01-03-2020, 04:42 PM (This post was last modified: 01-03-2020, 04:45 PM by Barefoot.)
Just a quick update.
The price of this stock has been up since the CNY holidays were over. Just as the market opened after CNY, the price briefly touched $31-$32 and shortly after that, it has risen to the 40s.
As you may know, basic infrastructures are what government like to invest on to stimulate economy during time of crisis. This time, the new "basic infrastructures" is 5G, cloud computing, networking infrastructure etc..As I have iterated many times, this company sits right on the sweet spot of the government new focus. This crisis only serves to accelerate the process.
26-04-2020, 05:41 PM (This post was last modified: 26-04-2020, 09:20 PM by Barefoot.)
Ruijie Networks just won another 700 millions worth China Mobile data centre switches contract. It is probably the first time that it came up top in high end switches market with the top 3 telcos in china. My attachment shows that it won 50%, Huawei in second place with 30% and ZTE with 20%. Contract value for Ruijie is about 700 millions, a new milestone as the highest contract value in the past are usually in the ballpark of 200-300 millions.
As people start looking around in China, they may start to realise switches supplies for newly built data centres mostly come from one company-that is Ruijie. Currently, 50% share in newly built data centre from china mobile , probably sole supplier for Alicloud datacentres, many more internet companies like jinritoutiao, tencent etc going to use its switches. Ruijie's revenue for this kind of white box switches in 2018 was just 400 millions. Then in 2019, it was about 1 billions. We estimate 2020 revenue for white box switches alone will be 2.5-3 billions. As it attains economy of scale, the net profit margin will improve for this segment. Arista network's net profit margin for its similar type of data centre switches is around 35%, we think Ruijie with economy of scale has no problem attaining 25-30% net profit margin.
Ruijie has setup a subsidiary in North American. Clearly, it is gearing itself to compete headon with Cisco and Arista. We may hear surprise good news soon.
2019's eps turns out be "just" RMB1.05, merely a 5% growth over 2018. However, that was bcos company has decided to give more bonus reward for its performing staffs that break new ground into new markets as well as ground breaking R&D. That was also to make up for the reduced bonus that it has given to its staffs in 2018. In other words, 2018 results isn't as good as it looks on surface, 2019 results is better than it looks on surface. We estimate this additional bonus reward to its staffs is approximately 100 millions. Without this, 2019 eps would have grown by 20% or more.
29-04-2020, 07:01 PM (This post was last modified: 29-04-2020, 07:32 PM by Barefoot.)
The Chinext board will be changed to registration-based IPO system. The advantage is that many innovative high tech companies will get a better chance of getting listed. Even though many may eventually failed, there exist a chance for keen eyed investors to buy shares of future Tencent, Alibaba etc at its earliest years.
Related to the above, this parent company announced that it will IPO-ed its most money making subsidiary, Ruijie Networks in the Chinext board (the first company under new system) by next year. Two diagonally opposite views regarding the long term benefits to the parent company emerges which honestly I am also not too sure about. Company's statement unambiguously states that it still command absolute control in this subsidiary but view emerges in market that it will lose its majority holding status after subsidiary listing.
04-06-2020, 05:45 PM (This post was last modified: 04-06-2020, 06:17 PM by Barefoot.)
After considering that after the listing of its subsidiary, Ruijie network, its holding will be diluted, I am temporarily out of this stock with more than 100% gain (entry price RMB17-18, around same time this thread was started).
I'll consider buying Ruijie Network directly if there is a good opportunity price point after its listing. Currently, I shifted my fund to low valuation, growth medical/TCM healthcare stocks in China. The entire sector has been flat at low point for the past few years. Volume has been observed in the past few days. Maybe, this is the only sector that has a chance in the second halve of the year.
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