Chinese Tech Stock Weekly Summary (Feb. 23 - Mar. 1, 2009)

by: IRG Ltd

The following is excerpted from IRG's weekly stock report:

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• China's mobile internet market develops rapidly on diversified application products and improved long-run user rates. Most of the mobile internet users were male, accounting for 74.6 percent of the total. Female users, however, are catching up year after year and the sexes are expected to merge within five years. People born in the 1980s accounted for 70.8 percent of mobile internet users. People were inclined to access the internet via handsets more frequently, and 34 percent users surveyed accessed several times per day. In terms of mobile internet application products, instant messengers remained popular as usual, accounting for 31.2 percent of the total, thanks to its huge user base. At the same time, social networking service products expanded market share rapidly in 2008. Entertainment services are the major reason for users to access the internet via handsets. The active users of handset music amounted to six million, and that of handset TV and handset blogs, two million. Products for commerce and study developed fast, especially the handset WAP mailbox service.
• China's mobile terminal (mobile phone) makers reported disappointing annual results for the year of 2008, in sharp contrast with hefty profit growth of telecommunication equipment manufacturers. Both Ningbo Bird Co. and ST Amoi Electronics foresaw a loss in 2008. China Kejian predicted a 10-million-yuan (US$1.5 million) loss in net profits. Zhejiang New Jialian Electronics, mainly engaging in development, production and sales of micro electro-acoustic devices for communications terminal products and portable digital products, predicted a 35-45 percent loss in net profits. Lin Qin, in charge of a mobile phone factory, stated that state supportive measures for boosting electronics and information industry benefited telecom equipment makers first and will take some time for the state support to benefit mobile phone makers. Demand for mobile communication, digital TV and next generation network is expected to increase 600 billion yuan (US$87.7 billion) in the next three years, with that of mobile communication amounting to 400 billion yuan (US$57.5 billion).


• Chinese mobile operator China Unicom (NYSE:CHU) ended January with 134.204 million GSM subscribers, up by 839,000. The company's fixed-line segment lost 125,000 million subscribers to reach a total of 109.445 million. Broadband subscribers grew by 971,000 to reach 31.052 million.
• China Telecom (NYSE:CHA) plans to develop 35 million CDMA subscribers in 2009, and expand its user population to more than 100 million by 2010. The company has signed with seven end product producers for purchasing the first batch of 3G handsets, covering more than 10 styles of CDMA2000 EVDO and totaling 1.2 million sets. 10 percent of end products it will purchase are high end, 60 percent are mid-end ones, and 30 percent are low-end. The company lacks 3.25 million sets of CDMA end products. China Telecom is expected to start 3G handset pre-commercial service in March and begin large-scale commercial operation in May.
• ZTE Corp. (OTCPK:ZTCOF) plans to cooperate with Chinese financial organizations to provide loans totaling US$15 billion to overseas telecom markets. The funding will be aimed at aiding telecom infrastructure construction in developed countries where funding has dipped due to the global financial crisis. ZTE would cooperate with Hong Kong's CSL New World Mobility ((CSLNWM)), a subsidiary of Australia's Telstra Corp. (TLS), to build the world's first SDR (Software Defined Radio) based HSPA+ (High Speed Packet Access +) network.
• ZTE Corp. announced that it has established a cooperation with T-Mobile, one of Europe's largest mobile operators. This cooperation covers handsets and data card devices for mobile applications. T-Mobile and ZTE have declared a new strategic partnership spanning all the European markets of T-Mobile. The signing of a General Framework Agreement (GFA) on handsets and data cards emphasizes the intention to strengthen the cooperation between T-Mobile and the Chinese telecoms equipment provider. The GFA represents a contract framework that spans the whole handling of a project and the possible adjustments of ZTE's mobile products for T-Mobile. Both partners agreed on the implementation of joint projects in the future. The GFA was signed on 18 November 2008 in Macao.
• China Mobile (NYSE:CHL) is considering making inroads into the Indian market via acquisitions. Despite the global financial crisis, the Chinese telecom carrier still casts its eyes on overseas markets and aims at India for its further expansion, cited the report. India's mobile telecom market has development potential and can lure 9 million new subscribers or so per month. China Mobile bought a 100 percent in Paktel for US$460 million and renamed the latter as CMPak. The Chinese telecom operator, which has invested US$1.66 billion in Pakistan by far, recently announced an investment of US$500 million in the country in 2009.

