XING

[Michael]

XING is probably one of the most manipulated stocks in the market. Manipulated both by insiders and the market.

So when so-called news is out (the CECT IPO was never off as said before!) it is normally more important to understand the context than the actual news. Why did management hint to Dutton that the CECT IPO was off and why do they now leak that it is on? Is this connected with the other rumors around cash flow problems etc.? And could that be why the stock behaved so nicely during the hailstorm of bad news?

Many questions that probably never will be answered.

The manipulation of the stock and the very low information level in general makes it very difficult to trade the stock from both a technical and fundamental point of view.

We have based our trading plan on the official information released by the company and we are sticking to the plan unless there are confirmed changes in the company's fundamentals.

[tokyopua]

Congrats to all of you profiting off this baby, I got out too soon 

It will just be a blip on the upward march of XING if it even shows up at all, but it will be interesting to see if Jim Cramer recommending Cisco over it in his new "Sudden Death" will have any impact at all.  Usually it takes him doing a whole tirade in a lightning round to bring a stock down for a day or two.

Anyway, its clear he doesnt follow the chart lol.

[voova99]

Aussie

Thank You for your informative answers  .
I'm in yet   

Like  Michael said - There are more questions than answers,
but I think risk/reward ratio is low 

[la-onda]

XING update:
Qiao Xing Universal Telephone Announces Key Operating Data for the Second Quarter 2006; Planned Acquisition of Remaining 20% Equity Interest of Qiao Xing Mobile Communication, and Positive Sales Momentum for the Week-long National Day Holidays in China
Tuesday October 31, 8:30 am ET

HUIZHOU, Guangdong, China, Oct. 31 /Xinhua-PRNewswire/--Qiao Xing Universal Telephone, Inc. (Nasdaq: XING - News) today Announces Key Operating Data for the Second Quarter 2006, Planned Acquisition of Remaining 20% Equity Interest of Qiao Xing Mobile Communication, and Positive Sales Momentum for the Week-long National Day Holidays in China.

Operating Data

Qiao Xing Universal Telephone's sales and operating income increased 15.6% and 518% respectively in the second quarter versus the first quarter of 2006. The significant increase in operating income is primarily due to the lack of stock based compensation in the second quarter. Stripping out stock option grants, operating income increased 38% primarily on improved gross profit margins.

                                                                   1Q         2Q
All figures in millions of US dollars                      2006     2006
Net sales                                                      84.1       97.3
Cost of goods sold                                         70.8       78.8
Gross profit                                                   13.3       18.5
Operating expenses other than share-based
compensation                                                -3.9       -5.5
Share-based compensation                               -7.3         --
Income from operations                                    2.1      13.0
Acquisition

In addition to the increase in operating performance, Qiao Xing Universal Telephone herein announces an acquisition from the minority shareholder the remaining 20% equity interest of Qiao Xing Mobile Communication, or QXMC, a British Virgin Islands company that holds a 93.4% interest in the Sino-foreign joint venture CEC Telecom, or CECT, for $43mn USD, to be paid partly in cash and partly in shares of Qiao Xing Universal Telephone. The valuation of QXMC was based on the implied valuations from the convertible debenture that was completed in June of this year. The acquisition is expected to be finalized no later than the end of December 2006, and the closing remains subject to customary closing conditions. Qiao Xing Universal Telephone arrived at the decision to make this acquisition based on the historical operating performance of CECT, and also the strategic consideration of converting QXMC into a 100% subsidiary to streamline the ownership structure of CECT.

Positive Momentum

Qiao Xing Universal Telephone would like to respond to reports circulated in the Chinese press surrounding performance leading up to the October 1 Chinese National Day by confirming that, up to October 1, CECT has received orders from distributors for about USD85mn for its recently-launched ''A1000'' and ''IP1000'' series of mobile phones.
According to a recent Sino Report, CECT's market share is tenth among all mobile phone brands and fourth among local brands in China. Despite relatively higher selling prices than most local brands, Qiao Xing Universal Telephone believes that this upward momentum of market share ranking is driven in part by the flexibility to offer differentiated products.

Other Updates

A financing solution reached with DKR Management via an issuance of $24mn USD in stock and 26mn USD in a convertible provided Funds for the acquisition of the 20% minority interest in QXMC. Terms were finalized on September 18th, and consist of 2 million shares placed at $12 and a CB with a conversion price of $14.30.

