3SOF

c360 Exceeds Key Business Objectives Since Acquisition by CDC Software
Thursday October 12, 8:04 am ET


ATLANTA--(BUSINESS WIRE)--c360 Solutions, a leading Microsoft Dynamics Customer Relationship Management Independent Software Vendor (ISV) and a division of CDC Software, a subsidiary of CDC Corporation (NASDAQ: CHINA - News), announced today that it has exceeded key business objectives during the five months since it was acquired by CDC Software. Since the completion of the acquisition of c360 by CDC Software in April 2006, c360 has:
Added 95 new channel partners bringing the total to over 600 worldwide
Reached total cumulative c360 licenses of over 190,000
Achieved maintenance renewal rates above 90%
Added 5 new products through licensing and acquisition
Estimated revenues for third quarter ended September 30, 2006 at 30% above budgeted revenues
"c360 was consistently reporting growth in many key business metrics when they joined us in April," said Eric Musser, president of CDC Software. "Leveraging the global capabilities of CDC Software, we're amplifying that growth trend as we take c360 into new markets. In addition, the release of Dynamics CRM 3.0 in December of 2005 by Microsoft has created a noticeable uptake in the CRM industry in general, and in the c360 applications in particular. We see this strong demand for c360 add-on applications for Microsoft Dynamics CRM continuing well into the future."

"The financial leverage that CDC Software has brought to c360 along with the market strength of Microsoft CRM has enabled excellent sales growth and performance," said John Gravely, vice president, Operations of c360. "Our partnership with Microsoft has helped us grow our base of channel partners and sales both domestically and internationally as we penetrate more markets together."

Alister,

I just got around to this thread this morning. 

Nice job on this one!     Applause.

Basis the semi-log scale, yesterday's high was smack on the top the channel, for Hit #4 since this very nice rally began in May, 2005.

On the first two hits, CHINA sold off a fair amount.  On Hit #3, on September 22, there was only a minor selloff on an MACD failure from below the signal line.

Yesterday, MACD crossed above zero, so that looks fine for a breakout above the channel. You might want to keep an eye on that, for any sign of failure.

I hope that this goes into acceleration mode for you.  Good luck!

Thanks for the input Melf


Leading Dairy Company Uses Ross Supply Chain Solution from CDC Software to Improve Forecasting and Meet Scan-Based Trading Mandate
Monday October 16, 7:35 am ET 
Guida's Milk and Ice Cream Gains Competitive Advantage with Enhanced Forecasting Capabilities and Retains One of its Largest Customers with Rapid Implementation of Ross SCM


ATLANTA--(BUSINESS WIRE)--Ross Systems, a global provider of enterprise software solutions and a division of CDC Software, a subsidiary of CDC Corporation (NASDAQ: CHINA - News), today announced that Guida's Milk and Ice Cream, a premier dairy based in New England, has achieved significant business improvements with Ross' supply chain management (SCM) solution. Optimizing Guida's forecasting capabilities and enabling the dairy company to meet one of its largest customer's scan-based trading (SBT) mandate, Ross SCM has improved operational efficiencies and driven cost savings and competitive advantage.

Guida's selected Ross SCM to address two critical business issues. First, the company needed a forecasting application that would handle all of the inherent variability in the business, capable of replenishing orders based on true demand versus previous order quantities. Without a more efficient method, Guida's would continue to face overstock issues, as well as frequent stockouts, resulting in costly special deliveries in order to keep customer commitments.

Secondly, Guida's turned to Ross SCM to meet the SBT mandate set by one of its largest customers, a major grocery chain. Since enabling SBT - the process of using point-of-sale scan data to manage payment, promotion and replenishment of products- was new to Guida's and the company faced a tight deadline, it was a daunting challenge.

"Guida's future with this very large customer hinged on the success of Ross SCM and our new SBT capabilities - failure was not an option," said Joel Bartolome, IT manager for Guida's. "Ross SCM fit our needs so well right out of the box that there was no need for customization. Because of this, and Ross' commitment to meeting our customer-mandated go-live date, the implementation went very well and the Ross SCM is a huge success."

Guida's implemented Ross SCM within 45 days during its busiest season to meet the SBT mandate, while its competitor scrambled and failed to meet the deadline. In addition, with Ross SCM, shipped orders reflect true customer demand, saving Guida's more than $4,000 a month by eliminating the need for special deliveries based on inaccurate forecasting.

"CDC Software is focused on helping companies like Guida's become customer-driven market leaders, demonstrating a superior ability to understand, attract and keep valuable customers," said Beth Berndt, director of Industry Solutions at Ross, focused on the food and beverage sector. "With Ross SCM, Guida's is able to deliver a responsive, differentiated and superior customer experience while running their business more productively, efficiently and profitably."

Alister,

CHINA broke out above that 16-month channel on Friday, on good volume.  Nice going! 

1. Introduction

I'm studying 3 stocks a day, as I prepare myself to co-manage the 3 Stocks on Fire Portfolio, and CHINA pop up on my long term bullish screen. I held this stock on the portfolio in the past, and now it is about double, so I want to check what's going on.

If you're new to www.3stocksonfire.org and would like to join our stock traders community, please register.

2. Profile

The CDC family of companies includes CDC Software focused on enterprise software applications and services, CDC Mobile focused on mobile applications, CDC Games focused on online games, and China.com focused on portals for the greater China markets. For more information about CDC Corporation (NASDAQ: CHINA), please visit www.cdccorporation.net.

3. Technical Analysis
3.1. All History Chart



We almost can't see the current bull trend on the long term chart. As any internet related stock, CHINA had its bubble and crash. But it was one of those that survived.

