Sinotel 1Q11 Profit falls 3.5 percent to RMB 27.7 million

Sinotel revenue for 1Q11 increased by RMB47.7 million (40.3%) compared to 1Q10. The increase was due

mainly to increase in revenue from indoor & outdoor of RMB39.5 million, sales of equipment of RMB18.1 million and system integration of RMB19.9 million. The increase was mainly due to increase in sales to China Mobile in Shanxi Province. The increase was offset by the decrease in revenue from emergency mobile communication station (EMCS) of RMB31.2 million.

Gross profit for 1Q11 decreased by RMB4.0 million (8.8%) compared to 1Q10. The decrease was mainly due to decrease in gross profit margin from 38.2% in 1Q10 to 24.8% in 1Q11. The decrease was mainly due to higher contribution from sales of equipment and system integration which have a lower gross profit margin. The percentage of contribution from sales of equipment and system integration increased from 15.9% in 1Q10 to 22.3% in 1Q11 and from 5.4% in 1Q10 to 15.9% in 1Q11 respectively.

Also, decrease in gross profit margin due to the pressure on the selling price since the Telco implemented the central procurement policy. In view of this, the Group has mitigated this downward trend by focusing on higher margin products and services as well as expanding its recurring income business.

As a result of the above, our net profit for 1Q11 decreased by RMB1.0 million (3.5%) compared to1Q10.

sgxstockpicker says:  It is an S-chip! What more should I say?

Sinotel Technologies : A Dying Or Dead Stock?

In my earlier post, I talked about how Sinotel Technologies' time has  come to past. There was definitely money to be made if you had bought into the S-Chip at prices below the current price of $0.345. More upside had you bought it during March 2009 bottom of around 10 to 12 cents. But I dare say that more investors bought into the stock when it was 50 - 70 cents during the euphoria over its ADRs and have been sitting on hefty paper loss.

Despite the recent slate of announcements and a revived PR campaign, from a long term investors perspective, I think the hey days for this company are over, consigned to the rubbish bin of history. Of course some people would point out that the stock is currently trading at about 4 times price-to-earnings. But I reiterate the point that the company has a very strong balance sheet even before the rights issue and the cash call was totally unnecessary from my point of view. Furthermore, I would really like to see the company payout some dividends. It has not done so in its listed history.

Defenders of Sinotel would say that the company has a recurring cash flow and that it is poised to benefit from China's growing wireless infrastructure. If that really is the case, why are there no dividends? Sinotel's management by declaring even a 0.1 cents dividend, will help bolster investors' confidence and interest. Too many an S-Chip show a huge cash pile but many have went belly up - ChinaMilk Products is a good example.

My conclusion is that there are other better companies with better fundamentals that have received lesser media coverage exactly because they are out to improve their returns to shareholders. Stay away.

Sinotel Technologies Makes A Call For Cash

One a market darling, a stock at the tip of everybody's tongues, Sinotel Technology has seen its fortunes plummeted. More recently, on 30 August 2010, the telecommunications services provider announced a 1-for-4 rights issue, aimed at raising $26.4m net.

In its filing with the Singapore Stock Exchange, the company said that the proceeds would be used to fund the expansion of business in the provision of telecommunication services as well as increase in business activities in the provision of services relating to base station monitoring and diagnostics services to Telcos.

In my opinion, from an investor's perspective, the frequency at which Sinotel has tapped the markets is disturbing. Prior to this rights issue, the company had placed 28m new shares. The Chinese market is one of the world's largest market for such mobile services. However, The business is very difficult and bargaining power does not lie in the hands of small providers like Sinotel, but the major telco operators such as Unicom.

Though not visible from the graph above, Sinotel has had a terrific run up. Despite the financial crisis, its stock price managed to rise and rise, with its peak around October 2009. It could be attributed to that fact that the 3G roll out by the Chinese government to stave of an economic slowdown in the country. Furthermore, the company had been on a protracted PR campaign, selling its growth story and ADRs.

However, its time has come to past. The recent most cash call probably signals the lack of sustainability of Sinotels expansion plan. The graph above shows that after the initial euphoria of China's stimulus measure had died down, Sinotel has made a swift but interrupted descent. My fundamental view is that the industry is too competitive for such a smallish company to survive through organic growth. This cash call - at least the reasons provided- is a demonstration of that the economics of the industry trump its press release. I will do a review 3 months down the road on this call. Maybe I am wrong. 

August Recap; Will I wake up when September ends.

Sorry for the belated postings. I have been flooded at work.

A quick recap of August.

The most notable has been the wild fluctuations in the the stock market. Notable stocks that have been steadily appreciating in price are: Sinotel, Genting Singapore and RTO Seroja Investments.

Going forward, there is one stock you should keep a look out for, Falmac.

It is also another RTO target this time by Peter Choo who might want to inject his mining assets into this troubled textile machine making company. I am suggesting only a small bet on the day it is lifted from suspension. This would take place after its EOGM at the end of Sept.

Before it got suspended, its last done price was $0.06. Also, Peter Choo and his associates own a large chunk of the company, despite its accounting iiregularities. What I dare hazard a guess as, would be that you should make a bid within 10 bids of this price ($0.06-0.11).

I do not know how they are going to solve the financial problems, but if they do, it would make Falmac at least worth $0.20.

you have been told.