: Safety/Risk Model for SIHI
Current Price:  n/a
F10k Day (2009-06-10): -100.00%$2.60
2009 Close: -100.00%$4.00
2010 Close: -100.00%$2.61
2011 Close: -100.00%$0.38
High (2012-04-26): -100.00%$0.79
Low (2012-10-19): -100.00%$0.03
Exchange: N/A
Market Capitalization: n/a
Total Shares: 28.59 mill
Float: n/a
Avg Volume: 80.60 k
Short Interest: 126.20 k
Short Ratio: 0.52%1.6 d
Last Quarter: 2010-12-31
Revenue (MRQ): 58.46 mill
Net Income (MRQ): 7.23 mill
Op. Cash Flow (MRQ): 4.19 mill
all financial data provided without warranty