Code JDMBA2b

Saturday, August 20, 2005

My Largest Stock Holdings

Attention! The following is a copy of a recent post from my new blog JDMBA. If you hope to read more posts like these in the future, do not return to JDMBA2b. Instead please visit my new blog JDMBA and update all your links and bookmarks to reflect my new blog name and address. Thank you!

Currently my 5 largest holdings are SIFY, WZEN, NTES, SOHU and SINA. Since I mainly talk about Chinese stocks on this blog, I have not spoken as much about SIFY and WZEN.

SIFY is an internet, network and ecommerce company in India. Currently most of their revenues come from corporate data and network services. Retail internet access is the next largest revenue contributor. Other areas such as online advertising, ecommerce and WVAS are still very small but growing quickly. Here is a link to their most recent quarterly report. According to Alexa, Sify is currently the 6th most popular website in India. It should be noted that Rediff, the 3rd most popular site according to Alexa, is also publicly traded on the NASDAQ under the ticker symbol REDF.

Sify is the clear leader in two areas, corporate network services and the operation of Internet Cafes or I-Ways in India. I see continued growth in both areas. In addition to further growth in their corporate networking, internet access and I-Way businesses, I am excited about Sify's potential growth in WIFI, VOIP, WVAS and Online gaming areas. Recently launched Sify Max, should be a positive for their fast growing shopping and WVAS business. The I-Way business currently has about 3000 internet cafe's (most of which are franchised). I see this as an excellent platform for a rollout of a MMORPG and Casual Games business in India. A3 licensed from Actoz is the MMORPG currently being promoted by SIFY.

Recent news for SIFY includes a ruling by the TRAI on ISP entry fees and licensing fees for offering VPN services. "VPN is a leased-line based service used by large corporate houses and retail chains to link up their offices across the country on a common network." As broadband rates continue to fall in India, broadband ISPs such as Sify Broadband will continue to benefit at the expense of (sometimes more expensive) dial up providers. Several years ago 3 companies (SAIF, SARF and Venture Tech) purchased SIFY shares at extremely low prices. All three have been selling SIFY shares over the last few years as prices have increased. Based on SEC filings I think no longer think SARF is a beneficial owner. SAIF (SOFTBANK ASIA INFRASTRUCTURE FUND) sold lots of shares over the last few days as prices increased on large volume. This heavy selling pressure from SAIF is likely one of the primary reasons why REDF outperformed SIFY by such a wide margin this week. As SAIF and Venture Tech run out of shares to sell, I believe the downward pressure on SIFY shares will lessen and SIFY will be ready for a large price run-up as it approaches profitability in the near future.

WZEN is a far less diversified business than SIFY; it is primarily a pure play MMORPG business based in Korea. Right now ALL of its revenue essentially comes from one game, MU. Earnings will likely continue to become weak until its next MMORPG is commercially released. It appears that its next game SUN will enter closed beta testing on September 27th. You can find further comments of mine about WZEN here. For anyone who is interested in investing in WZEN I HIGHLY recommend you visit their website and download trailers for their upcoming games. For my impression of which games will be successful in specific regional markets look here. I am most excited about the prospects of SUN, Huxley and APB. Since MU is rapidly aging, an investment in WZEN is largely a bet on the future success of upcoming games. Of course their huge cash position (Warning! Yahoo Finance Key Statistics are often not up to date. Always look at the most recent SEC filings and balance sheets for current data) is also very attractive!

My most recent comments on NTES can be found here. In my opinion, recent profit taking in NTES may be another good buying opportunity for those interested in initiating a long position in NTES. I think it is likely that even the highest analyst estimate for 2006 could prove to be too conservative. I felt that NTES would exceed 2Q 2005 analyst estimates and turned out to be right (actually the results were even better than I thought!). Since most Netease revenues come from online games lets hope that I am correct in forecasting Da Tang and Tian Xia Er and casual games revenues ahead of analyst estimates for 2006. I recommend reading this recent post by CoolHeadInvestor on NTES.

