Wednesday, August 19, 2009

Longtop Financial Technologies (LFT) Beats on Top Line, Misses on Bottom

It's rare to see these days a company beating on the top line (revenue) but missing on the bottom line (earnings); almost every earnings report has been the complete opposite - well at least in the U.S. where slashing the workforce is the way to "prosperity". Longtop Financial Technologies (LFT) continues to bemuse me... yesterday while every other China stock was rebounding it was down 5% in the morning taking us out of a newly installed position. By the end of the day it was up 3%. That alone is perplexing... but even more so are the gamblers anonymous who seemingly love to buy stocks going into earnings. I don't know what part of 50/50 proposition they don't get... I guess it's the love of gambling.

Overall it was a solid report - Longtop's main business is growing very well but its supporting business was relatively slow at 15% revenue growth. Guidance went up marginally. Full report here. Initial indications show LFT tumbling to around $25 in premarket.
  • Chinese financial software developer Longtop Financial Technologies Ltd. said Tuesday its fiscal first-quarter profit rose nearly 38 percent on growing demand across its customer base, and boosted its revenue and profit expectations for the full fiscal year.
  • Longtop reported net income for the three months ended June 30 of $8.4 million, or 16 cents per American Depositary Share, up from a profit of $6.1 million, or 12 cents per ADS, in the year-ago quarter. Excluding stock-based compensation and other one-time costs, Longtop's profit in the latest quarter totaled 20 cents per ADS. On that basis, analysts surveyed by Thomson Reuters expected a slightly higher profit of 21 cents per ADS, on average.
  • Revenue rose 47 percent to $28.5 million -- beating analysts' forecast of $27.1 million -- from $19.3 million in the year-ago period. Revenue from Longtop's core software development business primarily serving Chinese banks and insurance companies rose nearly 54 percent, while revenue from other services posted a more modest gain of nearly 16 percent.
  • Chief Financial Officer Derek Palaschuk said the company faces "some headwinds" in its "other services" business, which includes system integration and ATM maintenance services. The business segment accounts for under 15 percent of the company's total sales.
  • Longtop raised its full-year forecast for fiscal 2010 to an adjusted profit of $65 million, or $1.22 per ADS, from previous guidance of $63 million, or $1.20 per ADS, a forecast issued three months ago. Analysts expect a full-year profit of $1.19 per share, on average.
  • Longtop now expects full-year revenue of $145 million, slightly above its earlier forecast of $142 million and analysts' average estimate of nearly $143.5 million.
[Jun 12, 2009: Beginning Stake in Longtop Finanical]

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