Qiao Xing Mobile Communication 2008 Q3 Conference Call
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     lukematt
Member
Username: lukematt
Post Number: 7
Registered: 10-2008Rating: N/A
Votes: 0
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| | Thursday, December 04, 2008 - 12:21 am: |  
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As usual, Qiao Xing Mobile Communication’s (symbol: QXM) conference call contained some shocking surprises.
MOST SHOCKING
1. QXM has halted its plans to expand internationally, blaming the poor condition of the world economy.
I can’t decide if the CFO’s explanation smacks of nationalism or just plain reality.
** The company will continue to focus on China, which still has growth potential.
** No plans to sell VEVA models internationally. (Let’s see—QXM is shifting its business strategy to establish VEVA as a high-end brand. They will focus on China, not internationally. Does that mean—China is great, the rest of the world sucks?)
** The company may sell lower-end models in India. (Ouch.)
2. I hate to pick on QXM’s CFO, but I call ‘em like I see (hear?) ‘em.
I would love to play poker with the CFO. He’s not a very good liar…but he tries. 
If you listen to the conference call starting at about 33:30, you will hear the CFO’s very awkward attempt to explain why the company has not repurchased any shares since its announcement of a buyback program on September 19, 2008.
He claims that the repurchase program is “on hold” due to current market instability. He proudly throws out a trite “Cash is king”. Then, he proceeds to explain that QXM needs cash to develop the VEVA brand and to acquire a stake in a China home shopping network.
However, his statements include significantly more “ahh ahh” and “uummm” noises than elsewhere in the conference call, giving me the impression that the CFO doesn’t believe his own words.
3. QXM raised its initial offering price for the VEVA S70 model from (if I heard the numbers correctly) 2480 RMB to 2980 RMB. Wow—that’s a 20.16% increase.
In the back of my head, I thought, “They have a lot of confidence in their new model”.
Then, I heard the real reason for jacking up the price…the original price did NOT factor in using “Miss Zhang Ziyi, one of the best known Chinese actresses internationally, the leading actress of Crouching Tiger Hidden Dragon, to be the spokesperson for its luxury VEVA brand in China” (from QXM’s press release dated September 9, 2008).
That’s one pricey woman.
Now, a question bothers me…If QXM no longer plans to expand outside of China, why should we care that Miss 20% Zhang is one of the best known Chinese actresses internationally?
4. The last analyst during the Question & Answer session provoked some interesting responses about QXM’s convertible notes. (I remember him from the 2008 Q2 conference call. He was last there, too. I like him. He asks pointed, “put-management-in-the-hotseat” type questions.)
He wondered whether QXM can buy back the existing notes on the market. As usual, the CFO hemmed and hawed on any question related to the company’s cash horde, finally saying it might be possible to discuss the matter with the hedge funds who hold the notes.
The analyst concluded with “it might be a good way to use the cash for the benefit of the shareholders”.
From my perspective, this whole discussion is a joke. The notes were issued by QXM to raise cash. What—QXM should use its cash to buy back the notes? Silliness. Can’t we all just agree that QXM never needed to issue the notes? That the main purpose of the CONVERTIBLE notes is to dilute the existing shareholders? (Why would “somebody” want to dilute the existing shareholders? Because QXM is an excellent company—the first or second most successful mobile telephone manufacturer in the most populous and prosperous country in the world. That “somebody” is greedy and wants a bigger piece of the pie. Plain and simple.)
5. Fine. QXM has initiated their “VEVA website (http://www.vevago.com), which comes with e-commerce capabilities to enable customers to make purchases directly through the website”.
I looked at the website. It’s Chinese with **no button** to display an English version of the pages.
Do you see why this item is near the “least shocking” end of my list? It fits perfectly with QXM’s “we won’t expand internationally” mentality.
6. The VEVA S50 model is aimed at male professionals.
QXM is a slippery moving target sometimes. During the 2008 Q2 conference call, management stated “We are positioning the VEVA brand as a luxury accessory—like a handbag or shoes—for professional females.”
In this case (unlike the share repurchase slippery moving target), QXM seems to have made a good adjustment.
LEAST SHOCKING
…and, of course, a final piece of shocking news from 2008 Q3—there’s no shocking negative news in the numbers as several consecutive preceding quarters have presented to us.
(Message edited by lukematt on December 04, 2008)
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