Door Slam Chain Gang or Cheap as Noodles

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JQW, is a domestic Chinese B2B e-commerce operator which floated at 70p in December 2013. This week it reported an end of year trading update confirming that revenues are ahead of market expectations. Unaudited management accounts show that revenues are approximately £78.4m, which is 60% ahead of 2013. Profits for the period were in line with expectations increasing to around £21.2m which compares to £17m.


WOW, the market cap is £23.1m and have confirmed, in an RNS they expect to make a profit of £21.2m for the December 2014 year-end. Profits are not cash- but the trading update also stated there a strong Balance Sheet with £39.5m of cash. This is higher than last year’s £34m and is after paying out a whacking big special interim dividend of 5.2p a share amounting to £10m.


JQW operates the website, which is a business-to-business (B2B) e-commerce platform that connects Chinese buyers and sellers – predominantly smaller and medium-sized companies and this is a highly rated growth market (Alibaba). Initial registration is free but to access more services, such as search engine optimisation, website design and advertising, the companies have to subscribe for various packages and pay up front for a specified period. Revenues are recognised over the length of the contract. An International service, which is an Amazon type online megamall ( was launched in English in July 2014 and full marketing of the service is yet to start. JQW is developing smartphone ecommerce applications for iOS and Android which are being launched.

As JQW’s valuation seems so out of kilter, the negatives in the Trading Statement for current year prospects do not seem the main point. There is increasing pricing competition and advertising costs to support the advertorial services, which rose from £1.0m in 2013 to around £5.8m in 2014.  This has also translated into a decline in gross margin etc…..


So let’s re-state the value proposition;  a B2b technology company with around 240,000 fee paying clients with a target market of 34 million or so potential customer.  It is profitable, cash flow positive and pays a dividend. If it looks too good to be true, we know it probably is. As investors in AIM companies, are we naive to belief that the regulatory systems prevent outright lying?

Another thing to note is that the shareholder lock-in ended in December 2014 – 12 months after JQW joined AIM. The lock-in covers 79% of JQW shares, while orderly market agreements with shareholders owning 16% also end in December. Some of these shareholders are original venture capital investors, who may have an average price of perhaps  less than 10p and have been selling persistently and disruptively. Do these sellers know something we do not?

JQW’s management have stated a commitment to staying on AIM and there are two respected NEDs (Non-Executive Directors) with decent city and technology careers behind them. This gives us some comfort.

Trading Strategy

Assuming the Trading Statement stops the badly executed sales  by  the Chinese  venture capital investors, then the shares could recover. Assuming JQW is not going to be suspendered due to fraud then the shares are cheap.   On balance of risk and reward, JQW seem cheap enough.






11.25p (10.75p-11.5p)

Mkt Cap:£23m

Next Results: Finals Thursday 30th April


Last OMG! Price 65p, JQW seemed a much smaller rival to $160bn Alibaba quoted in the US.


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