Sunday, April 30, 2006
In the previous article we looked exclusively at FXI - iShares FTSE/Xinhua China 25 fund. In this section, we will compare FXI to PGJ. (Powershares Exchangetraded Fd Golden Dragon Halter Usx China Fund)
As can be seen in the chart above from Yahoo! FXI has out performed PGJ by about 8 percentage points in the past six months. Short term performance is hardly an indicator of long term performance. We will look into the holdings, objectives and the expense ratios charged by each ETF to see which one has a better prospect in the longer term.
FXI and PGJ both are in the same category - large cap growth segment. FXI holds 27 stocks from China. PGJ on the other hand invests in companies that are listed in the U.S stock market and derive majority of their revenue from China. PGJ has fifty-three stocks altogether in its portfolio.
FXI has an expense ratio of 0.74% where as PGJ has an expense ratio of 0.7%. FXI has 100% exposure to China whereas PGJ has 95% exposure to China. As we discussed in the last article, the Chinese government has a large say on how the companies it owns will do over long periods of time. PGJ has the same issues but somewhat to a lesser extent as it is investing in companies that derive large part of their revenues from China.
We looked at FXI holdings in the previous article. The PGJ holdings are described in detail here. The main areas of investment for PGJ are Energy (20%), Information Technology (23%), Industrials (10.4%), Consumer Discretionary (6.7%), Financials (4.6%), Materials( 8.3%) and Telecom Services (20%) and utilities (4.7%). The asset mix in PGJ is quite different compared to FXI. FXI invests in 24% in financials, 22% in oil and gas, 21% in telecom, 17% industrials, 10.6% basic materials and 4.3% in utilities.
The energy sector has done extremely well in past few months. This may partially describe the reason FXI has done well over the past six months. The asset mix of PGJ is quite different from FXI. If one is planning to invest greater than $10,000=00 in to China, it may make sense to split the assets into two funds.
Saturday, April 29, 2006
Infosys Technologies Limited (Infosys), along with its majority owned and controlled subsidiary, Progeon Limited (Progeon), and wholly-owned subsidiaries Infosys Technologies (Australia) Pty. Limited (Infosys Australia), Infosys Technologies ( Shanghai)Co. Limited (Infosys China) and Infosys Consulting Inc. (Infosys Consulting) is a leading global technology services firm. The company provides end-to-end business solutions that leverage technology thus enabling its clients to enhance business performance. The company provides solutions that span the entire software life cycle encompassing consulting, design, development, software re-engineering, maintenance, systems integration, package evaluation and implementation and infrastructure management services. In addition, the company offers software products for the banking industry and business process management services.
Infosys trades in Nasdaq under the ticker INFY. The ADRs trade for a slight premium to what they sell for in the Indian stock market. In this segment, let us look at the Infosys business, its profit margins and see if this is a stock worth buying at the moment.
The company's main business is Software services, products and business process management. This includes developing custom applications for clients, managing/servicing their systems and managing business process outsourcing. The total revenue by different segments are - software development 20%, maintenance 31%, re-engineering 4.3%, package implementation 17.3%, consulting 3.2% and testing 5.6%. Business process management is currently at 4%.
Infosys's big customers are insurance and banking at 36%, manufacturing at 14.5%, retail at 10.2% and telecom at 16.3%. Business process management is likely to be a major growth area for the company in the upcoming years if infosys can successfully leverage the relationship it has with insurance and banking sector.
Interestingly enough, one client contributes to 5% of the revenue which is pretty significant at 100 million dollars and the top ten clients contribute to 31% of revenue. North America provides 65% of the revenue and Europe is 25.5% of revenue. The company employs 52,700 people and interestingly enough 42,700 employees earn revenue for Infosys. The employee attrition is at 11% which is about the average. The two risks to Infosys is exchange rate fluctuation with the U.S dollar and the higher cost to hire employees. The company management has plenty of experience dealing with these issues and dont expect this to materially affect the company's finances in the coming year.
Infosys revenue grew at 50% pace in 2004-2005 and by 35% rate in 2005-2006. The growth rate is expected to slow down a bit to the 25-28% range in the coming years. The operating margin has been fairly steady in the 27-28% range from 2004-2006 and is expected to be in that range through 2007. The stock dilution year over year is around 2% a year and is pretty reasonable as the company doles out employee stock options.
The company has about $6.6/share of book value and is trading for about $78=00 in the U.S market. The EPS growth has been slightly behind growth rate in the past few years, so expect it to grow at around 20-22% rate. There could be a slight upside in the EPS growth and the general growth rate itself. Taking the book value out of the stock and putting a P/E of 30 on the current earnings, we get a price of about $68=00. A P/E of 30 is a decent mark up to include other intangibles such as brand value and the value provided by management. The stock is a buy if it trades at a discount to $68-$70.
Thursday, April 27, 2006
In the earnings report released today, Microsoft failed to meet the profit and revenue estimates for the year. In addition, Microsoft guided down the revenue forecasts for the coming quarter and FY07. The expenses for FY07 are expected to be couple of billions higher than anticapted by the analysts. So let us take a look at what is going on.
The total number of shares outstanding declined on 24th of April to 10,201,202,877. This declined from 10.303 billion shares from the 31st of March. This is better news for the investors.
Let us look at three basic components of the earnings report. The income statement, cash flow statement and balance sheet.
First the operating earning margins excluding investment income. The operating income is 35.5 cents for every dollar. This is a slight improvement from the 34.6 cents for every dollar. This is good news but the investment income declined for the quarter as cash and other short term investments declined this year compared to the past year. The share holders equity also declined this year compared to the prior year as more cash was deployed to buy back shares. Year over year the number of shares declined by about 300 million shares.
Let us take a look at cash flow statements next. The cash flow statements indicate large amount of cash being deployed to buy back shares. In the time period, 12 billion dollars were spent in buying back stocks.
The company makes majority of its money from windows client and office. Although the server and tools division is growing briskly, the division is not as profitable as the other two divisions. Meanwhile, the other four divisions turned into the red in this quarter. The CFO Liddell commented that the expenses will increase significantly in the coming fiscal year. The launching of new products will definitely increase the marketing expenses and the new products probably wont add to the bottom line immediately. The cost of doing business is also likely increase as the labor costs increase year over year. The senior management is planning to heavily increase spending on software services and windows life platform without really having established a solid beach head. There is also low employee morale.
