Stock Alert for E-Commerce China Dangdang Inc. (DANG)
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    Stock Alert for E-Commerce China Dangdang Inc. (DANG)

    E-Commerce China Dangdang Inc. (DANG) is a business-to-consumer e-commerce company in China. On its dangdang.com Web site, it offers more than 670,000 books and other media products as well as selected general merchandise products including beauty and personal care products, home and life style products, baby, children and maternity products, apparel, digital and electronics products. It also operates the dangdang.com marketplace program, which allows third-party merchants to sell their products alongside products sourced by the Company. DANG’s nationwide fulfillment and delivery capabilities, high-quality customer service support and scalable technology infrastructure enable it to provide a compelling online shopping experience to customers.

    Share Statistics (23-Sept-11)

    FY

    2009

    FY

    2010

    %

    Chg

    Q2

    2010

    Q2

    2011

    %
    Chg
    Symbol DANG Revenue, $CNY 1,457.65 2,281.69 56.5% 515.68 790.78 53.3%
    Current price $5.52 Gross marg. 22.0% 21.0% -4.5% 19.1% 12.3% -35.6%
    52wk Range: $4.81-$36.40 Oper. margin 0.7% -6.6%
    Avg Vol (3m): 3,803,210 Net margin 1.2% 1.3% 8.3% -3.4% -3.6% 5.9%
    Market Cap. 436.89M
    Shares Outstanding 79.15M EPS, $ 0.00 0.02 -0.11 -0.07 -36.4%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Shares of DANG have dropped 20.1% in the last five days; 24.3% in the last month; and 72.6% in the first half of the year.

    The Chinese business-to-consumer e-commerce company on Friday announced its recent fulfillment developments and the appointment of its head of technology, boosting its shares as much as 16%.

    The Company, in its release, said it commenced the operation of its Wuxi fulfillment center in late August, bringing its total warehouse space to 260,000 square meters at present, from 210,000 square meters at the end of the second quarter.

    The Company said it intends to open two additional fulfillment centers in order to further strengthen its fulfillment capacity, while continuing to improve the delivery services by further shortening delivery time. Currently, DANG offers same-day-delivery services in 17 cities and the next-day-delivery services in 72 cities in China.

    Following the resignation of Hubert Shio-Hsien Tai, the Company’s former chief technology officer, DANG named Justin Changqing Xiong as its head of technology, commencing September 20, 2011. Prior to joining the Company, Xiong served as chief operating officer at Et-China Ltd., one of the major travel agencies in South China from 2009 to 2010.

    DANG last month said it expects total net revenues in the third quarter to be in the range of RMB916 million to RMB928 million, representing year-over-year growth in the range of 51% to 53%. The forecast reflects Company’s current and preliminary view, which is subject to change.

    Shares of DANG added $0.64, or 13.11%, to close Friday’s session at $5.52.  Nearly 3 million shares have traded hands for the day, compared with the stock’s 10-day average volume of 1.8 million. In the past 52 weeks, shares of DANG have traded between a low of $4.81 and a high of $36.40.  It is currently trading below its 50-day moving average of $7.81 and below its 200-day moving average of $15.14. Market capitalization currently stands at $436.89 million and it has 79.15 million outstanding shares.

    Source:
    http://ir.dangdang.com/phoenix.zhtml?c=241200&p=irol-newsArticle&ID=1609490&highlight=

    Financial Summary


    DANG reported total net revenues of RMB790.8 million ($122.3 million) in the second quarter of 2011, representing a 53.3% increase from the corresponding period in 2010.

    Media product revenue for the second quarter of 2011 was RMB584.2 million ($90.4 million), representing a 34.1% increase from the corresponding period in 2010. General merchandise revenue for the second quarter of 2011 was RMB191.5 million ($29.6 million), representing a151.9% increase from the corresponding period in 2010. Other revenue including revenue from third-party merchants for the second quarter of 2011 was RMB15.1 million ($2.3 million), representing a 288.9% increase from the corresponding period in 2010.

    The Company had approximately 4.6 million active customers in the second quarter of 2011, representing a 38.6% increase from the corresponding period in 2010. Total orders for the second quarter of 2011 were approximately 9.2 million, a 33.1% increase from the corresponding period in 2010.

    Cost of revenues was RMB678.1 million ($104.9 million), representing 85.7% of total net revenues, as compared to 80.2% in the corresponding period in 2010. General merchandise revenue for the second quarter of 2011 was RMB191.5 million ($29.6million), representing 24.2% of total net revenues, as compared to 14.7% in the corresponding period in 2010. Gross margin of general merchandise currently is lower than the gross margin of media products. Gross margin in the second quarter of 2011 was 14.3%, as compared to 19.8% in the corresponding period in 2010. The decrease was primarily due to competitive pricing, changes in product revenues mix with a higher percentage of general merchandise and promotional measures, such as free coupons which were deducted from revenues directly.

