MSDW rates ASIA Outperform $90.00 in long term.
MORGAN STANLEY DEAN WITTER
AsiaInfo Holdings, Inc. ? March 28, 2000
The Internet Dragon
Summary and Investment Conclusion:
We are initiating coverage of AsiaInfo with an
Outperform rating and a 12-month price target of $90, a
22% upside potential to the stock?s current price.
AsiaInfo (?AI?) is a Beijing-based leading provider of
Internet-related information technology professional
services and is rapidly becoming a major Internet
software product provider in China. AsiaInfo is a unique play on China?s fast-growing Internet market. Internet users in China are expected to increase at a 54% compound annual growth rate (CAGR)from 3.8 million users in 1999 to 33.1 million users in 2004.Both the network solutions and software businesses are direct beneficiaries of the growth of Internet users.The company?s core strategy is to significantly grow its software business and build a long-term, high-margin scalable, software-driven business model. Its software business has three product segments: 1) Internet and IP (Internet Protocol) telephony customer management and billing (?CM&B?) software, 2) Internet messaging software and 3) Wireless and long distance telephony CM&B software. In 1999, software revenues were $6.5 million, representing 26% of total net revenues. We expect this business to grow 128% and 67% in 2000 and 2001,
respectively. By 2003 and 2004, we project that AsiaInfo?s
software business will grow to 45% and 49% of net
revenues respectively. AsiaInfo has established customer relationships and a large installed base. AI has close relationships with all the leading telecommunication service providers, ISPs and ICPs in China and has provided services and products to most of them. Its installed base of customers has accounted for, and is likely to account for, a majority of investments in Internet infrastructure in China. AsiaInfo is the builder of China?s Internet
Infrastructure network. AI is the dominant network
solutions provider of the Internet infrastructure build-out in China. It designed and built ChinaNet, China?s largest and first commercial national Internet backbone, is in Phase III of building UniNet China?s second national commerical Internet backbone, and is currently building CNCNET, China?s third national Internet backbone.
We project gross revenues to be $100.7 million for 2000E
and $156.6 million for 2001E. We expect the company to
produce profits beginning the second half of 2001.
Revenues after hardware pass through, or ?net? revenues are
estimated to be $38.8 million in 2000E and $74.4 million in
2001E. We are initiating coverage of AsiaInfo with an
Outperform rating and a 12-month price target of $90, a
22% upside potential to the stock?s current price. We believe the company warrants this valuation because it is a direct beneficiary of China?s fast-growing Internet market. |