The company faces numerous challenges and its inability to attract top engineering talent could prove to be problematic as it tries to make foray into the search area.
The company is expected to earn $1.39 in FY07. If one backs out $3=00/share, the P/E for 2007 is around 15. This is somewhat cheap. However, tech companies are not valued for their cash but earnings growth. Massive spending doesnt equal massive market share. Microsoft was consistently losing about a billion dollars a year on MSN in the late nineties, just putting the same figure on that business in in 21st century is not going to excite anyone.
Tuesday, April 25, 2006
The operating income margin declined this quarter compared to the same quarter last year. The operating income was 4.21% this quarter compared to 5.68% last year. The stock option expenses probably contributed to the reduction in operating income compared to last year. Net income as percentage of revenue was 2.23%.
The good news for Amazon.com is the increase in sales. The company continues to grow sales at a very fast clip, faster than Walmart. The growth rate for this year is around 20-25%, this should slow down further in the coming year. The book value of the company is about 70 cents a share which is about 2% of the value of the company. This is far lower than the other internet darling, Google which has a book value close to 8% of its stock value.
Amazon also faces nimble feeted competitors from Google to Ebay. It faces the risk of people turning on their search engines to find the best deals and search the books. One business prospect for Amazon is to host third party ads on its site using third party search technology such as Yahoo! or Microsoft. In this context, Microsoft might be a better partner for Amazon than Yahoo!
Amazon.com has fast growing sales that will keep boosting revenues for the next few years. However, the competitive landscape will be intense and cause some headaches to Amazon in the coming years. Amazon is a risky play but I wouldnt bet on the stock going down much. There is a lot of short interest in this stock which may prevent it from going down significantly. The more likely scenario is that the stock howers at the current levels for a long time.
Sunday, April 23, 2006
First, we have to look at the large cap growth sector. The work done by Fama and French shows that large cap growth funds typically under perform the large cap value segment as well as the total stock market as a whole. However, China is an atypical market. The economy is flying with 10% growth year over year and this growth is expected to continue through at least 2010 if not further. Compare this to the U.S market which grew at an average rate of 3% all through last century. Not only do we have a huge differential but the Chinese economy has grown at this rate for the past twenty years.
First let us take a look at the fund characteristics and let us then take a look at the stocks in the fund. FXI has a reasonable expense ratio at 0.74%. The funds net asset value was $80.81 but the fund was trading at $81.64 as of 4/21/2006. The fund returns were 46% for the trailing 12 months and 30% since the fund was listed.
The funds investments were distributed as follows on 1/31/2006. The fund had 1.8 billion dollars in assets and the assets were distributed as follows. The banking sector had 13.84% of assets (three banks), chemicals 1.56%( one company), coal 6.07(two companies)%, commerial services 5.71% ( three companies ), Electric 4.61% ( two companies ), Holding Companies 10.92% ( three companies ), Insurance 9.62% ( three companies ), Mining 2.79% ( one company ), Oil and Gas 24.25% ( three companies ) and telecommunications ( 20.57% ) (four companies). Short term investments total 3.55%.
More than fifty percent of the holdings are through Oil and Gas, Telecommunications, Banks, Holding Companies and Coal. In the past segments, we covered some of the Chinese companies listed in NASDAQ and NYSE.
The Oil and Gas segment has three companies - Cnooc Ltd(CEO), Petro China (PTR) and China Petroleum and Chemicals or Sinopec (SNP). Let us look at each of these companies to see how they look compared to the U.S oil and gas majors. Cnooc was in the news last year for their failed bid for Unocal, a U.S oil and gas company. Petro China is an oil major held by legendary investor Warren Buffet. CNOOC has a trailing P/E of 12 and a dividend yield of 2.2%. Petro China has a P/E of 12 and a dividend yield of 3.6%. SNP has a P/E of 11.2 and a dividend yield of 2.0%.
Compare this to Exon Mobil that has a P/E of 11.37 and a dividend yield of 2%. Chevron Texaco has a P/E of 9.4 and a dividend yield of 2.9%. The Chinese companies provide an alternative investment opportunity as they invest in areas where U.S can't operate in middle east and Africa. These companies are partly owned by the Chinese government and the downside in their earnings is limited. While Warren Buffet made the statement that Petro China is no longer undervalued, it is probably also true that it is not over valued. This is probably also true of other oil and gas companies in the FXI index.
The telecommunications segment has China Mobil Ltd (CHL), China Netcom Group Corp(CN), China Telecom Corp Ltd (CHA) and China Unicom Ltd. (CHU) respectively. CHU had a revenue growth of 12.5% year over year and a market cap of 100 billion. The P/E is also fairly reasonable at 18. CHL is also a major at a market cap of 118 billion and a P/E of 17. CN has a market cap of 12.7 billion and a P/E of 8. CHA has a market cap of 28 billion and a P/E of 8.54.
The banking segment has generally been considered as somewhat weak compared to their U.S counterparts. This is primarily because many of the banks are owned by the governement and the government has been using the banks to pump liquidity to the system. The government owned banks are unlikely to have problems as the government is sitting on a pile of foreign currency to the tune of about 800 billion dollars.
The China Index Fund (FXI) provides a way to invest in China and potentially the ability to ride the growth wave of China. The likelihood is for the Yuan to strengthen further as opposed to weaken against the dollar in the coming years. There are also risks as government has a large stake in many of the companies. In some sense, it is like betting that the current system of government is China will continue to thrive as opposed to betting on the company's management. This has its own pros and cons. At the moment though, it looks as though nothing can stop China from becoming the pre-eminent power in the world in the 21st century.
Friday, April 21, 2006
As we had forecast, Google earnings growth has slowed down to 60% year over year. The top line revenue and earnings growth were both above the average analyst forecast. This caused the stock to jump by 5.33% on Friday, the day after the earnings were released. Several analysts re-iterated their buy rating - let us take a look to see how things look like this quarter.
First the good part about the earnings report. Google increased its market share over both Yahoo! and Microsoft. Increasing market share is going to put more pressure on the competitors and is going to improve Google's competitive position. In the long term, market share is going to make the difference.
The operating margins declined to 32.95% from 34% from the previous year. The stock dilution year over year was 6%. This doesnt include the 2% dilution expected through the secondary stock offering. The company expects dilution due to employee stock awards to be in 1 - 1.5% range every year. This means the company will be issuing 3 - 4.5 million shares overall to current and new employees. The capital expenditures are also expected to increase for the rest of the year. From the earnings report, "We expect that the growth rate in capital expenditures in 2006 will be substantially greater than the revenue growth rate for the year. We expect the majority of investment to be focused on IT infrastructure including servers, networking equipment, and data centers, as well as real estate and campus facilities."
