Online Game Stocks Boost New York Index on Cash Coffers: China Overnight
Tudou Holdings Ltd. surged the most ever in New York, driving an index of U.S.-traded Chinese stocks to a seventh weekly gain, after the company announced an improved video platform with Weibo, a Twitter-like service with 250 million users.
Online game developers Shanda Games Ltd. (GAME) and Perfect World Co. also climbed as their high cash levels and cheapness compared with U.S. peers spurred analysts to upgrade their stock. The Bloomberg China-US 55 Index of the most-traded Chinese shares in the U.S. advanced 0.8 percent to a five-month high of 106.48 on Feb. 3, rising 2.3 percent in the week.
Shanghai-based Tudou has built an “enhanced” platform for users of Sina Corp.’s Weibo short-message social network to share their videos, the company said on Feb. 3. The improved service, which ensures Weibo users automatically become registered Tudou users, will boost traffic for China’s second- largest video website, said Echo He, a senior analyst at Maxim Group LLC in New York.
The deal “is extremely positive for Tudou and could really boost Tudou’s numbers,” said Kevin Pollack, a fund manager at Paragon Capital LP in New York, which invests in U.S.-listed Chinese stocks. “Investors are recognizing that there are some very attractive opportunities in the online gaming companies given their low valuation levels and sizable amounts of cash.”
After tumbling as much as 56 percent last year amid fraud allegations against Chinese companies, game developers trade at less than five times their estimated cash flow for 2012, compared with 15.5 for Electronic Arts Inc., the second-largest U.S. video-game publisher.
ETF at Six-Month High
American depositary receipts of Tudou surged 16 percent to $16.26 on Feb. 3, the most since its initial public offering in August, and were up 22 percent last week. Users of Sina’s Weibo service post about 86 million messages per day on average, Tudou said in a statement. Sina fell 0.4 percent to $75 in New York, paring its weekly advance to 7.2 percent.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., climbed 1.4 percent on Feb. 3 to a six-month high of $40.49. It advanced 2.2 percent last week, extending a five-week rally.
The Shanghai Composite Index rose 0.8 percent on Feb. 3 to an eight-week high of 2,330.405, climbing for a third trading week.
ADRs of Shanghai-based Shanda jumped 8.3 percent to $3.93 on Feb. 3, the biggest jump since Nov. 28. Shanda’s stock trades at 4.5 times its estimated cash flow for 2012, according to data compiled by Bloomberg, while the multiple is 3.4 for Perfect World, a Beijing-based online game developer.
Perfect World advanced 6.1 percent to $12.20, the highest level since Nov. 18. Jialong Shi, a Hong Kong-based analyst at CLSA, upgraded Perfect World to “outperform” from “underperform,” while lowering its 12-month price target to $12.50 from $13 on Feb. 3.
“These online gaming stocks are a good bargain for investors and the rally will continue this year,” said Andy Yeung, a New York-based analyst at Oppenheimer & Co Inc.
Changyou.com Ltd. (CYOU), the online-game unit of Chinese Internet portal operator Sohu.com Inc. (SOHU), advanced 5.3 percent to $29.09, the highest level since October. Changyou trades at 5.5 times estimated cash flow for 2012.
Fourth-quarter sales rose 36 percent to $124.4 million, according to the average estimate of 10 analysts surveyed by Bloomberg before Changyou.com reports results today. The company is forecasting $123.5 million. Sohu.com is also due to report fourth-quarter earnings today.
China Southern Airlines Co Ltd., Asia’s biggest air carrier by passenger numbers, jumped 5 percent to $27.09, the biggest one-day advance since Jan. 10, after entering into a partnership with Expedia Inc. to offer tickets through the online travel agency.
Expedia, based in Bellevue, Washington, will offer China Southern fares and inventory on its websites in North America, Europe and Asia, the company said in a statement on Feb. 3. The offerings will be also available on discount travel site Hotwire Inc. and on China’s Elong Inc., whose biggest shareholder is Expedia, according to the statement.
ADRs of China Southern, which each represent 50 common shares in the Guangzhou-based company, traded 2.5 percent higher than the company’s shares in Hong Kong, which climbed 3 percent to HK$4.10, the equivalent of 53 U.S. cents. The premium was the biggest since Jan. 10.
The Standard & Poor’s 500 Index advanced 1.5 percent to 1,344.90 on Feb. 3, extending its best start to a year since 1989, after a report showed that the U.S. jobless rate fell to 8.3 percent, the lowest level in three years.
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