Tudou Gains Most in 10 Weeks as Cost Controls Boost Profit

Tudou Holdings Ltd. (TUDO), the Chinese online video site being acquired by Youku Inc. (YOKU), gained the most in 10 weeks in New York as first-quarter profit and sales beat estimates.

American depositary receipts of Shanghai-based Tudou surged 12 percent to $33.44 at the close of trading in New York, the most since Youku said on March 12 that it planned to acquire its rival video site operator in a stock deal valued at about $880 million. Tudou shares have climbed 117 percent since the deal was announced. Youku jumped 11 percent, also the biggest gain since March 12, to $22.56.

Tudou is cutting costs in preparation for its merger with Youku, said Andy Yeung, a New York-based analyst for Oppenheimer & Co. Tudou in a statement reported first-quarter sales of $22.3 million, exceeding Yeung’s estimate of $21.4 million. Tudou reported a loss of 75 cents per share on a GAAP basis compared to a $1 loss forecast by Yeung.

“Tudou saw significant improvement on net income through cost controls that were much better than expected,” Yeung said in a phone interview. “This bodes very well for the acquisition process and is good news for investors.”

Yeung has an outperform rating on Tudou.

To contact the reporter on this story: Leon Lazaroff in New York llazaroff@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at Tbarak@bloomberg.net

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