Focus Media Holding -- a play on Baidu.com IPO debut tomorrow (FMCN) 18.86
-0.47 : Tomorrow's IPO of Chinese internet search firm Baidu.com (BIDU) is
certain to be a big mover. This morning, the co raised its expected range by a
substantial $4 to $23-25 and there is some talk it could hit $30 when it finally
opens for trading... Another recent Chinese IPO that has been a dud, but looks
sound, is Focus Media Holding. The co operates the largest out-of-home
advertising network in China using audiovisual tv displays instead of
traditional billboards to broadcast advertising. The co's significant market
share (72% of commericial buildings), combined with the exclusivity and renewal
terms contained in over 90% of its agreements with landlords, creates high
barriers to entry. The co is profitable and 2004 revenues were $29.2 mln, up
from $3.8 mln in 2003. The stock has done little since its $17 offering price.
Also, we would expect some initiaitons of coverage in the next 2 weeks or so,
especially from lead underwriter Goldman Sachs
I2 Technologies -- one to watch (ITWO) 12.36 +1.35 : As volatile as
the action in supply chain software-maker I2 Technologies (ITWO) has been
the past two weeks, rising to a high of $12.75 today from the $8 level (yes, we
wish we would have seen this one earlier), we would consider taking a hard look
at the stock on a pullback to the $12 area, or on a breakout above today's high.
We note that ITWO has continued to garner attention in the days following its
relisting, as it makes its way on to more radar screens. Right now, it seems
fairly cheap, trading at less than 1X sales. We think the stock should
have an easy path to that 1X level, around $14. We are also hearing that the
company
could be close to posting net cash on the balance sheet this quarter, as
it continues its debt cleanup. We believe that ITWO still has some of the best
supply chain technology for manufacturers, and may see revenue acceleration
due to the relisting and the perception that most of the messy details of the
company's multi-year restructuring are behind it.
American Oriental Bioengineering -- possibly cheap China biotech (AOB)
2.21 -0.19 : With recent interest in Baidu (BIDU) and any other new
company that seems to be doing anything in China (we note that Retractable
Technologies, RVP, is up some 26% today after it announced expansion plans
there), we're keeping an eye on American Oriental Bioengineering (AOB).
The co is not an IPO, so there really aren't that many people watching it. But
AOB does seem to be garnering some interest and a good deal of momentum
since it moved from the pink sheets to the AMEX Exchange on July 18. AOB is a
Chinese biotech company that says it produces protein peptide more efficiently
than traditional extracting techniques. The cos' proprietary techniques are used
to manufacture and formulate supplemental and medicinal products. Soybean
peptides are used in general food, health food products and some medicines. The
company also produces Cease-Enuresis Soft Gel, the only Chinese FDA-approved
first grade, prescription medicine that is specially formulated to help
alleviate bed-wetting and incontinence. We note that AOB has about $12.18 mln in
cash and equivalents, or about $0.29 a share (stock price is $2.21). Net
income last year rose 69% to $7.77 mln, or about $0.18, based on the number
of shares outstanding in the cos' most recently reported quarter (March).
That means that AOB is now trading at a little more than 12Xs '04 earnings. And
AOB should be even cheaper based on the EPS it could produce in '05.
Allegheny Technologies (ATI) - another titanium play (28.89 +1.27) -
Update: Titanium Metals (TIE +11%) is having a huge move today after guiding
higher. The stock has had an impressive run the past few months (up 100% since
May). However, a lesser known name with exposure to titanium is Allegheny
Technologies. The co makes specialty metals such as nickel-based alloys and
superalloys, titanium and titanium alloys, stainless and specialty steels, etc.
It's also a play on the strength of its end markets: aerospace, construction and
mining, chemical processing/oil & gas etc... ATI also guided higher today (see
8:01 comment), but it is not as high profile, so it's not moving nearly as much.
The co says its high-value products remain strong... With the stock trading at a
p/e of just 8.8x vs18x for TIE (one analyst), ATI is a name worth keeping on the
radar. Mkt cap $2.7 bln, float 80.6 mln, avg vol 1.4 mln.