In accordance with Nasdaq listing rules, a consolidated income statement for the first half of 2006 and an interim balance sheet shall be filed by December 31, 2006.

[la-onda]

just fyi, feedback is appreciated! Consolidation phase IMO
Another detailed report on the coming QXMC IPO:

http://www.cet.com.cn/20061101/BAIXING/200611011.htm

Time: before 2007/02
Underwriter: Goldman & others
Exchange: NYSE (for amount of capitalization and higer valuation)
Also, the report mentioned CECT's continuous momentum of sales growth.

Translated:
Three rounds of financing road map sprint Niujiaosuo declassified CT overseas listing

One of our reporters Ming
Qiao Xing subsidiaries under Zhongdiantongxin (CT), the United States listed rumors flirting with reporters depth gradually clear.

China's economy Times reporter access to the latest information. CT implementation of the IPO will not be later than next February. CT in this IPO, 20% of the equity sale may be. its financing will amount to over 250 million dollars.

Not long ago, the newly released "2006 HU Run IT rich list". Qiao Xing chairman Wu Ruilin the illustrious ranks fourth in the industry in his capacity as much attention.

While most brides also has been hiding out behind the scenes, but he has already been in the industry "phone magnate" reputation Qiao Xing Universal by the founders in early February 17, 1999 listing on NASDAQ in the United States. the first domestic private enterprises listed in the United States first. Qiao Xing Universal just released by the second quarter performance in 2006, Qiao Xing Universal operating profits of 12.9 million dollars. an increase of 136%. Earlier in the June 20, Qiaoxing Universal submitted to the United States Securities and Exchange Commission in 2005 Caibaoxianshi. Qiao Xing Universal 2005 net sales of 356 million U.S. dollars, compared with 42.4% growth in 2004 net profit of 31 million U.S. dollars, 987% increase over 2004. Consequently, the dollar rose to the highest price, Wall Street analysts "strongly recommends buying. HU Run in BIL Bang Bang Chan, Wu Ruilin name wealth has increased to 1.7 billion yuan this year from last year's four billion yuan.

Qiao Xing Universal inspired and driven by, CT listing is already in full swing.

"Selected Niujiaosuo called "Qiao Xing Mobile"
An industry insider said of the Chinese economy Times, CT is likely to be started within this year and to complete the listing process. the location of their choice and will not be listed in Hong Kong early last year, rumors outside the Main Board and will choose the U.S. stock market.

On CT Why abandon the Main Board listing as their destination, the industry said, As previously panda cell phone, cell phone manufacturers to choose a number of Mainland Yulong Main Board listing in Hong Kong, the share price has been in doldrums. Following long-term stock price hovering in a few Hong Kong dollars, but not the amount of financing. Therefore, CT should not choose Hong Kong as a main board listing goals. In addition, Qiao Xing Universal has been listed on Nasdaq, CT distribution to the Hong Kong-listed, there are many legal issues. listed in the United States were much more smoothly.

As for what is to choose the New York Stock Exchange or Nasdaq, the industry said, CT may be the ultimate place of listing the New York Stock Exchange, but not the Nasdaq. Qiao Xing Universal because its parent company has been listed on Nasdaq, CT again Adenauer city has little significance.

Chinese Economic Times reporters learned through investigation. Qiao Xing Universal under which there are two registered in the British Virgin Islands (BVI), the off-shore companies (Shell). were Qiao Xing Mobile (holding 80%) and Hong Kong (20% shareholding), a total of 100%. There is a separate office building in Hong Kong. According to the industry that the current CT Niujiaosuo listing of the names of the companies in the United States will very likely not Zhongdiantongxin. CT is not, but BVI company, "Qiao Xing Mobile." In principle it is not directly in a company registered in the international capital markets. In other words, the main companies listed on the capital market in the United States must be registered in the BVI, Cayman and other offshore companies.

So, if, in future, should not be the main Niujiaosuo listed Zhongdiantongxin or CT. It should be a BVI company, "Qiao Xing Mobile."
According to another report, CT shares held by Qiao Xing Mobile and Tianjin TEDA. more than 90% of the shares of the former, the latter holding the others.
Three rounds of financing, underwriting merchants set Goldman Sachs

Qiao Xing urge CT listed from the first half of this year Qiao Xing Universal evident in three rounds of financing.

