3SOF

I wrote the following analysis on the Analysis on Demand thread and just need to buy UTVG.OB today:

Quote from: Jim897 on September 21, 2007, 08:40:04 AM
David, here's another stock that I'd like you to analyze, UTVG.  It is a great growth story.  It is a leading air travel and air cargo transportation agency in Southern China.  The company (or analysts - I'm not sure which) is estimating .24 eps for 2007 and analysts are estimating .39 for 2008.  It currently trades at 3.45 and has been very bullish lately.

Yeah, I know that stock. I've covered it when it was trading at $0.9 and I was very positive on it, but failed to buy it (it was very thinly traded back then - and it still is, but that's not a relevant factor).

1. Profile

Universal Travel Group (UTVG.OB) provides domestic and international airline ticketing services and cargo transportation agency services primarily in the People's Republic of China. It also offers hotel reservations, packaged tours, and air delivering services. In addition, Universal Travel Group owns an aviation network, cnutg.com, which provides an air tickets sales network. The company is based in Los Angeles, California.

2. UTVG's stock market history



Man, UTVG.OB is up six fold since my initial analysis, what a miss

Let's see what we have now. The current market cap is 34,934,285*$5.54 = $193.5 M.

I see the company made several acquisitions recently:

• Universal Travel Group Announces Closing of the Acquisition of Xi'an Golden Net Travel Serve Service Co., Ltd.
PR Newswire (Mon, Aug 6)

«The price for the acquisition was $1,800,000, of which $1,542,000 was paid in cash. The remaining $258,000 was satisfied by the issuance of 151,765 shares of newly issued Universal Travel Common Stock.»

«The company had revenue of $5,500,000 and net income of $490,000 for 2006, and expects an 80% increase in revenue and net income for 2007.»

3.7 P/E ratio

• Universal Travel Group Announces Closing of the Acquisition of Shanghai Lanbao Travel Service Co., Ltd.
PR Newswire (Wed, Aug

«... announced today that it has completed the acquisition of Shanghai Lanbao Travel Service Co., Ltd. for US $3.920 million, of which $2.828 million was paid in cash and the remaining $1.092 million was satisfied by the issuance of 600,000 shares of newly issued Universal Travel Common Stock.»

«The company reported US $1.1 million in revenue and US $730,000 in net income for 2006.»

Net profit margin of 66% Earnings multiple paid was 5.4.

«"Due to the completion of these two acquisitions, we revised our previously announced guidance. We now expect to report 2007 revenue in the range of approximately $35 million to $36 million, up 250% to 260% from $10.01 million reported in fiscal year 2006. Net income for the 2007 fiscal year is expected to be in the range of $8.2 million to $8.5 million, or $0.23 to $0.24 earnings per share, an increase of 222% to 233% from $2.55 million reported in fiscal year 2006."»

WOW!

I'm dizzy, I really am, with this company's potential and my huge miss when it was trading at $0.9.

• Universal Travel Group Newly-acquired Subsidiary Xi'an Golden Net Reports $4.4M Revenue for the First Six Months of FY '07
PR Newswire (Tue, Sep 18)

• Universal Travel Signs Agreement to Acquire Foshan Overseas International Travel Service Co. Ltd.
PR Newswire (Fri, Sep 21)

«The price for the acquisition will be $6.5 million, of which $3.15 million will be paid in cash. The remaining $3,346,500 will be satisfied by the issuance of 1,122,986 shares of Universal Travel stock.»

«Foshan reported unaudited sales revenues of $11.9 million in FY 2006 with a net income of $930,000.»

So, the P/E of this acquisition was 7. Still cheap.

• Universal Travel Group Signs Agreement to Acquire 90% of Tianjin Golden Dragon International Travel Service Company
PR Newswire (Wed, Oct 17)

«The purchase price for this majority stake will be $7,889,000, of which $3,600,000 will be paid in cash and $4,289,000 will be satisfied by the issuance of 1,053,800 shares of Universal Travel stock.»

(the share part used to pay for the acquisitions is increasing).

«The company reported unaudited sales revenue of $16.17 million and net income of $1.13 million in FY'06.»

Again, P/E paid was 7.

«Jiang continued, "We estimate that the packaged tours segment will contribute about a substantial amount of Universal Travel Group's revenue. At present, China's tourism market demand is $150 billion, with a projected increase of 10% in the next five years. This represents broad development prospects for our company and a wonderful opportunity for further growth. In addition, we believe that the 2008 Beijing Olympics will further boost the overall business performance of UTVG."»