The company also benefited from a lower tax rate this quarter (27%). In the quarterly report, the company said that the tax rate is likely be higher at 30% for the entire year including this quarter. Google also increased its headcount by more than a thousand in the three month period between December and March. This is going to increase the expenses further. The book value of the company is about 33 dollars as the share holders equity rose by about 10% year over year.
To sum up, Google had a great quarter and gained market share. However, the company is expecting expenses to be higher for the rest of the year. In addition, the stock dilution is going to show up in the upcoming quarter. Expect the turbulence to continue in this stock for the rest of the year. At this time, the stock is fully priced and the slow down in profits is not fully reflected in to the stock. CNBC and few analysts were looking at proforma earnings where as one has to look at diluted EPS to get a real view into the business. We expect the competion to get tougher in the next year as Microsoft and Yahoo! roll out their own adsense programs.
Wednesday, April 19, 2006
The revenues increased year over year by 34% for the quarter. On a quarter over quarter basis, the revenue slightly declined. The last quarter of the year is typically the strongest quarter for many companies so this is not entirely unexpected.
The expenses in the quarter increased primarily related to stock expense related expenses. The operating income margin is currently 12.87% in the first quarter of 2006. This declined from 21% margins from 2005. The decline is primarily attributed to stock option expensing per the new accounting rules. The earnings per share declined to 11 cents per share from 14 cents a share from the year before. The decline in earnings is approximately 22%. The stock dilution year over year is very reasonable at 1%. If the earnings per share decline at the same rate through out the year, the EPS at the end of the year for Yahoo! is going to be $1=00. If the price stays at the same level for 2006 or if it appreciates by another 3-4 dollars per share, the P/E ratio will be around 35 or 37. If the revenue growth rate remains in the 30-35% range, this might be a reasonable price.
The cash flow from operations increased this quarter to about 343 million dollars from 317.5 million dollars though the company got a boost of 40 million dollars from stock based compensation. The stock holder equity also declined this quarter by about 100 million dollars compared to the end of last year. The book value per share is about 6 dollars per share. If one discounts the current book value from the stock price, the price seems fairly reasonable for the current growth rate. In other words, the stock is fairly valued and has potential for some upside if the company does well.
Sunday, April 16, 2006
(ASIA)AsiaInfo Holdings, Inc.
The best introduction for this company is from the company's website.
AsiaInfo Holdings, Inc. (Nasdaq: ASIA) is a leading provider of high quality telecom software solutions and security products and services in China. The company provides total customer solutions to some of China's largest companies, and helps its customers to increase their business value in fast-growing and evolving markets. AsiaInfo's products and services cover:
(1) telecom network infrastructure and application services, encompassing messaging, broadband and wireless; customer relationship management (CRM) and billing solutions; decision support systems; business intelligence (BI); and human resource management (HRM).
(2) Security products and services, including firewall, VPN, IDN and security management services.
Organized as a Delaware corporation, AsiaInfo has constructed national backbones and provincial access networks for all of China's major national telecom carriers since 1995, including China Telecom, China Mobile, China Unicom and China Netcom. Since 2000, the company has successfully shifted its focus from Internet infrastructure construction to the provision of a full suite of telecom software solutions.
Following its acquisition of Lenovo's non telecom IT businesses in 2004, AsiaInfo is now one of the top providers of security products and services in China.
The company has a market cap of 217 million and EPS of -0.83.
(CTRP)Ctrip.com International Ltd.
This company may be called the Chinese Expedia. As anyone familiar with the expedia story, one can ride the horse for a while before getting off. This company should be no different, but has some ride left in it. The company currently has a P/E of 50 and a market cap of 1.4 billion. Compare this with expedia - which carries a market cap of 6.65 billion and a P/E of 30.
Linktone carries a P/E of 17 with a market cap of 194 million. As noted in Yahoo! Finance, Linktone, Ltd. provides wireless media, entertainment, and communication services to mobile phone users in the People’s Republic of China. It engages in the development, aggregation, marketing, and distribution of consumer wireless content and applications for access by mobile phone users. The company offers entertainment-oriented wireless value-added services over the second generation (2G) and the 2.5G mobile telecommunications networks. Linktone’s 2G short messaging services-based services include ringtones, icons and screen savers, interactive SMS messaging in certain television programs, adventure, action, trivia and fortune-telling games, lunar and western horoscopes, POP messaging, jokes, fan clubs, event-driven or entertainment news updates, and a virtual mobile amusement park called WonderWorld.
From NetEase.com website,
NetEase.com, Inc. is a leading China-based Internet technology company that pioneered the development of applications, services and other technologies for the Internet in China. Our online communities and personalized premium services have established a large and stable user base for the NetEase websites which are operated by our affiliate. The NetEase websites had more than 786 million average daily page views for the month of December 2005, making us one of the most popular destinations in China and on the World Wide Web. In particular, NetEase provides online game services to Internet users through the licensing or in-house development of massively multi-player online role-playing games, including Westward Journey Online II, Fantasy Westward Journey and Fly for Fun. NetEase also offers online advertising on its websites which enables advertisers to reach our substantial user base. In addition, NetEase has paid listings on its search engine and web directory and classified ads services, as well as an online mall, which provides opportunities for e-commerce and traditional businesses to establish their own storefront on the Internet. NetEase also offers wireless value-added services such as news and information content, matchmaking services, music and photos from the Web which are sent over SMS, MMS, WAP, IVR and Color Ring-back Tone technologies. Other community services which the NetEase websites offer include instant messaging, online personal ads, matchmaking, alumni clubs, personal home pages and community forums. NetEase is also the largest provider of free e-mail services in China. Furthermore, the NetEase websites provide more than 17 channels of content. NetEase aggregates news content on world events, sports, science and technology, and financial markets, as well as entertainment content such as cartoons, games, astrology and jokes, from over one hundred international and domestic content providers.
The company has been consistently growing profts since inception ( 1997 ) and a market cap of 3 Billion and a P/E of 29.
