Sina’s Weibo Outlook Buoys Internet Stock Gains: China Overnight

Chinese Internet stocks climbed, led by Sina Corp. (SINA), after the company said its Twitter-like Weibo service may start contributing to sales in the second half.

Sina, owner of China’s third-most visited website, was the biggest gainer on the Bloomberg China-US 55 index of the most- traded Chinese stocks in the U.S. which added 1.7 percent, the steepest climb in seven weeks, to 108.61 yesterday in New York. Youku Inc. (YOKU), owner of China’s largest video sharing website, surged to a six-month high, while Baidu Inc. (BIDU), operator of China’s biggest search engine, advanced the most since Feb. 9.

Shanghai-based Sina has jumped 35 percent this year as Weibo users rose by about 50 million to more than 300 million in the past three months, according to Chief Executive Officer Charles Chao. Prospects the government will take further steps to preserve Chinese growth, the fastest of major economies, has helped drive a 13 percent gain in the Bloomberg China-US 55 measure in 2012. Policy makers cut the reserve ratio for banks for the second time in three months on Feb. 24.

“China’s Internet stocks, especially the bigger names like Sina and Baidu, still have lots of room for growth going forward,” Agnes Deng, a Hong Kong-based portfolio manager whose $405 million Greater China Fund invests in Chinese equities, said in an interview at Bloomberg’s headquarters in New York yesterday. “China will be able to maintain growth of more than 8 percent this year and further easing will be positive for Chinese equities.”

Shanghai-based Sina leaped 11 percent to $70.04 yesterday, the most since Jan. 27. The stock earlier surged as much as 14 percent.

‘Meaningful Monetization’

The company plans to start “meaningful monetization” of Weibo in the second half of 2012, CEO Chao said on a conference call yesterday.

“We do not expect that total monetization on Weibo will be significant this year,” he said. The company will start a Weibo-based display advertising system in the second quarter and several fee-based services beginning in the second half, Chao said.

Weibo may contribute $20 million to $30 million to Sina revenue in 2012, Andy Yeung, a New York-based analyst at Oppenheimer & Co Inc. wrote yesterday in a research note.

Sina’s net income came in at $9.3 million in the fourth quarter, from a net loss of $100 million a year earlier and a loss of $336.3 million in the previous three months, it said in a Feb. 27 statement. The company expects sales to be between $101 million and $104 million in the first quarter of 2012.

‘Valuation Levels’

Deng at the Greater China Fund said she is looking for better “valuation levels” to buy Internet stocks including Sina, after selling holdings of the company when its stock price reached $140 in April. The fund she manages has increased 18 percent this year after posting a 23 percent loss in 2011.

Sina is trading at about 76 times its estimated earnings over the next four quarters. The multiple has risen from 11 in March 2009 to a record high of 115 in September of 2011, data compiled by Bloomberg shows.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., climbed 1.5 percent to $40.29 yesterday, extending a 3.8 percent advance this month. The Standard & Poor’s 500 Index (SPX) added 0.3 percent to 1,372.18, closing above 13,000 for the first time since May 2008.

Beijing-based Youku surged 10 percent to $25.39 in New York, the highest level since Aug. 17. Youku’s competitor Tudou Holdings Ltd. (TUDO), China’s second-largest video sharing website, advanced 5.2 percent to $15.99, the most in three weeks.

Macau Revenue

Youku is scheduled to report its fourth-quarter results on March 14. Sales for the quarter probably rose 97 percent from a year earlier to 300.07 million yuan ($47.6 million), according to the average estimate of five analysts in a Bloomberg survey. That would exceed the company’s previous forecast of 297.3 million yuan.

American depositary receipts of Macau casino operator Melco Crown Entertainment Ltd. (MPEL) rose 4.3 percent to a five-month high of $12.78 in New York trading, 3.2 percent above its Hong Kong stock, the largest premium since Feb. 16. Each ADR represents three common shares. Melco’s shares traded in Hong Kong were unchanged at HK$32 yesterday, the equivalent of 4.13 per share.

Gaming revenue for the first 26 days of February in Macau, the only place in China where gambling is legal, indicates sales in the month are up about 20 percent from a year ago, Harry Curtis, an analyst at Nomura Securities International Inc., said in a client note yesterday.

Dangdang Gains

ADRs of China Southern Airlines Co. (ZNH), Asia’s biggest carrier by passenger numbers, added 2.9 percent to $24.92, the largest daily advance in three weeks. The ADRs, each representing 50 common shares, were 0.9 percent below Hong Kong stock, after trading at a premium in the previous five trading sessions. The company’s Shanghai-traded shares slid 1.1 percent to 5.42 yuan, or 86 U.S. cents per share.

E-Commerce China Dangdang Inc. (DANG), the biggest Internet-based online book retailer in China, advanced 8.9 percent to $6.84 in New York, the biggest gain in a month. Baidu, based in Beijing, rose 2.8 percent to $138.29. Renren Inc. (RENN), a Beijing-based social networking website, jumped 6.2 percent to $5.46.

Sohu.com Inc. (SOHU), which owns the third-biggest search engine, rose 3.1 percent to $50.57 while online games operator NetEase.com Inc. (NTES) climbed 4.2 percent to $53.31.

The Shanghai Composite Index (SHCOMP) rose 0.2 percent to 2,451.86 yesterday, the highest level since Nov. 17, extending gains this month to 7 percent.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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