Binbin Zhang's  Instablog

Sina corporation (SINA) as one of the largest internet companies in China has been traded down in the stock market for a while. Regarding its current stock price and the market environment, we believe SINA is undervalued and has solid upside potentials.

1. Sina Weibo

Sina issued the Enterprise-Weibo-2.0 system very recently. The system features five modules including the new Message Center, Data Center, Learning Center, My Applications (Open API) and Official Customer Services, which are strongly favored by the marketers. According to Sina CEO Charles Chao, Sina Weibo is hoping to boost enterprise accounts to 1 million at the end of this year.

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So far, there are almost 330,000,000 registered Weibo users in total. Among them, more than 140,000,000 users following enterprise accounts with the number of enterprise accounts followed by each active user distributed as (provided bySojump):

So, Weibo is a pretty attractive new marketing platform for most of the companies in China. The Ad prices on this platform are as follows (by TechRice)

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which are in the reasonable ranges compared to the traditional internet ads. Therefore, we could expect Weibo to cash in social ads very soon.

2. Sina Games

Marked as one of the biggest events in Sina's history, Sina officially launched its game center and announced the acquisition of the dealership of a new 3D webpage game <ShouHunZhiShen>. This is the first time Sina exposed itself to the growing online game business in China. The operation manager Yuli Liu said that Sina has been waiting and preparing for a long time to step in this field. Although it is a new business for Sina, it will never be late to take off at this moment. Since Sina will continue to look for the best and creative games different from the ones operated by competitors, Liu said that those games would finally become successful and get enough markets shares in China.

3. Investment

Although Sina lost money in Mecox Lane Limited (MCOX), the investment in Tudou finally paid off. In 2011, Sina spent $66.4M to acquire 9.05% shares of Tudou Holdings Limited (TUDO) with average $25.86/ADR, which is now been bought by Youku Inc. (YOKU) in a all-stock deal. The current market price for Tudou is $35.30/ADR, which means it will bring more than $20M profits to Sina at this moment. Other investments including 60 new micro-movies with LeTV (an interactive platform for entertainment databases, providing movies, animations, news and lifestyle information etc.), $30M in JuLeWang (China's largest video chat site) seem to be great deals and will generate profits to Sina, too.

4. Censorship

Although the threat of real-name regulation on Weibo has been mentioned with Sina's annual report to U.S. Securities and Exchange Commission, the "Sina Weibo Community Convention (beta)" as well as a new set of other guidelines has been introduced to promote self-regulations among users themselves recently. This is obviously a wise move to compromise between government regulation and user experience. To possess more control of groundless rumor spreading and fake accounts, Weibo will issue 80 credit points to each user. The points of credit will change according to the performance of each user, and as long as the credit point is deducted to 0 due to out-of-line behaviors, Weibo will shut the related account down. Therefore, we believe that all those Weibo new polices would finally gain government's favor and Weibo can finally avoid any potential crackdown threat from government censorship.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SINA over the next 72 hours.