My most recent comments on SOHU can be found here. Recently there has been a traffic decrease for Sogou on Alexa. It is too early to know the cause for sure. Perhaps there is an error at Alexa, or perhaps Alexa corrected a previous error. Based on the recent page views per user increase, perhaps one of the more inefficient Sogou referral sources (in terms of page views per user) stopped directing traffic to Sogou. I recommend keeping an eye on Alexa data. I feel pretty good about Sohu right now after recent insider purchases.

My most recent comments on SINA can be found here. I recommend listening for an announcement on what will happen to the 1pai joint venture with Yahoo after the Yahoo China/Alibaba deal. In my mind there are three possibilities:

1. Alibaba/Yahoo will purchase the remaining 1/3 ownership of 1Pai in order to gain full control. 2. Alibaba/Yahoo will leave 1Pai as is and Sina will continue to own 1/3 of the joint venture
3. Alibaba/Yahoo will merge 1Pai with Taobao in order to better compete with Ebay/Eachnet. Sina will be given an equity stake in the new Taobao/1Pai business (likely to retain the name Taobao).

I am hoping for the third option. Contrary to some people who think eBay will be successful in China, I think Alibaba will win. Meg Whitman and her team does not understand the local market as well as Jack Ma and his team and Alipay already has a good lead on PayPal.

Disclosure: I am long SIFY, WZEN, NTES, SOHU, SINA

Sunday, August 14, 2005

RSS Feeds for JDMBA

If you like my blog, you can now get automatic headlines as I publish them by adding JDMBA to your RSS feeds. Just click the "Feedburner", "My Yahoo", "NewsGator", or "My MSN" links on the right side of the page. Signing up is absolutely free. It will also help me monitor approximately how many regular readers I have.

Please sign up today!

Please note that the RSS feeds will be for my new blog:
http://jdmba.blogspot.com

This blog is no longer being updated

Thursday, July 28, 2005

Baidu IPO Coming Soon!

Baidu (BIDU is the proposed ticker) is among the most hyped IPOs so far this year. For more information on Baidu and the upcoming IPO read my new blog:
http://jdmba.blogspot.com/2005/07/baidu-ipo-hype.html

Comments on GRVY Trading Activity Today

Here is my impression of the Gravity news and resulting trading activity today: As a backdrop please note that GRVY:

  1. Has a relatively low float (number of shares available to trade) which increases volatility.
  2. Is not covered by many professional analysts or professional traders (I believe they are only covered by one analyst) which may imply a decreased efficiency of the market price equaling the “true value” of the shares.
  3. Relatively low institutional ownership.
  4. Has a high beta. Beta is the sensitivity of a stock's returns to the returns on some market index (e.g., S&P 500). For more on beta look here: http://invest-faq.com/articles/analy-beta.html

Stock price reaction to news about companies with a low float, little analyst or professional trader coverage, low institutional ownership and a high beta is often exaggerated. All of the factors listed above can increase volatility. On bad news such stocks will tend to take a short term drop more dramatic than fundamentally warranted. On good news they tend to rise in the short run more than they should. Supply/demand issues will exaggerate these gains or losses when there is a low supply (GRVY has a low float) or when trading volume is much higher than normal (such as today).

Read more on my new blog: http://jdmba.blogspot.com/2005/07/gravity-trading-activity-today.html

Sunday, July 24, 2005

Please Update Your Links!

If your webpage has a link to my old blog:
http://jdmba2b.blogspot.com,
please update your links to reflect my new blog address:
http://jdmba.blogspot.com

It appears that I am still getting quite a bit of traffic to my old blog that I would like to see coming to my new blog instead. Please help me out by making sure that your links to my blog contain my new web address.

For any of my readers who have a blog that may be of interest to my readers please let me know (my email address can be found in my profile) and I will be happy to link to your blog as well! Please come back and visit my new blog soon as there will be many Chinese ADRs reporting earnings in the next few weeks and I am eager to share my opinions.