3.2. Medium Term Chart



The medium term trend is bullish. There are resistance levels around $7.96, $12.75 and $14.90. The 200 day SMA has been a good indicator to predict CHINA.

3.3. Short Term Chart



Everything on CHINA's chart is pointing north: the trendline, the moving averages, the average volume, etc.

4. Fundamental Analysis
4.1. Number of Shares Outstanding



I'm surprised and pleased that the share count is almost the same now as it was back in 2000. This is almost a first for a Chinese company. The current market cap is 112.66 million*$6.835 = $770 M.

4.2. Liquidity



The current ratio has been higher than what it is now, but still $95 M in working capital and $129 M in cash and marketable securities. I think the balance sheet is ok.

4.3. Revenues



There's solid revenue growth since 2002. $305 M expected for the full 2006, so the revenue multiple is $770 M / $305 M = 2.52. This is about the average of the Internet Software & Services industry.

4.4. Profits



Analysts expect CHINA to be very profitable in 2006 and 2007. The average estimate for 06 EPS is $0.24 and for 07 it is $0.37. This is very fast growth. If these estimates are correct, the 07 forward multiple would be 18.5, and the growth rate would be 54%.

If the 06 EPS figure proves correct (CHINA needs to make $0.16 for the remaining two quarters - they still didn't report 3Q EPS, they will tomorrow), the current earnings multiple is 28.5. The average for the industry is 40.8.

4.5. Recent News

- «As published on July 17, 2006, the company's estimates for 2006 place total revenues in the range of US$300 million to US$305 million and (1)adjusted net income in the range of US$31.6 million to US$32.8 million.»

More recently they revised this revenue guidance to $305 M - $308 M. Probably net income will be something like $33 M, or about $0.29 a share. This is more than the $0.24 analysts are estimating (perhaps due to GAAP and non GAAP numbers). The current earnings multiple would then be 23, and the industry's average is 40.8.

- «... the company expects total revenues for the fiscal year ended December 31, 2006 to be in the range of US$303 million to US$307 million, an increase of over 24 percent over 2005's revenues. The company anticipates *adjusted net income to be in a range of $32.0 million to $33.3 million, an increase of over 100% over 2005's results. This is the second time in four months that the company has upwardly revised its fiscal year outlook.»

I guess everybody already knows about the 06 numbers, so probably they were already discounted by the share price (even though the multiples are lower than the industry's average).

5. General Overview

I'm undecided on what to think about these numbers in terms of the share price. In one hand, the company already made a lot of publicity on them, on the other, visibility and predictability is usually something that drives the multiples higher.

CHINA is a company of the future, engaged in software, mobile applications, online games and  internet portals. I love all these sectors. Valuation also seems attractive, with below average multiples and above average growth.

Usually the issue that kills these high growth Chinese stocks is their habit to dilute shareholder value. But I don't see that at all in CHINA, to my big surprise.

I don't know if 3Q numbers that will be released tomorrow will make the stock rally or decline, but I would see any decline as a buying opportunity. Therefore my outlook is positive on CHINA.

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This morning just before the open, about 2 hours after I published my initial analysis, CHINA released this news:

• CDC Corporation Announces Private Offering of $168 Million of Senior Exchangeable Convertible Notes due 2011
Business Wire (Mon 8:00am)

The news means CHINA got $168 M in cash now for CDC Software or CDC games shares when they make their IPO. The novelty is that CHINA plans to make IPO's on its subsidiaries, and probably this way these businesses will trade at higher multiples.

The news lacks many details, but overall, it's positive. It adds to my general bullishness on the stock.

Technically CHINA is making a breakaway gap with explosive volume:

CHINA is up 6% AH after posting better than expected results:

CDC Corporation Reports Record Revenues of US$78.2 Million and Adjusted Net Income of $10.1 Million for Third Quarter of 2006, an Increase of 26% and 214%, Respectively, Over the Prior Year Period

2007 guidance is also very encouraging. If CHINA trades at an average multiple it will be a $20 stock.

Good luck !

Indeed!

Thanks for the heads up on this one David, I got in this morning.  Had a listen to the CC, and it allsounds very encouraging, with strong growth going forward in all subsidiaries fo the company.  I wouldn't be surprised if we see a breakaway gap tomorrow on their very strong 2007 estimates.



ST

After filling the gap, china is breaking out bigtime baby - oh yeah!!



Thanks again David

hi,
up on volume , i like that .
maxi

Thanks ScottishTrader and rickjust, just leaving the updated chart, as it is a beautiful one

Quote from: David Randolph on November 21, 2006, 04:48:03 PM
just leaving the updated chart, as it is a beautiful one

yes it is, thanks for the pick.

maxi

I want to thank David for his fundamental analysis too.  I bought initially on his recomendation and held through earnings, then sold for a nice profit.  I bought back a few days ago at 7.60 because of David's recommendation of China and then when it  broke higher today  I bought more at 7.92.   

Quote from: Terliso on October 18, 2006, 03:40:20 PM
I jumped in also today

Sold CHINA for 19% profit & bought DNDN

I just wish that I held CHINA a little bit longer

http://www.3stocksonfire.org/trading/index.php?topic=904.270

Quote from: Terliso on November 21, 2006, 10:51:38 PM
I just wish that I held CHINA a little bit longer

Alister,

I just wish that I had bought it at all, after seeing it break out above that channel. 

Quote from: Melf Elf on October 13, 2006, 05:03:41 AM
Basis the semi-log scale, yesterday's high was smack on the top the channel, for Hit #4 since this very nice rally began in May, 2005.

I hope that this goes into acceleration mode for you.  Good luck!

Acceleration mode, indeed! 

Nice play, David, and nice pick for the 3SOF portfolio!  Applause.  I'm glad that so many of you  have it.