(SNDA)Shanda Interactive Entertainment
SNDA engages in the development and operation of online games in China. It offers a portfolio of online games, which users play over the Internet. The company’s content offerings primarily consist of online games, including massively multiplayer online role playing games (MMORPGs) and casual games. MMORPGs are action-adventure based, and draw upon martial arts and combat themes. Casual games are session-based, which can be played to a conclusion within a short period of time. The company has a market cap of 936 million and a P/E of 47. The company has earnings of 0.28/share.
(XING) Qiao Xing Universal Telephone
From Yahoo! site,
Qiao Xing Universal Telephone, Inc. engages in the manufacture and distribution of telecommunications products. Its product portfolio includes telecommunications terminals and related products, including fixed wireless phones and mobile phones; and consumer electronics, such as MP3 players, cash registers, and set-top-box products. The company also designs fixed line telephones and GSM mobile phones. Qiao Xing Universal distributes its products through independent regional distributors, and after-sales service centers, including wholesale agencies in China. As of December 31, 2004, the company distributed its products through 40 regional distributors to approximately 5,000 retail outlets in China. It has strategic partnership relationships with China Telecom, China Netcom, China Railcom, China Mobile, and China Unicom. The company was founded by Rui Lin Wu in 1992 and is based in Huizhou City, People’s Republic of China.
Xing has a market cap of 149 million and a P/E of 52. The company earns 0.17 cents/share.
From Yahoo! finance, SINA Corporation operates as an online media company and information services provider in China. The company provides an array of services to its users, including region-focused online portals, mobile value-added services, search and directory, interest-based and community-building channels, free and premium email, audio and video streaming, online games, virtual ISP, classified listings, electronic-commerce, and enterprise electronic solutions. Its advertising offerings include banner, button, and text-link advertisements that appear on pages within the SINA network. SINA has a market cap of 1.41B and a P/E of 36. The company earns 75 cents/share.
Sohu primarily offers content, brand advertising, sponsored search, wireless, e-commerce, and online gaming services through its Internet portal sites. The company has a market cap of 941 million and a P/E of 33. The earnings per share is 0.77.
(TOMO)Tom Online Inc
TOM Online’s primary business activities include wireless Internet services and online advertising. The company’s wireless Internet services comprise wireless Internet data services and wireless Internet voice services. In some sense TOMO and BIDU are competitors. Tomo has a market cap of 1.46 Billion and a P/E of 32.31. The company has earnings of 0.85/share.
(BIDU) Baidu.com, Inc.
Baidu offers search services in Chinese language. The company is profitable. The EPS for the company is 0.19 and a P/E of 310. The company has a market cap of 1.89 Billion overall.
(CMED) China Medical Technologies Inc.
The company's website provides a good snapshot of the company.
China Medical Technologies Inc. is a high-Tech enterprise of trading at Nasdaq with the ticker-CMED. We currently conduct our operation principally through our wholly-owned subsidiary Beijing Yuande Bio-Medical Engineering Co.Ltd. in China. Yuande was established in 1999 and its headquarters and manufacturing facilities are located in Bejing Economical and Technological Development Area. The company was awarded ISO9001 certification in 2001. Cooperated with researchers from Peking University, we have developed High Intensity Focused Ultrasound (HIFU) tumor therapy system through years of efforts with considerable investments. The equipment was granted the register and manufacture license by State Drug Administration in 1999. Moreover, this project has been listed as a State High-Tech Industrialization Advanced Project and approved by Science Research Fund of the Ministry of Public Health. The success in clinical application of High Intensity Focused Ultrasound tumor therapy system has realized the dream of non-invasive treatment of tumor. The product has got many patents both in China and abroad. Having been evaluated and demonstrated by senior experts for many times, the clinical application of this technology is considered to have reached world leading level. Through efforts on the research of chemiluminescence analysis, we are the first China-based company to grasp the core technology thereof, and the first to have a platform to develop and manufacture both equipment and reagent. We launched of our Enhanced Chemiluminescence Immunoassay (ECLIA) analysis system and reagents in 2004. We have a modern factory to produce High Intensity Focused Ultrasound tumor therapy system, ECLIA system and reagents and to carry out the R&D of new products. Our company is managed by experienced professional team and talented scientists. We have established nation-wide sale and customer service network. Sustained technical innovation, strict quality control and comprehensive after-sales service constitute our core competence, and create a solid foundation for our healthy growth.
CMED has a market cap of 664 million and a P/E of 26.
Thursday, April 13, 2006
Nasdaq has won round-1 with holdings in LSE. It is going to be difficult for someone else (NYSE, CME ) to mount a take over of London Stock Exchange. However, it is early to discount Nyse as it mulls its next move. Expect some more action in this front in the next few months.
It can also get real interesting if/when NYX and Nasdaq get into the futures trades. CME has been doing very well as a for profit company. Amex has some plans to go public itself sometime next year. So here is the current score -
- Creating a global network of stock exchanges - advantage NDAQ
- Trend - Every IPO has had a pop. CME, NDAQ after going public. Advantage NYX.
- Size - The market cap of all securities listed in NYX is 20+ trillion. NDAQ is 2.2 trillion. NYX market cap is four times that of NDAQ. Advantage NYX.
- Revenues - NDAQ recovered after years of stagnant/declining growth after buying INET and others. NYX has had steady revenues and Archipelago is gaining market share. Advantage NYX.
- Stock dilution - NYX former seat holders will oppose significant dilution by acquisitions without adding value. Advantage NYX.
- Listing companies - NDAQ fees are lower. Advantage NDAQ.
- Cost cutting upside - NYX has been a non profit. ( Grasso's pay excess is one example ). More opportunities to cut costs to make it a leaner organization. Advantage NYX.
- Moving the big board to electronic trade - neutral for the moment.
- Valuation - Difficult to put proper numbers around NYX right now - neutral for the moment.
Sunday, April 09, 2006
The U.S ran a trade deficit of 201 billion dollars with China in 2005. The U.S exports to China totaled 42 billion dollars where as the imports totaled 243 billion dollars. Only Canada and Mexico have larger overall trade with the U.S. The trade deficit with China is expected to widen this year to a larger number. The Chinese economy is expected to be buyont with growth rates of 8% or more for the next four-five years. The growth is going to come primarily through exports to U.S and other countries in the world. Against this backdrop, we will be taking a look at Chinese companies listed in NYSE to see what sector of the economy they are operating in.
ACH - Aluminum Corp. of China Ltd.