Thursday, July 21, 2005

Yuan Valuation Adjustment

Today the Chinese government announced a change to the exchange rate of 8.11 yuan to the dollar from 8.277 yuan to the dollar where it has been fixed for many years. Here is my opinion on the news in terms of politics, international trade, outsourcing and Chinese ADRs:

Read more about this topic and much more on my new blog:
http://jdmba.blogspot.com

If your webpage has a link to my old blog, please update your links to reflect my new blog address:
http://jdmba.blogspot.com

Wednesday, July 20, 2005

Conflicting Reports about CHL Revenue Sharing Changes

Will China Mobile (CHL) be changing the revenue split for NTES and SOHU? Currently they both get 85% and China Mobile gets 15%. The news of the revenue sharing models changing for some companies is not new:
http://tinyurl.com/8lczh

What is new are reports from iResearch that NTES and SOHU may be among those who are affected:
http://tinyurl.com/8avnk

Read more about this topic and much more on my new blog:
http://jdmba.blogspot.com

If your webpage has a link to my old blog, please update your links to reflect my new blog address:
http://jdmba.blogspot.com

Sunday, July 17, 2005

SIFY Earnings Preview

I am eagerly awaiting SIFY's 1Q (Yes I said first quarter. SIFY's calendar year ends March 31st) earnings release Tuesday morning:
http://biz.yahoo.com/bw/050715/155214.html?.v=1

I do not have any reason to expect that SIFY did much better or worse than current analyst expectations of a 4 cent loss per share:
http://finance.yahoo.com/q/ae?s=SIFY

I am much more interested in SIFY's future guidance. It is without question that SIFY management has made a number of large mistakes since their initial IPO during the internet boom. They overspent millions of dollars buying various Indian websites that are still worth only a fraction of the initial purchase price. Today SIFY is trading at a very reasonable valuation and has good prospects going forward assuming they can properly execute. Continued on my new blog............

Read my opinion of SIFY's prospects and what to look for on the conference call on my new blog:
http://jdmba.blogspot.com

If your webpage has a link to my old blog, please update your links to reflect my new blog address:

http://jdmba.blogspot.com

Friday, July 15, 2005

Casual Gaming Market in China

SOHU just announced they will launch a new casual gaming platform next Monday, July 18th. Here is the story as reported by Pacific Epoch:
http://tinyurl.com/bkds2

Netease recently launched a casual gaming portal as well which is now in beta testing. Now most of the major publicly traded Chinese portals (SINA, SOHU, NTES, TOMO) and gaming companies (SNDA, NCTY) are offering casual games or will be soon. Shanda and Tencent are the clear leaders in casual gaming at the moment. I believe Sina is doing pretty well also. Netease is obviously doing well in MMORPG games so it is likely that they can leverage some of that success to become a major player in casual gaming soon enough. As demonstrated recently by Shanda's rapidly accelerating casual gaming revenue it is an important and growing area. Competition will increase as more players enter the market. Many WVAS players will be or already are competing in the casual gaming market as well.

More about the Chinese casual gaming business on my new blog:
http://jdmba.blogspot.com

If your webpage has a link to my old blog, please update your links to reflect my new blog address:
http://jdmba.blogspot.com

Thank you!

Wednesday, July 13, 2005

Upcoming Baidu IPO

Goldman Sachs, Credit Suisse First Boston and Piper Jaffray are the underwriters. Baidu plans to raise up to US$80 million with the IPO. Based on recent revenue, profits and risk factors I do not think BIDU deserves a market cap greater than any of the three major Chinese portals (SINA, SOHU, NTES) right now. I will wait until after the IPO to evaluate if I am interested in buying BIDU at current market prices.

Read more about Baidu on my new blog http://jdmba.blogspot.com

If your webpage has a link to my old blog, please update your links to reflect my new blog address:
http://jdmba.blogspot.com

Thank you!

Tuesday, July 12, 2005

Mobile Gaming Market in China

The mobile gaming market is still in its infancy, although I think it will eventually become one of the worlds largest just like online gaming in China. Of the publically traded NASDAQ firms I think SNDA, TOMO, and KONG are best positioned for future market growth as of this moment.

