GIGM - Sector: Technology---Industry: Multimedia & Graphics Software

[David Randolph]

I've made several analysis on GIGM but none come up as evidently saying GIGM is a long term buy as the one I did yesterday:

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I gave it a 9 out of 10 and an estimated long term return of 26% a year. This is because GIGM's business is a high margin business, and the way revenues are growing ... not to mention the potential of their Chinese games that still aren't producing revenues. Even my brother plays Mahjong now (his girlfriend is Chinese).

Moreover, GIGM's business is, in my view, independent of the economic cycle, which adds a feel of safety to the investment.

On Tuesday there were news out that weren't reflected on my analysis (my fundamental service wasn't updated with the latest news), showing revenues and EPS for full year 2006 were in fact better than expected and considered in my analysis:

• GigaMedia 2006 Net Profit up 386% to US$31 Million
PR Newswire (Tue, Mar 13)

Net profit margin for the 4th quarter was an incredible 32.9% (on my long term estimate I'm considering just 20% for net profit margin).

I have no doubts GIGM is a spectacular long term holding and I want it on the Main for the very long term. What I'll do is just compare actual results with my estimates, and if on average the company keeps on track, I'll continue holding it over the years.

Trading Plan:

Buy GIGM, 6.66% of capital as always.

[la-onda]

GIGM again 

fyi:
GigaMedia "buy," target price raised
Thursday, March 15, 2007 10:41:55 PM ET
Roth Capital
NEW YORK, March 15 (newratings.com) - In a research note published yesterday, analysts at Roth Capital reiterate their "buy" rating on GigaMedia (ticker: GIGM). The target price has been raised from $15 to $17.


also check the GIGM link from our free board:
http://www.3stocksonfire.org/trading/index.php?topic=1441.390

cheers
Oliver

[nicknite20]

David,
Very excited to see GIGM added to the main..

As ive mentioned before..this is one of my largest holding & am as excited about the long term prospects as you are..
Nick

[David Randolph]

GIGM again 

fyi:
GigaMedia "buy," target price raised
Thursday, March 15, 2007 10:41:55 PM ET
Roth Capital
NEW YORK, March 15 (newratings.com) - In a research note published yesterday, analysts at Roth Capital reiterate their "buy" rating on GigaMedia (ticker: GIGM). The target price has been raised from $15 to $17.


also check the GIGM link from our free board:
http://www.3stocksonfire.org/trading/index.php?topic=1441.390

cheers
Oliver

Hi La-onda, as usually when there's an upgrade, stock's go down on that day

David,
Very excited to see GIGM added to the main..

As ive mentioned before..this is one of my largest holding & am as excited about the long term prospects as you are..
Nick

Thanks for your message Nick, we'll be able to exchange information about GIGM on this thread.

There's some information on this Fool's article:

GigaMedia's Strong Hand

Revenues from continuing operations rose 113% in 2006 from a year ago and our long term estimate looks for just 30% average annual revenue growth for the next 10 years.

I'll continue holding GIGM.

[David Randolph]

www.3stocksonfire.org has been experiencing technical problems, so I need to do these updates fast to send the daily newsletter.

Nothing new happened on GIGM at Friday's session, I'll keep holding the stock.

[David Randolph]

What is interesting about this GIGM investment is that I'm only calling for 30% average annual revenue growth for the next 10 year period, but the company is growing a lot faster than that:

«Consolidated revenues from continuing operations climbed 155 percent to US$30.1 million from US$11.8 million in 2005 and grew by 23 percent from the previous quarter.»

«"GigaMedia's net profit grew over four times in 2006, a great year by any standard," stated Chief Executive Officer Arthur Wang. "And our record fourth- quarter operating results and recent strategic developments point to an even stronger 2007."»

«"Our excellent financial results in 2006 tell only half the story: perhaps more important, 2006 was a year of key strategic accomplishments," stated CEO Arthur Wang. "We now have built by organic investment a leading pan-European online entertainment brand -- and by acquisition, an enormous pan-Asian online game platform with over 50 million registered users."

