China Tracker - Details for ZST Digital Networks (ZSTN)

 WARNING: Form 15 filed with the SEC!
 ZST Digital Networks
Shares Outstanding (MRQ): 11.63 mill
New Shares / Dilution (TTM): -0.02 mill-0.19%
Cash (MRQ): 40.21 mill0.00%
Account Receivables (MRQ): 21.25 mill0.00%
Account Receivables (Q/Q): -12.24 mill  
Long-Term Debt (MRQ): NO DEBT
Revenue Growth (Q/Q): -26.44% 
Revenue Growth (Y/Y): 98.28%
Net Income Growth (Q/Q): -38.55% 
Net Income Growth (Y/Y): 165.53%
EPS Growth (Y/Y): 166.03%
Net Margin (Q/Q): 15.5% (18.5%)-3.00% 
Net Margin (Y/Y): 15.5% (11.6%)3.90% 
EPS | P/E (2 MRQ Projection): $2.360.00 
CFPS | P/CF (2 MRQ Projection): $1.020.00 
Price/Sales (2 MRQ Projection): 0.00
Price/Book (MRQ): 0.00 
Auditor: BDO China Li Xin Da Hua
 
 Forward Projections (Fiscal Year)
EPS | P/E (Estimates updated 2011-03-04): $2.400.00 
 Basic Facts and History (show more)
Reporting Type: U.S. Company (10-K Filings) 
Going Public: IPO on 2009-10-20 
IPO Price: $8.00 (-100.00% since IPO)

 Business Outlook

For the full year 2011, the Company reiterates its estimates that revenues will range between US$160 million and US$175 million, and net income will range between US$28 million and US$30 million.

(Source: PR Newswire, 2011-05-05)

The Company believes that the allegations made against it by certain market participants are baseless and without merit. The Company's financial position and operations are fundamentally sound, and it continues to be well positioned to benefit from the growth opportunities in the IPTV and commercial GPS markets in Henan Province. The Company is in the midst of evaluating various legal options with respect to such baseless statements.

(Source: PR Newswire, 2011-04-25)

For the full year 2011, the Company estimates that revenues will range between US$160 million and US$175 million, and net income will range between US$28 million and US$30 million.

(Source: PR Newswire, 2011-03-04)

    see all Business Outlook notes


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 Analyst Coverage (show less)
2011-05-05Rodman & RenshawReiterationOutperform$14.00
 

The stock has attracted market scrutiny driven by short seller allegations against the business and insiders and accordingly has been under pressure. Over the last month management and short sellers have been debating publicly over various issues. These developments are clouding the operational aspect of the story and, in our opinion, are a near term overhang for the stock. The stock did react positively to the company's 1Q11 results but drifted lower to settle close to the company's cash per share levels. Despite various positives in 1Q11 performance including the appointment of a new CFO, we believe market regaining confidence in management and the business will be the single most important catalyst for this story.

For 2Q11, we are now projecting revenue, net income, and diluted EPS of $36.4 MM, $5.8 MM, and $0.46 per share. Gross and EBIT margins are expected to be maintained at 25% and 21% levels. For the full year FY11, our projections are revised to $172.9 MM for top-line, $28.3 MM for bottom-line, and $2.27 for diluted EPS, in line with the full year guidance.

At current levels ZSTN is trading at a P/E multiple of ~1.6x to our FY2011 earnings estimates. This is a substantially lower multiple compared to an average of ~20.0x for network equipment makers and ~13.4x for GPS / navigation providers based on forward FY11 consensus earnings. We are comfortable maintaining our $14.00 price target on ZSTN, which translates into a P/E multiple of ~6.2x to our estimates for FY2011, which still implies a discount to its peer group.

2011-04-14Rodman & RenshawReiterationOutperform$14.00
 

At current levels ZSTN is trading at a P/E multiple of ~2.2x to our FY2011 earnings estimates. This is a substantially lower multiple compared to an average of ~19.2x for network equipment makers and ~13.7x for GPS / navigation providers based on forward FY11 consensus earnings. We believe ZSTN should trade in line with the averages given the relative growth opportunity associated with it. We are comfortable maintaining our $14.00 price target on ZSTN, which translates into a P/E multiple of ~6.3x to our estimates for FY2011, which still implies a discount to its peer group.

2011-03-14Rodman & RenshawReiterationOutperform$14.00
 

At current levels ZSTN is trading at a P/E multiple of ~3.0x to our FY2011 earnings estimates. This is a substantially lower multiple compared to an average of ~17.4x for network equipment makers and ~12.3x for GPS / navigation providers based on forward FY11 consensus earnings. We believe ZSTN should trade in line with the averages given the relative growth opportunity associated with it. We are comfortable maintaining our $14.00 price target on ZSTN, which translates into a P/E multiple of ~6.3x to our estimates for FY2011, which still implies a discount to its peer group.

