Sinotel Technologies

Re: Sinotel Technologies

Postby mrEngineer » Thu Mar 04, 2010 8:06 am

Musicwhiz wrote:Hi Mr Engineer,

Could I find out from you on what you mean by "worst AR Transparency"?

I noted AmFraser "downgraded" it to 89c target price, still close to 80% higher than the last done market price. Any reason for their superb optimism or any justification for the higher valuations? How's competition? I understand there are a lot of unlisted 3G players in China. How will this affect Sinotel's business?

Thanks! :D


MW, your questions are tough to reply especially when I rushing off to work. lol. So i just make some quick remarks 1st.

"Worst AR Transparency" is a OPINION and not a fact. But here are some points to make such opinion.
- Some of the quarterly reports are copied and paste from excel onto the word document as pictures and pdf it. This means it is difficult for the investor or companies that summarizes AR to copy the info from the pdf into their own excel and do analysis.
- Most AR have 80-100 pages worth of information. Sinotel has only 60 pg for FY2008 AR. It looks like that cant be bothered or refuse to provide more information to investors. There are no pictures, no charts, no whatsoever.
- Sinotel does not provide simple segment revenue information. Such information is usually hidden in paragraphs or not even provided. This is a stark contrast to many other company AR.

To sum it up, I would ask myself whether is there something for Sinotel to hide?

On the analyst price and competition portion, I think this report might give you some answers. It should be due to the low p/e ratio as compared to the industry that gives it such high TP.
http://www.sharesinv.com/articles/2009/ ... dervalued/

As for the many players in the market, according to Sinotel, there were much more competition in the past then compared to current. If I am not wrong, there are only left 30+ players. Sinotel claim to be somehow ranked within top 10 of these players. According to them, barrier of entry are high in this industry as to qualified and certified to serve the large telecoms, it has to go through rigourous rounds of certification before new entrants can start doing the business. In fact, Sinotel said that the contracts are aplenty available and they are able to cherry pick them even if they are not top 3.
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Re: Sinotel Technologies

Postby Aspellian » Thu Mar 04, 2010 9:06 am

mrEngineer wrote:

As for the many players in the market, according to Sinotel, there were much more competition in the past then compared to current.

If I am not wrong, there are only left 30+ players.

Sinotel claim to be somehow ranked within top 10 of these players.

According to them, barrier of entry are high in this industry as to qualified and certified to serve the large telecoms, it has to go through rigourous rounds of certification before new entrants can start doing the business. In fact, Sinotel said that the contracts are aplenty available and they are able to cherry pick them even if they are not top 3.


sounds so good that IT MUST TRUE!!

anyone has friends working in China Telcos than can go and see whether Sinotel really exists or not. haha!!

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Re: Sinotel Technologies

Postby mrEngineer » Sat Mar 06, 2010 12:51 am

Aspellian wrote:anyone has friends working in China Telcos than can go and see whether Sinotel really exists or not. haha!!


Haha. Maybe we can rope in winston to help us in that when he goes to China or something? winston plssssssss?

Finally found something on the internet. I believe this should be the china website.
http://www.xbell.com.cn/index.html

A good article written on the transformational story of Sinotel from a mining company by the CEO.
What attracts me most is his ambition to tap into foreign markets like Singapore and UK to enhance mobile network connectivity.
http://ceo.weaseek.com/2008/0811/49391796_1.shtml
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Re: Sinotel Technologies

Postby mrEngineer » Sun Mar 14, 2010 9:48 am

An excellent news from Sinotel. Well.. Being skeptical of Singapore market, I wonder this news was the reason of the recent bump up or a possible reason for the stock to charge tomorrow? We'll see tomorrow. :D

SINOTEL QUALIFIED AS CHINA MOBILE’S DESIGN VENDOR TO PROVIDE DESIGN SOLUTION FOR WIRELESS NETWORK INFRASTRUCTURE SYSTEM

Singapore, 12 March, 2010 – Sinotel Technologies Ltd. (“Sinotel” or the “Group”), an innovator in the provision of wireless telecommunications infrastructure and solutions in the PRC, is pleased to announce that the Group was qualified as China Mobile’s design vendor for its wireless network infrastructures.

In a bid to streamline its wireless infrastructure development, China’s mobile carriers (“Telcos”) are moving towards segregating the process of building its network coverage into three segments; Procurement of equipment, Design and Installation. The Telcos have started central procurement in late 2008 and have just completed the process of qualifying vendors capable of providing design solutions.
Being a qualified design vendor, the Group will now be allowed to bid for design contracts across all provinces in China where China Mobile operates. China Mobile will reassess the qualification of all the vendors annually.

Said Mr Jia Yue Ting (“贾跃亭”), Executive Chairman of Sinotel, “The Group is thrilled to have been chosen as one of China Mobile’s qualified vendors to provide design solution for its wireless network infrastructure. This is a testament to the Group’s capabilities in becoming the choice of Telcos for the development of infrastructure solutions.

Mr Jia explains, “Among the three segments, infrastructure design solutions reap higher margins when compared to equipment sales and installation works. Design solutions require skillful engineering, an attribute which has been synonymous with the Group’s competency.”
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Re: Sinotel Technologies

Postby mrEngineer » Thu Apr 15, 2010 12:39 am

my good friend today emphasized and highlighted to me on the concerns of the average receivables. So I went to dig abit more to answer his concerns.