3. Valuation Model

I've derived some rough estimates, which are my best guess into this company's prospects:



According to my estimates, UTVG still looks extremely attractive, even after a 6 fold advance in less than a year.

4. Conclusion

I've never seen a company growing so rapidly, through organic growth and acquisitions, as UTVG. The way I see it, management has been buying fast growing and very profitable companies for as low as 7 times annual earnings or even less. US stock market investors are willing to pay at least triple for the same companies.

It is somewhat annoying to buy a stock 500% plus higher than I could have bought in the beginning of the year, but given the fundamental information there's nothing else I can do but buy UTVG.OB as soon as possible.

Trading Plan:

Buy UTVG.OB, 6.66% of capital as usual.

Lovely, another one that IB doesn't allow....let me see if I complain as the last time they will deliver it.

Best luck for all that can.

Quote from: Dracull on October 30, 2007, 11:00:35 AM
Lovely, another one that IB doesn't allow....let me see if I complain as the last time they will deliver it.

Best luck for all that can.

"Unfortunately you can not trade this stock at IB. The reason is due to clearing constraints. IB primarily clears all of our transactions electronically. Since this security is not DTC eligible, i.e. electronically cleared, and physical stock certificates are required to be held in this case we do not allow our traders to hold positions in this security. IB is not set up for this type of physical clearing and holding of physical stock certificates. We apologize for any inconvenience that this may have caused you. "

Didn't work...I will have to skip this one.

Dracull, why don't you open an account with, say TDAmeritrade, and use it for a few positions that you can't open otherwise? I have had only limited problems with them, of no siginificance.

I'm considering doing so at the end of the month, Berloga. Pitty, as the comissions on IB are really cheap, but I can't afford to be left out of the race on another stock. I think that I still have my old Datek account open, I will check it out.

I too use IB and opened an account at TDAmeritrade to handle these situations.  It is very frustrating to say the least.  I love the $1 and $2 trades but they seem to have a lot of problems finding shares to short and allowing purchases of OTC stocks.  At least IB started allowing CHME (Probably thanks to Dracull)!

I dont get the heading buy at 7 sell at 21?

Stocky,

I believe David is referring to the P/E...

Quote from: David Randolph on October 30, 2007, 08:37:33 AM


4. Conclusion

I've never seen a company growing so rapidly, through organic growth and acquisitions, as UTVG. The way I see it, management has been buying fast growing and very profitable companies for as low as 7 times annual earnings or even less. US stock market investors are willing to pay at least triple [/font] for the same companies.

It is somewhat annoying to buy a stock 500% plus higher than I could have bought in the beginning of the year, but given the fundamental information there's nothing else I can do but buy UTVG.OB as soon as possible.

Trading Plan:

Buy UTVG.OB, 6.66% of capital as usual.

Thnx Basanlas

QuoteStocky,

I believe David is referring to the P/E...

That's it basanlas, applaud

UTVG's business model has been buying profitable companies for 7 times earnings (or less) in China, while US stock market investors value them at least triple that earnings multiple.

There's one analyst covering the stock and he has the following estimates:



However, his projections were made before most announced acquisitions, so I need to try to make my own 2008 projection for revenue and EPS given the current public information and fundamental trends.

So let me consider 2006 as the starting point:



2006 revenue was $10 M and the # of shares outstanding was 34,220,000. Net Income was $2.56 M, so net profit margin was 25.6%. The balance sheet had $7.46 M in current assets.

Q1 2007 results, still without any new acquisition, were as following:



Then we've had, in April 10, 2007, UTVG acquired Shenzhen Speedy Dragon, for about $4 M, in cash and shares. New shares coming from this acquisition were 714,285.

«SSD is engaged in the business of air freight forwarding. The company is a nationwide cargo logistics company providing commercial, point-to-point parcel and container transportation
services. It also operates as an international and domestic freight forwarding agency for Chinese civil aviation companies and provides railway and express delivery services.

SSD has a fleet of more than 200 franchised vehicles and manages warehouses totaling 40,000 square meters (approximately 430,556 square feet), which it uses to stage, transfer, and store packages in transit. The annual volume of the company's air cargo transportation accounted for approximately 30% of the total air cargo market in Shenzhen, China.»