2010-11-03Rodman & RenshawReiterationOutperform$14.00
 

Strong 3Q10 Results ZSTN today announced its 3Q10 results with revenue, net income and diluted EPS of $38.5 MM, $6.4 MM and $0.55, beating our expectations of $35.2 MM, $5.5 MM, and $0.47, respectively. Top-line grew by 34.6% Y-o-Y from $28.6 MM and 16.5% sequentially from $33 MM. Revenue growth in 3Q10 was primarily driven by healthy demand for cable TV networking and set top box equipment and sequentially higher GPS system and services revenue. GPS segment contributed ~$8 MM in revenue, representing 21% of total. Gross profit was ~$10 MM, implying 26.0% in gross margin, compared to $4.8 MM or 16.8% margin in 3Q09 and $8.3 MM or 25% margin in 2Q10. We believe margin improvements were driven by higher contribution from the GPS segment. Operating expenses were ~$1.2 MM, representing 3% of revenue, compared to $0.35 MM or 1.2% of revenue in 3Q09 and ~$1 MM or 3.15% of revenue in 2Q10. The company ended the quarter with cash balance of $34.2 MM and working capital of ~$60 MM.

Collection improvements helped the company put up a strong cash flow performance going into 2H10. Cash provided by operating activities for nine months in 2010 topped $21 MM. We believe the company should be able to end 2010 with positive cash flow from operations.

ZSTN has come under pressure from a negative article published earlier today in Seeking Alpha by an investor who claims a short position in the name. In the prior quarter ZSTN had moved higher into earnings release and was mirroring a similar trend for this quarter driven by expectations of solid results and in line with this ZSTN's results today were higher than our projections and in line with expectations set by management for 2010. However, investors have been cautious about the small cap China sector over the past few months driven by negative news flow for some of the companies in the space and investors seem to be overlooking ZSTN's announced results that include higher GPS driven revenues and much improved cash flows and focusing on the negative commentary. Management will have to find a way to alleviate concerns around issues raised. The company still has a share buy back in place that could provide support to the stock.

At current levels ZSTN is trading at a P/E multiple of ~4.0x and ~3.8x to our FY2010and FY2011 earnings estimates. This is a substantially lower multiple compared to an average of ~16x for network equipment makers and ~12x for GPS / navigation providers based on forward FY11 consensus earnings. We believe ZSTN should trade in line with the averages given the relative growth opportunity associated with it. We are comfortable maintaining our $14.00 price target on ZSTN, which translates into a P/E multiple of ~8.1x and ~7.6x to our estimates for FY2010 and FY2011.

2010-08-24Rodman & RenshawReiterationBuy$14.00
 

ZSTN today announced that the Board has authorized the company to buy back up to $1 MM worth of ZSTN’s common shares in the open market (at management’s discretion). We believe management is correctly taking advantage of the company’s low share price relative to the earnings outlook. Management’s follow through with this program should provide a certain level of support for the stock price. Since the 2Q10 earnings release on August 10, 2010, ZSTN shares rose ~11.5%, but still down 32.5% YTD from $8.76 levels at the beginning of 2010. We are not making any changes to our outstanding share count expectations yet.We are comfortable maintaining our $14.00 price target on ZSTN, which translates into a P/E multiple of ~8.8x and ~8.5x to our estimates for FY2010 and FY2011. We justify this by pointing investors to the company’s low PEG ratio of ~0.17x at these multiples based on our estimate for FY11 EPS growth. 

ZSTN is currently followed by 2 analysts. Both give the stock a positive rating. The average price target is 14.50.


    see all Analyst Ratings

 Investor Presentations
2010-09-22 (HTML)   VIEW
2010-05-10 (HTML)   VIEW
ZSTN
Telecommunications

COVERAGE SUSPENDED OR TERMINATED
 
READ: Score Cards Explained
SAFETY/RISK SCORE
HIGH RISK
DETAILS: Safety/Risk Model for ZSTN
Current Price:  n/a
F10k Day (2009-10-20): -100.00%$7.52
2009 Close: -100.00%$8.76
2010 Close: -100.00%$6.83
2011 Close: -100.00%$2.26
High (2012-07-11): -100.00%$6.75
Low (2012-04-26): -100.00%$0.31
Exchange:
Market Capitalization: n/a
Total Shares: 11.63 mill
Float: n/a
Avg Volume: 57.80 k
Short Interest: 729.00 k
Short Ratio: 12.70%12.6 d
Last Quarter: 2011-03-31
Revenue (MRQ): 33.80 mill
Net Income (MRQ): 5.23 mill
Op. Cash Flow (MRQ): 8.74 mill
all financial data provided without warranty