Thursday, December 30, 2010

Cogo's (NASDAQ:COGO) Acquisition of MDC Businesses Expand Industrial Exposure

Cogo Group's (NASDAQ:COGO) acquisition of some of MDC Tech's businesses has propelled them to a stronger position in the industrial sector, which should improve its margins going forward.

Ticonderoga said, "This morning, Cogo announced the acquisition of certain businesses of MDC Tech Inc. and inline with the company's outlook for an industrial-related deal to be unveiled by the end of 2010. Essentially, MDC is a technology solutions and engineering services company with most of its operations in China. Given the success of the Mega Smart deal, investors should embrace Cogo's bolt-on acquisition strategy and MDC furthers the company's push into the industrial market that enjoys faster growth and richer margins. When considering the MDC deal, we estimate Cogo's industrial exposure could rise to approximately 25% of sales by 4Q11 versus 18% in 3Q10. Trading at less than 8x (ex-cash) our CY11 pro forma EPS estimate, Cogo still represents an attractive value in our view."

Ticonderoga maintains a "Buy" rating on Cogo Group, which closed Wednesday at $9.22, gaining $0.49, or 5.61 percent. Ticonderoga raised their price target on them to $12.50.

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