Comtech Group Inc. (COGO, Financial) filed Quarterly Report for the period ended 2010-09-30.
Comtech Group Inc. has a market cap of $258 million; its shares were traded at around $7.41 with a P/E ratio of 15.8 and P/S ratio of 0.9. COGO is in the portfolios of Paul Tudor Jones of The Tudor Group.
Prior to January 1, 2008, the PRCs statutory income tax rate was 33%. In addition, Shenzhen Comtech, Comtech Communication, Comtech Software, Comloca Technology (Shenzhen) Company Limited (Comloca), Epcot Multimedia Technology (SZ) Co. Ltd. (Epcot), Shenzhen Huameng Software Company Limited (Huameng PRC) and Viewtran Technology (Shenzhen) Co., Limited (Viewtran PRC) (collectively the Shenzhen Subsidiaries), being located in the Shenzhen Special Economic Zone in the PRC, were subject to a reduced tax rate of 15%. Since the Shenzhen Subsidiaries agreed to operate for a minimum of 10 years in the PRC, the Shenzhen Subsidiaries were each entitled to a tax holiday of two-year tax exemption followed by three-year 50% tax reduction from the first profit making year after offsetting accumulated tax losses of the respective Shenzhen Subsidiaries.
The CIT law and its relevant regulations provide a five-year transition period from January 1, 2008 for those companies which were established before March 16, 2007 and which were entitled to preferential lower tax rates under the then effective tax laws or regulations, as well as grandfathering certain tax holidays. The transitional tax rates are 18%, 20%, 22%, 24% and 25% for 2008, 2009, 2010, 2011 and 2012 onwards, respectively. For the Shenzhen Subsidiaries that were entitled to the tax holidays of two-year tax exemption followed by a three-year 50% tax reduction from the first profit making year after offsetting accumulated tax losses, and they are entitled to continue the tax holidays until they expire. For Comloca and Huameng PRC which had not commenced their respective tax holiday as of December 31, 2007, the CIT law and its relevant regulations require the tax exemption period to begin on January 1, 2008.
As a result of the above incentives, our operations have historically been subject to relatively low tax liabilities, which will increase in the near future. Our effective tax rate was 10.6% and 11.6% in the nine months ended September 30, 2010 and 2009, respectively. Included in the income tax expense for the nine months ended September 30, 2010 was a deferred income tax benefit of RMB2,699 thousand (USD403 thousand) as a result of the amortization of intangible assets of RMB16,353 thousand (USD2,444 thousand).
Product sales for the three months ended September 30, 2010 was RMB661,392 thousand (USD98,855 thousand), or RMB10,329 thousand, or 20.0% higher than the corresponding period in 2009. Digital media sales increased by RMB40,851 thousand (USD6,106 thousand), or 12.1%; telecommunications equipment related sales increased by RMB27,640 thousand (USD4,131 thousand), or 20.0%; and industrial business related sales increased by RMB41,838 thousand (USD6,253 thousand), or 55.3%. The increase in product sales was mainly attributable to the Groups continued effort and strategic focus in the expansion of the industrial business end-market, the increased sales volume as a result of growing demand and the promising new lines of business such as automotive, HDTV, smart meters, smart grid and 3G handset access.
Gross Profit. Gross profit was RMB94,982 thousand (USD14,196 thousand) in the three months ended September 30, 2010, an increase of RMB14,153 thousand (USD2,115 thousand), or 17.5% when compared to RMB80,829 thousand in the corresponding period in 2009. The increase in gross profit was primarily attributable to increased sales volume in all end-markets. Gross margin was 14.2% in the three months ended September 30, 2010, compared to 14.4% in the corresponding period in 2009.
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Comtech Group Inc. has a market cap of $258 million; its shares were traded at around $7.41 with a P/E ratio of 15.8 and P/S ratio of 0.9. COGO is in the portfolios of Paul Tudor Jones of The Tudor Group.
Highlight of Business Operations:
Noncontrolling interest consisted of 30% and 40% of the outstanding equity interest in Long Rise and Comtech Digital Technology (Hong Kong) Limited (Comtech Digital), respectively. For the quarter ended September 30, 2010, approximately 1.7% of our total net revenue was generated through Long Rise. Comtech Digital was established in March 2010 and 1.1% of our total net revenue was generated for the third quarter of 2010.Prior to January 1, 2008, the PRCs statutory income tax rate was 33%. In addition, Shenzhen Comtech, Comtech Communication, Comtech Software, Comloca Technology (Shenzhen) Company Limited (Comloca), Epcot Multimedia Technology (SZ) Co. Ltd. (Epcot), Shenzhen Huameng Software Company Limited (Huameng PRC) and Viewtran Technology (Shenzhen) Co., Limited (Viewtran PRC) (collectively the Shenzhen Subsidiaries), being located in the Shenzhen Special Economic Zone in the PRC, were subject to a reduced tax rate of 15%. Since the Shenzhen Subsidiaries agreed to operate for a minimum of 10 years in the PRC, the Shenzhen Subsidiaries were each entitled to a tax holiday of two-year tax exemption followed by three-year 50% tax reduction from the first profit making year after offsetting accumulated tax losses of the respective Shenzhen Subsidiaries.
The CIT law and its relevant regulations provide a five-year transition period from January 1, 2008 for those companies which were established before March 16, 2007 and which were entitled to preferential lower tax rates under the then effective tax laws or regulations, as well as grandfathering certain tax holidays. The transitional tax rates are 18%, 20%, 22%, 24% and 25% for 2008, 2009, 2010, 2011 and 2012 onwards, respectively. For the Shenzhen Subsidiaries that were entitled to the tax holidays of two-year tax exemption followed by a three-year 50% tax reduction from the first profit making year after offsetting accumulated tax losses, and they are entitled to continue the tax holidays until they expire. For Comloca and Huameng PRC which had not commenced their respective tax holiday as of December 31, 2007, the CIT law and its relevant regulations require the tax exemption period to begin on January 1, 2008.
As a result of the above incentives, our operations have historically been subject to relatively low tax liabilities, which will increase in the near future. Our effective tax rate was 10.6% and 11.6% in the nine months ended September 30, 2010 and 2009, respectively. Included in the income tax expense for the nine months ended September 30, 2010 was a deferred income tax benefit of RMB2,699 thousand (USD403 thousand) as a result of the amortization of intangible assets of RMB16,353 thousand (USD2,444 thousand).
Product sales for the three months ended September 30, 2010 was RMB661,392 thousand (USD98,855 thousand), or RMB10,329 thousand, or 20.0% higher than the corresponding period in 2009. Digital media sales increased by RMB40,851 thousand (USD6,106 thousand), or 12.1%; telecommunications equipment related sales increased by RMB27,640 thousand (USD4,131 thousand), or 20.0%; and industrial business related sales increased by RMB41,838 thousand (USD6,253 thousand), or 55.3%. The increase in product sales was mainly attributable to the Groups continued effort and strategic focus in the expansion of the industrial business end-market, the increased sales volume as a result of growing demand and the promising new lines of business such as automotive, HDTV, smart meters, smart grid and 3G handset access.
Gross Profit. Gross profit was RMB94,982 thousand (USD14,196 thousand) in the three months ended September 30, 2010, an increase of RMB14,153 thousand (USD2,115 thousand), or 17.5% when compared to RMB80,829 thousand in the corresponding period in 2009. The increase in gross profit was primarily attributable to increased sales volume in all end-markets. Gross margin was 14.2% in the three months ended September 30, 2010, compared to 14.4% in the corresponding period in 2009.
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