Yucheng Technologies Limited (YTEC)

Expect explosive growth of this company in the next five year at least. The only way this stock is not going to perform well is that the company executives steal the money and artificially make the net profit (meaning after all "expenses") lower than it should be, or keeps diluting the shares with greed (that's another way to steel from the shareholders). I'd like to believe (hope anyway) that this is not going to happen with Yucheng.
Now let me tell you why the stock fell 30% after the 1Q report. Its net profit was 33% lower than what expected by the analysts. If that's all you heard, you would be thinking about a company that's in some serious troubles. Nothing is further from the truth. The truth is that the company is doing incredibly well. Its real profit for 2008Q1 is actually 88% higher than that of 2007Q1. Dilution of shares was one cause for the not-so-high EPS, but of course that was taken into consideration by analysts already before the 1Q release. What caused the lower than expected profit was that the company decided to spend some of its gross income on a critically important business expanding opportunity, namely to install point-of-sale (POS) machines. POS is seeing explosive growth in China. At this point, it's at a "land grab" stage. Because of it's nature of a fixture within a banking-merchant system, once an early player got in, it’s difficult for the later comers to get in. For a company like Yucheng, POS is an investment opportunity of a life time. I would say it would be foolish if the company had decided to save the money to just impress its stockholders. So the company did what it should. One of course should not be surprised by a temporary penalty on it stock prices due to an EPS that's lower than expected.
What IS surprising is the magnitude of the drop, which seems to be a reflection of the "huge" drop of the net earnings. But this where many people are misunderstanding, largely because of the simple math misconception. To explain this, let me give you a simple hypothetical:
Suppose a company has a known earning pattern of Q1 = 1.5M, Q2 = 3M, Q3=7.5M, Q4 = 3M. If the company incurs a 0.5M one-time extra expense, what would be the impact on the earnings? The answer, which is quite simple, is that it depends on which quarter the expense happens. If it's Q1, the impact is 30%, if it's Q3, it would be 6.5%. Well, you see, that's Yucheng's Q1 story. We just happen to be looking at it Q1 results when the profit is known to be the lowest of the year. If you are seeing what I am saying, you would buy this stock and would not be surprised by the company's better than expected earnings in the next two quarters. Then, if you are a long term investor, you should buy this stock at the present price any way, whether or not you understanding the above math.

Yucheng is the leader in IT services for banks in China. A very tiny percentage of the Chinese population is currently utlizing banking technology (credit/debit cards, online banking, etc). Over the next 10 years, Chinese consumers are going to migrate towards credit/debit cards and more automated and online banking. Chinese banks are already gearing up for the changes and they are choosing YTEC to help them. There is incredible opportunity in this business and YTEC is very well positioned.

Yucheng announces yet another contract win. This time with commercial bank, Bank of Shanghai. With contract wins coming from left and right, ranging from the larger banks to the smaller ones, Yucheng is putting their products and services to work, gaining wider publicity and earning a more solid reputation. Do not forget, their highly specialized management sees 9.3m in net income by the end of the year compared to the previously stated 8.5m. Once the market cleans its act, YTEC will head to the high teens to low twenties.

Heavily oversold, Heavily undervalued.

I like the growth potential for a company that is building out a leading Point Of Sales merchant acquiring services platform in China. As YTEC builds out card adoption and incentive programs, we'll see the increase in POS transactions flow through to the bottom line.

The recent pull back looks like a case where investors and analysts can't see the train coming for the tracks.

I'm jumping on board YTEC!

Don't need to think to hard on this one. Read
the press on ytec for the last year. These guys
are the fair-haired favorites of the power structure. Look who uses their services. They
will NOT be permitted to fail.

Undervalued Chinese IT stock.....seems to keep signing lucrative projects with Chinese banks. Huge upside potential on this one.

Little known company that has a very strong financial services IT business in China. The valuation is about a 25-30% discount to Longtop (ticker LFT).

Two main reasons: Money and China!

This is stock takes 3 steps forward and 2 steps, back don't pay attention to the volatility though, it's a good company that is undervalued. And I own it in real life. I bought at 14 and am looking for atleast 30 before I sell.

Expanding middle class in China.

This is a roller coaster stock I've had my eyes on for quite some time.

Still need to do more DD (hence my "few weeks" outperform call).

What I gather from today's developments is 1) this is a well run company, that is 2) spending money to fuel expansion and growth, that 3) analysts have pumped too hard. Haircut was unjustified in my humble opinion.

This is an important space. Missed out on Mastercard? Visa? Take a look here. I think they may have all the long-term fundamentals ... sans hype.

China's banking infrastructure is being built up from square one, and YTEC is poised to capture the lucrative point of sale (POS) market, allowing Chinese customers to use credit or debit cards at stores. YTEC is building a nice moat for itself and has very little debt and a PE ratio that would be moderate for a middle-of-the-road American company, let alone a Chinese company with terrific growth prospects. I'm leary of the often overheated, overhyped Chinese stocks, but this one and Gushan (GU) seem like overlooked giants in the making.

Yucheng Technologies isn't as Yuck'ie as the name implies! It's a small cap technology company, primarily servicing banks. Banks in China are on a growth spurt as the Chinese populace starts to receive reasonable wages for their hard work. The rising GDP is helping to form a middle class and the banks are seeing an increase in all phases of computer needs from software, networking, internet banking to database management. It has also been gaining ground at smaller rural banks. Founded in 1999 it services many of the state run banks that are adding branches at a rapid rate. Though small, with it's 12% margins, P/B of 2, and positive cash flow, it stands to gain market share in a growing industry in China. Revenue has doubled year over year the last two years.

This company recently revised its 2008 estimates upwards to about $100 million. That puts it ahead of its major competitor, Longtop (LFT). The Point of Sale segment only generates about 3% of revenue, but they are quite successful with their consulting and software. They work with all sizes of banks. Their ASP project (application software provider--they provide the software which runs on, in this case, a third party's server) has five clients, and this is quite scalable. They're getting out of the hardware business, which increases sales but doesn't have high margins.

Their own estimates of growth are about 30% for next year. They have a good position and an apparently good reputation in China. I believe China's banking industry will spend heavily on beefing up their internal systems. If that spending starts to swing to e-banking and call centers, where YTEC is the leading provider, this stock could benefit substantially.

Foreign Stocks are all the rage and probably the rage is over. However, this one stock is keeping my in the foreign stock game. This company makes an interesting product in China. They make all the units that retailers have to swipe credit cards. Now in the US and most civilized areas, these units are staples within stores, but in China this is a new concept and is slowly growing across the country. This company pretty much has a monopoly on the market for these devices and should be a valuable stock for the next couple of years.

I see growth to cont to be profitable under all market conditions for YTEC's IT development and POS growth. They may miss upcoming earnings due to POS growth (which will take ~2yrs to see a ROI) in which case hopefully the stock plummets and I can bet the farm on a profitable turnaround. I will start buying on 50C dips below $10 with an aim for adding 20% of my total invested at each dip.

Low relative PE, good star ranking, PEG & 09 PE still below normal - bottom fishing 8/10.

Playing an exaggerated post-earnings dip here. This company is probably a bit overrated at the moment but is a pretty solid buy near $7.50 or below.

78 minutes to see a teller in China come on people