    Fulfillment expenses which include warehousing and shipping expenses were RMB105.4 million ($16.3 million), representing 13.3% of total net revenues, compared to 13.1% in the corresponding period in 2010. The increase was primarily due to the opening of the new warehouses in Shenyang and Guangzhou, as well as investments in improving customers’ shopping experience through faster delivery services.

    Marketing expenses were RMB18.0 million ($2.8 million), representing 2.3% of total net revenues, compared to 3.9% in the corresponding period in 2010. The decrease was primarily due to different marketing tactics in the two corresponding periods.

    Technology and content expenses were RMB20.8 million ($3.2 million), representing 2.6% of total net revenues, compared to 2.8% in the corresponding period in 2010.

    General and administrative expenses were RMB20.7 million ($3.2 million), representing 2.6% of total net revenues, compared to 3.3% in the corresponding period in 2010.

    Share-based compensation expenses, which were allocated to related expense line items, were RMB2.6 million ($0.4 million) in the second quarter of 2011, a 37.8% increase from RMB1.9 million in the corresponding period in 2010.

    The Company recorded an operating loss of RMB52.2 million ($8.1 million) in the second quarter of 2011, as compared with an operating loss of RMB17.1 million in the corresponding period in 2010, primarily due to the decrease in gross margin.

    Operating loss excluding share-based compensation expenses (non-GAAP) was RMB49.6 million ($7.7 million), a 226.6% increase from the corresponding period in 2010, primarily due to the decrease in gross margin.

    Net loss was RMB28.4 million ($4.4 million), representing a 60.0% increase from the corresponding period in 2010, primarily due to the decrease in gross margin.

    Net loss excluding share-based compensation expenses (non-GAAP) was RMB25.8 million ($4.0 million), a 62.6 % increase from the corresponding period in 2010, primarily due to the decrease in gross margin.

    As of June 30, 2011, DANG had cash and cash equivalents, short-term time deposits and held-to-maturity investments of RMB1,644.3 million ($254.4 million), as compared to RMB1,691.9 million as of December 31, 2010.

    Capital expenditures for the second quarter of 2011 were RMB9.8 million ($1.5 million).

    Adjusted EBITDA loss (non-GAAP) in the second quarter of 2011 was RMB43.5 million ($6.7 million), representing a 320.4% increase from the corresponding period in 2010, primarily due to the decrease in gross margin.

    Source:
    http://ir.dangdang.com/phoenix.zhtml?c=241200&p=irol-newsArticle&ID=1596804&highlight=

    Financial Strength (23-Sept-2011) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.16 2.20 2.09 0.78
    Current Ratio (MRQ) 1.83 2.84 2.67 1.15
    LT Debt to Equity (MRQ) 10.58 12.10 108.85
    Total Debt to Equity (MRQ) 16.89 20.37 145.47
    Interest Coverage (TTM) 0.87 0.98 23.52

    Source: Reuters.com, SEC Filings

    Analyst Consensus

    Analyst Recommendations and Revisions

    1-5 Linear Scale Current 1 Month
    Ago
    2 Month
    Ago
    3 Month
    Ago
    (1) BUY 1 1 0 0
    (2) OUTPERFORM 2 2 2 2
    (3) HOLD 6 6 7 4
    (4) UNDERPERFORM 1 1 1 1
    (5) SELL 0 0 0 0
    No Opinion 0 0 0 0
    Mean Rating 2.70 2.70 2.90 2.86

    Source: http://www.reuters.com/finance/stocks/analyst?symbol=DANG.N

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Sep-11 8 142.83 145.20 140.13
    Quarter Ending Dec-11 8 169.95 173.90 163.70
    Year Ending Dec-11 11 546.32 563.98 535.40
    Year Ending Dec-12 11 839.25 930.23 804.12
    EARNINGS (per share)
    Quarter Ending Sep-11 6 -0.06 0.01 -0.11
    Quarter Ending Dec-11 5 -0.05 0.02 -0.09
    Year Ending Dec-11 7 -0.12 0.04 -0.24
    Year Ending Dec-12 5 -0.10 0.16 -0.36
    LT Growth Rate (%) 4 58.75 75.00 50.00

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=DANG.N

    Technical Analysis


    Source: http://stockcharts.com

        1. Comparative Analysis

          Company Name Ticker Price per Mrkt. Cap. P/E P/S
          Sept-23-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
          Amazon.com Inc. AMZN 223.61 101.50B 113.51 69.66 2.08 1.58
          eBay Inc. EBAY 32.08 41.34B 16.04 13.83 3.59 3.06
          Wal-Mart Stores Inc. WMT 50.80 175.09B 11.31 10.39 0.40 0.38
          Catalog & Mail Order Houses Median 25.31 n/a 0.52 n/a
          E-Commerce China Dangdang Inc. DANG 5.52 436.89M n/a n/a 0.80 0.52

          Source: Thomson Financial

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