Chinese Tech Stock Weekly Summary

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

Internet

• Members of an overseas Chinese democracy party have sued Yahoo (YHOO) for human rights abuses, claiming the company turned over information to Beijing about a colleague that led to his arrest and jailing. Zheng Cunzhu, a Los Angeles businessman and member of the China Democracy Party, sued on behalf of Li Zhi, a party member sentenced in 2003 to eight years in prison after Yahoo supplied information to identify and convict him, according to the complaint filed in San Francisco federal court. The February 22 lawsuit comes three months after Yahoo agreed to provide legal, humanitarian and financial support to the families of two jailed mainland writers to resolve a similar lawsuit over disclosures made to the central government that led to their arrests. Yahoo chief executive Jerry Yang apologized to the families at a U.S. congressional hearing last November.

• SK Telecom Co. (SKM) plans to open an online marketplace in China this year and is contacting Taobao and other Chinese e-commerce firms for possible partnerships, according to the company. Last week, the company opened a customer-to-customer online shopping site, "11st", targeting the country's US$17.0 billion e-commerce market, currently dominated by Yahoo-owned Gmarket and eBay Inc.'s (EBAY) local unit. Aside from offering everything from shoes to flat-screen TVs and air tickets, the new site allows customers to chat with other shoppers and synchronize their PC screens allowing them to shop together. The company is aiming for more than 1 trillion won (US$1.1 billion) in transaction value in 2009. SK Telecom expects to start generating profits once transaction value reaches 1 trillion won (US$1.1 billion), helped by gains from mobile payment and advertisements. As mobile operators struggle in the saturated market, SK plans to combine its e-commerce business model with its efforts to grow in overseas markets, such as China.

• Ctrip.com International (CTRP) said quarterly net profit doubled, beating expectations because of higher bookings and pushing its share price up in after-hours trade. The company, which is benefiting a wealthier and expanding mainland middle class who is spending more on travel, said it is growing faster than its competitors. Ctrip.com confirms that its market share increased last year mainly due to such events as the Beijing Olympic Games scheduled for August and the Shanghai World Expo in 2010. For full-year, Ctrip said it expected to continue year-on-year net revenue growth of around 35 percent.

Mobile/Wireless

• China Hualu Group Co., Ltd. announced its entry into the domestic mobile phone market. The company will introduce six series of concept mobile phones in March as the first step of the strategy. China Hualu is controlled by the State-Owned Assets Supervision and Administration Commission of the State Council and mainly engages in the audiovisual, movie and IT industries. Beijing has completed the testing of the TD-SCDMA standard on the mobile phone network, edging closer to the commercial launch of the homegrown technology, industry insiders said. The field tests were carried out in 10 major cities, involving only employees of the telecommunications companies and professional users. The central government wants to showcase the TD-SCDMA standard during the Beijing Olympics since a successful trial would pave the way for the issuance of 3G licenses. The project is now in the optimization phase and afterwards, trials involving citizens will be launched. China Mobile (CHL) has spent about 25 billion yuan (US$3.5 billion) on building a TD-SCDMA trial network in eight cities: Beijing, Shanghai, Guangzhou, Shenzhen, Qinhuangdao, Xiamen, Tianjin and Shenyang.

• China Mobile and China Netcom (CN) will put their homegrown TD-SCDMA networks into operation during the Beijing Olympic Games. According to China Mobile, the company will conduct related testing after terminal acquisition and provide TD commercial services for common users in the Olympic Games period. China Netcom has not received any notification to transfer its own TD trial network to China Mobile, therefore the company will undertake the network operation independently in the period. So far, China Mobile has built TD trial networks in Beijing, Shanghai, Tianjin, Guangzhou, Shenzhen, Shenyang, Xiamen and Qinhuangdao while China Netcom has a TD network in Qingdao.

• China Mobile Ltd. foresees only a small Chinese stock market float when its planned listing finally goes ahead, according to the company’s chief executive officer Wang Jianzhou. Further according to Wang, there are a lot of procedural issues to be resolved, but China Mobile is working hard on returning to the A-share market.

