Tài liệu Nothing But Net 2009 Internet Investment Guide 31 docx

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Global Equity Research

05 January 2009

Imran Khan

(1-212) 622-6693

imran.t.khan@jpmorgan.com

Our Estimates and Outlook for 2009

We forecast net revenue of US$652.7MM in 2009, up 27% Y/Y, and GAAP diluted

EPS of US$2.69, up 11% Y/Y, or adjusted EPS (ex-share-based expense) of

US$2.80, up 11% Y/Y. We forecast MMORPG revenue of US$549.8MM in 2009

(84% of total revenue), up 29% Y/Y, and casual game revenue of US$80.6MM (12%

of total revenue), up 20% Y/Y.

We forecast gross margin at 70.9% for 2009, slightly lower than 71.8% for 2008,

adjusted operating margin (ex-share-based expense) of 39.3% for 2009, slightly

lower than 41.1% for 2008, and adjusted net margin of 30.6% for 2009, down from

35.7% for 2008 (on higher effective tax rate of ~24% in 2009, due to Actoz – with

higher tax rate in Korea – and Aurora combination).

Our Estimates and Outlook for 2010

For 2010, we forecast net revenue of US$736.2MM, up 13% Y/Y, and GAAP diluted

EPS of US$3.05, up 13% Y/Y, or adjusted EPS of US$3.16, up 13% Y/Y. We

forecast MMORPG revenue of US$615.8MM in 2010 (84% of total revenue), up

12% Y/Y, and casual game revenue of US$93.8MM (13% of total revenue), up 16%

Y/Y. On margins, we forecast gross margin at 70.8% (stable Y/Y); adjusted

operating margin of 39.1% (stable Y/Y) and adjusted net margin of 31.0% (also

stable Y/Y).

Price Target, Valuation and Rating Analysis

We maintain our Overweight rating on Shanda, which remains our top pick in the

online game sector in China. Our price target is US$35 (June-09), which implies

14.5x 2008E and 13.0x 2009E GAAP EPS, or 13.9x 2008E and 12.5x 2009E

adjusted EPS. Our price target is below our DCF valuation of ~US$55 (13% WACC,

0% terminal growth), due to the lower sector multiples. Historically, the game sector

has traded at a forward P/E of 10x-20x. We believe Shanda can trade towards the

mid-end of this range, due to upside potential to our estimates from successes in

upcoming new games, and in-game advertising. On the other hand, with general

stock market weakness, the stock is not likely to trade at the historical high end of

around 20x, in our view.

Risks to Our Rating

Risks to our rating and price target include: (1) existing games seeing a significant

decline from lack of new content or promotions, (2) new major titles seeing lower￾than-expected gamer interest, and (3) any new business initiatives that would lead to

large investments.