By: Kleer Closing date of application: 19 November 2007 Commencement of trading: 21 November 2007 Established in 2002, Z-Obee is a PRC-based integrated mobile handset solutions house that provides the complete design services spanning the entire handset design cycle, including industrial/mechanical/software/hardware design, procurement of hardware, prototype testing, pilot production, and production support. They serve 2 major groups of customers: 1) Licensed mobile handset manufacturers

• provide solutions to manufacturers who procure hardware components, assemble the handsets and sell them under their own brands

2) Mobile handset distributors

• Provide handset designs
• Procurement and production support services to distributors who manufacture and sell their handsets under the manufacturer's brands

Key Competitive Strengths:

1. They have an experienced and innovative product development team of 141 engineers.
2. They are one of the first solution houses to bring handsets with dual GSM card and full-flat touch-screen to the PRC market.
3. From FY2006 to FY2007, they more than doubled their number of product solutions available which lead to an exponential 8x increase in FY2007 revenue and profit.

Key Growth Plans:

1. Within PRC, they plan to tap into new consumer markets such as younger consumers and consumers in rural ares.
2. Outside of PRC, they plan to set up a sales and marketing office in Hong Kong, and to expand into similar overseas markets like SE Asia, South America, and India.

Financial figures Intended IPO price: $0.34 No. of shares available for public offer: 5m No. of shares available for placement offer: 124m Total post invitation share capital: Approx. 497.6m Note: Unaudited 4QFY2007 figures were available in the prospectus. FY2006 Revenue: $6.3m Profit: $1.6m NAV: 0.0392 EPS: 0.00332 EPS % Incr: 700% PE ratio: 102.4x Price: 0.34 4QFY2007 Revenue: $66.8m Profit: $12.8m NAV: 0.0861 (incl. IPO proceeds) EPS: 0.026 EPS Incr: 770% (Est.) PE Ratio: 13x Price 0.34 Dividend policy: No fixed policy. Conclusion: The most eye-catching figure for Z-Obee has to be that its EPS increase has risen exponentially over the past two years. If it were to be able to maintain that rate of increase, then we would surely have a potential multi bagger here. But one thing I learned in the course of my research over the last three years, is that such exponential earnings are usually not sustainable over the longer period of a few years. Of course, there can be exceptions, such as Apple or Google, or even Raffles Education as a local example. But those are the rare exceptions. And although Z-Obee might seem to have that potential given that the possible growth in the PRC mobile handset industry is endless, I also tend to be more sceptical of promises by small cap China companies because many of them have failed to deliver on their promises. Many of them have showed so much promise on their IPO prospectus but are now languishing and neglected because they have failed to live up to their potential. Another reason I'm not so positive about Z-Obee is because it has received almost no attention from the brokers, and even on the many stock forums. Although that is by no means a guarantee that this IPO will sink, it is usually quite an accurate indication. As such, I am going to peg Z-Obee at a Fair Value of $0.32 or 12x PE only. I would prefer for it to deliver its 1QFY08 results to see if it can keep up its growth rate before I give it a higher rating. Probability of getting allotted for the IPO - LOW I have only included the key points of the prospectus. Certain information have been omitted in order to keep my write-up short, but you can find the entire prospectus here.