From reading SEC files I see that SSD had no operations in 2006. However, in the Q2 2007 earnings report I get this:

«Universal Travel reported record revenue of $7.02 million for the second quarter, an increase of approximately 657% from $928,000 for the comparable quarter in fiscal year 2006. The increase in revenue is attributable to the acquisition of Speedy Dragon and an increase in the customer base of the pre- existing business from 1.5 million members to approximately 1.7 million members at the end of the quarter. For the quarter, Yu Zhi Lu reported $4 million in revenue, or approximately 57% of overall sales for the company. Speedy Dragon contributed the other $3.02 million in sales, 43% of the company's revenue. During the first quarter YZL reported $4.3 million in revenue, or approximately 61% of overall sales for the company and Speedy Dragon contributed the other $2.68 million, or 39% of the company's revenue.»

So, Speedy Dragon revenue growth from Q1 2007 to Q2 2007 was 12.7%. This gives me about 50% in annualized terms (more, but lets keep it this way, this is a rough estimate). This tells me Speedy Dragon revenue will be about $13 M in 2007 and I figure, about $20 M in 2008.

UTVG's revenue by itself (or stand alone Yu Zhi Lu) , were $4.3 M in Q1 2007 and $4 M in Q2 2007, so revenue declined about 7% sequentially. I'm going to estimate that Yu Zhi Lu revenues will stay flat around $4 M a quarter in 2007 and 2008.

So, considering just Yu Zhi Lu and Speedy Dragon, I see $36 M in 2008 revenue.

Moving on to the next acquisition:

«LOS ANGELES and SHENZHEN, China, April 23 -- Universal Travel Group (OTC
Bulletin Board: UTVG - News), a leading air travel service provider in Southern
China, announced today its intention to acquire Shanghai Lanbao Travel Service
Co., Ltd.»

«The company reported US $4.5 million in revenue and US $380,000 in net income for
2006.»

«The company's centralized Internet and mobile phone booking systems are open to
more than 200,000 hotels, 5,000 booking centers and more than 8,000 travel
agencies and tourist companies throughout China, providing them with real-time
data transfer and information.

By the end of 2008 the company expects to become one of the top three providers
in the hotel booking industry in China. The company's goal is to become a global
provider of hotel, aviation and tourism information by 2012.»

In September 19 I get this in a press release:

«Shanghai Lanbao, had unaudited revenues of $1.3 million and a net income of $770,707 for the first six months of 2007.»

Very fat net profit margin here, but small revenue number. I would say Shanghai Lanbao will have 2008 revenue of about $3.5 M.

UTVG's total 2008 revenue estimate rises to $39.5 M. Strangely I can't find a price for this acquisition, let's say the share count rises 1 million to 36 million.

Next acquisition:

«LOS ANGELES and SHENZHEN, China, Aug. 6 /PRNewswire-FirstCall/ -- Universal Travel Group (OTC Bulletin Board: UTVG), a leading air travel and air cargo transportation agency in Southern China, announced today that it has closed the acquisition of Xi'an Golden Net Travel Serve Service Co., Ltd. The price for the acquisition was $1,800,000, of which $1,542,000 was paid in cash. The remaining $258,000 was satisfied by the issuance of 151,765 shares of newly issued Universal Travel Common Stock.

Xi'an Golden Net Travel Serve Service Co., Ltd. was established in 2001. The company focuses on the domestic tourism market and provides air tickets, train tickets and other services. The company had revenue of $5,500,000 and net income of $490,000 for 2006, and expects an 80% increase in revenue and net income for 2007.»

I see about $15 M revenue coming from here in 2008, after about $10 M in 2007. Total 2008 revenue estimate stands at $54.5 M, share count is 36.2 million.

Next:

• Universal Travel Signs Agreement to Acquire Foshan Overseas International Travel Service Co. Ltd.
PR Newswire (Fri, Sep 21)

I see $20 M more in revenues coming from this acquisition in 2008 and 1,122,986 new shares.

Total 2008 revenue estimate rises to $74.5 M and the share count to 37.5 million.

Another:

«LOS ANGELES and SHENZHEN, China, Oct. 17 /PRNewswire-FirstCall/ -- Universal Travel Group (OTC Bulletin Board: UTVG), which operates through its wholly owned subsidiary, Shenzhen Yu Zhi Lu Aviation Service Company Ltd. (YZL), a leading travel and cargo transportation agency in Southern China, announced today that it has entered into an agreement with the shareholders of Tianjin Golden Dragon International Travel Service Co., the largest travel agency in the city of Tianjin, China, whereby Universal Travel Group would acquire, in the aggregate, 90% of the outstanding capital stock of Tianjin Golden Dragon. The purchase price for this majority stake will be $7,889,000, of which $3,600,000 will be paid in cash and $4,289,000 will be satisfied by the issuance of 1,053,800 shares of Universal Travel stock.»