April 28, After twice previously issued to overseas investors about 20 million U.S. dollars of convertible bonds, Qiao Xing Universal with two foreign strategic investors had signed a binding agreement, The latter sold to the value of 40 million U.S. dollars of convertible bonds.
According to the agreement, which could be converted to bondholders in the three years after the completion of the transaction. These will be based on its trading privileges Qiao Xing Universal convertible bonds into ordinary shares. These bonds can be converted into the main CT Qiao Xing Mobile offshore companies and the listing of ordinary shares after the IPO. Qiao Xing Mobile can price their shares prices seven times the 2005 EPS calculation.

Public records indicate that as early as February 2003. Qiao Xing Universal's subsidiaries under Qiaoxing Mobile CECT65% a cost of 316 million yuan to purchase the shares. October 2005. Qiao Xing Universal Telecom holding 90% of the subsidiary Qiao Xing CECT25% also spend 80 million yuan to purchase the shares, The transfer of shares will be registered in the BVI to the Qiaoxing Mobile so that the latter holding 90% in CT. Thus, the controlling shareholder of Qiao Xing Qiao Xing Universal Mobile CT of the few effective shareholding reached 72%. According to calculation, even in the implementation of the IPO CT, Qiao Xing Universal's shareholdings in several CT will remain above 50%.
Chinese Economic Times in an interview also learned that the lead underwriters of the IPO has selected CT existing listing. Qiao Xing Universal CT affiliated companies including the lead underwriters Goldman Sachs IPO year.

Strengthen the R & D focus difference competition

Earlier this year, Wu Ruilin CT in the listing, he said, The funds will mainly be spent on the research and development of the financial and construction channels. He also said that through the acquisition of CT does not preclude research and development institutions to increase research and development efforts. Before the industry was also a rumor that CT has a lock on the development of foreign enterprises. But industry speculation that the IPO journey starts with CT. Even CT relevant merger plan, estimated to wait until after the listing can be activated. Public records indicate that the current CT in Huizhou factory has an annual output of 500 million cell phones. Three research centers are located in Beijing, Shenzhen and Huizhou, which will be responsible for high-end cell phones. research and development of 3G mobile phones and smartphones. CT was one of the earliest to conduct our own research and development of enterprises. China now has the largest research and development team in the domestic mobile phone manufacturers.
According to another report, the current Zhongdiantongxin 3G terminal products in more than 300 R & D personnel. also concentrated in Beijing, Huizhou and Shenzhen R & D base is mainly in research and development of GSM mobile phone technologies. 50 Zhongdiantongxin current balance of the annual introduction of new mobile phones, and the speed of product development and launch international mobile phone giants Nokia, Motorola has been the same.CT will continue to expand cell phone use this function in a big fuss about. If the introduction of this extraordinary staging in May 1000 hours A1000 phone industry look, Wang Philips waiting to break the record of 850 hours.
Found in the first three quarters of the domestic mobile phone market data show that in September Legend, Zhongdiantongxin (CT) Brand made significant progress, the rapid growth in sales, Zhongdiantongxin (CT) to squeeze four former domestic brands, the highest of all mobile phone brand nine. there are signs of rising and rankings. Sources indicate that CT Mobile and China Unicom will be to further strengthen and expand the market share of customized business cooperation. CCID analysis that the future of time, the Chinese mobile phone market growth rate gradually slowed down. Competition from brands, frontline companies (mainly referring to the first half of the 10 firms) brand outside the living space will be gradually reduced, At present, the domestic market will be substantially reduced the number of cell phone manufacturers. If CT ultimately successful listing, Niujiaosuo the landing will be the first in China's domestic mobile phone manufacturers. This will also haze of China's mobile phone market from the present to give a strong boost to the economy.

[winner919]

I actually can not understand why people are so enthuism to the CECT IPO. is it a kind of dilution? the current stock price of XING included the earning from CECT. once CECT IPO, the total number of shares increased. BTW, the CECT only ranked 10th or 9th in the cell phone market of China and the price for the CECT phone is higher than other domestic phone manufactuers. I really can not see the organic growth in the future people expected. any comments?

[AussieTrader]

I actually can not understand why people are so enthuism to the CECT IPO. is it a kind of dilution? the current stock price of XING included the earning from CECT. once CECT IPO, the total number of shares increased. BTW, the CECT only ranked 10th or 9th in the cell phone market of China and the price for the CECT phone is higher than other domestic phone manufactuers. I really can not see the organic growth in the future people expected. any comments?