• China Mobile is negotiating with overseas partners to lower its international roaming fee. China hammered out a scheme to lower the ceiling of domestic roaming fee. The scheme will be fully implemented by China’s two mobile operators, China Mobile and China Unicom (CHU) on April 1, 2008. According to the company, the reduction of domestic roaming fee will also reduce China Mobile’s revenue, but it expects that the loss will be offset by the expected increase of subscriber number and profit from data services.

Telecommunications

• China's communications industry got positive results in the first month of 2008. For the period, the industry generated a total business volume of 184.6 billion yuan (US$25.9 billion), rising 27.8 percent year-on-year, and 69.5 billion yuan (US$9.8 billion) business revenues, up 9.9 percent year-on-year, including 31.3 billion yuan (US$4.4 billion) contributed by the mobile communications networks, growing 15.2 percent. In January, the talk time of long-distance calls through fixed-line telephones reached 8.06 billion minutes in China, down 0.4 percent from the same month of 2007. But the talk time through mobile phones totaled 221.89 billion minutes, hiking 36.2 percent, in spite of the impact from the snowstorm in South China. 54.64 billion short messages were sent through mobile phones in the month, up 32.8 percent. In the month, 6.987 million telephone clients were newly added in the country, increasing the total number to 919.7 million. The number of fixed-line telephones users decreased by 1.496 million but that of mobile phone users increased by 8.483 million up to 556 million.

• CLSA noted that the Ministry of Information Industry confirmed yesterday that the China's telecom restructuring is underway. According to CLSA, restructuring has passed the first hurdle, but the process could drag on as the government is trying to create "super ministries" by combining the MII with other ministries. This is likely to require new Vice Premier Wang Qishan's approval, and CLSA expects no real change in the sector until 2009.

• China Unicom said that a reshuffle of China’s telecom industry is expected to start in the first half of this year. According to market hearsay, the company will be separated in the reshuffle to form two full-play telecom operators. China Unicom has denied rumors about the company’s plan for refinancing.

• Nokia China opens its new headquarters in Beijing. It is a six-story building that has a total floor area even larger that of its world headquarters in Finland. The new headquarters will house 2,000 research and development and management staff. The headquarters, R&D center inside and manufacturing base located in the Beijing Economic-Technological Development Area in Yizhuang, southeastern Beijing, will form the Nokia China Campus. The headquarters building started construction in May 2006 with an investment of 450 million yuan (US$60 million).

Media, Entertainment and Gaming

• SK Telecom announced that the company has signed an investment agreement with Beijing TaiheMusic Co., Ltd (TR Music) acquiring a 42.2 percent stake of the recording company. SK Telecom will participate in the management of the company as the equal majority shareholder along with Taihe Media, the current largest shareholder. Through this agreement, SK Telecom expects to create strong synergy effects with its other businesses such as mobile phone, content, and convergence services. SK Telecom and TR Music will focus on pioneering new business areas, developing capable producers, fostering young talent while striving to develop new business models for digital music contents. The Chinese music market is posting continued growth due to the broad consumer base, fast-growing digital music service, and government efforts to address the illegal market. With the advancements, SK Telecom plans to build TR Music into a major music label not only in China but also in Asia. Digital contents created by TR Music will also be offered through Viatech and UNISK, SK Telecom’s subsidiaries in China. This will help SK Telecom secure strong distribution networks in the digital contents market and create synergy with telecommunications and convergence business in the future.

• Giant Interactive Group Inc. (GA) announced that it has established cooperation with Huawei Technologies on R&D of server platforms for online games. The two companies would make joint efforts to develop next generation computing platforms to improve maintenance, customer service, and players’ overall game experience. Under the agreement, Huawei would provide high-level hardware and customized software, and Giant Interactive, which recently saw peak concurrent users of its pillar game ZT Online breaking 1.5 million, will set multiple indicators for server operation and optimization, based on its know-how of China’s online game industry. Giant Interactive has applied its self-developed advanced server engine to its new game Giant Online, which will enter into public testing soon and is expected to draw one million concurrent players. According to iResearch, Giant Interactive generated revenues of 440 million yuan (US$61.8 million) in the fourth quarter of 2007, ranking third among domestic peers, after Shanda (SNDA) and Netease (NTES).

