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/index.cfm?fa=viewfeature&articleid=2734&languageid=1
Seeking Alpha article I wrote… http://seekingalpha.com/article/1126561-nq-mobile-high-growth-strong-tech-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.