«The company reported unaudited sales revenue of $16.17 million and net income of $1.13 million in FY'06.»

I guess $20 M more in revenue and about 1.1 million more in shares and this gives me 2008 revenue of $94.5 M and 38.6 million shares.

Now, it is hard to know the net profit margin of all these businesses combined. I know I have 25% in my valuation model, but I'm going to lower this to 20%. And this way I get $18.9 M in net income in 2008, or $0.49 EPS.

With the stock trading at $5.6, the forward EPS multiple appears to be 11.4. Given investors appetite for Chinese stocks at this moment and this company's growth, I would say the earnings multiple should be at least 25, which would translate into a $12.28 stock in late 2008, not counting with more acquisitions.

I'll keep holding UTVG.OB for the long term.

being that this is pink sheet...do you think the accounting numbers are accurate for the company?

I thought pink sheets aren't as accountable as those listed on the exchanges...

Quote from: kpunarc on October 31, 2007, 09:17:22 AM
being that this is pink sheet...do you think the accounting numbers are accurate for the company?

I thought pink sheets aren't as accountable as those listed on the exchanges...

It is OTCBB, not PK.

Every time I buy a new stock, it goes down over the short term. This "indicator" is so reliable they should use it in short term technical analysis

Maybe UTVG.OB will even go down to close the gap at $4.58. But investors selling at that point should know they're selling a company trading below 10 times earnings, while it grows EPS by 100% plus a year.

I see UTVG.OB at $12 or more in 12 months time and nothing will shake me out of this conviction. At least nothing coming from the technical side.

I'll keep holding UTVG.OB for the long term.

UTVG update:
1)
Seeking Alpha:
Universal Travel Group: Benefitting From Chinese Expansion
posted on: November 01, 2007 | about stocks: UTVG.OB   

The size of China's travel market is relatively small compared to that of the United States—$134 billion and $1.3 trillion, respectively. Even so, China's swelling middle class and an unprecedented rise in disposable income have created one of the fastest growing tourism sectors in the world. In fact, the country is expected to eclipse Germany and become the third largest travel market by 2011, according to e-Marketer. And the World Travel and Tourism Council predicts that by 2010, China will receive more than 64 million tourists annually. The numbers and outlook justify the bullish sentiment among industry analysts, who forecast companies in the sector will grow 40% to 45% through 2008.

One player keyed into the China travel boom is Universal Travel Group (UTVG.OB), a small cap that provides travel services that include airline tickets, hotel and restaurant reservations, packaged tours and air cargo services. Based in Shenzhen, the nation's transportation hub and one of the world's fastest growing cities, Universal Travel Group serves domestic and international business and leisure customers traveling to, from and within mainland China, as well as the hot tourist markets of Hong Kong, Macao and Taiwan. Universal Travel has eight company owned reservation office locations, 103 franchised locations and a high-volume call center facility (which has reported a 30% jump in phone traffic each month since the end of last year).

The Company has forged lucrative partnerships with Chinese domestic and world-class international carriers, including British Airways, Air France, Cathay Pacific, Iberia, Virgin Atlantic, Turkish Airlines, Swissair and others. Through its November 2006 alliance with TravelSky, a leading provider of IT solutions for China's air travel and tourism industries, the company has secured access to more than 3,000 domestic and international hotel booking services. A wave of acquisitions, including the recent purchases of Tianjin Golden Dragon International Travel and Foshan Overseas International Travel Service Co. Ltd., providers of domestic and international packaged tours, will provide a windfall of customers and increase cross-selling opportunities for the company.

Of course with the 2008 Olympics coming to China will also benefit the expansion of travel needs. Another interesting aspect is that it has coverage from at least one legitimate US-based equity research company: Maxim Group.When I say legitimate, I mean that these guys are not "for-hire" research company where you pay a certain amount to the "stock promoter", they do a mass-mailing and then parties never speak to each other again.
Now, more on the financials and prospects for Universal Travel Group: UTVG reported a strong quarter in August 2007, in which they beat the street estimates by 25% resulting in .05 eps for the quarter. The growth story is just starting as UTVG expects to report earnings of .24 for 2007 which entails 200% earnings from 2006.

For 2008 analysts are expecting UTVG to report .39eps giving them a low forward 08? PE of just 8.56. We should expect the stock price to continue north to catch up with its future valuation as time passes. Theoretically for UTVG to be fairly valued in its industry we should expect price to proceed skyward near $14/share as we head into 2008. This is calculated by multiplying the expected annual 2008 eps of .39 x the industry average PE of 36x earnings which gives us an estimated share price of $14.04.

