Tuesday, November 06, 2007

Global Sources (NASDAQ:GSOL): Price target upped to $45 at Citigroup

- Citigroup is out with a wonderful call on Global Sources (NASDAQ:GSOL) upping their price tgt to $45 from $25 and saying the stock looks undervalued. Global Sources is a leading provider of B2B eCommerce and speciality media services that facilitate Asian, and especially China, trade with the West.

The company is the smaller of two players in what is effectively a duopoly market, and it is differentiated by two primary characteristics: 1) A more comprehensive offering, including an Online marketplace; speciality print catalogs/publications; and leading China Sourcing Fairs trade shows; and 2) By having a greater emphasis on screening, filtering and verifying suppliers for quality/capabilities.

Global Sources has a very long history of doing this business: it has been engaged in international trade-related B2B commerce for 36+ years, and in B2B eCommerce (read: online) for nearly 12 years.

According to Citi, one of the difficulties in valuing Global Sources has been the absence of good comparable companies. With a direct competitor recently going public, however, they can now provide more meaningful inputs to their methodology. Based on their latest estimates for 2008-09, the firm arrives at a fair value of US$45.77. Their target price represents 27x 2009E non-GAAP EPS.

Citigroup lists 10 reasons why they believe the Street is currently undervaluing the assets of Global Sources. The reasons range from good visibility into revs and earnings to a large and loyal community of active buyers.

Most importantly, while Citi believes the current fair value of GSOL is $45 per share, they note it could go higher if comparable multiples climb higher as well.

Notablecalls: I must say it's fairly difficult to sum up this 30 page note in just couple of paragraphs. The main thing about this call is that it highlights this under-the-radar stock in a way that will likely generate significant buy interest. The direct competitor gone public is of course Alibaba.com.

While I'm not too familiar with GSOL, I've talked to some people that see the co as a real rule-breaker. This is pretty much what Citigroup is saying in their call. I strongly suggest you check it out, if you have access to their research.

For short-term traders, I would not be surprised to see a Baidu-like movement in the stock today and over the next couple of weeks. The stock's a huge mover and I suspect will challenge its all time highs in the very near term.


Anonymous said...

Ecommerce is definitely a trend setter, it provides a medium for the buyer and supplier to meet without actually the need of travelling any distance. For example, a furniture manufacturer requires raw materials such as wood, paint, and varnish. In B2B e-commerce, manufacturers electronically place orders with suppliers and many times payment is made electronically. http://www.infyecommercesolution.com/

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