Asian Tech Stock Weekly Review (May 17 – 23, 2010)

by: IRG Ltd


Forval Telecom, a company focused on providing VoIP, Audio and Documentation services to the corporate sector, announced revenues of 13.9 billion yen (US$155 million) and net profit of 194 million yen (US$2.1 million) for the full year ended March 31st, 2010. The figures reflect a fall of 7.2% and increase of 46.1% respectively over the last year. The company’s operating margin fell by 11.4% to 347 million yen (US$3.8 million). For the current year, the company expects revenues of 14 billion yen (US$155.5 million) and net income of 200 million yen (US$2.2 million).
Hikari Tsushin (OTC:HKTGF), a diversified conglomerate with interests in the internet, telecommunications services and equipment industries, announced full year net income of 755 million yen (US$8.3 million) and revenues of 349.1 billion yen (US$3.8 billion). The figures compare with net loss of 1.0 billion yen (US$11 million) and revenues of 333.7 billion yen (US$3.7 billion) last year. Hikari focused on expanding its nationwide sales network and customer service capabilities during the year even as the difficult economic environment affected the purchasing capabilities of its customers. The group forecast a 6% increase in revenues and 77.5% increase in net income for the current year, based on a recovery in its main businesses.
Softbank (OTCPK:SFTBF), the internet and telecom giant, announced plans to set up an Asian joint venture with Ustream, a provider of live video services with over 100 million monthly viewers, mainly in the US The joint venture will be called Ustream Asia and will be 60% owned by Softbank subsidiary TV Bank, 32% by Ustream and 8% by U.S. venture capital firm DCM.The joint venture will offer a service that will allow users to redistribute live video captured on mobile handsets, on the internet. Ustream will first launch the service in Japan, followed by Korea, China and possibly India. Softbank had previously invested US$20 million in Ustream in January and is all set to invest another US$10 million in June. In related company news, Softbank unveiled new mobile handsets with built-in applications to access Twitter, the micro-blogging service. The move is aimed at making it easier for people to ‘tweet’ or post comments of the application through their mobile phones. Japan is a rapidly growing market for Twitter, although mobile access to the platform is currently limited mainly to iPhone (NASDAQ:AAPL) users. Incidentally, this news announcement was streamed live through UStream, its new video service.
Leading online mall operator Rakuten (OTCPK:RKUNF) announced the acquisition of Inc. in a deal worth US$250 million. The announcement is part of the company’s initiative to establish itself internationally and represents its first foray into the US market. had revenues of US$62.5 million in 2009 and a client base of 14 million for its e-commerce operations. Rakuten had recently announced a partnership with Baidu (NASDAQ:BIDU) to launch a virtual shopping market in China and is also actively scouting for opportunities in Europe and other markets. Rakuten posted net income of 56.6 billion yen (US$617.6 million) on revenues of 298 billion yen (US$3.2 billion) in 2009.
Media, Entertainment and Gaming
Leading game operator Square Enix Holdings (OTCPK:SQNXF), announced operating profit of 9.5 billion yen (US$102.4 million) on revenues of 192.3 billion yen (US$2.1 billion) for 12 months ending March 31st, 2010. Growth was primarily driven by the games and merchandising divisions, which grew by 254% and 124% respectively over the previous year.The Amusement, Publication and Mobile Phone Content divisions changed by -11.8%, +16.4% and +8.1% over last year.For the current fiscal year, the company forecast revenues of 160 billion yen (US$1.7 billion) and operating income of 20 billion yen (US$218.2 million).


Mobile/ Wireless
KT Corp. (KTC), Korea’s largest fixed-line operator, could build a high-speed LTE network in 2011 if the growth in mobile data traffic justified the investment. The company will partner with telecom equipment manufacturers Samsung (OTC:SSNLF) and LM-Ericsson (NASDAQ:ERIC) to roll-out the network. KT is the exclusive distributor of the iPhone in Korea and has witnessed a surge in data usage on its networks in recent months. The company also said that it expects its existing W-CDMA, WiFi and mobile WiMAX networks to handle existing demand for bandwidth. The company also announced plans to spin-off its property assets, having a book value of US$5.7 billion, into a separate company and transform them into a new source of revenue.