"We are seeing but the early returns from our investments and strategic steps to build a dominant online entertainment business," explained CEO Arthur Wang. "As such, we are looking to deliver tremendous shareholder value in 2007 and beyond."»

I'll keep holding GIGM.

[yukiii]

Sold 1/2 today thanks David

[David Randolph]

Sold 1/2 today thanks David

You're welcome yukiii

GIGM is growing a lot faster that my estimate, at least for now. I just need 30% average annual revenue growth and revenues from continuing operations grew 155% in 2006, and 23% from Q3 to Q4 2006

On my video analysis I said I was expecting about 17% net profit margin for 2007 and 20% over the long term, but the company already had a net profit margin of 32.89% in Q4

Perhaps, since yukiii sold half of his position, GIGM will have a short term pullback, I don't know about that, but fundamentals tell me GIGM only has one way to go: up, up and away !

[David Randolph]

GIGM is trouncing my expectations by a wide margin, as revenue growth is accelerating. That is expanding net profit margin from my expectation of 17% to more than 32%. This substantially improves my long term estimates for GIGM, which were awesome already.

Therefore I've decided to buy GIGM also for the 3 Stocks on Fire Portfolio, as I believe it is one of the two stocks with the most potential in the Main Portfolio.

The chart says there can be a pullback as the stock closed just a bit below its 7 year high of $13.79, but that's not an input in my decision making process. I'm on the path to long term investing, using long term analytical tools.

I'll keep holding GIGM for the long term.

[David Randolph]

When something like the following starts getting traction:

«The sequential quarterly operating margin improvement was driven by a sharp pick-up and significant margin expansion in the Asian online games business in the fourth quarter.»

... we know the best is yet to come.

I'll continue holding GIGM.

[sfhappyfish88]

Do we still have the daily discussion session today? I can't find it. 

[David Randolph]

Do we still have the daily discussion session today? I can't find it. 

Sorry sfhappyfish88, I wasn't able to start a new thread on Friday in the Stock Talking Board, but there was one open.

As for GIGM, the stock was able to close at a new 7 year high of $13.95, above the "important" technical resistance of $13.79, which probably will now act as support (the all time high was $91 in 2000).

We're not the only ones loving GIGM, also the Fool's community enjoys it a lot, with a 40% average annual EPS growth estimate for the next 5 years: 5 More Top Growth Stocks

As for analysts in general, look how they have been raising estimates:



Now they're estimating $0.61 for the full year 2007, but the company already made $0.51 in 2006 and $0.17 EPS for the fourth quarter. If it just maintains the $0.17 rhythm per quarter, it will make $0.68 for the full year, and everybody, including the company's management, expects strong growth, so clearly those 2007 estimates need to rise some more or the company will easily beat them by a wide margin.

I'll keep holding GIGM. 

[David Randolph]

And the market is responding la-onda, with GIGM closing at a new 7 year high yesterday. The stock keeps looking at recent financial performance and ahead:

«"We are seeing but the early returns from our investments and strategic steps to build a dominant online entertainment business," explained CEO Arthur Wang. "As such, we are looking to deliver tremendous shareholder value in 2007 and beyond."»

I'll keep holding GIGM.

[David Randolph]

Let's consider the next sentence from the 4th quarter earnings release:

«"GigaMedia's net profit grew over four times in 2006, a great year by any standard," stated Chief Executive Officer Arthur Wang. "And our record fourth- quarter operating results and recent strategic developments point to an even stronger 2007."»

An even stronger 2007? Does this mean that net profit will grow by more that 4 times in 2007 in comparison to 2006? Not impossible.

GIGM had net income of $30.8 M in 2006. If this number quadruples it will have net income of $123.2 M.

Now, GIGM is a $714 M market cap, so if this happens the forward earnings multiple would then be 5.8. But probably the CEO didn't mean what I'm seeing, did he?

Anyway, no doubt the business is growing by leaps and bounds, I'll keep holding GIGM.

[David Randolph]

GIGM came down to touch the $13.79 support level, prior resistance. Perhaps it will start moving up again soon, but the short term doesn't bother me much now. As I look to the long term I see a very attractive fundamental position and inevitably a higher stock price for GIGM.