Yucheng Technologies posts robust Q4 above the Street
Yucheng Technologies Ltd. (Nasdaq: YTEC), a Chinese IT services provider to the local banking industry, reported fourth-quarter results significantly higher than Wall Street was forecasting and issued new guidance for fiscal 2008 above the consensus estimate.
For the three months ended Dec. 31, 2007, the small cap recorded net income of $4.3 million, or $0.26 per share, above the Thomson Financial mean earnings estimate of $0.18 per share. The current quarter’s bottom line compares with net income of $2.3 million, or $0.27 per share, for the same quarter last year. The net income number excludes amortization expenses of intangible assets of $0.31 million related to the firm’s acquisition of e-Channels.
Revenue totaled $23.5 million, an increase of 89% over the $12.4 million for the same period last year. Susquehanna Financial analyst James Friedman was forecasting revenue of $16.4 million for the quarter.
IT solutions and services revenue for the fourth quarter grew 193% from the same period in 2006, mainly driven by increased sales from product lines in Yucheng’s on-line banking, call center, risk management and core banking businesses.
“The company continues to enjoy the secular demand by Chinese banks for basic technologies, including ATM, online banking, and point of sale credit card processing,” Friedman wrote in a research note today. The analyst reiterated his “Positive” rating on the stock today.
In 2007, Yucheng said it was able to deepen banking relationships with its top 15 banks and successfully expand into the next tier of banks, which includes more than 60 city commercial banks and rural credit unions. The company also said its channel management services are also being adopted by Chinese subsidiaries of foreign banks.
“With the Chinese economy growing at a rate of 11% per annum, and domestic banks under pressure to upgrade their banking IT infrastructure to provide a diverse range of products and improve customer service as they seek to compete with foreign banks, there has been a surge in demand for online banking, risk management, business intelligence, and data analytics solutions from banks in China,” wrote Friedman.
Looking to fiscal 2008, Yucheng is estimating revenue to be between $71.5 million to $74.5 million, above the $60.48 million four analysts surveyed by Thomson Financial were on average forecasting.
The small cap is projecting net income to be in the range of $14.7 million to $15.2 million.
On account of the company’s strong guidance, Friedman is raising his estimates. The analyst is now forecasting revenue for 2008 of $71.6 million from $60.7 million and earnings of $0.84 from $0.68 per share.
In 2008, Yucheng said it will continue to carry out its growth strategy of migrating into higher margin IT solutions and services business, and expanding its client base by penetrating its existing banking clients and continuing to focus on expanding relationships with the smaller banks. The company said it plans to aggressively expand its POS merchant network. Additionally, Yucheng said it will explore potential acquisitions, strategic partnerships and joint venture opportunities.
Shares of Yucheng Technologies (YTEC) popped 13.64%, or $2.08, to $17.35 at 11:21 a.m. ET. Shares of Yucheng Technologies have been trading in the range of $6.82 to $18.01 for the past 52 weeks.