Aluminum Corporation of China Limited engages in the production and sale of alumina, primary aluminum, and ancillary products primarily in the People's Republic of China and internationally. It operates in two segments, Alumina and Primary Aluminum. This company is currently trading at a P/E of 13 and dividend yield of 2.5%. ACH has a market cap of 12 billion.
CEA - China Eastern Airlines Corporation Limited.
China Eastern Airlines Corporation Limited and its subsidiaries provide civil aviation, air cargo, postal delivery, and other extended transportation services in the People’s Republic of China. The company has 1.5% dividend yield and had an operating loss last year. The company has a market cap of about 800 million.
LFC - China Life Insurance Company Limited.
LFC is trading at a P/E of 30 and provides life insurance services in China. LFC doesnt provide a dividend. It has a market cap of 37 billion.
CHL - China Mobile (Hong Kong) Ltd.
CHL has a P/E of 17 and a dividend yield of 2.3%. It has a market cap of 115 billion. CHL provides telecommunication services primarily in mainland China.
CN - China Netcom Group Corporation (Hong Kong) Limited.
CN has a market cap of 12 billion and P/E of 9. The dividend yield is 0.3%. CN provides fixed line communication service and other internet services.
SNP - China Petroleum & Chemical Corporation.
Has a market cap of 47 billion and a P/E of 9.5. The dividend yield is 2.4%. SNP engages in the exploration, development and production of oil and natural gas in the people's republic of China.
ZNH - China Southern Airlines Company Limited.
ZNH has a market cap of 1.4 billion and hasnt had positive earnings thus far. The company engages in the operation of airlines, as well as in aircraft maintenance and air catering operations in the People’s Republic of China and internationally.
CHA - China Telecom Corporation Limited.
CHA has a market cap of 27.5 billion and a P/E of 9. 7. The company has a dividend yield of 2.7%. The company provides wireless services to business and residential customers in mainland China.
CHU - China Unicom.
CHU has a market cap of 11 billion and a P/E of 17.6. It has a dividend yield of 1.6%. CHU is an integrated telecom operator with both GSM and CDMA technologies in China.
GSH - Guangshen Railway Co. Ltd.
GSH has a market cap of 1.8 billion and a P/E of 23. The company provides a dividend yield of 6.6%. Guangshen Railway railway provides passenger and freight transportation services between Guangzhou and Shenzhen, and certain long-distance passenger transportation services.
HNP - Huaneng Power International Inc.
HNP has a market cap of 8 billion and a P/E of 14. HNP does power generation in China.
Jilin Chemical Industrial Company, Ltd. (JCC)
PTR - Petro China has a market cap of 192 billion and a P/E of 11. It has an earnings yield of 3.4%.
SHI - Shanghai Petrochemical Company Limited.
SHI has a market cap of 4 billion and a P/E of 19. SHI doesnt pay a dividend.
STP - Suntech Power Holdings Co., Ltd.
STP has a market cap of 5 billion and a P/E of 113. STP doesnt have a dividend yield.
YZC - Yanzhou Coal Mining Co. Ltd.
YZC has a P/E of 13 and a market cap of 4.4 billion. YZC engages in mining, preparation and sale of coal. It also provides railway coal transportation services in China.
Saturday, April 08, 2006
From the 10-K,
We are engaged in the ownership, development and commercial utilization of entertainment content. To date, we have focused on acquiring globally recognized entertainment content and related assets, including the rights to the name, image and likeness of Elvis Presley (1935-1977), the operations of Graceland and proprietary rights to the IDOLS television brand, including the American Idol series in the United States (which first aired in June 2002 and commenced its fifth season in January 2006), and local adaptations of the IDOLS television show format which, collectively, air in over 100 countries around the world. Our existing properties generate recurring revenues across multiple entertainment platforms, including music and television; sponsorship, licensing and merchandising; artist management; themed attractions and touring/live events.
The company is primarily in the Elvis Presley and IDOLs business. On the opportunities ahead for the business, again from the 10-K
On February 7, 2005, we acquired an 85% interest in the entities which own and/or control the commercial utilization of the name, image and likeness of Elvis Presley, the operation of the Graceland museum and related attractions, as well as revenue derived from Elvis Presley’s television specials, films and certain of his recorded musical works (the “Presley Business”). The Presley Business consists primarily of two components: first, intellectual property, including the licensing of the name, image, likeness and trademarks associated with Elvis Presley, as well as other owned and/or controlled intellectual property and the collection of royalties from certain motion pictures, television specials and recorded musical works and music compositions; and second, the operation of the Graceland museum and related attractions and retail establishments, including Elvis Presley’s Heartbreak Hotel and other ancillary real estate assets.
We believe the name, image and likeness of Elvis Presley, as well as related intellectual property assets, are prime examples of the type of content that offers opportunities to generate increased revenues from diverse platforms and distribution channels. Elvis is the best-selling solo musical recording artist in U.S. history, having sold more than one billion albums and singles worldwide and having set records for the most albums and singles that have been certified Gold® and Platinum® by the Recording Industry Association of America. In each of the past five years, Forbes Magazine has listed Elvis as the top earning deceased celebrity. During that time, more than eleven million Elvis albums have been sold worldwide and an average of approximately 567,000 people have visited Graceland annually.
While, to date, the Presley Business has been successful in accomplishing its primary goal of protecting and preserving the legacy of Elvis Presley, we believe there is a significant opportunity to further enhance the image of Elvis Presley and develop commercial opportunities for the Presley Business. For example, we are exploring opportunities to bring Elvis-related attractions and/or themed venues to Las Vegas and other strategic locations throughout the world, including Asia, the Middle East and Europe.
The second business is the IDOL business where the company owns the licenses for American Idol and similar programs in hundred different countries. The company has agreement with Fox Telivision to ocntinue the IDOL program through 2009.
The company has about five dollars of assets per share and the shares are tading around $14/share now.