Media, Entertainment and Gaming

• Shanda (NASDAQ:SNDA) said fourth-quarter net income rose to 342.7 million yuan (US$50.1 million) from 292.6 million (US$42.8 million) a year earlier which beat the 313.3 million yuan (US$45.8 million) average of analysts’ estimates compiled by Bloomberg. Revenue rose to 1.02 billion yuan (US$148.5 million) from 714.2 million yuan (US$104.4 million) last year.
• Shanda began recruiting members for its interactive assistance platform, "Shanda Eda", for the second time among gamers of the classic version, Mir 2 Sidestory of its licensed MMORPG Legend of Mir II. Mir 2 Sidestory gamers at or above level 60 can register to become platform members and then obtain cash, virtual currency, tokens and other rewards by answering questions from new gamers.
• NetEase (NASDAQ:NTES) has beaten expectations for its fourth quarter after it posted a 28 percent year-on-year revenue increase and a nearly 48 percent profit boost compared to the same quarter in 2007. Compared with its third quarter, both NetEase’s total revenue and gaming revenue dropped, but the two figures represented dips of less than one percent. NetEase made US$117.5 million in fourth-quarter revenues, and gaming revenue increased more than 32 percent year-on-year. NetEase, which is China’s second-largest gaming developer after Shanda Interactive, attributed much of its bolstered fourth-quarter earnings to a 14 percent increase in ad sales and the launch of several MMORPG games. The company improved its figures from 2007 to 2008 as a whole, reporting a 29 percent increase in total revenues to US$436.2 million from US$338 million. Meanwhile, advertising services rose 33 percent to US$59.5 million and net profit was up more than 26 percent. NetEase announced the sudden departure of co-COO Michael Tong, effective next month. His duties will be assumed by CEO William Ding.
• AirMedia Group Inc. (NASDAQ:AMCN), operator of the largest digital media network dedicated to air travel advertising in China, announced strong results for the fourth quarter and full year 2008. For fourth quarter 2008, total revenues increased by 148.4% year-over-year to US$40.5 million including revenues from digital frames in airports grew by 1,264.3% year-over-year to US$17.2 million. Adjusted net income (non-GAAP), which is net income excluding share-based compensation expenses and amortization of acquired intangible assets, increased by 50.0% year-over-year to US$10.5 million. For the full fiscal 2008, AirMedia reported total revenues of US$125.5 million, up 187.9% year-on-year. Total revenues for the fourth quarter of 2008 reached US$40.5 million, representing a year-over-year increase of 148.4% due to the increases of revenues from all of the product lines. The quarter-over-quarter increase was due to the increases of revenues from digital frames in airports, billboards on gate bridges in airports and other displays, which was partially offset by the decreases in revenues from digital TV screens in airports and on airplanes. AirMedia expects that its total revenues for the first quarter of 2009 will be in an amount ranging from US$32.0 million to US$34.0 million, representing a year-over-year increase of 48.2% to 57.4% from the same period in 2008.
• China media and advertising company XFMedia (XFML), announced US$251.5 million net loss, including one-time charges of US$245.6 million driven primarily by a one-time non-cash impairment charge on goodwill and intangible assets of US$206.4 million in connection with its annual impairment testing conducted. Net revenue for the fourth quarter of 2008 was US$32.9 million, up 9% year-on-year from US$30.2 million. Net revenue for the full year 2008 was US$114.2 million, up 44% from US$79.1 million in 2007. EBITDA for the fourth quarter of 2008 was US$5.2 million, down 47% year-on-year from US$9.9 million. XFMedia was approved earlier in January to change its name to Xinhua Sports & Entertainment Limited.
• is preparing to build a national Web TV station, the website of the State Administration of Radio Film and Television of China (SARFT). is cooperating with CCTV's advisory firm to make a market research on Web user needs, consumer favorite, and consumption mentality for the establishment of the national Web TV station. It will consider clinching a strategic cooperation relation with China Mobile for its own cellphone-based new media blueprint, which is aimed to form the nation's biggest video on demand (VOD) platform; and will enact a package of regulations and rules about new media's content and management.

• Fosun International Ltd. purchased 33.84 million ADS in Focus Media Holding Ltd. (NASDAQ:FMCN). The Shanghai-based conglomerate has spent US$279.8 million in the acquisition which account for 26.14% of Focus Media’s outstanding shares.


• China last year sold more than 32 million units of personal computers (PCs), 15.2 percent more than the previous year. Sales revenue hit 161.2 billion (US$23.61 billion), up 9.6 percent from a year earlier. PC sales, including sales of desktop PCs, laptops and servers, slowed down both in volume and
value due to the economic downturn. Last year China sold about 22.49 million desktop PCs, up 6.8 percent over 2007, with the sales revenue declining 0.8 percent to 85.4 billion yuan (US$12.5 billion))year on year. Sales of laptops experienced a surge of 43.2 percent to 9.02 million units over 2007, totaling 63.6 billion yuan (US$9.3 billion), rising 27.1 percent year on year. The server sales revenue moved up moderately, by 11.1 percent, to 12.3 billion yuan (US$1.8 billion) in 2008.

Alternative Energy

• LDK Solar (NYSE:LDK) warned the company will curtail expansion this year and lose US$135 million to US$145 million in the fourth quarter as wafer prices fell. Makers of solar cells and modules have suffered in recent months as the global credit crisis dried up funding for new projects and the weak euro hurt margins for companies that sell into the European arena. Suntech Power (NYSE:STP) lost US$65.9 million in the fourth quarter. Last week, Trina Solar (NYSE:TSL) warned its margins would suffer due to writedowns on the value of its solar inventory, while Canadian Solar Inc. (NASDAQ:CSIQ) would ship fewer solar cells in 2009 than it had originally forecast. LDK Solar plans to delay wafer expansions by one quarter, meaning it will hit 2.0 gigawatts (GW) of solar wafer capacity by the end of 2009 instead of an original plan for 2.3 GW. The company plans to delay the installation of a 5,000 metric tons (MT) production train to 2010. Another two new trains of identical size will be completed in the second quarter and second half of 2009, respectively.