Chinese Internet Companies: Winners & Losers

Chinese stocks - Winners and Losers

As more Chinese players like Alibaba plan to sail to the American shores with their IPO’s, we thought it would be a good exercise to evaluate how some of the Chinese large-cap internet companies have fared in the last 12 months (LTM).

China is now a big player in the internet economy. A lot of global internet companies like Facebook and Twitter are not allowed to operate in China. This has given a big boost to home-grown companies. Some of them may be labelled copycat sites, but they are big on impact nevertheless. To illustrate, two of Twitter’s Chinese twins, Sina Weibo and Tencent Weibo, individually have more active users than Twitter does despite its global presence. There’s a long list of critics when it comes to Chinese internet companies, but today the reality is, you may love them or hate them, but you can’t ignore them!

Chinese Internet Companies: The Top 5 Stocks

Of the 20 companies that we analysed, these were the ones that set the cash registers ringing, and big time! During the same period, QNET, NASDAQ's internet companies index moved up by about 57% while NASDAQ Composite moved about 33% higher and the S&P 500 moved up a little over 20%.

Company LTM stock return Current stock price* Market Capitalization
Vipshop Holdings (VIPS) 488.1% $143.74 $7.28B
YY Inc. (YY) 409.4% $81.4 $4.66B
ecommerce China Dangdang Inc. (DANG) 324.9% $16.23 $1.31B
Qihoo 360 Tech (QIHU) 277.5% $118.31 $28.35B
21Vianet Group (VNET) 210.0% $28.18 $1.98B

* As on Mar 11, 2014

Chinese Online Companies: The Bottom 5 Stocks

We were pleasantly surprised to find that no stock in our list of 20 stocks had actually lost investors any money. Except CYOU, all the other bottom of the list performers don’t really deserve to be in a bottom 5 list with the kind of stock returns they have generated.

Company LTM stock return Current stock price* Market Capitalization Ltd. (CYOU) 0.5% $28.18 $1.48B
Renren (RENN) 18.7% $3.81 $1.42B
NeEase Inc (NTES) 27.9% $68.3 $8.87B
51Jobs Inc. (JOBS) 32.8% $76.22 $2.25B
Sina Corp (SINA) 41.7% $68.69 $4.58B

* As on Mar 11, 2014

Most overpriced Chinese online companies

We looked at the Price/Earnings (P/E) and Price/Sales multiples across these companies, and found them to be expensive stocks at current valuation multiples.

Company LTM stock return LTM P/E LTM P/S
Qihoo 360 Tech (QIHU) 277.5% 153.95 17.63
YY Inc (YY) 409.4% 91.97 19.54
Vipshop Holdings (VIPS) 488.1% 239.57 6.52
NQ Mobile Inc (NQ) 101.1% 155.08 3.67
Baidu (BIDU) 97.9% 35.5 12.02

*Excludes stocks with net losses and thereby no Price Earnings ratio.

Among this list of stocks we’ve been following search giant Baidu for a while, and we love the company because it delivers exceptional revenue growth and profitability just as routinely as it delivers search results. To read our latest earnings review for Baidu, click here.

Least expensive Chinese internet companies

Company LTM stock return LTM P/E LTM P/S Ltd (CYOU) 0.5% 5.6 2.22
Shanda Games Ltd (GAME) 119.8% 9.1 2.51
SINA Corp (SINA) 41.7% 23.54 1.25
Perfect World Co. Ltd (PWRD) 112.6% 16.38 2.5
NetEase Inc (NTES) 27.9% 12.26 5.77

*Excludes stocks with net losses and thereby no Price Earnings ratio

Game developer NetEase is another company that we have been tracking for some time and we are optimistic about the company owing to its focus on self-developed games and mobile platforms. To read our latest Earnings Review for NetEase, click here.

Unprofitable Companies

Company LTM stock return LTM P/E LTM P/S
ecommerce China Dangdang (DANG) 324.9% - 1.39
21Vianet Group (VNET) 210.0% - 5.58
Youku Tudou Inc (YOKU) 79.8% - 12.21
Sohu.comInc (SOHU) 68.0% - 2.11
Renren (RENN) 18.7% - 7.78

While it’s great to point out the winners, for this list of 20 stocks, we thought it would be unfair to show you just the top 5. After all, it’s not every day that a stock with a 150% return doesn’t make it to the top 5. The complete list is in the table below.

Company Market Cap Current Stock Price LTM Stock Return LTM P/E LTM P/S
Tencent Holdings (TCEHY) 149.06 79.04 120.2% NA NA
Baidu (BIDU) 60.71 173.5 97.9% 35.5 12.02
Qihoo 360 Technology(QIHU) 28.35 118.31 277.5% 153.95 17.63
NetEase (NTES) 8.87 68.3 27.9% 12.26 5.77
Vipshop Holdings (VIPS) 7.28 143.74 488.1% 45.06 6.91 (CTRP) 6.43 49.57 148.6% 45.06 6.91
Youku Tudou (YOKU) 5.82 31.04 79.8% - 12.21
YY Inc (YY) 4.66 81.4 409.4% 91.97 19.54
Sina Corp (SINA) 4.58 68.69 41.7% 23.54 1.25 (SOHU) 2.92 76.27 68.0% - 2.11
Giant Interactiv Corp (GA) 2.69 11.2 75.3% 15.34 7.2
51job Inc (JOBS) 2.25 76.22 32.8% 27.92 8.22
21Vianet Group (VNET) 1.98 28.18 210.0% - 5.58
Shanda Games Ltd (GAME) 1.77 6.55 119.8% 9.1 2.51 (CYOU) 1.48 28.18 0.5% 5.6 2.22
Renren (RENN) 1.42 3.81 18.7% - 7.78
E-commerce China Dangdang (DANG) 1.31 16.23 324.9% - 1.39
Perfect World Co. (PWRD) 1.11 22.6 112.6% 16.38 2.5
Autonavi Holdings Ltd (AMAP) 0.96 20.7 97.3% 58.7 6.24
NQ Mobile Inc (NQ) 0.898 18.6 101.1% 155.08 3.67

Note: Tencent Holdings is an OTC stock.

See our analysis and Score for Baidu, NetEase, SINA, Qihoo, SOHU, YY, NQ, Renren

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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