1. The recv turnover in 2007 was 257 days and 2008 was 183 days. For FY2009, the calculated avg recv turnover was 195 and worst case using latest 2009 recv of 265 days. This is well within range of the historical recv turnover and estimated turnover by analyst of 200-300 days.

2. There is a good blog that explains why the industry has a long cash conversion cycle. In summary, Sinotel pays its inventory/equipment vendor in 2nd month and finished installation and receive certification after 6th month. It will recognise 100% revenue once it receives cert and 2-3 mths later, it will get e 50% cash payment and 6mths later after final certification it will get 45% cash payment. The final 5% will be received after e 12mth warranty period is over. Pls refer to this blog for more info. http://mejonequity.blogspot.com/2009/08 ... ogies.html

Thus, in order to counter-check the account receivables, I am expecting to see a quite substantial increase in cash for the next quarter report based on the fact that Sinotel should recv at least 50% cash payment in 2 months. However, this has to be verified with whether there are new projects that will eat into the 50% incoming cashflow. This can be done so by checking the change in the inventory. Since there was only minor increase in inventory for year 2009 qtr 4, we should expect both inventory and recv to drop in e next quarter report.
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Re: Sinotel Technologies

Postby Musicwhiz » Thu Apr 15, 2010 12:44 am

Interesting that Sinotel is in an industry which has such a long cash conversion cycle (I mean like, 256 days??). This, to me, actually poses a significant risk to the business as cash may be tied up for long periods and will be unavailable for deployment if opportunities to use the cash should arise.

One should also ascertain whether such a long cash conversion cycle makes it "safe" to invest in such a company, as a sudden turn in the business or increased competition may have an adverse impact on cash flows and lead to a significant short-term cash drain. Not only that, but inventories may also build up as a result of competition/lower demand and this acts as a double whammy.
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Re: Sinotel Technologies

Postby mrEngineer » Thu Apr 15, 2010 7:35 am

Musicwhiz wrote:One should also ascertain whether such a long cash conversion cycle makes it "safe" to invest in such a company, as a sudden turn in the business or increased competition may have an adverse impact on cash flows and lead to a significant short-term cash drain. Not only that, but inventories may also build up as a result of competition/lower demand and this acts as a double whammy.


Hi Musicwhiz,

Due to the nature of the business, it is expected that OCF to be negative and this is happening so in their results. Competition wise as explained earlier is not a main concern as their clients are e only 3 big chinese telecoms. Inventories build up is actually an indicator of the business improvement for the next few quarters as I mentioned that Sinotel account for inventories only after 2 months when they managed to secure the installation project. Sinotel is somewhat like a construction coy once it manages to secure the installation project, as long as the certification is given, no competition will be able to wrestle away that project and revenue of it will be certain.

But I don't deny that the long cash conversion cycle is an inherent risk for investing in Sinotel. However, due to the growth of the industry in China and the management trying to secure more possible lines of credit to finance the deals, there are very much room for growth for Sinotel as long as the industry growth does not saturates. Do note that every loan that is further granted in its line of credit would require Sinotel to produce the relevant contracts signed before the financing is provided.

Thus, the main risk I truly fear is the quality of the installation provided as the telecoms would only pay the cash if the audit is certified. This information is not easily available around and only the employees would know it clearly. I would probably ask this during the next AGM
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Re: Sinotel Technologies

Postby mrEngineer » Tue May 04, 2010 2:51 am

I got so fed up with the replies in CNA forum that I posted this there

The massive selling for Sinotel is totally uncalled for. Based on the NAV provided in the 1Q10 report, 204.4RMB/share = 41c/share. So basically at the current market price, you are almost buying close to company assets with capability to generate revenue. And based on this quarter alone, the EPS is already 8.8RMB/share. The irony is that 90% of the assets are current assets where inventories will turn into revenue, other receivables will turn into cash.

If the stock ever trades below 41c/share, it means either 3 things:

1) The company does not worth that much, meaning there are some discrepancy in the account receivables or inventories. After talking to the CFO and doing some calculation on my own, I restored much confidence with the account receivables. They are generally collectable but held up due to the restructuring of the telecoms.

2) The company will generate negative growth and will deplete the assets. This is so untrue when first of all, no matter how bad the scenario for the company is facing, it can still earn $ (especially from their recurring income of maintenance project and the revenue of EMCS)

3) The market sentiment is so bad like in crash of 2007 which is untrue as well.

So, in my opinion, those who are hoping that the stock price to further fall might not get what they want. In any way, if the price falls below the NAV, I would happily continue to collect more of this stock and wait for it to explode again once they re-emerge of this restructuring crisis.

Remember; be greedy when others are fearful. This is a BB controlled stock. If you forget the fundamental and try to follow the trend too much, you probably will fall into their trap one day.
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Re: Sinotel Technologies

Postby millionairemind » Tue May 04, 2010 7:54 am

I am not vested Mr. Engineer...

But just remember to avoid the Endowment effect.
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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Re: Sinotel Technologies

Postby ichew » Tue May 04, 2010 8:31 am

hi MM,
wat's Endowment effect?
thanks :)
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