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    Stock Alert for China Information Technology Inc. (CNIT)

    China Information Technology Inc. (CNIT) is a  provider of integrated solutions for the Geographic Information Systems (GIS), Digital Public Security Technology (DPST) and the Digital Hospital Information Systems (DHIS) markets in China.  It provides a broad portfolio of fully integrated solutions and services, encompassing both software development and display technologies.  The Company’s customers are mostly public sector entities that use its products and services to improve the service quality and management level and efficiency of public security, traffic control, fire control, medical rescue, border control, surveying and mapping, as well as healthcare management. CNIT was founded in 1993 and is headquartered in Shenzhen, China. 

    Share Statistics (8-June-11) FY 

    2009

    FY 

    2010

    %  

    Chg

    Q1 

    2010

    Q1 

    2011

    %  

    Chg

    Symbol CNIT Revenue, $Mn 101.00 163.85 62.2% 25.31 26.95 6.5%
    Current price $1.92 Gross marg. 49.1% 41.0% -16.5% 40.0% 50.2% 25.5%
    52wk Range: $1.40-$6.78 Oper. margin 26.0% 33.1%
    Avg Vol (3m): 819,115 Net margin 59.6% 21.0% -64.8% 24.8% 30.5% 23.0%
    Market Cap. 100.43M
    Shares Outstanding 52.30M EPS, $ 0.62 0.66 6.5% 0.12 0.17 41.7%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    CNIT spiked more than 33% to close Wednesday at $1.92.  In the past 52 weeks, shares of CNIT have traded between a low of $1.40 and a high of $6.78.  Approximately 2.3 million shares have traded hands during the session, versus the average daily volume of 1.58.  CNIT is currently below its 50-day and 200-day moving averages of $2.48 and $3.93, respectively.

    Staring this year, the Company has organized its businesses into two main segments:  Information Technology (IT) and Display Technology (DT).  IT includes businesses surrounding its variety of software core competencies.  Such core competencies are currently primarily in Geographic Information Systems (GIS), Digital Public Security Technologies (DPST) and Digital Hospital Information Systems (DHIS).  IT segment revenues are generated from the sales of software and system integration services, as well as hardware other than display products.

    DT includes businesses surrounding its display technology core competencies both in its traditional businesses such as GIS, DPST and DHIS, and in new industries CNIT is expanding into, such as education and media solutions, and consumer products.  DT segment revenues are generated from the sales of display hardware and total display solutions of hardware integrated with proprietary software and content, as well as services.  CNIT reported that there was a significant growth of its DT business, which contributed 29.57% of total revenues in the first quarter, as compared with 22.01% from the same period in 2010.

    Recent News

    CNIT early this month announced a new $3.5 million contract with the Shenzhen Traffic Police Bureau, which includes work to design and create three tailored technology systems — a special “On-Stop Driving License Processing System; a “Consolidated Vehicle-Related Business Auditing and Monitoring System; and a “Vehicle Inspection and License Plate Management System.”

    CNIT chairman and CEO Jiang Huai Lin said the Bureau has long been a significant customer of CNIT for many years, and that the Company is proud to continue to provide them with its proven, best-in-class information systems services.

    First-quarter Results

    CNIT reported revenue of $26.95 million for the three months ended March 31, 2011, compared to $25.31 million for the three months ended March 31, 2010, representing an increase of $1.64 million, or 6.5%. The Company attributed the increase to the strong demand of system integration solutions for the Shenzhen Summer Universiade to be held in August 2011, as well as the strong growth of display products.

    The Company’s income from operations for the quarter was $8.92 million, up 35.83%, or $2.35 million, from $6.56 million for the same quarter last year.

    The Company reported gross profit of $13.65 million for the quarter, up almost 23% from $11.12 million in the prior year.  Gross margin came in at 50.67%, an increase of 674 basis points from last year’s comparable figure.

    CEO Jiang Huai Lin stated that the Company is pleased to report healthy results and improved quality of earnings, despite the first quarter usually being the slowest time of the year due to the Chinese New Year holiday. According to CEO Jiang Huai Lin, CNIT’s contract wins during the first quarter of 2011 came from 26 regions and were valued at $36 million, representing increase of 17.6% compared to the same period last year.

    As of March 31, 2011, CNIT had $23.77 million in cash and cash equivalents as well as restricted cash, as compared to $26.51 million at the end of 2010.  Cash flow from operating activities for the three months ended March 31, 2011, amounted to $1.90 million, as compared to a net cash outflow of $11.34 million from operating activities in the previous year.

    CNIT last month reaffirmed its revenue guidance of $165 million to $187 million for the fiscal year 2011, and adjusted net income guidance of $42 million to $45 million, excluding any non-cash expenses as a result of employee stock awards, amortization of intangible assets associated with acquisitions and changes in fair value of contingent considerations.

    Visit CNIT at www.chinacnit.com

    Financial Strength (08-June-2011) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.33 1.80 2.28 0.71
    Current Ratio (MRQ) 1.59 2.11 2.71 1.04
    LT Debt to Equity (MRQ) 3.10 11.29 14.12 137.64
    Total Debt to Equity (MRQ) 31.80 14.60 24.57 182.97
    Interest Coverage (TTM) 129.99 3.24 0.83 18.06

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among one polled investment analysts. Against the China Information Technology Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 0 1 0 0 0 0
    4 weeks ago 0 1 0 0 0 0
    2 months ago 0 1 0 0 0 0
    3 months ago 0 1 0 0 0 0
    Last year 2 1 0 0 0 0

    The one analyst offering a 12-month price target expects CNIT share price to rise to 9.00 in the next year from the last price of 1.44.

    Source: markets.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Jun-11 1 37.76 37.76 37.76
    Quarter Ending Sep-11 1 49.97 49.97 49.97
    Year Ending Dec-11 2 176.07 180.15 172.00 160.14
    Year Ending Dec-12 1 200.94 200.94 200.94
    EARNINGS (per share)
    Quarter Ending Jun-11 1 0.17 0.17 0.17
    Quarter Ending Sep-11 1 0.22 0.22 0.22
    Year Ending Dec-11 2 0.87 0.90 0.84 0.80
    Year Ending Dec-12 1 0.95 0.95 0.95

    Technical Analysis

    Source: http://stockcharts.com

    CNIT is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold

    The MACD for CNIT currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    June08-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Autodesk Inc. ADSK 38.24 8.83B 22.76 18.84 4.03 3.60
    China TransInfo Technology Corp. CTFO 3.98 100.57 5.69 4.74 0.62 0.52
    Tyler Technologies Inc. TYL 24.46 783.72M 31.77 26.02 2.55 2.34
    Kingtone Wirelessinfo Solution Holding Ltd. KONE 0.79 11.06M n/a n/a n/a n/a
    Application Software Median 27.62 n/a 2.79 n/a
    China Information Technology Inc. CNIT 1.92 100.43M 2.29 2.02 0.56 0.50

    Source: Thomson Financial

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