Xiaofan Zhang

China: World of Tradecraft

Greg:

Thanks for sharing your opinions!

Xiaofan

NetEase: China's Most Investor-Friendly Online Gaming Company

Thanks for your comments! Here are my thoughts:

1) NetEase was honest about the problems in Tian Xia II. This is evidenced in historical posts in Tian Xia II's official forum at tx2.netease.com.

2) If NetEase initially provides WoW PCU and ACU breakdown, and then stops doing so, then we can conclude that its level of transparency is reduced. It's too extreme to say a company "is no longer transparent."

3) Being transparent is a major part of being friendly to investors. What you said about Tencent may be true, but that does not change my conclusion on NetEase. What NetEase is doing is good for every investor, while those investor meetings held by Tencent are typically reserved for institutional investors.

4) I did not say investor friendly equals corporate governance. The topic of this article is investor friendliness, not corporate governance.


On Jul 31 07:06 AM Game wrote:

> 1) If NetEase is honest about its weakness, it would have told investors
> Tian Xian II was a crab when it was launched two years ago and it
> would not have delayed that game again and again.
> 2) If NetEase is not going to provide WoW PCU and ACU breakdown in
> the future, can we conclude that NetEase is no longer transparent?
> ?
> 3) Transparent ≠Investor friendly. Ask around how many investor meeting
> Tencent have each quarter and how this number compared with other
> Internet companies!!
> 4) One of the investment consideration is corporate governance, but
> investor friendly ≠corporate governance.

Top 10 Chinese Internet Stocks: Comparing P/E Ratios

Thanks guys for your comments!

On the topic of "high P/E means high growth and low risks", let's put it in context: The table in my article shows CTRP's growth potential is similar to that of SINA, SNDA, NTES, and lower than that of PWRD, CYOU, SOHU. But CTRP's P/E ratio is much higher than the P/Es of these six peers. The reason is: investors believe CTRP involves lower risks. In this case, CTRP's high P/E implies low risks perceived by investors.

Having said that, I admit that my original sentence "high P/E means high growth and low risks" was incorrect. It should have been "high P/E means high growth or low risk, or both".

anonemouse was correct in pointing out the potential risks involved in some high-P/E Chinese stocks. I think in this case, investors who have pushed up these stocks' valuation believe the risks are reasonable after taking into account the potential growth and returns. The market may be wrong on these stocks, but this is what the market is believing now. We may disagree with the market, and we may even be able to achieve good returns by betting against the market.

Xiaofan


On Jul 16 02:26 AM anonemouse wrote:

> Exactly Glen. The only way to mitigate the various risks is to buy
> something cheaply by whatever combination of metrics one chooses
> based on Earnings, Book, Sales, FCF etc.
>
> In regards to Alphameither's statement I do understand why people
> accept higher multiples on a stock, but I would love to see the evidence
> that a high PE implies low risk in regards to as the author put it
> the 'investment risk'.
>
> Here's another gem in regards to CTrip: "its stock chart shows something
> other Chinese internet stocks do not have: a four-year uptrend with
> very low risks ".
>
> The chart shows share price going up and the author is correlating
> this with risk? The statement implies price going up means low risk,
> i.e. the fact it has went up in the past means it is at low risk
> of dropping in future. Yeah right.
>
> I actually like CTRIP medium term prospects too but the author should
> seriously do some reading on the definition of risk and investments,
> and look beyond prices going up and high PEs.
>
> A.
>
>
>
>

The Best Times to Buy Shanda's Stock

Hi Ryan:

This article includes a table which lists some metrics about key online games in China:
seekingalpha.com/artic...


On Jul 10 04:37 PM Ryan Barnes wrote:

> You seem to be quite familiar with the company's history and offerings.
> I've been researching the company for some time, and I missed a chance
> to step in earlier this year. The multiple is now such that it will
> need to keep executing 25% + top-line growth in order to fulfill
> it.
>
> How do you view the company's competitive position? Do you have any
> data on the number of monthly users, average purchases per user,
> etc? Enjoyed the article but I'm hungry for some fundamental metrics.
>
>
> Best of luck in your investing efforts.
>
> EpiphanyOne

What's Driving NetEase's Stock Price?

Hi kagame:

Thanks for your suggestion. I have written an article on SNDA:

seekingalpha.com/artic...


On Jul 07 09:08 AM kagame wrote:

> Care to do a similar analysis on SNDA and PWRD? Thanks!

What's Driving NetEase's Stock Price?

On Jul 07 09:08 AM kagame wrote:

> Care to do a similar analysis on SNDA and PWRD? Thanks!