The company had a loss in 2005 as operating expenses were higher than revenue. From the company's 10-K:
Combined operating expenses for the year ended December 31, 2005 increased by $94.7 million over the prior period. Of this increase, $69.8 million reflects the operating expenses of 19 Entertainment since its acquisition, including $9.6 million of acquisition-related depreciation and amortization expenses. Presley operating costs increased $9.2 million, primarily due to the production costs for “Elvis by the Presleys” and $3.1 million of acquisition-related depreciation and amortization expenses. MBST had operating costs of $2.1 million, including $0.3 million of acquisition-related depreciation and amortization expenses. Corporate overhead costs, including $0.7 million of non-cash compensation, account for $11.4 million of the increase and $2.2 million represents other costs related to the transition of the Company in February 2005, including the investment by RFX Acquisition LLC and the acquisition of the Presley Business. Included in the $2.2 million of other costs are $1.1 million of operating costs of an affiliate of RFX Acquisition LLC, primarily salaries, employee benefits, rent and other overhead costs incurred from November 2004 through February 7, 2005, which were reimbursed by the Company upon closing of the RFX Acquisition LLC investment and the Presley Business acquisition. The remaining costs consist of legal expenses, listing fees, and due diligence expenses.
The company plans to improve Graceland and other Elvis properties to increase revenue. It also has plans to restore Elvis back to Vegas and internationally. This effort is expected to take several years. The company is expected to be profitable this year and increase its profitability next year. The company is fairly valued at the moment and there will be time to buy into the company. Although I do agree with Hilary that this company has potential, I would wait for a couple of quarters to see how the company is executing before jumping into buy this stock.
Friday, April 07, 2006
We reduced our direct position in currencies somewhat during 2005. We partially offset this
change, however, by purchasing equities whose prices are denominated in a variety of foreign currencies and that earn a large part of their profits internationally. Charlie and I prefer this method of acquiring nondollar exposure. That’s largely because of changes in interest rates: As U.S. rates have risen relative to those of the rest of the world, holding most foreign currencies now involves a significant negative “carry.” The carry aspect of our direct currency position indeed cost us money in 2005 and is likely to do so again in 2006. In contrast, the ownership of foreign equities is likely, over time, to create a positive carry – perhaps a significant one.
Yahoo! carried a news article talking about the BRIC countries and emerging markets. The article correctly said the returns from emerging markets averaged 12% in the first quarter of this year. Of the emerging markets, the returns from Brazil were up 20.2%, returns from Russia 28.3%, returns from India 21.1% and returns from China 21.4% respectively. In the previous article, we discussed the pros and cons of investing in India. We also looked at some of the mutual funds that provide investment options for U.S based investors in India.
In this article, we will look at the economies of the BRIC countries and look at some of the ETFs and mutual funds specializing in the BRIC countries.
Brazil has a land area roughly equalling that of the U.S and a population of about 190 million people. Brazil is replacing the U.S as the worlds agricultural power house. Brazil has a population of 190 million with the median age in the mid twenties. The size of Brazil's economy is about 870 billion dollars at current exchange rates. The economy grew at the rate of 4.9% in 2004 and 3.3% in 2005. It is expected to increase to 3.5% in 2006. The economy is powered by surging exports particularly to the asian countries. Brazil has a trade balance of about 40 billion dollars with the U.S and runs a surplus of about nine billion dollars.
Russia is worlds largest country by land area with a population of 143 million people. GDP is around 750 billion dollars by 2005 expectations. The economy is growing at a fast pace because of the surging energy exports. The Russian economy is expected to grow by 6.1% in 2006 if the oil prices stay in the $60 level. The economy grew at 6.5% rate in 2005. Russia has about 20 billion dollar trade with U.S and runs a surplus of about 11 billion dollars.
Indian economy expanded at 7.6% rate in 2005. The economy is expected to grow at 8.1% rate in 2006 and sustain this momentum for the next couple of years into 2008. India is worlds seventh largest country by land area and is the second most populous country. We looked at some of the pros and cons of investing in India in the previous article. The size of the Indian economy is about 800 billion dollars and the growth rate is expected to ratchet upwards steadily. India's trade with U.S is about 27 billion dollars and India runs a trade surplus of about ten billion dollars. The trade is expected to be bigger in size in 2006 and along with it the trade surplus.
China is the worlds most populous country and is almost the same size as the U.S. in size. The Chinese economy is expected to grow at the rate of 8% - 9% through 2010. The size of the Chinese economy is about 2 trillion dollars and is likely to continue to grow at a fast pace through 2015. China's trade with the U.S totaled 285 billion dollars in 2005 with exports outpacing the imports by 201 billion dollars. The trade is expected to be much larger in 2006 with a larger surplus with the U.S.
Given this, let us take a look at the United States economy. The U.S economy is expected to grow at 3.5% in 2006 and the growth is expected to slow down to 3.3% in 2007. The growth is expected to slow down but continue to grow till 2009. The current GDP is at 12.5 trillion dollars at the end of 2005. The economy is expected to grow to 14 - 14.5 trillion by 2009.
In the prior article, we looked at investing in India. MSNBC ran an article of mutual funds and investment options in the China region. We will look into the Chinese market in more detail in the upcoming articles. The ETFs in the Chinese market are FXI and EWH respectively. ML also wrote an article comparing the Japanese and Chinese economies and the prospects in them. Some of the other mutual funds specializing in China are:
GCHAX - AllianceBernstein Great China Fund
NGCAX - Columbia Newport Greater China Fund
EVCGX - Eaton Vance Greater China Growth Fund
FHKCX - Fidelity China Region Fund
GOPAX - Gartmore China Opportunities Fund
ICHKX - Guinnes Atkinson China & Hongkong Fund
MCHFX - Matthews China Fund
TCWAX - Templeton China World Fund
The ETFs and mutual funds specializing in Russia are as follows. After our China series, we will take a look at investment options in Russia. Some of the mutual funds specializing in Russia are:
TRF Templeton Russia and East European Fund Inc
CEE The Central Europe and Russia Fund Inc
LETRX ING Funds Russia Fund
XTRFX Templeton Russia and East European Fund Inc
XCEEX The Central Europe and Russia Fund Inc
TMRFX World Funds Inc Third Millennium Russia Fund
The Brazilian ETFs and mutual funds are as follows:
EWZ iShares Inc MSCI Brazil Free Index Fund
BZF Brazil Fund Inc.
BZL Brazilian Equity Fund Inc.
XBZFX Brazil Fund Inc.
XBZLX Brazilian Equity Fund Inc .
Let us also take a look at the generic ETFs EEM and VWO that invest in emerging markets. Let us see how they stack up when it comes to the BRIC countries.
First EEM, EEM has about 21.72% of its assets in the BRI countries with zero percent invested directly in China. However, EEM invests about 36.1% in Korea, Hongkong and Taiwan. All these countries have large investments in China and I would add this up to EEM's share in the China market. EEM has 55.8% invested in BRIC and peripheral countries.
