The Perfect Time To Invest In Perfect World [View article]
The share prices of the China game companies, PWRD, CYOU and GA, are super cheap. PWRD is by far the cheapest. My worry is that for whatever reason, there are fewer active pay accounts (fewer serious players) for the MORPGs. It seems that this downward trend has been there for a while. I don't play any kind of online games. May be you can shed some light here.
The Perfect Time To Invest In Perfect World [View article]
Well, the following is from the Q&A section of the Q1 2012 presentation. I don't think Mr. Lau answered the question regarding the increase in loans.
Operator
Thank you for your questions. Next question comes from the line of Adam Krejcik from Roth Partners. Please ask your question.
Adam Krejcik – Roth Capital Partners
Yeah, hi there. First, on your balance sheet, your short-term bank loan doubled this quarter, so, just wondering why you feel the need to increase your amount of debt when you have a pretty significant amount of cash. And then also, related to that, is your buyback still effective, the RMB100 million buyback, is that still in place? Are you buying any shares? And hence, the Board consider paying an annual dividend as well as a special dividend [that was just had]? Thank you.
Kelvin Lau
Thank you, Adam. In policy, the short-term investment representing I think the short-term fixed deposit, we put that cash in the bank. So I think in Q1 we put some of our cash in the safe deposit. So, this is the major reason for the increase in the short-term investment. The short-term investment merely represents for the fixed deposits, number one.
Number two is regarding the share buyback, we don’t have any share buyback plan approved by the Board, but I think we will see -- I think consider the share buyback program going forward.
Regarding the dividend, I think I mentioned in the last earnings call that we paid out a special dividend in April 2012 this year. We adopt a dividend policy in that going forward we will have a regular annual dividend paying to our shareholders. However, when to pay and how much to pay is still subject to the Board approval on an annual basis.
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Kevin, Do you know the reason that game companies such as GA, PWRD and CYOU are expericing slower revenue growth? And the analysts are projecting no EPS growth for fiscal 2012 also. Is the sector matured in China or kids simply moved on to simple games on iPad?
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I am not sure the $8/share in cash is significant if you look at account payable and short + long term debts. If you net out everything against cash, short tem investment and receivable, you can see the cash doesn't belong to the shareholders.
On the other hand, the valuation is really cheap based on FCF/market valuation. Cash return of 20% is quite a bargain.
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The borrowing cost has gone up recently. This is from today's WSJ:
The spread between the yields of junk bonds and U.S. Treasurys has ballooned in recent months as the government bonds rallied even as high-yield debt sank. The spread on the Barclays Capital High Yield Index over Treasurys widened to 7.66 percentage points this week—the highest since November 2009—from 5.87 percentage points at the end of July.
Moreover, privet equity firms have postponed IPOs of their holdings due to poor market performance.
Interesting. Johnz, do you think Zongpin may have mixed some supermarket counter locations in the retial store list? Because #170 and #171 look to me are supermarket counters. Has Zhongpin ever provided a list of supermarket counters locations? They are suppose to have more than 2000 of these locations.
I found a couple things pretty strange. First, the store list does not give you the exact street address for any of the 1200 stores. The information gives only general locations.
Second, if you google zhongping frozen pork in Chinese (which is the store name), you will find only limited information. If they have a franchise network, I would imagine the franchisees would want to post more photos and infromation on the web.
Third, a large part of the inflation in China is related to the pork prices, according to the government. On a slide in Zhongping's presentation, it seems that gross margin has been improving lately. That means they could pass all the inflation to the cunsumers by raisig prices. Why is the pork price in China so inelasitc? And where is the government price control on consumer products?
I don't have either long or short position on HOGS.
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What do you think about CYOU and its products? How does PWRD compare to CYOU?
The Perfect Time To Invest In Perfect World [View article]
The Perfect Time To Invest In Perfect World [View article]
Operator
Thank you for your questions. Next question comes from the line of Adam Krejcik from Roth Partners. Please ask your question.
Adam Krejcik – Roth Capital Partners
Yeah, hi there. First, on your balance sheet, your short-term bank loan doubled this quarter, so, just wondering why you feel the need to increase your amount of debt when you have a pretty significant amount of cash. And then also, related to that, is your buyback still effective, the RMB100 million buyback, is that still in place? Are you buying any shares? And hence, the Board consider paying an annual dividend as well as a special dividend [that was just had]? Thank you.
Kelvin Lau
Thank you, Adam. In policy, the short-term investment representing I think the short-term fixed deposit, we put that cash in the bank. So I think in Q1 we put some of our cash in the safe deposit. So, this is the major reason for the increase in the short-term investment. The short-term investment merely represents for the fixed deposits, number one.
Number two is regarding the share buyback, we don’t have any share buyback plan approved by the Board, but I think we will see -- I think consider the share buyback program going forward.
Regarding the dividend, I think I mentioned in the last earnings call that we paid out a special dividend in April 2012 this year. We adopt a dividend policy in that going forward we will have a regular annual dividend paying to our shareholders. However, when to pay and how much to pay is still subject to the Board approval on an annual basis.
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The Perfect Time To Invest In Perfect World [View article]
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Do you know the reason that game companies such as GA, PWRD and CYOU are expericing slower revenue growth? And the analysts are projecting no EPS growth for fiscal 2012 also. Is the sector matured in China or kids simply moved on to simple games on iPad?
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On the other hand, the valuation is really cheap based on FCF/market valuation. Cash return of 20% is quite a bargain.
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The spread between the yields of junk bonds and U.S. Treasurys has ballooned in recent months as the government bonds rallied even as high-yield debt sank. The spread on the Barclays Capital High Yield Index over Treasurys widened to 7.66 percentage points this week—the highest since November 2009—from 5.87 percentage points at the end of July.
Moreover, privet equity firms have postponed IPOs of their holdings due to poor market performance.
I have found the hogs [View instapost]
Johnz, do you think Zongpin may have mixed some supermarket counter locations in the retial store list? Because #170 and #171 look to me are supermarket counters.
Has Zhongpin ever provided a list of supermarket counters locations? They are suppose to have more than 2000 of these locations.
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First, the store list does not give you the exact street address for any of the 1200 stores. The information gives only general locations.
Second, if you google zhongping frozen pork in Chinese (which is the store name), you will find only limited information. If they have a franchise network, I would imagine the franchisees would want to post more photos and infromation on the web.
Third, a large part of the inflation in China is related to the pork prices, according to the government. On a slide in Zhongping's presentation, it seems that gross margin has been improving lately. That means they could pass all the inflation to the cunsumers by raisig prices. Why is the pork price in China so inelasitc? And where is the government price control on consumer products?
I don't have either long or short position on HOGS.
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