3SOF

Quote from: David Randolph on May 25, 2007, 05:04:38 AM
I said this:

QuoteNTES touched its $17.53 - $17.55 short term support level again yesterday. Let's see if it bounces, but perhaps it will have to go down to test the long term ascending trendline before bouncing strongly, that would be a nice trap (the ascending trendline currently stands at $16.98).

The low of the day was $16.97 and BigSully1 ...

QuotePicked up NTES @ $17.00. Hope the trendline holds.

... bought right at support. The only thing lacking is the a rally now. Let's see what the next few days bring, I hope it's not a breakdown, since NTES is now trading at 14.8 times this year's estimated earnings.

I'll continue holding NTES.

I already sold at $17.50. I didn't buy for an investment. Just saw an easy way to skim 3%. Sorry.

QuoteI already sold at $17.50. I didn't buy for an investment. Just saw an easy way to skim 3%. Sorry.

Lol, you don't need to be sorry BigSully1 I don't have a problem if you guys use the information I provide in your own personal way. Nice short term gain

Quote from: David Randolph on May 25, 2007, 10:06:33 AM

QuoteI already sold at $17.50. I didn't buy for an investment. Just saw an easy way to skim 3%. Sorry.

Lol, you don't need to be sorry BigSully1 I don't have a problem if you guys use the information I provide in your own personal way. Nice short term gain

Thanks David. I did use your information to make the trade. Without it, it wouldn't have happened. You're a generous man. Applaud.

QuoteThanks David. I did use your information to make the trade. Without it, it wouldn't have happened. You're a generous man. Applaud.

Thanks BigSully1, just doing my job

Ok, even though BigSully1 was able to capture 3% or so from NTES, the Main Portfolio is losing 7.59% on this stock, so obviously I'm not pleased with it.

There are alternatives to NTES in the same exact sector (China's online gaming), namely SNDA and NCTY. Let me make a quick comparison between the three:



As we can see, NTES is the cheapest in terms of earnings multiple and has the highest net profit margin, but the smallest revenue growth rate. If we look at the balance sheets, we'll see that NTES has $520 M in cash, SNDA has $462 M and NCTY has just $111 M.

It's incredible the amount of cash these companies have, with little debt. It's also amazing how they've achieved this with just 1 star online game. I can see the significance of Tianxia 2 and why NTES went down 5.9% on the day it was postponed.

Technically SNDA and NCTY are behaving much better than NTES. The question here is: should I chase the ones the market likes more at the current time, or buy the out of favor but fundamentally stronger company?

I believe NTES recent slower growth is due to temporary issues, and growth will probably pick up again in the future. The company has the resources and knowledge to make it happen.

I'll continue holding NTES, but I wonder if I shouldn't also buy SNDA or NCTY, they also look very attractive.

I sure like the way NTES is responding, after touching the medium term ascending trendline support. Volume was quite strong today.

My take is the stock is too cheap to handle at current levels. The 1st quarter results were further confirmation of my long term views for this company.

NTES has the highest net profit margin of the Chinese online gaming group, and therefore it is the more efficient company. It is very hard to justify a P/E of 15 for a company operating in this booming sector. Their subscriber base can be multiplied by 10, what's 20 million subscribers in a country with 1.3 billion people?

Moreover, I believe that in this sector the Chinese are being trully innovative, I don't know of any European company (or even American company), being even remotely as successful as NTES or SNDA in online gaming. Who knows, maybe these companies will even expand overseas ... there's a huge market waiting for them. Well, they don't need that for now, China is big enough.

I'll keep holding NTES, I see it approaching the top of the symmetrical channel, currently at $20.79. 

NTES opened down because of Shangai's 9% fall overnight. But that fall happened because the Chinese government tripled the tax on transactions on the exchange overnight, in another attempt to cool down the red hot bull market going on there. Of course, the tax rate on transactions doesn't change companies values, so the 9% fall wasn't due to a fundamental reason.

Therefore it was irrational to sell NTES because of that motive, and in fact the stock closed higher on the day, as it naturally should. I hope NTES is able to breakout above $18, there's a short term resistance there. Volume has been strong enough to support a bullish breakout.

Fundamentally you already know what I think of it, NTES, operating in such a high growth/high profitability sector like online gaming, is terribly cheap at these levels.

I'll continue to be a long term investor in NTES shares.

Technically NTES was able to close above the $18 short term resistance level. It seems the way is clear for a move towards the medium term descending trendline, currently at $20.8.

NTES, a Chinese online gaming company with strong growth and more than 50% net profit margin is trading at 15 times 2007 estimated EPS of $1.16. Too cheap to handle at current levels.

I'll keep holding NTES.

