WEB NEWS Investor Alert
Duoyuan Global Water Inc. (NYSE: DGW) ("Duoyuan" or the "Company"), is a leading China -based domestic water treatment equipment supplier. The Company's Special Investigation Committee (the "Committee") today announced that based on the available bank account statements, the Company's bank balances were approximately:
(i) USD$24,362,243 plus RMB801,756,757 (USD$122,286,126) equal to USD$146,648,369 on March 31, 2011 , and
(ii) USD$23,221,331 plus RMB683,530,316 (USD105,409,872) equal to USD$128,631,203 on May 31, 2011 .
The Committee utilized the Company's existing eight (8) online internet banking facilities for the March 31 and May 31, 2011 RMB balances, and those internet bank balances were consistent with the bank statements. Internet banking facilities for the USD accounts will be established, but were not available to review in connection with this press release. The cash balance dates selected for the disclosure above are ones the Committee deemed demonstrative for the ongoing investigation.
Status of Special Investigation
The Committee has advised that the special investigation is ongoing and that: (i) the Committee has engaged Baker & McKenzie and PricewaterhouseCoopers ("Special Counsel") to provide assistance to the special investigation to address various allegations made against the Company; (ii) Special Counsel is in the process of gathering more information and documents, including but not limited to banking documents and sales records, and conducting review and verification of documents and the information received; (iii) verification and review of the financial records, including the cash balance figures stated above, will be conducted; (iv) interviews have been conducted with certain key members of the management team, (v) further interviews will be conducted with additional members of management and with other relevant third parties, and (vi) given the ongoing investigation, it is premature to report any conclusions.
The Special Committee with the assistance of its Special Counsel is working to conclude the investigation as soon as possible. The Committee intends to provide updated information from time to time on the status of its investigation efforts when it deems appropriate.
Investor Alert
BEIJING , July 20, 2011 /PRNewswire-Asia-FirstCall / -- Duoyuan Global Water Inc. (NYSE: DGW) ("Duoyuan" or the "Company"), a leading China -based domestic water treatment equipment supplier, announced that it will further delay the filing of its annual report on Form 20-F for the fiscal year ended December 31, 2010 that was originally due on June 30, 2011 . The Company has previously filed a Form 12b-25 notification of late filing with the United States Securities and Exchange Commission to extend the filing due date to July 15, 2011 .
As previously announced, the Special Investigation Committee of the Company's Board of Directors is conducting an independent investigation into certain accounting and financial reporting matters. The investigation continues to make progress and currently includes review of documents, interviews of key personnel and examination of financial records.
The Company will delay the Form 20-F filing until such time as the investigation has been completed. Trading in the Company's ADR's on the New York Stock Exchange ("NYSE") was halted on April 20, 2011 , and the Company is optimistic that trading will resume (although there can be no assurance that this will occur) once the Special Investigation has been completed and the Company has filed its Form 20-F for the fiscal year ended December 31, 2010 with the SEC. The Company has been in regular contact with the NYSE, and will remain in contact as the investigation proceeds.
Analyst Reports
Rodman and Renshaw on DWG 4/06/2011
Duoyuan Global Water Inc. Amit Dayal - Senior Analyst (212-356-0535) DGW: Rating Under Review
Rating Under Review: We are revising our rating on DGW to Under Review from Market Perform. This change is driven by new developments that have led to DGW’s current CFO, Steve C. Park’s announcement on April 4, 2011 that he will leave the company to pursue another opportunity (but will help the company with the transition process until the Skadden review is finished or June 30, 2011, whichever is earlier). The company also announced that DGW’s board has formed a special investigation committee to oversee the third party review.
Stock Performance: We revised our rating on DGW on March 23rd 2011 after the 4Q10 earnings release based on the fact that the third party review has been further delayed to the end of 2Q11. The stock has been trending lower since then. We are removing our financial projections for DGW and putting the company Under Review until we get further clarity on the third party review.
Company Description: Duoyuan Global Water Inc. (DGW) is a Chinese Water Treatment Equipment provider. DGW was the only private-owned company when it introduced the first electric water conditioner in 1989. Since then, the company has diversified and expanded its offerings to include water purification products (in 1998) and wastewater treatment products (in 2001).Notice Regarding Privacy and Confidentiality: This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.
CFO Trail
BEIJING, April 4, 2011 /PRNewswire-Asia-FirstCall / -- Duoyuan Global Water Inc. today announced a pending executive management transition. The Company's Chief Financial Officer, Stephen C. Park, announced his intention to leave the Company to pursue another professional opportunity. In order to assist with the transition, Mr. Park intends to remain with Duoyuan until the completion of the third party review or June 30, 2011, whichever is earlier. The Company is in the process of engaging a professional international search firm to assist in appointing a successor.
