Friday, October 12, 2007

 

Position Update: XFML

Late last night, I had a conference call with the Beijing IR of XFML.

A few things I thought were worth noting:

- The company has used 9 of the 50 million dollar share buy back. I got the sense they intend to pick up the pace, sometime soon.

- They are serious about Corporate governance and want to improve their image, here on Wall Street.

- One of the ways they want to improve their image is by "reporting good quarterly numbers," that either meet of exceed expectations.

- They have 30 year contracts in place, thanks to the Chinese government.

- Earnings will be out, before November 15th.

All in all, I hung up thinking "they're going to blow the doors off the estimate."

Comments:
Sept sale up, PPI down below estimates.

Could be another day for the bulls.

Thanks for the xfml update.
 
In all seriousness -- "30 year contracts with the Chinese Government?"

That would be the same volatile group of octagenarians who are currenlty trying to navigate the straits between rampant capitalism and totalitarian communism?
 
You speak Chinese, too??? I got some at 8.5 this AM. Hopefully we will ride this one to the moon!
 
And granted, I'm a hypocrite in a sense, because I got some STeVe, which has similar risks. I guess I feel there are a few more barriers to entry protecting STeVe, and its higher profile might make it harder for the Chicoms to nationalize in a pinch.

Then also, STeVe doesn't have weird shit like this going on either:

Updated: Yucaipa Buys Stake In Chinese Fin Info Firm Xinhua Financial Media
By Joseph Weisenthal - Wed 26 Sep 2007 08:45 AM PST

Updated below: Shares of Chinese online financial news agency Xinhua Financial Media (NSDQ: XFML) are up today on an announcement that investment group The Yucapia Cos. will take a stake in the company through an agreement to purchase shares from existing owners coming out of IPO lockup. Yucaipa, the investment vehicle of Ron Burkle, is likely to take an active role in the company’s operations, possibly helping the company look for future transactions. The announcement is also a positive, since it means fewer shares coming to market in the near term. The company has had a rough time of it since its IPO in March, with shares at one point dropping 50 percent off its highs. The company, and its American-born CEO Fredy Bush, were the subject of an investigative piece in the Wall Street Journal this summer, which looked at its rise and relationship to the Chinese government. It has revamped its governance policies in May after its CFO resigned. Terms of the investment were undisclosed. Release.

Update 1: WSJ reports that this move comes as parent Xinhua Finance Ltd. attempts to sell U.S. proxy-advisory firm Glass Lewis & Co...Xinhua Finance’s $45 million acquisition of Glass Lewis this year thrust the Chinese company into the spotlight when two Glass Lewis executives, including the former chief accountant of SEC, resigned after the takeover.

 
And WTF was this all about?

paidContent.org
Ron Burkle Investment In Xinhua Financial Media Stake: Some Details
Wednesday October 10, 3:20 pm ET
By Joseph Weisenthal


A recent SEC filing indicates that Ron Burkle's Yucaipa fund got a pretty nice deal when it purchased a stake in Xinhua Financial Media (NasdaqGM: XFML - News) at the end of September. The 8.57 million share stake, which was purchased from company insiders, cost the fund $25.72 million or $3 per share. At the time the deal was announced, shares in XFML were trading near $9 share, while the lowest the company's shares got this summer was $5.20. Already the purchase represents a $60 million profit, although there's no indication that Burkle is interested in a quick flip. Xinhua has been under a cloud of controversy for several months amid questions about its corporate governance. The fact that insiders were willing to sell at such a discount might suggest a level of concern over the company's fortunes not previously expressed. Filing. [via NYP]
Disclaimer: Larry Kramer, our board member, recently joined Xinhua's board as well.


 
Good stuff Fly, thanks for doing the heavy lifting for us. Any XFML price targets in mind?
 
Jake--

The person who wrote that article was an idiot.

2 ADS shares= one of ours.

Therefore, Burkle bought for $6, not $3.

During that time frame, the 90 day moving average is $5.8.Completely standard.

As for the other stuff, it has been rectified. The company is doing great, apparently.
 
$20, by mid- 08.

Or, considering how these Chi-com stocks are, next week.
 
Hmmm... should have been tipped by the "paid content" moniker.

WTF, they're paid to obfuscate?

Thanks for the heads up.
 
SA up 8% thus far.
 
XFML sounds like it has fraud in its DNA.

I wasn't reassured by your highlights from the conference call. All the items related to improving their image and improving corporate governance were really about managing the stock: One of the ways they want to improve their image is by "reporting good quarterly numbers," that either meet of exceed expectations.

That single line is just about a perfect summary of some of the biggest accounting scandals of the past decade.

You're probably right that this is a good trade. This company is almost certain to burn investors again, but that will probably happen at a higher price.
 