BigSully1 bought NTES right at the low of the swing, but I bet I'm going to make a lot more money than him holding this stock

Anyway, I'm still losing 2.67%. But I don't see that lasting, the market is responding extremely well to the exact touch in the ascending trendline on the chart below. NTES is now above the initial earnings reaction, so everybody that sold after the earnings news (which by the way were above expectations), were wrong.

I almost can't believe I'm buying a strong growth, extremely fat net profit margin, Chinese online gaming company for 15 times earnings

I'll keep on holding NTES.

Quote from: David Randolph on June 02, 2007, 06:27:49 PM
BigSully1 bought NTES right at the low of the swing, but I bet I'm going to make a lot more money than him holding this stock

I won't take that bet David, because I'd say the odds are not nearly as good for me as they were of me gaining a very quick 3% overnight. Hit my target and ST expectation, and I'm happy.

QuoteI won't take that bet David, because I'd say the odds are not nearly as good for me as they were of me gaining a very quick 3% overnight. Hit my target and ST expectation, and I'm happy.

I'm glad you're happy BigSully1, but I wonder how you conciliate short term and long term trading. I mean, if you care about a 3% overnight gain, you will also care about a 3% overnight loss, so you'll try to be on top of all short term swings, and that makes you a short term trader, with all the problems that involves. Anyway, maybe you can capture short term gains in some stocks and in others let them run for a long period ... I can't, at least not in a justifiable manner, one that wouldn't put my readers scratching their heads, thinking

Yesterday NTES opened down, like most China related stocks, but closed higher. I guess the people that sold at yesterday's open will buy at today's open (at a higher price, of course), since the Shangai stock index rose 9% overnight

I'll keep holding NTES.

I don't think my 2.25% loss in NTES will last much longer, as the stock, slowly but surely, has been moving back up.

I'll keep holding NTES.

People insist in selling NTES at the open, but the stock ends higher on the day. I feel quite safe holding NTES, I don't think online gaming depends on the economic cycle, and the more people playing games, the more people will play. It will just keep growing, it's absurd to value this stock at 15 times trailing earnings.

I'll continue holding NTES.

Unfortunately NTES opened down and stayed down yesterday. Fundamentally it is one of the most attractive stocks I've ever seen:



EPS growth is impressive. Net profit margin in 2006 was 57.4%, the highest I've ever found. And the company trades at half the industry's average valuation, it's ridiculous.

Analysts don't think there will be much growth going forward. They think online gaming in China will slowdown. Do you believe them? I don't, I believe the number of online gamers will continue to rise, and as personal income in China rises, they'll be able to spend more.

I'll keep holding NTES.

I'm very bullish on Chinese online gaming stocks, but I especially admire NTES, because it boasts the highest profit margin of the group (around 57% ). It is also the cheapest, trading at 16 times 2006 EPS.

I'll keep holding NTES.

NetEase (NTES) held their 1Q F07 conference call recently and the news was not all that good. The company seems to have goofed in their market research for their new online game Tianxia II. Investors have slammed the stock which has dropped nearly $1.2 a share in just a few days, and looks poised to drop even more as worries over a Chinese stock market bubble sits on investor's mind. This is rather remarkable since Netease actually beat their numbers for this quarter. This did little to stop selling in the stock once investors heard the bad news during the conference call. The stock currently trades at $17.20 a share. The price per sales ratio is close to 8, rather high for a company with a market cap of over 2 billion. The P/E ratio is only 14.83 possibly indicating that investors don't seem to feel that future growth is likely.

During the recent conference call the company was asked about the delay for Tianxia II. Netease indicated that the game did not do well in beta testing because the game design and player functionality needs to be more conducive to beginner play. Users felt the game was too advanced and users had trouble achieving higher levels in the game. Missing was the more fun parts of the game that seemed to be important to the users while they attempted to get to higher levels. Netease is taking the game back into development to change the beginner levels.

Unfortunately Netease does not see the game situation improving enough to impact the bottom line before late 2007, or probably 2008. The company does have other games in development but again these will not start producing revenue until late 2007 or early 2008. The only bright spot for 2007 is that Westward Journey II appears to still be doing well and Westward Journey III is nearing release. This is an updated version of Westard Journey II that has completely new graphics and some additional gameplay features. It entered a closed beta testing period last week. The hardware requirements and game levels will remain the same as Westward Journey II.

In other areas Netease did not do as well with their financial numbers. Advertising and wireless service revenues both dropped this quarter. The better than expected game revenue kept the overall financial picture above analyst's expectations. Compared to the same period one year ago several key financial indicators have taken a turn for the worse. Cash from operations is down 28.8% and free cash flow is down 33.6%. Capital expenditures are up 58.2%. However, long-term debt declined 11.1% to $90.2 million. Clearly, the company has some work to do in order to protect cash flow so that it will have enough R&D money for future games. Getting Westward III and Tianxia II out the door soon is critical.