Jim Sun of Evolution Securities China released a note to clients earlier today on Sina (ticker: SINA). Key extracts:
Rating and valuation: We are reiterating our SELL recommendation, and reducing our target price from US$20 to US$18, which represents 12.8x our FY07 EBITDA/share estimate and 14.3x our FY07 ex-cash EPS estimate. Our multiple is based on the 15.1% long-term growth rate and 0.85x PEG estimates.
1Q06 outlook lowered. The company expects 1Q06 revenue will be in the region of US$44.5m-46.5m, which is about 7% lower than our and the consensus’ previous estimates. The company projects non-GAAP net income will be between US$8.5-9.5m in 1Q06, about 30% lower than our previous estimate of US$14.1m.
Reducing our FY06 EPS estimate. Following these results, we are reducing our FY06 EPS by 18% from US$1.04 to US$0.85 to reflect the decline of wireless VAS and slower growth of online advertising business.
Uncertainty remains in both the short and long term. We anticipate that management will be re-structured, adding uncertainty for the company in the short term. Moreover, the company still doesn’t have a clear long- term strategy.