Continue reading on my new blog:
http://jdmba.blogspot.com/2005/07/mobile-gaming-market-in-china.html

p.s. Those of you using RSS feeds and those of you who have linked to my page, please start using my new blog address: http://jdmba.blogspot.com

Thank you!

Monday, July 11, 2005

Business Opportunities in China

For my readers who have an interest in investing in China the following teleconference this Thursday at 8:30PM Eastern time should be very interesting....

To continue reading please visit my new blog:
http://jdmba.blogspot.com/2005/07/business-opportunities-in-china.html

Sunday, July 10, 2005

New WVAS Revenue Sharing Model at China Mobile

As reported last week, China Mobile (CHL) has made some major changes to its WVAS revenue sharing model. Historically the service providers took 85% and China Mobile took 15%. With the new changes the service providers will take 85% going forward only if they do all of the marketing and customer service related to the WVAS product. China Mobile will take 30% or 50% instead of 15% depending on the amount of marketing and customer service responsibility they take on with regard to the service provides WVAS product.

Continue reading at my new blog:
http://jdmba.blogspot.com/2005/07/new-china-mobile-wvas-revenue-sharing.html

Saturday, July 09, 2005

eBay Finally Launches Paypal in China

Read more about the Paypal launch on my new blog:
http://jdmba.blogspot.com

Wednesday, July 06, 2005

SWOT Analysis of WZEN

Webzen (WZEN) is currently one of my favorite holdings in the Asian online gaming sector. While I believe others may be much better positioned in the key Chinese market and have executed much better than WZEN over the last few years (such as NTES another one of my key holdings), I think that WZEN is trading at far to low a valuation to resist.

Applying a standard SWOT analysis to WZEN:

Read more here....
http://jdmba.blogspot.com/2005/07/my-opinion-of-webzen.html

Friday, July 01, 2005

My New Blog

At some point I plan on replacing http://jdmba2b.blogspot.com with http://jdmba.blogspot.com since I see the later as being a more desirable domain name. Please be patient with me as I move content onto this new site. Thank you!

Thursday, June 30, 2005

My Current Asian ADR Positions

Lots of people have been asking me which Asian ADR’s I currently have positions in. Although my positions may change at any time, here is the current list and a sentence or two about why I own shares in each:

NTES- Its two primary games are still growing, upcoming games and casual have high potential. Internal development leads to high margins, better game localization and reduced hacking risk.
SINA- Leading portal in China which is very attractive to advertisers who want to reach the large and growing Chinese consumer market. Huge user database that will become better monetized over time across multiple business segments.
SOHU- Multiple attractive web properties (www.sogou.com, www.sohu.com, www.chinaren.com, www.17173.com, www.focus.cn, and www.go2map.com). Sogou has a good position in the growing China paid search market.
TOMO- Strong WVAS position, strong execution. Tom/Skype and India Games acquisition both have good long term prospects.
KONG- Almost $3 per share in case. Strong position in 2.5G, and mobile gaming markets. Well positioned for 3G going forward.
SIFY- Strong market position in corporate networking and as an ISP. Clear leader in India Internet Café market. Well positioned to monetize user base with WVAS, advertising and online gaming going forward.
TLK- Leadership position in Indonesia where wireless penetration is still low. Good growth prospect and very reasonable valuation.
WZEN- Lots of cash as compared to market cap. Although its primary game MU is aging, its game pipeline looks very strong over the next few years
SNDA- Leadership position in China online gaming market. Casual gaming, mobile games, WVAS, advertising and possibly IPTV as future growth drivers.

There are of course multiple risks involved with all of these stocks. Type the ticker symbol that interests you into the Google search box in the upper right hand corner to find more detailed blog postings of mine on each of these stocks. I am not making any investment recommendations here. Please do your own research and evaluate your risk profile before investing.

