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The Company is an interactive entertainment media company and the an operator of online games in China.
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TheGarcipian (98.98) Submitted: 7/11/07 2:57 PM : Start Price: $32.10 SNDA Score: 15.74
With fat margins, a forward PE of 19, a PEG=0.8, Shanda Entertainment is blowing the doors off its industry. Similar to reasons why I think NCTY (The9 Limited) will continue to do well (namely, the huge wellspring of millions of Chinese youth ready to pay up for the ability to play these online games), I think SNDA will do well too. Its financials are not quite as good as NCTY, but I like what I see: profit/operating margins at 52.4% and 31.6%; RoE=41.2% (though RoA is only 6.8%, pretty anemic for a gaming company); quarterly Rev & EPS growth of 55.9% and 3700+%, respectively. I am concerned that the Debt/Equity ratio is so high (currently 78%); hopefully, this is a short term thing.
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kagame (34.92) Submitted: 10/01/07 9:43 PM
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NCTY is a one trick pony. SNDA is diversified and innovative.
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TheGarcipian (98.98) Submitted: 10/03/07 1:21 AM
One trick pony? Well, yes, if you consider RPGs (Role Playing Games) like Guild Wars, World of Warcraft, Ragnarok, Hellgate: London, and a handful of others as a single "collective trick". Sure. SNDA may indeed be more diversified and innovative, and it is more fiscally stable on most financial ratios, but NCTY isn't to be sneezed at. According to this report from July 2007, http://biz.yahoo.com/ap/070713/china_warcraft_s_skeletons.html?.v=2"Launched by Irvine, Calif.-based Blizzard Entertainment Inc., 'World of Warcraft' is the world's most popular online game. In China, it has more than 3.5 million subscribers."That's a lot of ponies out there! And each is paying monthly fees to keep playing these games. True, NCTY's Q2 net income reduction of 40% YOY was a surprise, but I think the stock (now down 38% from its high--OUCH!) is even a better bargain. Those eyeballs will continue to generate income for the company, and if the 2nd quarter was truly only a "transitional" one, as the CEO says it was, we should see this puppy pop back up like an undead zombie. While SNDA is the better buy right now (according to my number crunching), it won't be for much longer. I'm looking for NCTY to bottom out in the next 1-3 months, then move up sharply in or around the holidays. Just before that, it should make for a screaming Banshee buy! I'm in it for the long haul, and NCTY is the smaller company, hopefully to prove itself more nimble. We'll have to wait and see. Meanwhile, I'm hoping for a bottom of around $25/share before the Slow Stochiastics start to move back up, indicating an imminent rise in the stock. Good luck with your pony!
kagame (34.92) Submitted: 10/15/07 4:05 PM
What is your opinion on NTES, the other Hidden Gem recommendation from when they suggested SNDA at $40 before its crash? Thanks in advance.
TheGarcipian (98.98) Submitted: 10/16/07 1:50 PM
Hi kagame,Haven't really thought about NTES before, but doing a quick perusal of the Yahoo! Finance numbers, I think it's got some good prospects.PROS: cash on hand equivalent to 1/6 of market cap (nice in troubling times like these); relatively low Debt/Equity ratio of 28% (though I always want that lower); PEG at a nice 0.97; margins and RoA/RoE numbers all in double-digits (very nice!); and good free cash flow; CONS: Quarterly Revenue & Earnings growth are negative (but I think that's changing); and insiders own so little of the stock.Without looking at anything else, I say I'm intrigued enough to do more digging, see what prospects their business model has in front of them, how their competition stacks up, etc. It very well could be a good choice.
dcfinanceguy (67.91) Submitted: 11/07/07 8:45 PM
Revise my estimate willl hit $45 soon
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