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Great NQ write-up by hedge fund Toro Investment Partners
02-24-2013, 06:34 AM
Post: #1
Great NQ write-up by hedge fund Toro Investment Partners

When I come across an investment idea that I find super compelling, I like to share it.  I believe you will find NQ Mobile compelling, if you spend 15 minutes reading the attached write-up from hedge fund Toro Investment Partners and the articles linked to below.  NQ Mobile (NQ) is a global mobile security and privacy protection SaaS company for smartphones.

NQ Mobile (NQ) is trading around $6.40 and has approx $2.46/share in net cash.  Top line is growing 80%+ y/y and is trading under 4x EV/EBITDA.  It is a perfect play on global smartphone adoption and the rapidly increasing malware threat targeting Android smart phones.  Company reports 4Q12 earnings on March 6.  I expect another solid report (company has beat and raised last 6 quarters).  Street estimates 2013 revenue to be $153M.  Given the recently announced distribution deals and increasing monetization of its 280MM worldwide users, I expect 2013 revenue to be 180M-190M.  2013 FCF should be approx 40M (against a current enterprise value of $200M).

Many have reasonable concerns that is it a Chinese company.  That said…(1) the company raised $31M from VCs including Sequoia and GSR and was deeply vetted by both (Sequoia holds its 7M shares post-IPO) (2) the company is audited by PWC (the only top 4 not to have a problem with Chinese frauds) (3) NQ went through a proper IPO process (not a reverse merger) and was vetted by 3 US investment banks (4) NQ registered for a secondary and was vetted by Morgan Stanley and Merrill Lynch in Summer 2012 (5) ex-CTO of Samsung Wireless, Omar Khan, performed EXTENSIVE due diligence (using his extensive contacts in the mobile industry) before joining in Jan 2012 as co-CEO (6) NQ’s products have 50,000+ reviews (ave rating 4.5 stars) in Google’s app store. (7) 2 of NQ’s core products won Top 25 awards at CES 2013.

There was an article in the FT on Feb 21 on NQ….  on.ft.com/Yepvgj

Here’s another article from Knowledge@Wharton on NQ…  http://www.knowledgeatwharton.com.cn/ind...nguageid=1

Seeking Alpha article I wrote…  http://seekingalpha.com/article/1126561-...dirt-cheap

NQ is my favorite long for 2013.  The author of the attached write-up, Taek Kwon, runs a $100M China-focused HF, is ex-TPG and has outstanding contacts in China (he is Chinese).  I agree with all the content in the article.  With the stock trading around $6.40 currently, I believe the stock will trade over $15 before the end of 2013.  Fair value is well over $20.



Attached File(s)
.pdf  130221 - NQ Mobile - Investment Memo.pdf (Size: 277.84 KB / Downloads: 39)
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02-24-2013, 12:44 PM
Post: #2
RE: Great NQ write-up by hedge fund Toro Investment Partners
Thanks for that, doublebagger. I guess earnings March 6 will have provide some impetus to get out of the trading range.
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02-24-2013, 12:50 PM
Post: #3
RE: Great NQ write-up by hedge fund Toro Investment Partners
That's a pretty thorough report. I thought these charts looked good, assuming they were yearly growth figures. They're not, they're quarterly growth figures (registered, active, paying users)...

Pretty phenomenal.
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02-24-2013, 12:53 PM
Post: #4
RE: Great NQ write-up by hedge fund Toro Investment Partners
The Toro analysis is spot on.

AVG came out with earnings yesterday. Mobile users grew 30% for them QoQ. AVG is focused on the US and Europe. I cant help but think thats gotta mean NQ should see some explosive growth for 4q12.
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