Samsung Electronics (OTC:SSNLF), the world’s largest electronics company by sales, announced a record 26,000 billion won (US$23 billion) investment plan for the current year. The proposed investment plan almost triples the company’s original budget and is higher than the combined investments of global companies like Intel, IBM and Sony. The company plans to spend 8,000 billion won (US$7 billion) on R&D, 11,000 billion won (US$9.7 billion) for the semiconductor division and 5,000 billion won (US$4.4 billion) for the LCD division. Samsung’s Chairman, Lee Kun-Hee is also expected to meet Sir Howard Stringer, Chief Executive of Sony Corp., to discuss collaborations in development of LCD panels and 3D television sets. The company is also planning to release a new range of smartphones based on its proprietary operating platform Bada. Samsung hopes to emulate the success of Apple and RIM in creating an ecosystem of customers and developers so that it can build new revenue sources from its own Samsung applications store and also create synergies with its other businesses. In related news, Samsung Display, the world’s largest manufacturer of high-end screens for mobile devices, announced an investment plan of 2.5 trillion won (US$2.1 billion) in the next two years, to build the world’s largest production line of ultra-bright LED screens. The company believes that demand for high-end mobile displays is so strong that it might fail to fulfill customer requests even after expending its capacity seven fold by next year. Samsung Display is an equal joint venture between Samsung Electronics and Samsung SDI.
Mobile/ Wireless
China Telecom (NYSE:CHA), the smallest of the three mobile operators in China, announced a partnership with RIM (RIMM), to offer BlackBerry services over its EVDO 3G network. The move is the company’s attempt to catch up with its larger rivals in the smartphone market. China Mobile (NYSE:CHL) already has a similar partnership with RIM, while China Unicom has an exclusive arrangement with Apple to distribute the iPhone. China Telecom entered the mobile business in 2009 after a government initiated restructuring in China’s telecom sector. The company already has about 56 million mobile subscribers and is planning to spend more than 10 billion yuan (US$1.5 billion) on handset subsidies in 2010, to aggressively expand its subscriber base further.
China Mobile (CHL), China’s largest mobile services company, requested for bids to build the third phase of its 3G mobile network, based on its proprietary TD-SCDMA standard. The company spent US$21 billion in 2009 building the network, following the awarding of licenses by the government. The bulk of the contracts last year had gone to local telecom equipment manufacturers Huawei and ZTE. Ericsson, which is the world’s largest maker of telecom gear, also won small contracts worth about US$1 billion from the company representing about 5% of total expenditure. Ericsson said that it was hopeful of maintaining its share of the current year’s expenditure also. China Mobile faced some difficulties with its chosen 3G technology due to the lack of networking equipment and cell phones available to support the standard. However, the TD-SCDMA’s 4G successor, called TD-LTE already being tested by the company in Shanghai, is closer to other globally accepted standards and might find supporting services and infrastructure more easily.
A survey by China Market Research Group revealed that potential buyers of the iPhone were staying away because of Apple’s (AAPL)association with China Unicom (NYSE:CHU), and that the poor brand image of Unicom represented a barrier to purchase in consumers’ minds. The study interviewed 2000 consumers between the ages of 22 and 32 and found that while the iPhone was highly desired, less than 10% were customers of Unicom. Most respondents believed that China Mobile had a more stable network and offered better service. In China, iPhones purchased in the grey market can be used on China Mobile’s EDGE network and many customers use this option to access China Mobile’s cheaper 2G plans, rather than China Unicom’s 3G plans, which are much more expensive.
China wireless value added services provider Linktone Ltd. reported GAAP net income of US$0.1 million compared to US$0.3 million last year. Gross revenues for the first quarter increased to US$19.0 million from US$14.8 million for the same period last year. The company anticipates gross revenues to be in the range of US$13 - US$14 million.
China’s State Council, the highest government body, issued an opinion paper calling for private investment in China’s telecommunications and related infrastructure sectors, with the clause that the investment be restricted to equity participation only. This is the first time ever that the Chinese government has even considered allowing private investment in the sector, which has, until now, been restricted to state-owned players. The government body also advocated that private investment be allowed in related industries such as telecom value-added services, content creation, applications and intelligent network services.
