This column is a combination of a speculation piece and a technical piece so I decided to leave it untitled in that sense. However, this stock has been cooking and seems to have more upside, so I wanted to put it on your radar screens. I recently discovered it and was extremely intrigued and decided to profile it here. The company is called Sky-mobi Limited (MOBI).
According to Yahoo! Finance, the company operates the mobile application store in China. The company works with handset companies to pre-install its Maopao mobile application store on handsets and with content developers to provide users with applications and content titles. Users of its Maopao store can browse, download, and purchase a range of applications and content, such as single-player games, mobile music, and books.
Big Agreement
Last week, the company signed a significant advertising contract with Chinese giant Sohu in which Sky-mobi will publish advertisements for Sohu’s advertising clients on Sky-mobi’s MRP ad network. Sky-mobi will be paid at an agreed minimum target rate, and will share revenue with Sohu that exceeds the minimum target rate. The mobile advertising space is a great growth arena and has CEO Michael Song excited.
The balance sheet is excellent with no debt and $2.43 per share in cash, which is about a sixth of the market value. The stock is not dirt cheap, but for a growing microcap, not expensive either with a forward p/e of about 18.8. There is only one analyst covering the company, but earnings estimates have increased over the past 60 days.
The Chart
This is my favorite part of the story right now. The stock staged an awesome breakout on the Sohu news and has kept going since. I would expect the stock to slow down and digest some of the gains in the near term, but also think that it has further upside going forward.
As always I have to warn that this is a Chinese small cap company, so there are risks with accounting and disclosure, but it does pass the smell test in terms of being “too good to be true.” The financials are good but not unbelievable. I think this stock has the potential to hit $17 in a year based on its current momentum.
A Small Cap Gem That Is Rolling is an article from: 
