Piper Jaffray Comments On CNinsure Following Recent Earnings Release

CNinsure CISG reported 4Q10 operating EPS of $0.37 compared to Piper Jaffray and consensus estimate of $0.34. The upside to Piper's forecast resulted from lower than forecasted operating expenses as top-line numbers basically reported in line. However, Piper notes the 4Q saw overall Y/Y EBITDA margins deteriorate 120bps, along with a sliding pre-tax income margin. Importantly, looking ahead, management noted expectations for 20.0-23.0% growth in 1Q11, well below historical guidance of 30%. Commission and Fee revenue increased 30.6% Y/Y to $68.0M, in line with Piper's $69.0M estimate. Total operating expenses increased 33.4% Y/Y to $47.9M, compared to the estimated $49.6M. Given the quarter's results, Piper revised estimates, taking 2011 EPS from $1.37 to $1.36 and rolled out its 2012 EPS estimate of $1.68. The PT remains $14 based on an unchanged target multiple of 8.0x 2011E EBITDA per share of $1.73. Piper Jaffray has an Underweight rating on CISG. CISG closed Monday at $17.88