The Beijing Consumers’ Association, an influential consumer group in China, asked the country’s fixed-line operators in the country to cut monthly landline rental charges by at least 50%. The association further argued that new technology and greater scale have brought costs down dramatically, while rentals continue to remain at the same levels. The highest number of complaints that the association received in 2009 pertained to fixed-line charges, although companies like China Telecom charge only about 21.6 yuan (US$3.2) per month as rental fee.
Media, Entertainment and Gaming
Leading online media and mobile value-added services operator Sina Corp. (NASDAQ:SINA) expects revenues of US$90 - US$93 million for the current quarter, on the back of a rapidly recovering internet advertising market. For the first quarter of 2010,the company announced non-GAAP net revenues of US$80.3 million, higher than the company’s own guidance of US$78.0 million and up 19% year-on-year. Non-GAAP net income stood at US$22.3 million, up 66% over the corresponding period last year. Growth was primarily driven by the company’s online advertising business, which grew 47% YOY after adjusting the results of the company’s real-estate online advertising business. The mobile value-added services business remained flat, mainly due to billing restrictions imposed by Chinese mobile companies on content providers since late last year, in a bid to crack down on pornography on the internet. Sina competes with Tencent (OTCPK:TCTZF) and Sohu (NASDAQ:SOHU) and is the market leader in the portal advertising business in China. (NASDAQ:NTES), China’s third largest online game operator, announced first quarter net profit of 452.3 million yuan (US$66.2 million), an increase of 8.5% YOY and revenues of 1.2 billion yuan (US$175.7 million), an increase of 51%. Growth for the quarter was primarily driven by a surge in advertising and online gaming revenues although the company failed to match analysts’ revenue expectations of US$187 million. NetEase is reportedly scouting for acquisition opportunities to beef up market share of its online search service Youdao, for which the company could draw from its reserves of 7.7 billion yuan (US$1.1 billion). Youdao is currently competing with platforms like Sogou and Soso from rival companies Sohu and Tencent respectively to take second place behind market leader Baidu after Google decided to run its China operations from its Hong Kong site. As of December 2009, Sogou, Soso and Youdao had market shares of 1%, 0.7% and 0.4% respectively in the online search business in China.
Game operator Dokomo Network Technology (DKM Game) announced the acquisition of online game developer Perfect Storm Network Technology. The deal is reportedly worth 60 million yuan (US$8.8 million) and is expected to be closed by the end of June, 2010. Perfect Storm is expected to complete development of its 2D fantasy MMORPG ‘Yanhuang Online’ soon, and will continue other existing projects at DKM Game after the acquisition.
Online gaming company Perfect World (NASDAQ:PWRD) posted net income of 305.2 million yuan (US$44.7 million) and revenues of 625 million yuan (US$91.5 million) for the first quarter of 2010. Net income grew by 12.7% sequentially and 41.6% YOY, while revenues grew by 2.8% sequentially and 40% annually. The company’s average concurrent user base fell by 14.2% over the previous quarter to 993,000, while active paying customers dropped by 23.7% to 1.67 million. Perfect World, however, attributed the decline not to lower demand, but to technical complications and the company’s own stringent anti-cheating stance.
Out-of-home advertising solutions provider Focus Media (NASDAQ:FMCN) announced net loss of US$954,000 and revenues of US$124.9 million for the first three months of 2010. The figures compare with net loss of US$5.7 million YOY and net loss of US$53 million on a sequential basis. The company’s revenues for the last quarter were US$144.3 million and US$104.7 million last year. Focus Media’s LCD advertising business contributed 44.3% to total revenues, while poster frame and internet advertising contributed 22% and 23.5% respectively. For the current quarter, the company expects revenues to be about US$142 million, with the LCD and poster frame divisions bringing in almost US$99 million.
Online game operator Giant Interactive (NYSE:GA) reported first quarter net income of 185.5 million yuan (US$27.1 million), down 20% YOY and 6.3% over the previous quarter, and revenues of 304.4 million yuan (US$44.5 million), down 18.5% year-on-year but up 10.3% sequentially. Average concurrent users for online games stood at 588,000 an increase of 21% over the last quarter, while active paying accounts stood at 1.37 million, up 20.6% over the last quarter. The company’s average revenues per user, however, dropped 8.5% to 220 yuan (US$32.2)., an online video site, announced plans to set up a joint venture with China Digital TV Holdings to offer IPTV services in the mainland from June, 2010. Openv had previously received an investment of US$14.5 million from China Digital in January. Only three state-run companies, CNTV, Shanghai Media Group and WASU Media Group have managed to procure government IPTV licenses till date, in China.
