Company underwriter calls Chinadotcom a good buy
Paul Mooney in Beijing
ChinaOnline
(6 June 2000) Lehman
Brothers has raised its
estimates for Chinadotcom
following the company's
better-than-expected first
quarter results, the global
investment bank announced
June 5 in a news release.
Stephen McKeever, Asia
Communications & Internet
analyst, reiterated the
bank's 1-Buy rating for
Chinadotcom, and set a
US$82 share price target.
"Given the company's ability
to generate multiple
revenue streams from
diversified sources and the
financial strength accorded
by its US$561 million cash
war chest, Chinadotcom
remains our top pick among
the pure Internet plays in
Asia ex-Japan," said
McKeever.
Chinadotcom's first-quarter
revenue was US$20 million,
up 84 percent
quarter-on-quarter and 71
percent above Lehman
Brother's forecast of
US$11.7 million. Of this,
advertising revenue
accounted for US$9 million,
80 percent above Lehman's
forecast, and the Web
Connection contributed
US$10.2 million, 82 percent
above the company's
forecast.
The Internet company's
portal network achieved 16
million average daily page
views, 208 percent above
Lehman's forecast, while
registered users, who
represent a critical base of
sticky repeat visitors to the
portals, rose to 4.5 million
during the first quarter, up
from 2.2 million at the end
of the last quarter of 1999.
As a result of the
exceptionally strong results,
Lehman Brothers conceded
that it had "clearly been too
conservative" in forecasting
the extent to which
Chinadotcom's businesses
have grown in recent
months.
"We believe that the
disparity between our
forecasts for 1Q 2000 and
the company's actual results
were caused by our
conservative assumptions
with respect to the total
number of Internet users in
the countries of Greater
China?China, Hongkong
and Taiwan."
Lehman Brothers raised its
revenue forecasts for 2000
and 2001 to US$99 million
and US$207 million,
respectively, from US$42
million and US$79 million
previously.
The investment bank said
that unlike pure portal plays,
Chinadotcom's "build,
distribute, sell" strategy had
allowed the company to
generate multiple revenue
streams from its three main
areas of operation: the Web
Connection, the portal
network and the 24/7 Media
Asia advertising network.
Peter Yip, CEO, said
Chinadotcom would invest
up to US$250 million in
mainland China over the
next few years in view of the
opportunities presented by
the country's now almost
certain accession to the
World Trade Organization in
the wake of the recent
agreement with the
European Union and the
U.S. Congress? decision to
accord permanent normal
trade relations to China.
The news release said that
Chinadotcom was the envy
of its peers with ample
financial resources to
execute its business plan
and make strategic
acquisitions. It said that as a
result of the current slump
in valuations attached to
Internet companies globally,
that Chinadotcom should
now be able to consummate
acquisitions on terms that
are significantly more
favorable than those that
prevailed a few months ago.
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