Why China Digital TV Holding Co., Ltd. Shares Jumped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of China Digital TV Holding Co. Ltd. (NYSE: STV  ) jumped more than 14% Monday, extending Friday's impressive rally following a favorable asset restructuring agreement with Cinda Investment Co.

So what: Under the terms of that arrangement, China Digital TV will contribute its CA, Network Broadcasting Platform, and Video on Demand businesses into a new company called Shanghai Tongda Venture Capital, which will trade on the Shanghai Stock Exchange and be controlled by Cinda Investment. China Digital TV, for its part, will acquire a controlling stake in the new venture and receive RMB1.15 billion in cash, or just under $185 million based on today's exchange rates.

Now what: With shares of China Digital TV having nearly tripled so far this year, it's easy to forget the company had previously suffered through slowing growth and has seen shares fall more than 50% over the past five years. But investors are rightly elated by its recent efforts to both monetize assets, as well as diversify its business by focusing on value-added services. In the end, while I'm not particularly anxious to chase this one higher for now, I'll admit shares still reasonably priced trading at 13.7 times trailing-12-month earnings. 


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