Date
20 August 2017
Feitian has overtaken Moutai to become the most expensive stock in China. Are investors getting carried away? Photo: Feitian Technologies
Feitian has overtaken Moutai to become the most expensive stock in China. Are investors getting carried away? Photo: Feitian Technologies

Feitian rally: A case of irrational exuberance?

Xiaomi founder Lei Jun once said famously that given the right environment, even a pig can fly. Right now in China, Feitian Technologies (300386.CN) appears to be one such flying pig.

Feitian on Monday surpassed Moutai (600519.CN) to become the most expensive mainland-listed stock. The company, which is involved in information security products, has broken all records of new listings by closing limit-up 10 percent everyday since its debut in late June.

Last quoted at 142 yuan apiece, it has ballooned three-fold in three weeks. Market value reached 13.5 billion yuan even as the firm’s core earnings last year amounted to just 190 million yuan.

The Beijing-based firm has no doubt come to the market at a good time, given that network safety has become a national issue after the Snowden incident in the US.

Few are willing to let go of Feitian as the rally goes on. But if the surge suddenly stops or reverses course, investors will have only themselves to blame. Feitian has already filed five notices with the stock exchange to warn of the rising risks along with stock price jump.

Among other things, the company has reminded investors that half of its revenue comes from one single biggest client — Agricultural Bank of China. Also, project tendering is getting more competitive.

Majority of income is derived from one key product, USB Key, whose average selling price has been declining over past three years. New technology may come along to render Feitian’s core edge obsolete too, the company says.

Investors, beware. 

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RC

Funny Money.

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