Chinese Tech Stock Weekly Summary (Mar. 16 - Mar. 22, 2009)

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

• • •

Internet

• Tencent Holdings Ltd. (TCEHF.PK) posted a better-than-expected 69 percent jump in fourth-quarter net profit on higher revenue from Internet services, but warned its performance this year will be hurt by the global slowdown. Tencent said there will be a substantial impact on its advertising business this year, though it plans to boost its staff in China by 1,300 and that it is also looking to make acquisitions as the global crisis depresses asset values. The company is looking to buy or invest in Asian online game developers. The company's online advertising business has been facing severe pressure in the first quarter as advertisers scale down or delay their spending. The company plans to
boost its staff in China as its businesses keep growing. Tencent will add positions in several areas, including online games, mobile value-added services and online advertising. As of Dec. 31, the company had 6,194 employees, mostly based in China.

• Sina Corp.'s (SINA) fourth-quarter net income rose 46 percent on surging revenue, but the company issued a weak first-quarter outlook as macroeconomic conditions hit advertisers. The spillover from the global financial crisis into post-Olympic China has hurt the Chinese brand advertising market, and the impact was especially severe in the first quarter of 2009. Revenue increased 44 percent to US$101.5 million, just above Sina's November target of US$98 million to US$101 million. The company, which owns China's largest Web portal, projected first-quarter revenue of US$73 million to US$77 million. Analysts had expected US$89 million.

Alternative Energy

• China Sunergy (CSUN) has entered a 10-year framework agreement with Advanced and Automotive Solar Systems for the supply of up to 480MW of Sunergy cells from 2009 to 2018. The nonbinding agreement allows China Sunergy to supply asola with 30MW of cells in 2009 and 50MW each following year. Other specific details of the negotiation have yet to be discussed in the following months. Sunergy announced earlier this month that it would supply 10-30MW of solar cells to Advanced and Automotive Solar Systems, with fixed pricing for the first half of 2009.

• Canadian Solar Inc. (CSIQ) recorded a net loss of US$50.6 million, compared to the previous year’s net income of US$6 million and the previous quarter’s US$11.1 million. Net revenues amounted to US$73 million while quarterly shipments reached 19.6MW, for 2008 shipments of 167.5MW. For the full year 2008, net revenues were US$709.2 million, up 134 percent, with a net loss of US$10.0 million, compared to a US$0.2 million loss in 2007. The loss included a US$23.3 million inventory write-down and a US$12.8 million provision for doubtful accounts. For fiscal 2009, assuming a better macro environment in the second half, the company expects net revenues to reach US$600-800 million on shipments of 300-350MW.

Telecommunications

• China Mobile Ltd. (CHL) posted the lowest growth in profit in more than four years as the slowing economy discouraged customers from using their mobile phones. Fourth-quarter net income rose 11 percent to 30.2 billion yuan (US$4.4 billion) from 27.2 billion yuan a year earlier. That compared with the 30.6 billion yuan (US$4.5 million) median estimate in a Bloomberg survey of seven analysts. Sales climbed 13 percent. Chairman Wang Jianzhou expanded networks and cut fees to add users in rural areas as the global recession slows demand in China’s cities. The carrier, which had 463.9 million subscribers at the end of January, will step up discounts and roll out high- speed services nationwide this year to counter competition from China Telecom Corp. (CHA) and China Unicom (Hong Kong) Ltd. (CHU). The economic slump and increased spending on rural networks has contributed to the lower-than-expected earnings. EBITDA rose 12 percent but EBITDA margin narrowed to 52.5 percent from 54.3 percent last year.

• ZTE (ZTCOF.PK) planned to make a major smartphone push in the US market in 2009, including possibly partnering with Verizon Wireless (VZ) on a dual-mode CDMA/LTE handset. The Chinese vendor and handset maker will focus primarily on smartphones and on phones with Qwerty keyboards. ZTE has previously hopes to become one of the world's three largest handset vendors in the next five years, and a strong push into the U.S. market would definitely help it achieve that goal. Sun hinted that ZTE is in talks to forge partnerships with Verizon, AT&T Mobility (T) and Sprint Nextel (S). ZTE's partnership with Verizon could include a next-generation 3G/4G dual-mode phone.

• China Unicom will likely report its 2008 net profit more than tripled. China Unicom’s earnings rose more than 50 percent last year, mainly because of the sale in October of its CDMA operations to China Telecom. The Beijing-based operator will alaos restate its 2007 results to reflect its merger with fixed-line operator China Netcom Group Corp. (Hong Kong) Ltd. (CN). China Unicom's 2008 revenue likely rose 48 percent. Investors will be focusing on the company's 3G mobile strategy and guidance on provisions for its personal handyphone assets.

Media, Entertainment and Gaming

• Shanda Online (SNDA) plans to jointly operate all games from Ourgame, a Beijing-based gaming firm, and will sign an official agreement at the end of March. Ourgame will become the fourth company to join Shanda's development platform, after Kingsoft, Shanghai Storm Information and LineKong.

• Exports of Chinese-developed online games will probably exceed US$100 million in 2009. The Chinese central government offered support to domestic game exports in an effort to promote Chinese culture. It plans to organize an overseas road show for domestic companies. The Ministry of Culture (MOC) will release regulations within the year to help strengthen its oversight on online game operations.

Software

• Baosight Software booked a revenue growth of 17.4 percent year-on-year, and net profit growth of 32.4 percent year-on-year, for the fiscal year 2008. The company recorded revenues amounting to 1.8 billion yuan (US$264 million) and net profit of 136.9 million yuan (US$20 million) in 2008.

Comments

[ArtfulDodger:]

Thank you again for the excellent run down on Chinese techs. I really appreciate this info!

Mar 24 01:43 PM