Let us look at VWO next. VWO has 14.4% in Brazil and India with zero percent in China and Russia. VWO invests in 42.22% in Korea, Hongkong and Taiwan. Overall, 56.6% is invested in BRIC and BRIC peripheral countries.
Does this make one fund better than the other? Probably not. We will examine China, Russia and Brazil and the ETFs/Funds in these specialized markets in the next few weeks in more detail.
Monday, April 03, 2006
In the previous article we discussed Indian economy and some investment options. In this segment, we will take a look at the ETFs and mutual funds that provide exposure to India and look at them in some more depth.
EEM provides exposure to emerging markets with investments in many emerging economies. The countries that EEM invests in are Korea (17%), South Africa (12%), Brazil (11%), Taiwan (10.5%), HongKong (8.71%), Mexico (7.55%), Russia (5.74%), India (4.98%), Israel (3.57%) and Thailand (2.7%). EEM has an expense ratio of .75% and in the past year has slightly outperformed VWO - Vanguard Emerging Market Index Fund. This fund has returned 12.35% todate.
VWO is Vanguard's emerging market index fund. Though similar to EEM, the asset allocation is slightly different. VWO invests in Korea (18.64%), Taiwan (15.81%), South Africa (11.16%), Brazil (8.05%), Hongkong (7.77%), Mexico (6.87%), India (6.35%), Israel (3.03%), Thailand (2.17%) and Turkey (2.11%). VWO has a higher allocation in India and has no allocation in Russia at all. The expense ratio is lower at 0.3%. EEM probably has had a slightly better return than VWO this year but VWO seems to be picking up this year.
IFN is a closed end investment management company. According to ETFConnect.com, this fund is trading at 28% premium to net asset value as of 3/31/2006. The fund has a four star rating from morningstar. The expense ratio is very difficult to determine with different sources showing expense ratios from 2.5% to 4%. IFN has done better than EEM this year by about 10% points this year. The holdings for IFN as of 12/31/2005 according to etfconnect.com and the percentage holdings per company are as follows:
Infosys Technologies, Ltd. 9.2%
Reliance Industries, Ltd. 7.78%
Oil and Natural Gas Corp., Ltd. 6.32%
Bharti Tele-Ventures, Ltd. 4.73%
Bharat Heavy Electricals, Ltd. 4.55%
Housing Development Finance 4.28%
ITC, Ltd. 3.47%
State Bank of India 3.23%
Tata Motors, Ltd. 3.12%
Hindustan Lever, Ltd. 2.58%
IIF Morgan Stanley India Investment Fund was trading at a premium of 7.35% to NAV according to etfconnect.com on 4/4/2006. The expense ratio is not clear and varies from 1.5% to 2.6% according to various sources. The returns seem to be slightly higher compared to IFN but IFN has been around for a longer time. IIF has trailed IFN in the past one year by about 10% points.
As of 02/28/2006, according to etfconnect.com, the IIF holdings were as follows.
Bharat Heavy Electricals 11.4%
Siemens India Ltd 6.1%
Hindustan Lever Ltd 5.5%
ABB Ltd India 4.9%
Hindustan Construction Co. 3.9%
Housing Development 3.7%
ITC Ltd 3.7%
Infosys Technologies Ltd 3.6%
Hdfc Bank Ltd 3.3%
Hero Honda Motors Ltd 3%
MINDX Matthews India Fund was started on 10/31/2005. The fund expenses are 2% but the fund has lagged behind the BSE 100 index. The fund managers attribute the lag to the timing of the fund launch. MINDX performance has been right up there with IFN ever since inception.
As per the quarterly report from 12/31/05, MINDX had the following holdings.
Dabur India Limited 4.7%
Housing Dev Finance Corp 4.4%
Sun Pharmaceuticals Industries Ltd 3.6%
Infosys Technologies Lmtd 3.6%
Hindustan Lever, Ltd 3.5%
HDFC Banking, Ltd 3.2%
SIFY Ltd, 3.0%
CESC Ltd, 2.9%
Reliance Industries Ltd, 2.9%
Gail India, Ltd. 2.8%
ETGIX Eaton Vance Greater India Fund. The fund carries an expense ratio of around 2.5% but the expense ratio varies from year to year. This doesnt include the front load fee that is charged for the fund. The front load fee varies from 5% to 0% depending on the money invested. ETGIX has trailed IFN if one looks at the performance for the past one year. However, it has done better than IIF. The company holdings were as follows as of 12/31/2005.
SIEMENS INDIA LIMITED 4.50%
RELIANCE INDUSTRIES LIMITED 4.45%
TATA CONSULTANCY SVS LTD 4.44%
INFOSYS TECHNOLOGIES LTD 4.24%
GLAXOSMITHKLINE PHARMACEUTIC 3.69%
OIL & NATURAL GAS CORP LTD 3.43%
BAJAJ AUTO 3.39%
SUN PHARMACEUTICAL INDUS LTD 3.30%
HINDUSTAN LEVER LIMITED 3.28%
SUZLON ENERGY LIMITED 3.21%
BHARAT PETROLEUM CORP LTD 2.97%
FINANCIAL TECHN (INDIA) LTD 2.75%
MARUTI UDYOG LTD 2.74%
ITC LTD 2.59%
To sum up - all the funds have done extremely well. While there are some variations in each of the funds and the expense ratios are difficult to predict, the rising tide of economic growth is lifting all the mutual fund boats.
Sunday, April 02, 2006
First an overview of the natural foods industry. UNFI 10-K describes the natural foods industry as follows:
Natural Products Industry
Although most natural products are food products, including organic foods, the natural products industry encompasses a number of other categories, including nutritional, herbal and sports supplements, toiletries and personal care items, naturally-based cosmetics, natural/homeopathic medicines, pet products and cleaning agents. According to the June 2005 issue of The Natural Foods Merchandiser, sales revenues for all types of natural products rose to $45.8 billion in 2004, an increase of approximately 6.9% over 2003. This increase in sales was driven primarily by growth in the following categories:
· packaged grocery and fresh produce;
· frozen and refrigerated meats, poultry and seafood;
· bread and baked goods;
· personal care products; and
· dairy products.
The fastest growing categories in natural and organic products were personal care products, fresh meat and seafood, baked goods and pet products.