Hey Winner, The benefit to XING stock can be best explained from a pure valuation perspective. If CECT goes to IPO and at IPO it is valued for example at $1B and XING has 75% ownership of CECT (if they were to sell 25% of the shares for the IPO and retain 75% ownership) then XING valuation itself would have to align upwards to take into account this ownership valuation e.g. 75% of $1B = $750M therefor XING fair value shoud be at least $750M (it's CECT ownership valuation) and that does not include all the other assets and divisions of XING e.g. QXMC etc. So bottom line is it will force upwards the value of XING shares (in theory!)

Sales growth wise, XING is gaining market share and maintains healthy margins in a highly competitive price oriented market. If they are able to demonstrate high quality and better features (relative to competition) for a higher price and consumers accept that, then that is a winning combination for me as a stockholder.

So, now it looks like not only will CECT go IPO, but QXMC also. Again it is not released news by XING, but there seems so much press coverage in China that the weight of evidence is becoming compelling. Combine that with the acquisition of the remaining 20% of QXMC ownership (from the minority interest party) which means XING owns 100% of QXMC and now 93.4% of CECT. My reading of that transaction is that it is part of the process of gaining full and clear ownership prior to the IPO(s).

Good Trading

[winner919]

Aussie:

Thank You very much for your explaination. it makes sense for me to the valuation of CECT. but the voluation of XING should depend on their revenue and potential net income. this is not spin off but issue more shares. let us assume the valuation of XING which includes CECT and QMXC now is 400M as the stock of XING reflected, if they go to CECT IPO, the valuation of CECT should be $300 M and QMXC is $100M. let us say the IPO price of CECT is $10 and they can issue 30m shares for CECT. The total shares doubled, which means the shareholder of XING can only get half of the net income. I am doubt about the balance sheet of XING. may be they have too much debt and they need money. be careful with chinese stocks. may be CECT IPO just rumor but not reality.

[winner919]

One more thing from their IR is that they spend 43 m for 20% QXMC, which means they vulue QXMC at 215 m. QXMC own 94% CECT, which mean the valuation of CECT is about 200M. Considering they have 25 m shares. the share price of XING should be less than $9. may be $12 will be a good support.

Good luck

[voova99]

Hey Winner, The benefit to XING stock can be best explained from a pure valuation perspective. If CECT goes to IPO and at IPO it is valued for example at $1B and XING has 75% ownership of CECT (if they were to sell 25% of the shares for the IPO and retain 75% ownership) then XING valuation itself would have to align upwards to take into account this ownership valuation e.g. 75% of $1B = $750M therefor XING fair value shoud be at least $750M (it's CECT ownership valuation) and that does not include all the other assets and divisions of XING e.g. QXMC etc. So bottom line is it will force upwards the value of XING shares (in theory!)

Aussie

I just don't understand how do you get $1B for CECT 

Best,
Vova

[AussieTrader]

Hey Voova, I just used $1b as an example. I could have used $500M or $100M. It was just a number to show how the valuation could benefit XING.

[la-onda]

Dutton Associates Update:

[voova99]

Hi

I think that end of the year will be very interesting for us.
From Kevin "Avalon MB" :

From: Finance_Master Sent: 11/3/2006 9:44 PM
My estimates:

3Q: revenue 140M ~ 150M. Opt income: 18M ~ 22M
4Q: revenue: 240M ~ 280M. Opt income: 27M ~ 33M

   



Best,
Vova

[voova99]

 

http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001062592%2D06%2D000042%2Etxt&FilePath=%5C2006%5C11%5C13%5C&CoName=QIAO+XING+UNIVERSAL+TELEPHONE+INC&FormType=SC+13G&RcvdDate=11%2F13%2F2006&pdf=

[AussieTrader]

Thanks Voova,

That is a big development. Bear Stearns has an 11.25% stake in XING as of Q3 2.667M shares.

One can only speculate on why e.g.

May be they are as a result of the Chinese QDII investment program (BS participates in that)
May be they are positioned as a result of the potential IPO and their involvement there
May be they are starting a leveraged buyout or attempting to get seats on the board
May be they are just seeing the upside potential over the next few years as part of their overall China strategy

Whatever, it is a huge positive for the stock price over the coming weeks / months.