AutoNavi Gains on Profit as Lawsuit Sinks Ambow: China Overnight

Chinese stocks traded in New York rose for a second day after AutoNavi Holdings Ltd. (AMAP) rallied on better-than-estimated earnings. Ambow Education Holding Ltd. (AMBO) plunged as investors pursued a lawsuit against the company.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. added 0.8 percent to 93.8 yesterday. AutoNavi, a Chinese digital map content provider, gained the most in five weeks after fourth-quarter net income surged 23 percent. Spreadtrum Communications Inc. (SPRD) rallied as Yanzhou Coal Mining Co. traded at the biggest premium to its Hong Kong shares since Jan. 2. Ambow tumbled to a record low as investors filed a class action against the company.

The China-US gauge followed stocks in Shanghai higher as speculation grew the government will take steps to bolster local markets and as better-than-estimated U.S. housing data and rising durable goods orders bolstered confidence in the world’s largest economy. The 22 companies on the China-US gauge that reported since mid-January earned on average more than double what analysts forecast, while their results fell below projections by a mean 8.6 percent three months ago, data compiled by Bloomberg show.

“We’re going to see earnings grow again after 18 to 24 months of flat earnings, which helps create tailwinds for Chinese stocks,” Eric Brock, who helps manage $3.8 billion as a portfolio manager at Clough Capital Partners, said by phone yesterday from Boston. “The general recovery trend in the Chinese economy continues, and we look at China as being on a sweet spot now. U.S. data continue to come in strong.”

ETF Advances

The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., climbed 0.9 percent to $38.47. The Standard & Poor’s 500 Index (SPX) rallied 1.3 percent to 1,515.99.

AutoNavi’s American depositary receipts added 2.6 percent to $10.64, gaining the most since Jan. 22 and trimming its 2013 decline to 6.2 percent.

The provider of Chinese map content to companies from Apple Inc. to Sina Corp. reported fourth-quarter profit of $8.7 million, according to a statement yesterday from the Beijing- based company. Net income beat the $6.4 million average estimate of two analysts surveyed by Bloomberg. Revenue jumped 26 percent to $43.6 million. AutoNavi said it expects 2013 revenue to grow as much as 10 percent to $176 million.

AutoNavi had a total 98 million users of its free mobile map application by the end of 2012, up from 40 million a year earlier, it said. Its monthly active users of more than 49 million last year compared with over 20 million in 2011.

Spreadtrum’s Earnings

Spreadtrum, a Shanghai-based mobile chipmaker, surged 5.2 percent to $16.53, the highest close since Feb. 5.

The company said Feb. 26 first-quarter revenue will range from $180 million to $186 million, beating the $179.9 million mean estimate of eight analysts compiled by Bloomberg. Fourth- quarter adjusted profit of $31.2 million was higher than the $29.7 million average projection of three analysts and revenue of $203.1 million also beat the $195.5 million mean estimate.

“Smartphones are driving better than seasonal first quarter,” Randy Abrams, a Taiwan-based analyst at Credit Suisse Group AG, who rates Spreadtrum the equivalent of buy, wrote in a note yesterday. “The stock is reasonable with valuations remaining low and smartphones ramping up with strength.”

Semiconductor Manufacturing International Corp. (SMI), a chip foundry also based in Shanghai, soared 5.9 percent to $2.71, the steepest rally in three weeks. Its ADRs traded 0.1 percent above shares in Hong Kong, the first premium since Feb. 18.

Ambow, a private tutoring company based in Beijing, tumbled 17 percent to $1.30, the lowest close on record. The drop, the biggest since September, has extended this year’s loss to 42 percent.

‘Fake Acquisition’

Ambow was sued by a group of investors including Byron Brown, who are seeking unspecified damages and legal fees on behalf of U.S. purchasers of Beijing-based Ambow’s ADRs in connection with the its initial public offering on Aug. 5, 2010, according to an amended complaint filed Feb. 19 in federal court in Los Angeles.

Ambow, which runs elementary, middle and high schools, as well as colleges and career centers, wrongly said it had acquired Changsha Study School in 2008, while it actually paid “to borrow this school’s name and revenue for the IPO,” the plaintiffs alleged. Mandy Li, a spokeswoman for Ambow in Beijing, didn’t immediately respond yesterday to an e-mail seeking comment on the amended complaint.

Yanzhou Gains

Yanzhou Coal Mining Co. (YZC), China’s fourth-largest coal miner, climbed 3.1 percent to $15.20 yesterday, increasing the most since Jan. 2. Its ADRs, each representing 10 underlying shares, traded 2.5 percent above its Hong Kong shares.

The Shandong province-based company’s unit Yancoal Australia Ltd. (YAL) posted net income of A$404.6 million ($414 million) in 2012, from A$301.5 million in the previous year, Yanzhou Coal said in a filing yesterday.

The Hang Seng China Enterprises Index (HSCEI) advanced 0.4 percent to 11,144.34, rebounding from a two-month low, while the Shanghai Composite Index of domestic Chinese shares gained 0.9 percent to 2,313.22, the most in three weeks.

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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