Sina Leads Rally on Alibaba Deal as Youku Gains: China OvernightBelinda Cao
Chinese stocks traded in New York rose, led by Sina Corp., which jumped the most in eight months after agreeing to sell a stake in its Weibo service to Alibaba Group Holding Ltd. as part of an e-commerce alliance.
The Bloomberg China-US Equity Index of the most-traded Chinese equities in the U.S. climbed 1.1 percent to 92.15 in New York, after posting the biggest five-day gain in three months last week. Sina surged the most since August, while Youku Tudou Inc., owner of China’s biggest video websites, advanced to a two-month high as Chairman Victor Koo said viewership on mobile devices surged. LDK Solar Co. jumped 7.1 percent after selling more shares to an existing investor.
Sina, whose Twitter-like Weibo.com service had 503 million registered accounts by the end of 2012, said Alibaba, China’s largest e-commerce company, will pay $586 million for about 18 percent of Weibo with an option to increase the stake to 30 percent, according to a statement issued yesterday. Chinese Internet companies including search-engine owner Baidu Inc. are seeking to diversify amid a slowdown in online advertising.
“This is absolutely good news for Sina, as the deal values Weibo more than the highest estimates on Wall Street,” Henry Guo, an analyst at research firm ABR Investment Strategy LLC, which focuses on technology and media companies, said by phone from San Francisco. “Alibaba’s investment in Sina helps find a way for the social media company to translate their large traffic into income, a step forward in the Internet space.”
The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., advanced 1.3 percent to $37.42 in New York, the highest price in a month. The Standard & Poor’s 500 Index added 0.7 percent to a record high of 1,593.61 as pending sales of U.S. homes climbed.
The Bloomberg China-US measure fell less than 0.1 percent this month, after retreating 1.9 percent in March and 6.2 percent in February.
Sina’s shares surged 9.4 percent to $55.03 in New York, after earlier soaring as much as 21 percent to $60.81. Sina has rallied 10 percent this year, compared with a 7.1 percent drop in the Bloomberg China-US gauge.
Based on the Alibaba deal, 86Research Ltd. valued Sina’s portal business, Weibo and cash at $5.2 billion, or $78 per share, according to a note dated yesterday.
Sina and Alibaba, the Hangzhou, China-based company that runs the Taobao online shopping platform and Alipay Internet payments, will cooperate in areas including user account connectivity, data exchange, online payment and online marketing, according to yesterday’s statement.
“The cooperation between China’s biggest e-commerce company and the biggest social media provides big room for imagination,” Tian X. Hou, founder of T. H. Capital LLC, which compiles research on U.S.-traded Chinese companies, said by phone in New York. “The companies’ resources are unique each in their own areas and their integration is beneficial to both.”
The acquisition price for the stake in Weibo indicates Sina shares could rise to as high as $90, Hou said.
Piper Jaffray & Co. analysts led by Gene Munster raised their price target for Sina to $75 from $65 in a report dated yesterday, citing cash Sina received from the transaction and prospects Weibo’s value will continue to increase.
The deal “represents a meaningful turn in the monetization of Weibo,” according to the Piper Jaffray note.
Youku Tudou, based in Beijing, rallied 6.2 percent to $20.09 in U.S. trading, the steepest advance since Feb. 14.
The company’s viewership on mobile applications for smartphones and tablets such as Apple Inc.’s iPad was 50 percent higher this month than at the end of last year, Chairman and Chief Executive Officer Koo, said in an interview in Beijing April 27. Youku bought rival Tudou Holdings Ltd. last year to reduce costs on content and bandwidth.
Youku Tudou, which hasn’t been profitable since it listed on the New York Stock Exchange in 2010, is on a “clear path to profitability,” Koo said.
LDK Solar, a Xinyu, China-based solar manufacturer that has $2.8 billion of debt, jumped 7.1 percent to $1.35 in New York, the highest close since March 15.
The company agreed to sell more shares to Cheng Kin Ming’s Fulai Investments Ltd., which will boost his stake in LDK to 25 percent, according to an LDK statement April 26. LDK will issue 25 million new shares at $1.03 each to Fulai, which also has the right to choose two non-executive directors.
Yingli Green Energy Holding Co., another solar maker, climbed 5 percent to $2.51, extending a five-day rally. Trina Solar Ltd. gained 7.6 percent to a two-month high of $5.21.
China Eastern Airlines Corp., the nation’s second-largest carrier, fell 2.1 percent to a two-week low of $20.42 in New York. The American depositary receipts traded at a premium of
2.3 percent over the airline’s Hong Kong shares, the most since March 15, data compiled by Bloomberg show.
The company’s stock was cut to neutral, the equivalent of hold, from outperform by CIMB Group Holdings Bhd. analyst Andrew Orchard.
Stock exchanges on mainland China were closed for a public holiday and trading will resume May 2. The Shanghai Composite Index of domestic Chinese shares slumped 3 percent last week to 2,177.91, the lowest level since Dec. 24. The Hang Seng China Enterprises Index in Hong Kong dropped 0.4 percent to 10,785.58 yesterday after a three-day advance.