short: acorn international (nyse : atv)...david chenghong he vice president mr. he served as cfo at...
TRANSCRIPT
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Short: Acorn International
(NYSE : ATV)
McIntire Investment Institute
Analyst Presentation
Prepared by Chuhan Wang April 7, 2010
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Outline
• Industry and Company Overview
• Fundamentals and 52 week Chart
• Thesis Points
• VAR Summary• VAR Summary
• Catalysts
• Risks
• Final Recommendation
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Industry and Company Overview
TV direct sales programs, often referred to as TV infomercials, in
combination with a nationwide distribution network to market and sell
products and services to consumers.
China's TV direct sales only accounts for 0.1% of the Country's total
retail sales.retail sales.
Companies in this industry often operate as integrated multi-platform
marketing company that develop, promote, and sell consumer products
and services in the China.
Acorn International, Inc. is founded in 1998 and is headquartered in
Shanghai, China. Acorn markets its own proprietary products and
services, as well as third-party products and services.
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Cont. Industry and Company Overview
TV Direct Sales Platform
include catalog sales, Internet sales, through print media and radio, and
customer loyalty programs, the core is significant TV air time presence.
Nationwide Distribution Platform
further extends the media effect on the ground through local and print
media and increases availability of products on a local/regional level. media and increases availability of products on a local/regional level.
ATV typically grant distributors the exclusive right to distribute selected
products and services in their respective territories.
Joint Sales and Marketing Services
generate TV direct product and services sales revenues. In addition,
receive additional payments from their joint sales partners based on
sales of featured products or services through their own distribution
channels.
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ATV: the Fundamentals
Market Cap: 148.68M
Current stock price:5.04
Beta: 1.15
52-Week Low : 3.08
52-Week High : 7.30
% Held by Insiders: 0.59%
% Held by Institutions: 1.20%
Price/Book : 0.73
Enterprise Value : -9.59M
P/E : 12.24
Total Cash Per Share : 5.454
Total Cash: 161.53M
Total Debt : 3.25M
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52-Week Chart
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Thesis Points
• Products=bubbles in the air
• Competitors are “bigger fish”
• Illusions are not real• Illusions are not real
• Questionable management team
• Destroy the reputation=suicide
• Little analyst coverage, inefficient and we
have an edge!
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Products=bubbles in the air
--but what if it breaks?
Acorn International
Ozing - English Learning
Babaka –Posture Correction
Cobor -Skincare Cosmetics
ER-Energy Release
YYD-Oxygen Generating
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Ozing, Ozing, Magical Ozing,say the spell twice and you get 100 on test
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Competitors are “bigger fish”
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The Sharks and the fish
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Illusions are not real
Acorn International 橡果国际
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Growing complaints surfacing
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Who’s who in the story
-questionable management team
James Yujun Hu
chairman of the board of directors and chief executive officer of ATV
1996 to 1998, Mr. Hu served as the executive vice president at TVS
David Chenghong He vice president
Mr. He served as CFO at TVS prior to joining ATVMr. He served as CFO at TVS prior to joining ATV
Tingtao Han
CEO of Yiyang Yukang cell phone company
And also8
Ella Man Lin vice president
Used to be: manager of the human resources department at TVS
Kevin Guohui Hu vice president
Used to be: general manager in charge of media and assistant president at
TVS
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Destroy the reputation=suicide
•Less confident in buying without
seeing
•Easy to be attracted by Celebrities
on Commercials
•Never come back again if got hurt
And Acorn shouldAnd Acorn should
•Reputation is the key to the profits
•38% (from 72%) depends on
returning customers
But Acorn8.
•Really bad after-sales services
•Exaggerating effects
•Lying about bonus
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Misperception
- what makes Acorn a big Short
1. Potential new products are market-leader-to-be, and will
drive up Acorn’s 2010 profit
2. The price is low enough to buy in again
3.Tons of cash sits on top of little debt is a growing sign3.Tons of cash sits on top of little debt is a growing sign
4. The impairment loss with the acquisition of
YiYangYuKang and failure of marketing mobile phone
headsets is bottoming
5.Strong and experienced management team
6. Loyal consumers and high satisfaction
7. The former CFO Jordon Wang left out of family issue,
and has nothing to do with the 2009 Q4 loss
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VAR Summary
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Contact listHuasongHuasong Ma Ma
Archiater in PLC China 306 Hospital, Professor
over 20 years’ experience, expert in campylorrachis scoliosa
Lily Yan WangLily Yan Wang
Experienced English teacher in Advanced English class in
Beijing No.8 Middle School
ZhiyingZhiying PengPeng
Executive manager of BTV based infomercial company
Professor Professor WilkieWilkieProfessor Professor WilkieWilkie
Survey of Students at New Oriental and middle school Survey of Students at New Oriental and middle school
English ClassEnglish Class
Myself , and my family memberMyself , and my family member
GaihuaGaihua SunSun
Medical Expert in the “professional inventing and developing
team” of BaBaKa
ChenghongChenghong HeHe
VP, CFO of ATV,
JingwuJingwu Ma Ma
Secretary of Tingtao Han, the CEO of Yiyang Yukang
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Survey on Ozing
used an
Ozing beforestill using it find it helpful
would recommend
it to others
New
Oriental 67% 5% 1.7 3%
* "find it helpful" is based on average grade, with :1=not helpful at all,
2=sometimes not helpful, 3=ok, 4=somewhat helpful, 5=very helpful
Middle
School42% 7% 2 4%
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Catalysts
•Their product causes serious health issues and
attract regulatory attention from the public
•Spend much cash on financing new products and
potential acquisitionpotential acquisition
•Quarterly earnings of 2010 miss their aggressive
estimates
•Issue FY guidance ,and revenue guidance below
Analyst Estimates for the company
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Risks
What save them for a last breath?
1.Hiring Highly competent CFO/Managers
2.Mask takes longer than expected to fall
offoff
3.Acquisition of highly profitable products
4.Savvy advertising
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Final Recommendation
I maybe wrong8.
MII should wait and see the 2nd and 3rd
quarter report and reevaluate ATV’s position
I maybe wrong8.
•Maybe I just talked to the wrong person?
•Maybe only unsatisfied consumers like to share
their unpleasant experience?
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Short: Acorn International
(NYSE : ATV)(NYSE : ATV)
McIntire Investment Institute
Analyst Presentation
Prepared by Chuhan Wang April 7, 2010