According to The Natural Foods Merchandiser, the continuing growth trend is driven by consumer desire for healthy, tasty and low-cost prepared food. More than half of American households represent “mid-level” organic customers, that is, they regularly purchase organic and natural products and want to learn more about nutrition as concerns continue to mount about health claims, food safety, irradiation and genetically modified organisms’ issues.
UNFI is a national chain and being a national chain provides it some advantages. It helps it integrate the administrative function and also enables it to get better deals as it is able to use its size to its advantage. In addition, it is also able to achieve savings through reduction of overlap in geographic regions.
UNFI has a solid expasnsion plan that includes expanding the customer base, expand into other channels of distribution and expand the UNFI brand. UNFI carries more than 40,000 natural and high quality products which are independently tested for its authenticity by third parties.
Let us look at the UNFI customer base and its balance sheets. Whole Foods Market represents 26% of UNFI sales. UNFI has an agreement with Whole Foods through 2007. Renegotiating this contract will be critical for the continued growth of UNFI. Given the large size of a single contract, Whole Foods is likely to have an upper hand in the negotiations. The sales mix of UNFI is worth noting. The sales to super market chains increased 4% in 2005 from 2004. Similarly distribution to independently owned natural product retailers declined by 5%. This point is worth noting only to underscore the importance of Whole Foods as a customer to UNFI. We will also see the impact of this to the balance sheet shortly.
The gross profit percentage declined in 2005 from 2004. It declined in 2004 from 2003. The gross profit percentage in each of the years is as follows: 20.3% in 2003, 19.8% in 2004 and 19.2% in 2005 respectively. One can expect to see decline in the operating profit margin if the supermarket sales continue to climb as the current trend shows. At the same time, the company has achieved efficiencies by decreasing the total operating expenses. The total operating expenses declined from 17.3% in 2003 to 15.7% in 2005.
The stock holders equity increased by 27% in 2005 from 2004. Cash flow from operating activities increased by 29% year over year. The proforma diluted earnings per share increased 12% in 2005 from 2004. The stock dilution in 2005 compared to 2004 was 1.5% which is very reasonable.
The company is expected to grow in the 18-25% range in the next couple of years. The risks to the stock are decline in margins because of a re-negotiation of the contract with Whole Foods in 2007. The company states that negotiation of a contract with Wild Oats caused the decline in margins in 2006. The company is well managed and run. The median analyst estimate for the company's stock is $37=00 in a years time. It is fully priced at its current levels. Should the stock dip, it should provide a good buying opportunity.
First let us look at the similarities between the U.S and India. Both are very diverse countries with multi cultural democracies. India has had a stock market for more than one hundred years and has deep roots in entrepreneurship. The Indian government has been moribund but the economy has galloped through individual ingenuity. Another similarity between India and U.S is the high amount of internal consumption. India has a very large population and unlike other countries in Asia, runs a trade deficit with the rest of the world. No one knows if running a deficit is a good thing or a bad thing, there are opinions on both sides. Countries that rely on exports have had problems as exemplified by the Japanese and European economy in recent times.
The differences are also stark. U.S has good infrastructure and some world leading companies. India lacks infrastructure and has a very large population that is below the poverty level. However, the stock market is always focused on the future. Future in India looks very bright with economy for the next two years being predicted to grow at the rate of 8% or higher by the U.N. Let us look at the mutual funds investing in India and the Indian companies trading in the U.S stock market.
First the mutual funds and ETFs. Unfortunately, there is no ETF that exclusively invests in Indian market yet. Hopefully, an ETF will be available to U.S investors in the near future. Meanwhile IShares Emerging Markets Index Fund, EEM provides about 6% exposure to India. Vanguards VWO provides about 6% exposure to India as well. VWO has a lower expense ratio compared to EEM and the fund hasnt been around enough to see if EEM provides better returns than VWO.
Then there is IFN - the India Fund Inc. (expense ratios are from morningstar) The fund has done really well but has an expense ratio of 2.74%. There is also IIF - Morgan Stanley India Investment Fund with an expense ratio of 2.5% as well. Both the funds have done extremely well in the past twelve months.
There is ETGIX ( Eaton Vance Greater India Fund ). According to both Morningstar and Fidelity, this is a fund that charges front end load for balances less than a million dollars. It also has management fees, 12-b1 fees, an expense ratio of 2.77%.
There is MINDX ( Mathews India Fund ) has a 90 day redemption fee. It has an administrative fee of .25% and management fee of .75%.
Both these funds have done extremely well this year and will probably will continue to do well in the next couple of years.
Let us take a quick look at the Indian stocks trading in the U.S market to see how they are doing.
INFY - Infosys Technologies Limited. This traded for $78 in the U.S market with a P/E of 41. It trades at a discount in the Indian stock market for about $68.
SAY - Satyam Computer Services. It trades for $44 in the U.S market with a P/E of 30. It trades in India for about $20=00 in the Indian market. It is likely that the U.S ADR is equivalent to two stocks in the Indian market.
SIFY - Satyam Infoway trades for about $14=00 in the U.S market. I couldnt find the equivalent share in the Indian market.
WIT - Wipro Limited sells for about $12 in the Indian market but sells for about $15=00 in the U.S market.
HDB - HDFC Bank Limited. Trades for $54.50 in the U.S stock market and goes for about a third in the Indian market. Indian shares are equivalent to 1/3 of their U.S ADRs.
IBN - ICICI Bank Lmtd trading for $28 and goes for about $14 in Indian stock market. U.S ADR is equivalent to two stocks in Indian market.
VSL - Videsh Sanchar Nigam Limited for $22 and sells in India for about $11. U.S ADR is equivalent to two stocks in Indian market.
MTE - Mahanagar Telephone Nigam Limited for $8 and for about $4 in India. U.S ADR is equivalent to two stocks in Indian market.
RDY - Doctor Reddy's Labs for $31 and for about the same price in India.
TTM - Tata Motors Limited trades for $21 and for about the same price in India.
PTI - Patni Computer Systems Ltd trades for $20.45 and for about $11 in India. It is likely that the U.S ADR is equivalent to two stocks in the Indian market.
MT - Mittal Steel Company, NV trades for $37.75. Couldnt find an equivalent stock in India.
There are numerous opportunities to invest in India for U.S based investors. The Indian economy is expected to continue to do well in the next couple of years and the underlying fundamentals are strong. The democratic underpinnings provide a good foundation to India and make it less volatile compared to some of the other emerging markets.
Missed one company in the original report.
REDF - REDIFF.COM Selling for $22.5 in the U.S market.