Established ~3% Position Exceed Company (Ticker EDS)

Established a ~3% position in Exceed Company Ltd, ticker EDS, at $8.95.

Purchased the position for the following reasons:
(1) Exposure to growing middle and upper class young Chinese who are enjoying rising incomes and increasing interest in living healthy.
(2) Strong 2011 sales fair with a 25% y/y increase in wholesale order values relative to 2010. "One of the strongest growth rates in the industry."
(3) Exceed has been aggressively opening new stores, increasing the number of units by 15% over the past year.
(4) Rising prices for footwear and apparel improving gross margins with management's expectations of continuing to expand margins through economies of scale.
(5) Expansion of apparel and footwear product lines increasing interest from consumers. This expansion is backed by an aggressive marketing campaign around a "happy lifestyle," with a popular Taiwan music group - By2.
(6) $95 million net cash on balance sheet (over $3 per share),  with healthy CFO of $19 million last quarter.
(7) EDS is trading at 4x the C11 consensus estimate, which includes only one estimate for an under-followed stock.

Concerns:
(1) Low visibility into demand trends, business and reporting is not up to U.S. standards.
(2) Currency and country risk.

This is an investment considered quite high risk, but the cash on the balance sheet and low P/E makes the rick-reward tolerable, in my view.
 

Company Description
Exceed Company Ltd. (Exceed) designs, develops and wholesales footwear, apparel and accessories under the Xidelong brand name. It has three principal categories of products: footwear, which mainly comprises running, leisure, basketball, skateboarding, canvas, tennis and outdoor footwear; apparel, which comprises of sports tops, pants, jackets, track suits and coats, and accessories, which comprises of bags, socks, hats and caps. In October 2009, Exceed Company Ltd. announced the completion of the acquisition of Windrace International Company Limited. The Company sells the products mainly through the Xidelong retail stores. Exceed’s 22 distributors own and operate all Xidelong retail stores. As of December 31, 2009, there were 3,694 Xidelong retail stores, of which 1,000 were operated directly by distributors and the remaining were operated indirectly through authorized third party retail store operators.