Saturday, June 25, 2005

New Google Search Box

Many of my readers have been asking for a better way to search my prior blog postings. I have just added a Google search box to the upper right hand side of the page. Try typing in the ticker symbols of your favorite Chinese stocks to find recent relevant blog postings of mine. Or type some common keywords relating to law school, business school, finance or China, to find my recent postings on the topic.

Of course you can always select "Web" instead of "jdmba2b.blogspot.com" in the Google search box to find additional information on the internet relating to topics discussed in my blog.

Let me know what you think and please continue to email me suggestions about how to improve my blog!

AnonymousLawyer

I have been reading this blog for a while:
http://www.anonymouslawyer.blogspot.com/

For quite some time many people thought it was a real blog of a big law partner. It turns out it is all fictional and written by a current Harvard Law School student. I think it is one of the funniest blogs I have ever read. While everything is made up, much of it is similar to what actually happens in big law firms across this country (perhaps just exaggerated a little at times). Here is a copy of a recent post written by AnonymousLawyer on Saturday, April 02, 2005:

"This is a terrible day. Every year it frustrates me. For no good reason, tonight at 2 A.M. we lose a billable hour. Daylight savings time is ridiculous. Individually, it's not a big deal, but think of it on a firm-wide level. That's hundreds of billable hours. Gone. Without a trace. And don't tell me we get them back in October when the clocks turn the other way, because by October everyone forgets about the debt they incur back in April, and just uses the extra hour to sleep. It's a useless waste of valuable time, and I hate having to tolerate it every single year. Definitely on the list of things I will change when I become chairman of the firm."

"Hourly billing gets a bad reputation, but I don't know why. If we charged a flat fee by project, we would have an incentive to push the work down the food chain to our most junior-level associates, or, even worse, farm it out to temps. This way, the clients get what they pay for. If I spend an hour with your file, that's one rate. If an incompetent first-year spends an hour with your file, that's a different rate. Only makes sense that way, since my time, obviously, is a lot more valuable. Everyone knows that."

If any of my readers have a blog that relates to the subjects I like to talk about please send me the link and I will be happy to add it to my blog.

Tuesday, June 21, 2005

Telkom Corruption Investigation

I was not happy reading this Jakarta Post story as TLK is one of my major holdings and has done quite well for me lately:
http://www.thejakartapost.com/detailbusiness.asp?fileid=20050621.L01&irec=0

"The government-sponsored interdepartmental corruption eradication team is intensifying its investigation into corruption allegations at state telecommunication company PT Telkom, following initial evidence of graft allegedly committed by the company's management."

"under the new contract Telkom should pay an annual payment to MGTI within the contract period totaling US$517 million, aside from assuming full responsibility to build and finance new telecommunication facilities in the two provinces"

"All MGTI shareholders, including Telkom's rival state telecommunications firm PT Indonesian Satellite Corp. (Indosat), Widya Duta Infotel, Telstra Global Ltd, NTT Finance and Sumitomo Corporation agreed to sell their entire stake to PT Alberta Telecommunication (Alberta) for a total of $266 million in January last year"

"Aside from the MGTI deal, the anticorruption team is also probing allegations of kickbacks during the construction of network infrastructure for Telkom's latest cellular technology Telkom Flexi."

It appears that TLK has massively overpaid for MGTI. Although some financing issues were alleged to have blocked the $266 million deal last year, I am sure that TLK could have financed it in the international debt markets. TLK is profitable, growing and in a leadership position in India. Somebody would have purchased bonds at a reasonable rate of return so TLK could have financed the deal. I am concerned about the kickback allegations. I am going to hold onto my TLK shares for the moment as I still feel that they are way undervalued (assuming any possible corruption can be eliminated) but that does not mean I am happy about this. Perhaps if TLK falls back below 20 based on continued reaction to this news I will buy more shares. My future decision to remain a TLK shareholder hinges upon the elimination of any corrupt management going forward.

Disclosure: I am long TLK

Another recent TLK related story (on a more positive note):
http://jdmba2b.blogspot.com/2005/05/motorola-going-after-small-towns-to.html