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SOKF, an opportunity

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By stocklad

Posted: Sunday Jan 17 6:37:12PM 2010

SOKOís Q2 2010 financials were released on 14 January 2010 and exceeded my expectations. The company acquired two facilities in H1 and two more after Q2 closed. Of course, none of the 4 facilities under construction are in the Q2 numbers. A few Q2 highlights: - Revenue was up 61% YoY and 15% sequentially - Gross margin of 69.5%, is up from 66.0% in Q1 and 65.5% YoY - EPS was up 77% YoY and 31% sequentially - The stock price is up 55% to $4.10 from $2.65 (when I first posted about the company on 29 December 2009) Since there is no seasonality to the underlying business, one can multiply Q2 EPS by 4 to get a feel for underlying annual EPS, as follows: $0.175 x 4 = $0.70/share. That makes the underlying P/E something like $4.10 / $0.70 = 5.86. Using trailing twelve months earnings to calculate a P/E yields a P/E of just 7.66. In my opinion, the company should see many years of rapid growth. Iím very much looking forward to this company graduating to a regular stock exchange. Then, it should get a much higher P/E. Until then, I can live with the growth as is.

By another pothole

Posted: Sunday Jan 3 10:39:10AM 2010

Looks like a good bet for a 50% plus gain in 2010.

By stocklad

Posted: Tuesday Dec 29 7:52:23PM 2009

Company: SOKO Fitness & Spa (SOKF, Nasdaq OTCBB), reverse acquisition on 11 April 2008, May year end Website: September 2009 investor presentation: Business: 3 complementary businesses: 3 fitness clubs, 9 beauty salons & spas and 1 beauty school in China Clients: Mid to high end consumers Competitive advantage: - Revenue Growth: last 5 quarters were $4.3M, $4.6M, $5.1M, $5.6M and $6.4M - Fully diluted eps growth: last 5 Qs were $0.085, $0.099, $0.109, $0.117 (approximation based on interpolated share count) and $0.134 - Huge cash flow from operations, which is funding rapid expansion - High gross margin (66%) - High net margin (35%) - Excellent retail locations - Size: much larger than competitors in Harbin - Expansion Plans: to open 8-9 new facilities in the next year (4 facilities are now under construction, including 3 to open in January 2010) - Cross-selling opportunities between fitness, beauty and spa - Developing higher margin spa products & services - Ready supply of high quality workers: company takes top 10% of beauty school students to work in its facilities - Low income taxes due to corporate structure - No seasonality - Low customer drop out rate Price/ttm earnings ratio: $2.65/0.459 = 5.77 Comment: While they might do a share issuance for future growth, much of it can be funded internally. I can see them graduating to a regular stock exchange in the next year.

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