Mr. Wenhua Guo, the Company's Chairman and Chief Executive Officer, stated, "Steve's expertise and leadership during the IPO and subsequent public company reporting periods has been invaluable to us. We are actively initiating the new hire recruitment process, and some of the key qualities we seek include knowledge of the U.S. capital markets, a strong accounting background and experience in communicating with a diversified shareholder base.
"On behalf of the Board of Directors and the management team, I would like to thank Steve for his contributions to the Company and wish him the best in his future endeavor," concluded Guo.
Analyst Reports
Rodman and Renshaw on DGW 3/24/2011
DGW: Internal Review Overhang Still In Place; Revising Rating To Market Perform
Rating Revision: We are revising our rating on DGW from Market Outperform to Market Perform. We believe the stock will remain in limbo until the Skadden led internal review is complete. When the review was initiated (at the end of September 2010) the expected timeline for completion was one to four months. Management now expects the review to only be complete by end of 2Q11. Though the company continues to report healthy operational execution we believe the stock will only reflect this in the form of an appropriate multiple once Skadden reports its findings. We will revisit our rating upon the completion of the internal review.
4Q10 Results: DGW reported 4Q10 revenue and Non-GAAP net income of ¥220.4 MM ($33.4 MM) and ¥49.3 MM ($7.5 MM), with diluted Earnings Per ADS of ¥2.00 ($0.30), compared to our expectations of $34.2 MM, $8.7 MM, and $0.35, respectively.
Full Year 2010: On a full year basis, the company generated ¥1.02 BB ($154.4 MM) in revenue, ¥245.1 MM ($37.1 MM) in earnings (Non-GAAP), and ¥10.05 ($1.52) in diluted EPS.
Margins : Gross margin for the quarter declined to 42.0% from 47.3% in 4Q09 and 46.1% in 3Q10. Management attributes the decrease to (1) lower savings in COGS from a lower revenue base in 4Q compared to 3Q driven by seasonality. (2) y-o-y increase in raw material cost and a weak pricing environment due to increased competition.
Daxing Facility Commencement: The company stated that the Daxing facility won’t be ready until 3Q11, implying a further delay from the original plan. Management indicated an increasingly strict government mandate in plant operation has resulted in a longer-than-expected approval process.
1Q11 Guidance and Estimates: For 1Q11, the company is guiding for revenue of ¥195 MM. Management expects a moderated growth rate for the full year 2011 (~20%), but in 2012 the growth may return to 30% levels as the Daxing facility starts contributing meaningfully. For 1Q11, we expect revenue, Non-GAAP net income, and EPS of ¥191.6 MM ($29.0 MM), ¥34.7 MM ($5.3 MM), and ¥1.41 ($0.21), and our full year estimates are ¥1.22 BB ($184.6 MM), ¥230.3 MM ($34.9 MM), and ¥9.18 ($1.39), respectively.
Stock Performance: The stock has traded lower post the 4Q10 earnings call driven in our opinion by the internal review issue and margin pressure on the business (for competitive and cost reasons). The stock has traded closer to the company’s cash levels after the drop in September 2010 and we believe this may continue to play out in a similar manner until we get closure on the internal review.Notice Regarding Privacy and Confidentiality:
Comments & Business Outlook
Fourth Quarter Highlights :
Revenue increased 13.7% to RMB220.4 million ($33.4 million ) from RMB193.8 million in the prior year period.
Gross profit increased 0.9% to RMB92.6 million ($14.0 million ) from RMB91.7 million in the prior year period.
Gross margin was 42.0% compared to 47.3% in the prior year period.
Diluted earnings per ADS was $0.30 compared to RMB1.80 in the prior year period. Each ADS represents two of the Company's ordinary shares.
Mr. Wenhua Guo, the Company's Chairman and Chief Executive Officer, stated, "We are pleased to have achieved full year 2010 revenue of over one billion RMB. This landmark achievement demonstrates our ability to deliver sustained growth and our continued strong presence in China's water treatment industry. We recognize that our fourth quarter performance reflects expected seasonality as well as the shift in timing of revenue that we mentioned last quarter. At the same time, we continue to be confident in our ability to drive long-term growth through our comprehensive and high-quality product offerings, low-cost manufacturing base, extensive distribution network and focus on continually developing new products ."
Mr. Stephen C. Park, Chief Financial Officer, stated, "As we move into 2011, our competitive position remains strong and we are poised for future growth supported by our trusted brand name and extensive distribution network. With this in mind, we expect to generate revenue of approximately RMB195 million in the first quarter of 2011 ."
Corporate Governance
BEIJING, Dec. 27, 2010 /
PRNewswire-Asia / -- Duoyuan Global Water Inc. today filed a Form 6-K confirming that it will retain the China member firm of Grant Thornton International ("GT China") as its independent registered public accounting firm. The Form 6-K reports the resignation of JBPB & Co. (formerly Grant Thornton ("GT Hong Kong")) as a result of its merger with BDO Limited.