Zynga, a developer of social games in the US, announced its entry into Asia with the acquisition of XPD Media, a social gaming company in Beijing. The terms of the deal were left undisclosed. Zynga, which operates Farmville and Mafia Wars on platforms like Facebook, MySpace and the iPhone, has more than 230 million active monthly users. The company also recently announced a five-year strategic partnership with Facebook to develop more social games. Late last year, Zynga also announced that it had sold about US$180 million of company securities to Russia’s Digital Sky Technologies. XPD Media, backed by True Ventures and Pilot Group was founded in early 2008 and has over 40 employees.
Tencent Holdings (OTCPK:TCTZF) is reportedly scouting for potential acquisitions in the internet and gaming industries in countries like Brazil, Russia and India, apart from South-East Asia, to establish itself a global internet giant like Google. The group, armed with cash of US$1 billion and market capitalization higher than that of eBay (NASDAQ:EBAY) and Yahoo (YHOO), hopes to capitalize on its popularity in the cut-throat internet chat and gaming space in China, and generate a significant part of its revenues from international operations in the future. Tencent already owns a 10% stake in Russia’s Digital Sky Technologies and minority stakes in Vietnam’s VinaGame and MIH India, which owns a networking platform called ibibo.
eLong (NASDAQ:LONG), an online travel services provider, posted net income of 5.9 million yuan (US$861,000) on gross revenues of 107.5 million yuan (US$15.7 million). The figures reflect an increase of 197% and 30% over the corresponding period of last year. The company’s revenues from hotel bookings went up by 23%, while revenues from air ticketing increase by 38% year-on-year. The company expects net revenues to be between 102 million yuan (US$14.9 million) and 111 million yuan (US$16.2 million) for the current quarter.
Global Sources’ (GLSL.PK) first-quarter profit more than doubled on widened margins while revenue dipped slightly due to continuing soft demand. The company reportednet income of US$2.6 million compared with US$1.2 million in the same quarter last year. First-quarter profit more than doubled on widened margins while revenue dipped slightly due to continuing soft demand. Excluding special items, the company earned US$3.3 million Revenue fell by 2.5 percent to US$33.9 million from US$34.8 million. The company said it expects to post second-quarter revenue of US$57 - $57.5 million. Global Sources also announced that it is planning to repurchase 6.67 million shares, or about 15 percent of its common stock outstanding, for US$9 per share in cash. The tender offer of up to $60 million is expected to be made before the end of June and should be completed by the end of July. The purchase price is a 32 percent premium over the company's closing share price on Tuesday. Directors and officers of Global Sources, who collectively own about 48 percent of outstanding shares, can be expected to sell shares. The company also said its chief financial officer is resigning. Global Sources is a business information provider, whose core business is to facilitate trade from Greater China to the world through marketing Web sites and trade shows in China.
Neelie Kroes, the vice-president of the European Commission, said that the Chinese internet firewall is a violation of WTO regulations and that it constituted a trade barrier. Neelie argued that the firewall blocked communication for internet users and prevented the free flow of information. The vice-president spoke at the China headquarters of video-sharing company Tudou, considered to be a rival to Google’s (NASDAQ:GOOG) YouTube, which is banned in China. Tudou adheres to the government’s censorship rules and claims to delete almost 100,000 video every month involving pornography and politics. Neelie said that the issue of Chinese internet firewalls should be considered by the WTO as a free trade violation and dealt with accordingly. The US government had also previously considered taking China’s restrictions to the WTO.
Alternative Energy
Jinko Solar (NYSE:JKS), a vertically integrated solar product manufacturer, raised US$64 million through a successful IPO of 5.4 million American Depositary Shares (ADS) at US$11 per share. The company had originally planned to raise US$85 million by issuing 10.6 million shares in the range of US$6 – 8 per share, but decided later to reduce the size of the offering.
Disclosure: No positions