Ott--

As Americans, we have this innate fear of anything Chinese. Ask most people and they'd say everything in China is a fucking scam.

In the meantime, their markets have made ours look like shit on a stick.

I cannot tell you, with any degree of certainty if XFML will "fuck investors."

Reading through the allegation, I believe they are frivolous and feel it's baked into the stock.

On face value, they operate a very good business.
 
How have the Chinese (as a gov't I mean, the people are fine, and the womens is hot) done anything in the last... fifty plus years to warrant our trust?

I don't think Americans "fear" the Taiwanese any more than they fear the Japanese, the Singaporese, the Thai, Phillipino, etc, etc.

The problem with the (Red) Chinese, the Viet Namese, Burmese, etc, is not that they are Asian, but that -- being totalitarian nations -- they do not subscribe to the traditional tenets of the capitalist system, which makes their capital markets that much more risky in which to speculate.

For most investors, the rule of law is a stomach settler.

Simple as that.
 
Dead on, Fly. We have an innate fear of China and of communism that goes back for decades. We're conditioned by fear, and because China has been 'closed off' for so long, that feeling perpetuates. But in the past ten years, the Chinese have made an extraordinary transformation into an industrial nation... they've opened up the inland, cars are replacing bicycles, and they're out studying our 'playbook' on how to industrialize so they can utilize their endless supply of labor and be competitive. Companies like XFML backbone an eventual transparency and visability that give China a credibility they desperately want... in order to be a big (if not 'the') player in the global marketplace. The giant brains in governement are also busy having think tank conferences on how to make the free market transformation without collapsing their traditions and government overnight. (hard to navigate these tricky capitalist waters and stay true to your communist roots.) Many idiots out there will cling to thier fear of China though, until it rips off their fuzzy moustaches giving them nowhere to hide their antiquated thinking.
 
Ott,

why dont you do some digging and see what the company has done since the allegations? HAve you read the CEO's response? Have you seen what they have done in the meantime to bolser confidence?

simply read the article above to see how accurate some reporting is, and how doubt can be conjured up from thin air.

The company is run by an American. Just because its based in China it is unscupulous?
 
Jeebus. My issues with the company have nothing to do with it being a Chinese business.

Notice my references to the companies own statements. Notice my references to the accounting scandals, which involved U.S. companies. Notice the total lack of references to the country in which XFML does business.

In other words, read what I wrote. I'm not Jake. I'm far more suspicious of companies that are based in Salt Lake City, Denver, Boca Raton, or Las Vegas than I am of companies based in China.

XFML carries the taint of rip-off artists. The bozos who gae the company that taint may not have titles any longer, but I see nothing that tells me to rest assured that there has been a clean sweep.

So, with that suspicion lurking in my mind, alarm bells go off when I read that the company's approach to cleaning up its image includes working at keeping earning at or above expectations.

Unless a company needs to raise a lot of capital, I don't like seeing management paying much attention to the stock price and to what analysts think. Manage the business. Tell investors what's going on. If analysts aren't buying the positive outlook, persuade with results.

I understand that investor relations are important, but setting a goal of meeting or exceeding quarterly expectations is a dangerous way to conduct business. We've seen what happens when companies put too much emphasis on hitting the numbers.

What kind of moron lets analysts set important company goals, anyway?
 
Ott--

While you may be right, you are living in an Utopian world, where publicly traded stock don't give a fuck about eps estimates.

Last time I checked, the estimates are their bible. They live and die to meet or exceed the estimates.

Honestly, if speaking to mngt and they told me they didn't give a fuck about eps estimates, I'd hang up and sell the stock twice.

This is the world we live in.

Don't be a player hater. Hate the game, bitch.
 
Manage the business AND manage the stock. The two are married. Build a loyal investor base by delivering results and creating 'brand recognition' to what your stock represents to investors. MVIS is a good example... company on a one year upswing from excellent management but they need to manage the stock better to build a loyal investor base. They're close, but they need to do a better job. Once that is in place, and investors finally get it about what MVIS represents... onward and fucking upward.
 
Honestly, if speaking to mngt and they told me they didn't give a fuck about eps estimates, I'd hang up and sell the stock twice.

Heh. And you should, because most managements that have made statements like that have done it only after things start to go wrong and they know that they don't have a prayer of meeting estimates.

I like to hear management express their interest in EPS in terms that reflect what management is supposed to be doing -- talking about, say, 15% annual revenue growth and a 200-basis-point increase in gross margins, rather than talking about beating a quarterly analyst estimate.

Now, what you reported was coming from the IR department and was aimed at a specific audience. If that kind of talk stays in the IR arena, my hackles will slowly lower. If management starts sounding like the IR department, I'll assume the worst.
 
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