Analyst Reports
Rodman & Renshaw on DGW
Overview: DGW reported 3Q10 revenue and GAAP net income of $51.5 MM and $13.5 MM, with diluted Earnings Per ADS of $0.55, compared to our expectations of $47.9 MM, $11.3 MM, and $0.46, respectively. On a non-GAAP basis, which excludes a share-based compensation of $0.14 MM, net income and earnings per ADS should be $13.7 MM and $0.55, compared to our estimates of $11.4 MM and $0.46. Top-line grew by ~37.8% Y-o-Y and 18.9% sequentially. Gross profit stood at $23.7 MM or 46.1% gross margin, compared to $18.5 MM or 49.5% in 3Q09 and $20.7 MM or 47.8% in 2Q10. GAAP-net income was $13.5 MM, compared to $10.8 MM in 3Q09. Diluted EPS was $0.55, while Non-GAAP net income and diluted EPS were $13.7 MM and $0.55, respectively. The company ended the quarter with $152.6 MM in cash while accounts receivable and inventory stood at $40.5 MM and $8.6 MM.
CCTV Campaign Ended: After a third-party analysis, the company decided to terminate the CCTV advertising campaign in September 2010. This decision has reduced the selling expenses by 22.2% Y-o-Y, due to a RMB 6 MM refund upon the termination of the CCTV contract. Going forward, management expects selling expenses to be in the range of 5%~7% of total revenue.
CapEx Plan Raised: Management has raised its goal of capital spending for 4Q10 and FY11. For 4Q10, management expects a total CapEx of RMB 233 MM ($34.8 MM), of which $23 MM will be used for building construction, $5 MM for licensing expense, and $6.8 MM for equipment purchases. For FY11, total CapEx is expected to reach $92 MM. Management also indicated that guidance for the aggregate CapEx for the next two year has been raised to $209 MM from $165 MM issued previously.
Near-Term Growth Drivers: We believe near-term growth drivers should include (1) acceleration of China’s demand for water treatment equipment imposed by the upcoming 12th Five-Year Plan. (2) additions of new distributors across China. (3) New product launches and new licensing agreement signed.
Guidance & Estimates: Management maintained 4Q10 revenue guidance of RMB 210 MM, or ~$31.3 MM, implying a 29% Y-o-Y growth for the full year. We are now projecting 4Q10 revenue, net income, and diluted EPS of $34.2 MM, $8.6 MM, and $0.35, leading to full year estimates of $152.6 MM, $37.2 MM, and $1.52. For FY11, our projections are $178.3 MM, $40.3 MM, and $1.61, respectively.
Valuation: At current levels DGW is trading at P/E multiples of ~8.4x and ~7.9x to our FY10 and FY11 estimates. These multiples are well below industry averages of 17.6x and 16.6x. We believe DGW should be trading, at a minimum, in line with the industry given the growth opportunity associated with it. We are comfortable maintaining a $24.00 price target for DGW, which translates into P/E multiples of 16x and 15x to our estimates for FY10 and FY11 EPS. Notice Regarding Privacy and Confidentiality:
Comments & Business Outlook
Third Quarter 2010 Financial Highlights
Revenue increased 35.1% to RMB344.7 million ( $51.5 million ) from RMB255.2 million in the prior year period.
Gross profit increased 25.7% to RMB158.8 million ( $23.7 million ) from RMB126.4 million in the prior year period.
Gross margin was 46.1% compared to 49.5% in the prior year period.
Diluted earnings per ADS was $0.55 . Each ADS represents two of the Company's ordinary shares
Non-GAAP diluted earnings per ADS was RMB3.71 ($0.55) in the third quarter of 2010, compared to RMB3.40 ($0.51) in the prior year period.
Mr. Wenhua Guo , the Company's Chairman and Chief Executive Officer, stated, "We are pleased to announce strong third quarter results, which demonstrate another quarter of sustained growth and presence in China 's water treatment industry. This quarter's revenue increased due to strong demand from all three product segments, which was partially due to a change in the timing of sales as some customers shifted fourth quarter purchases to the third quarter in order to meet the completion deadlines of China 's 11th Five Year Plan. From a business perspective, we are also excited to have signed three new licensing agreements so far this year that will not only complement and enhance our existing product portfolio, but also extend our reach into new areas of technology so we may further diversify our high-quality product offerings. Moving forward, we are confident in our ability to drive long-term growth through our comprehensive and high-quality product offerings, our low cost manufacturing base, our extensive distribution network and our focus on continually developing new products."
Financial Outlook
Mr. Stephen C. Park , Chief Financial Officer, stated, "As we move forward through 2010, our competitive position remains strong and we are poised for future growth supported by our trusted brand name and extensive distribution network. With this in mind, we expect to generate revenue of approximately RMB210 million in the fourth quarter of 2010 or over RMB1.0 billion for the full year of 2010 . This implies a year-over-year growth rate of approximately 29% for the full year of 2010."