Or if you calculate the 2008 share price target by giving UTVG the same forward PE as CTRP (which is 53), you get a price target of $20.67 (.39 eps X 53 p/e). So one can use a "median" price target between the two and you come up with $17.36 stock price. The estimated above targets would give stockholders a possible 220% to 400% return from today's stock levels. Another future catalyst for a rise in the stock is that (unconfirmed) Universal Travel Group is now in the application process to move from the OTCBB to an AMEX listing. This of course will give the stock more liquidity and exposure to institutional interest. For those who always like to examine a stock from a technical side, UTVG is building on a bullish breakout.

The stock has been experiencing increasing daily trading volume during the last four months and the stock is trading above the 10, 20, 30, 50 and 200-day moving averages. The Point and Figure chart (P&F) is showing a short-term price objective of $11.

UTVG currently has a total of 34.9 million outstanding. The float is only about 12 million shares.Although the stock has risen since July 2007 from $2 to now around $5.50, this company is still under the radar of many investors and has a lot of growth left to achieve the calculated $17.36 price target.

With the great expansion of China happening in front of our eyes, it should provide the opportunity for Universal Travel Group's to achieve their goal to become one of China's leading travel services provider in the aviation, cargo, hotel booking and tour packaging segments.

Maxim just recently raised their target from US $5 to $7 for UTVG:

Thanks for this research piece La-Onda

La-Onda also sent me interesting information over the e-mail, I'm sure he won't mind if I reproduce it here:

«Hi David,
I have asked a friend about UTVG, please check his answer:

Hi again,
UTVG. Be VERY careful here...I "know" them. Very crooked management. Couple yrs ago, they had dismissed board for fraud, they were delisted in the past, and had a few times huge pump/dump action...Stock was going up, and down like jo-jo, from 50 cents to 3-4 dollars..I am not sure if there is now any real change...
XX.

Unfortunately he didn't provide any link etc.
Could you please check the UTVG management at one of your next updates?
thanks in advance
Oliver»

Unfortunately I'm very short on time today (man, IMMR's conference call lasted 2 hours or so - and my kids are at home today, always pushing me around ...) but I'm going to investigate this deeply over the next few updates.

I read most of the 2nd quarter 10-Q filed with the SEC and understood UTVG was recently formed by a reverse merger:

«In June 2006, the Company shifted its business to the travel service industry in
China through the acquisition of Full Power Enterprises Global Limited ("FPEG")
a holding corporation formed under the laws of the British Virgin Island which
owned all of the capital stock of Shenzhen Yu Zhi Lu Aviation Service Company
Limited ("YZL"). The acquisition of FPEG was treated as an acquisition by the
accounting acquiree (YZL) accounted for as a recapitalization and as a reverse
merger by the legal acquirer for accounting purposes so the financial statements
included herein reflect the historical financial results of YZL.»

The only "history" we have in the 10-Q is the following:

«Universal Travel Group, Inc. was incorporated on January 28, 2004 under the laws
of the State of Nevada. Full Power Enterprise Global Limited - BVI was
incorporated under the laws of the British Virginia Islands. Shenzhen Yuzhilu
Aviation Service Co., Ltd was incorporated on March 9, 1998 under the laws of
the Peoples Republic of China (PRC). Shenzhen Speedy Dragon Enterprises Limited
was incorporated in August of 2002 under the laws of the Peoples Republic of
China (PRC). Full Power Enterprise Global Limited owns 100% of the Shenzhen
Yuzhilu Aviation Service Co., Ltd. Collectively the four corporations are
referred to herein as the Company.»

The company's Chairman  and CEO is a Chinese woman:

«Universal Travel Group Chairwoman and CEO Ms. Jiangping Jiang said, "Universal Travel had a successful second quarter this year. We are pleased with the operational results for the company, particularly with the sequential quarterly reduction of costs, despite the acquisition of Speedy Dragon on April 10, 2007. Gross profit for the quarter was $2.62 million, which yielded a gross margin of 37.3%, up sequentially from the 32.4% we reported for the first quarter of this year. Net margin for the quarter was 23.5%.»

I say that at first sight the company's business is new and legit. I'll have to dig a lot deeper, deeper than just reading SEC filings, to know about management's or owner's past. And I'll do that over the upcoming updates.

For now I'll keep holding UTVG.OB for the long term. Thanks La-Onda