• CDC (CHINA) aims for US$1 billion revenue within the next three years. The company believes that without that billion-dollar scale, it cannot compete with the Microsofts of the world. It claims to be currently the only Chinese software company with the global reach to achieve that. The drive to reach a competitive, world-class scale, following the ambitious path taken by the Lenovo Group (LNVGY.PK) in the computer hardware sector, is expected to help stimulate further development in the mainland software market. According to Thomson Financial, CDC's sales should grow 15.6 percent to US$426.1 million this year from US$399.7 million last year. Net profit this year is forecast to rise 6.05 per cent to US$33.1 million from US$31.3 million. From April 2002 to September last year, CDC Software made about 16 strategic corporate acquisitions including human resources and payroll management software specialist Platinum China and United States-based ERP supplier Ross Systems.

• Shanda Interactive Entertainment reported a 21.8 percent increase in fourth-quarter profit after it upgraded titles and strengthened promotions. Profit for the quarter hit US$40.1 million, as sales surged 51.8 percent to US$97.8 million from a year earlier. The company expected first-quarter revenue to grow another 6 to 9 percent to between US$103.6-106.6 million, against a consensus estimate of US$97.5 million. Active paying accounts increased 12.7 percent from the previous quarter to US$3.47 million, but the average rate dropped 3.1 percent to 57.8 yuan (US$8.12) per month. Players were drawn to Shanda's games because of the release of upgrade packs and promotions, said Citigroup.

Hardware

• Dell (DELL) recently announced that it started selling in China its Inspiron 530 and 531 desktops preinstalled with the Ubuntu 7.10 operating system. Ubuntu will provide one-year technological support for its products, while Dell will provide guidance on basic installation, startup and uninstallation. In 2007, Dell cooperated with Novell on the introduction of the Optiplex 755 and 330 desktops preinstalled with the SUSE Linux Desktop 10 operating system targeting the Chinese users.

• UTStarcom Inc. (UTSI), China’s networking solutions provider, announced that its IP Video Surveillance [IPVS] system had been selected by China Netcom to serve as the primary design and deployment platform for the latter’s Safe-City project in Benxi, Liaoning Province. Financial details of the deal were not disclosed. UTStarcom is responsible for the overall design, implementation and construction of the entire surveillance system in this project and the company would establish 700 surveillance points (cameras) throughout Benxi in the first phase of the project.

Semiconductor

• Samsung Corp. achieved a total turnover of about US$38.9 billion in the Greater China Region for the fiscal year 2007, up US$9.0 billion compared from US$29.7 billion a year ago. Samsung's turnover reaped in the region, including Mainland China, Hong Kong, Macao and Taiwan, had accounted for about 25 percent of the total it achieved overseas by the end of 2007, said the South Korean consumer electronics giant in a statement on its website. Notably, the turnover it achieved in Mainland China reached a record high of about US$10.8 billion in 2007, accounting for more than 40 percent of the total it captured in the region.

• China Securities Regulatory Commission urged Amoi Electronics to carry out corporate reform after investigating into its huge losses. In responding to the requirement of CSRC, the company says that it will close down all of its branches and subsidiaries across the country and turn some of them into representative offices in a bid to reduce operational costs. Moreover, the new management team of the company will make changes to the company structure and business models in the near future. In the third quarter of 2007, Amoi Electronics recorded net losses of 110 million yuan (US$15.5 million), in contrast to losses of 352 million yuan (US$49.5 million) for the first half of 2007. In the meanwhile, sales and gross profits of the company’s mobile phone sector had been falling significantly. Its liquid crystal display TV and mobile phone businesses were both in struggling operations during the period.

Disclaimer: IRG is not responsible for the accuracy of the news compiled within this article, which is based on publicly available information.

Comments

[windinmyface2]

Found a Chinese stock you may be interested in, Jade Art Group, JADG
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[windinmyface2]

What do you think about Stem cell research? I have stock in one company, and am waiting in hopes that the next President will allow Federal funding. I have been buying it over the past year and a half. Any thoughts on the subject?

[equal future]

WINDIMMY, try to diversify in a few stem cell companies, maybe one in europe, one in asia etc.