Fair Value for AsiaInfo Holdings

Though still a very volatile stock, AsiaInfo Holdings (ASIA - Snapshot Report) does show promise with its products and services, according to Zacks senior technology analyst Lawrence Orlowski, CFA. However, the analyst maintains a Hold rating on the shares, as explained in his latest report: “Management is focusing on high margin businesses and phasing out less profitable ones. AsiaInfo continues to expand its offerings in telecom software and security services and sees significant cross-marketing opportunities arising from these products. It has deployed software solutions aimed at improving the services provided by telecom carriers. It has built network support management systems that provide real time monitoring systems to increase operating efficiency. Furthermore, AsiaInfo has promoted the development of mobile communication data warehouse technology in China. “However, there are macro factors affecting the fortunes of AsiaInfo. The prospects of AsiaInfo Holdings depend on the health of the telecommunications industry in China. The company also faces stiff competition from new foreign entrants in the Internet services industry. It is imperative that AsiaInfo provide innovative solutions across all of its product markets to avoid losing its market position to new entrants. And, even after adjusting for its current cash holdings, the company’s valuation appears fairly valued. “In Q4 [the fourth quarter], the company performed in line with our estimates. The solid results indicate that demand for AsiaInfo’s telecom services is gaining traction in China. Nevertheless, guidance was below our prior estimates. We have set a target price of $8.75. On a cash-adjusted basis ($3.44 in cash and short-term securities), we have derived a target P/E [price-to-earnings] multiple of 29.0x, which appears to reflect the company’s level of risk and growth potential.” Read the analyst report on ASIA