Holy Dividend Batman! PWRD finally set to turn the corner!
March 15, 2012
– Comments (9) |
RELATED TICKERS: PWRD
I bought Perfect World (PWRD), the Chinese MMPORG gaming company back in 2009 on the recomendation of Motley Fool Rule Breakers. Rule Breakers sold as the company's earnings cratered, but I stubornly held on and kept buying more as the valuation of the company got better and better.
In case you still own it, you should know they just (finally!) reported a blockbuster quarter.
Earnings Release:
Get full details at: http://www.pwrd.com/html/en/pdf/12_03_en_final.pdf
My take
They grew earnings by double digits year/year (around 21%). The Price/Earnings Ratio yesterday was around 5. I think the p/e should be closer to 15-20, which puts my price target in the range of $45-60.
Of course, I've been wrong on this stock since 2009, but I am stubborn and think I will be proven correct in the long run.
Guidance for Q1-2012 isn't insprining. The company reported RMB 721 for Q1-2011. The guidance is for RMB 714-753. Basicly flat. This type of news would usually depress a stock, but when you are coming off of a P/E of 5, the stock is going to soar. I bet we will see $20/share in no time flat!
Big News:
"As the Company continues to generate strong free cash flow from its healthy operations, the Company would like to return value to its shareholders in appreciation of their long-standing trust and support. On March 14, 2012, the Company's board of directors declared special cash dividends in the aggregate amount of approximately USD95 million to the Company's shareholders of record as of the close of business on April 6, 2012 (Eastern Time), at USD0.40 per Class A or Class B ordinary share, or USD2.00 per ADS, each representing five Class B ordinary shares of the Company. The dividends are expected to be distributed in cash in or around April 2012.
The Company intends to distribute dividends annually in the future. However, the distribution of any future dividends will be at the full discretion of the Board and will be dependent upon the Company's financial position, results of operations, available cash, capital requirements and other factors."
Yes! That is $2.00 per American Depository Receipt! That is a massive dividend -- Markets closed at $12.55/share -- so that is a yield of nearly 15%. Of course PWRD is up huge on the news -- over 25% after hours.
I think the company is issuing this massive dividend as a signal that the stock is very undervalued.
Bottom Line:
I was wrong for years, but I think it might have turned the corner. I sure hope so, because I am very down on this stock.
My personal buys:
65 shares total at an average price of $23.15. I am down overall -45.8% vs S&P gain of 25.8%
10/09 $42.33 6 shares
8/09 $37.79 12 shares
5/10 $31.60 7 shares
9/2011 $17.99 16 shares
2/2012 $12.01 24 shares
What do you think? Has PWRD turned the corner or is this bounce setting investors up for disapointment?
BoiseKen
p.s. This is not an endorsement to buy PWRD -- remember, I've been dead-dumb wrong for 3 years. But, I do think it is worth another look -- there were reasons the stock dropped for those 3 years -- mainly, they were reporting terrible earnings. But when the earnings ratio is so depressed, its hard to ignore the value!
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