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Tuesday, 14 August 2007

Sunray's 1Q 2007 results on 14th August 2007

At first glance

Earnings dive about 200% into net loss again this quarter. Company reported in the statements that the poor performance was due to the fire that disrupted its production and the reform in the China's medical equipment industry.

Further Analysis

I think Sunray's have several problems at hand:

1) It is heavily dependent on its TCT business. Though TCT was superior compared to traditional pap spear, is the increase in accuracy worth the increase in price, i.e. in switching from using the latter to former?

2) Ever since the last few quarters, it had attributed a severe drop in profitability (leading to loss making) to reform in China's medical industry - moving towards tender system in equipment procurement. The cited reason is that the tender system resulted in lengthier procurement process and keener competition. Is Sunray fighting against other TCT suppliers or different providers (pap smear, other tests?) for cervial cancer detection?

3) TCT is its strongest segment while the rest are fighting a losing battle (e.g. fetal monitoring products). If it can't depend its TCT, what can it depend on?


Given current business condition, all depend on whether Sunray can utilise its relatively huge resources and hopefully achieve the following:

1) Able to expand its TCT business to more provinces in China and beyond

2) Its wireless fetal monitoring is able to sell well post 2Q 2008

3) Deploy (wisely) the 20m RMB to expansion business via R & D, joint venture, or more acquisitions.

The potential ultra cigar butt

Given current subprime crisis that prompted global sell off in equities, Sunray's share price is eroded steadily everyday. If it ever trades below 6 cents (its estimated cash per share as of 30th June 2007), it will be ridiculously cheap to confer it the status of a true blue ultra cigar butt. I will raise cash to buy if this opportunity arises!



Anonymous Anonymous said...

Good observation on the cash balance!
We shall see if Sunray can reverse on the trend of its revenue dips after re-org in its sales team and expanding its customer base. They need to win more bids in the tender system! Recurring revenue will be up due to consumable. It should also try to reduce the account receivable which is amazing high now - > 3 times it's quarter revenue.

18 August 2007 at 03:51  
Blogger Market Uncle said...

I didn't notice the unusually high account receivable. This might be a another area of concern. I will be watching this closely. Not vested, yet.

18 August 2007 at 23:12  
Anonymous Anonymous said...

Think can KIV this counter for a long long time...

22 February 2008 at 12:56  
Anonymous Penny Stock Newsletter said...

Theirs always a great bargain stock somewhere in the world

12 December 2011 at 14:43  

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