Bona Film Group Limited (BONA)
|
Lentuo International (LAS), $94mm IPO
with a market cap of $381 at the price range mid-point of $12.5
Scheduled for Friday December 10 2010 |
|
SUMMARY |
|
Based in Beijing LAS is a direct way to participate in the growing automobile market in China. |
|
36% premium to US-based care dealerships. The premium is based on a higher operating margins & faster expected growth. |
|
. At 19 times annualized earnings for the six months ended June 30 2010 (using the price range mid-point of $12.50), LAS is priced 36% higher US-based car dealerships, which sell at a P/E multiple of 14
. LAS’s operating margin of 9%, however, is more than double US comparables, and the Beijing auto market expects much higher growth than the US auto market. |
|
Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
Operating |
|
annualizing June 6 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
Margin |
|
Lentuo Intern'l (LAS) |
$381 |
1.0 |
19 |
2.8 |
2.8 |
9% |
|
AutoNation (AN) |
$3,990 |
0.3 |
14 |
2.0 |
6.0 |
4% |
|
Penske Automotive (PAG) |
$1,450 |
0.1 |
14 |
1.4 |
483 |
2% |
|
Sonic Automotive (SAH) |
$691 |
0.1 |
14 |
1.7 |
-4.5 |
3% |
|
Each ADS represents two ordinary shares |
|
BUSINESS |
|
. The largest non-state-owned automobile retailer in Beijing, China as measured by new vehicle sales revenues in 2009, according to the CADA, (China Association of Automobile Manufacturers).
. Operates six franchise dealerships, ten automobile showrooms, one automobile repair shop and one car leasing company in the Beijing metropolitan area, which is the largest automobile market among all cities in China in terms of annual new passenger vehicle registrations, according to the CADA.
. Three of LAS’s six dealerships are also among the leading dealerships in China for their respective brands as measured by individual dealership new vehicle sales volume. |
|
. In 2009, new vehicle sales accounted for 91.0% of total revenues, automobile repair and maintenance service operations accounted for 8.7%, and insurance and finance-related services and other operations accounted for 0.3%. |
|
MARKET |
|
According to the CADA
. The Beijing metropolitan area is the largest automobile retail market among all cities in China as measured by annual new passenger vehicle registrations.
. Beijing's passenger vehicle market grew 50.1% in 2009 over 2008, with 519,000 new passenger vehicle registrations.
. For the year ending December 31, 2010, Beijing's passenger vehicle market is expected to grow 9.6% year over year, with 569,000 new passenger vehicles expected to be registered |
|
BRANDS |
|
Has one dealership for each of six different brands and sells domestically manufactured or imported vehicles offered by joint ventures between foreign and Chinese automakers. These brands include FAW-Volkswagen, Audi, FAW-Mazda, Shanghai-Volkswagen, Toyota and Chang An-Mazda, representing some of the most popular mid-line and luxury brands in China. |
|
According to the CADA, Shanghai-Volkswagen and FAW-Volkswagen were the two highest selling brands in China from 2007 to 2009 and Audi was the top selling luxury brand in China during the same period, in each case as measured by the number of vehicles sold. |
|
The top three brands of vehicles that LAS sells, which collectively represented approximately 75.8% of LAS’s new vehicle sales revenues in 2009, are Audi, FAW-Volkswagen and FAW-Mazda. |
|
USE OF PROCEEDS, $83.3mm |
|
. $58.0 million to expand the size and scope of the dealership network through the establishment of new dealerships and acquisitions; |
|
. $8.0 million to enhance higher margin products and services, increase sales at existing dealerships and implement other growth strategies |
|
. Balance for working capital & other general corporate purposes |
|
Lentuo International |
LAS, C+, 7 |
|
|
|
|
Post ADS equivalents: 30.5mm |
|
Auto sales |
|
|
|
|
|
|
|
Beijing, China |
2007 |
2008 |
2009 |
June6mos09 |
June6mos10 |
IPO Mkt |
|
Revenues ($mm) |
$249 |
$282 |
$345 |
$163 |
$194 |
Cap (mm) |
|
Gross profit |
8% |
10% |
12% |
10% |
12% |
$381 |
|
Operating margin |
5% |
7% |
9% |
7% |
9% |
@$12.5 |
|
Net income |
$5.2 |
$11.5 |
$19.0 |
$7.5 |
$10.0 |
|
|
Net income % of rev |
2% |
4% |
6% |
5% |
5% |
|
|
Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
|
annualizing Sept 9 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
|
Lentuo Intern'l (LAS) |
$381 |
1.0 |
19 |
2.8 |
2.8 |
25% |
|
SCORECARD |
|
Mgt |
Market |
Market Do- |
Proprie- |
Total |
|
1-5, 5 is high |
|
|
Growth |
mination |
tary |
rating |
|
20 is perfect |
|
2 |
2 |
2 |
1 |
7 |
|
COMPARE & CONTRAST |
|
|
|
|
|
|
|
Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
Operating |
|
annualizing June 6 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
Margin |
|
Lentuo Intern'l (LAS) |
$381 |
1.0 |
19 |
2.8 |
2.8 |
9% |
|
AutoNation (AN) |
$3,990 |
0.3 |
14 |
2.0 |
6.0 |
4% |
|
Penske Automotive (PAG) |
$1,450 |
0.1 |
14 |
1.4 |
483 |
2% |
|
Sonic Automotive (SAH) |
$691 |
0.1 |
14 |
1.7 |
-4.5 |
3% |
|
