VIPSHOP (VIPS) IS GROSSLY OVERVALUED

Currently VIPShop is trading at $72, an increase of over 161%% in the past 6 months. This is a bit ridiculous as there are really not much changes in basic company fundamentals for this company.

The current share price already reflects the most optimal scenario this company will ever have. At this price level, it has really very limited upside. However, the downside risks are significant for this company.

From my extensive knowledge of the Internet space in China, VIPShop is close to its maximum growth potential. Past explosive historical growth is actually due to its low base, which is a mathematical fact for almost all early-stage growth companies. It is as simple as that, an increase from $1 to $10 commands 900% growth rate. Nevertheless, I will analyze its business in several parts as follows:

1. Revenue Potential
VIPShop is close to reaching its full scale. I expect 20-30% further expansion at maximum in the coming few years based on current quarter revenue annualized. The revenue may expand to about $2 billion at some point by around 2016. I don't see much further growth potential beyond that and its revenue may even start declining due to increasing competition from big players. The current website is already too crowded, gradually damaging user experience.

2. Margin Contraction
As with all e-retailers these days, most players are having decreasing margins due to ever keener competitions. VIPShop will not be an exception. VIPShop will have decreasingly bargain power with suppliers and may have to incur more marketing costs due to ever increasing competition. Many e-retailers are having negative net margins these days!

3. Possible Future Inventory Writedown
Just like many Chinese shoes and apparel manufacturers/retailers,  many of their past profits are lacking quality.  For those companies, a shipment to distributors count as sales but eventually many of them have to be bought back as excess inventories from distributors. The consequence of this is to create large profit in early years and then follow big some large inventory writedowns. Similar thing may happen for VIPShop if VIPShop cannot send the unsold stocks back to the supplier in the future, which is possible.

4. Competition
VIPShop is just a simple website that costs fewer than $1K to replicate in China. It has very low entry barriers. There are tons of sites like this in China, such as Shangpin, Jiapin, etc. I think the biggest competition will come from existing huge incumbent players such as 360Buy, TMall and Tencent. They may just tweak their existing platform to conduct similar flash sales function.

5. Industry Trends
The current hype of VIPShop is partly due to the industry inventory glut of the shoes and apparel industry in China. But the industry is already near the bottom and some segments such as Sports apparel and shoes are already experiencing a slight recovering after some painful destocking activities. It will likely be more difficult for VIPShop to source the products in the future.

6. Consumer Reaction
VIPShop sells a few premium brands, but most items listed are actually crappy brands that trying to sell at a high price. Chinese consumers may not be aware of this at first. But gradually I believe they will find out about it and stay away from VIPShop.

I think in the long run, VIPShop may generate $50 million net profit per year, which is not a bad figure for a website. Applying a 10x muliple, I think it's fair value stands at $500 million, which is about $9 dollars per share, in line with IPO pricing. There is substantial downside risk for this stock!!!

中國金石 (1380) 動向

好耐都無時間寫BLOG了...

一年多時間, 中國金石(1380)已被前大股東掏空, 將資金据為己有, 同時走埋佬....
小股民真係慘慘慘.............

前大股東作奸犯科, 明目張膽從公司偷錢, 香港警方及內地公安應儘快把此人逮捕, 希望或許追番少少錢....  但係似乎暫時無下文....

當時公司其他人扮演什麼角色?  多宗交易付款對方是否友好人士?  公司秘書, 行政總裁, 財務總監應否付上刑事或民事責任?

被人偷走的錢, 恐怕好難追得番....  小股民點算?  或許找保薦人花旗及核數佬安永索償? (涉及披露不全, 有意瞞騙)

亦希望傳媒朋友多加關注, 多加報導... 希望有關執法機關加快揖兇!