ChinaScope Daily Dim Sum: February 2012

Wednesday, February 29, 2012

Feb 29 - China’s Iron Ore Import Dependency Drops Further

Source: Xinhua, Yicai, ChinaScope Financial (Data)

+ WANG Xiaoqi, Vice Chairman of the China Iron and Steel Association, said on February 28 that China’s iron ore import dependency has dropped from 70% in 2009 to 60% in 2011.

+ In 2011, China’s iron ore output was 1.33 billion metric tons, 283 million tons or 27.15% higher year-on-year, sufficient to meet the demand for the domestic production of 65 million tons pig iron.

+ Statistics show that at the end of 2010, China’s output from rights and interests in overseas iron ore mines totaled 150 million tons per year, and this number increased by 30 million tons in 2011. This indicates that China’s dependence on iron ore produced by foreign entities will be reduced in the future.

+ The iron ore trading market is still in a downturn; turnover primarily being in low-grade ores. Data from the General Administration of Customs show that in January, China imported 59.32 million tons of iron ore, a 13.99% year-on-year decrease; the average import price was USD 136.5 per ton, a 9.9% year-on-year decrease.

The growth of iron ore import is decreasing while the growth of domestic output is increasing

Other News Headlines:

n Weibo’s Over 300 Million Users; A potential Revenue Generator

n Country Garden: 2011 Net Profit at CNY 5.8 Billion

n China’s Iron Ore Import Dependency Drops Further

n Negative Growth in Fixed Asset Investments in Cement Industry, First in Five Years

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Feb 29 - Country Garden: 2011 Net Profit at CNY 5.8 Billion

Source: Country Garden, ChinaScope Financial (Data)

+ On February 28, Country Garden Holdings Co., Ltd. (HKEX: 2007) reported that in 2011, the company’s gross revenue was CNY 34.7 billion, a 34.7% year-on-year increase; its net profit was CNY 5.8 billion, a 19.6% year-on-year increase.

+ In 2011, Country Garden made about CNY 43.2 billion of contracted sales value, a 31% year-on-year increase; the gross floor area (GFA) of contracted sales was about 6.87 million square meters, a 15% year-on-year increase.

+ MO Bin, President and Executive Director of Country Garden, takes a cautious approach to the real estate market this year, and predicts a zero year-on-year sales growth.

In 2011, Country Garden (2007.HK) realized a year-on-year growth of around 30% in revenue, net income and contracted sales volume.

The gearing ratio, measured by the net debt (total debt net of unrestricted cash and cash equivalents) over the total equity, exceeded 70% in 2011.

The growth rate of Country Garden’s (2007.HK) property inventories has not increased significantly over the past two years.

Other News Headlines:

n Weibo’s Over 300 Million Users; A potential Revenue Generator

n Country Garden: 2011 Net Profit at CNY 5.8 Billion

n China’s Iron Ore Import Dependency Drops Further

n Negative Growth in Fixed Asset Investments in Cement Industry, First in Five Years

Feb 29 - Weibo’s 300 Million Users; A potential Revenue Generator

Source: Sina, ChinaScope Financial (Data)

+ Sina Co. (NASDAQ: SINA) released its 2011 fourth quarter earnings report on February 28 showing that its Weibo, a micro blogging service, has more than 300 million registered users. Daily active users (DAU) represent 9% of the total registered users. At the end of 2011, visits to Weibo using mobile devices have surpassed that of personal computers for the first time.

+ Sina’s gross margin for Q4 2011 was 54%, operating margin was a negative 7%, and net profit margin was a negative 66%. The main cause for the losses last year was Weibo; however, executives at the company say that when the advertising system goes online in the second quarter of this year, Weibo will be a revenue generator for the company.

Ratio of Sina Weibo’s daily active user (DAU) has dropped to 9%. Only about 60% of the users newly registered in January have provided their real name when identifying themselves, which brings concerns about what will happen when all users must identify themselves from March 16th onwards.

At the end of 2011, visiting frequency from mobile terminals surpassed personal computers. The rise of smartphones and the wide use of Mobile Weibo App will contribute greatly to Sina’s income (display AD on Weibo APP) in the second half on 2012.

However, the management estimates that Weibo related expenses will increase, offsetting the revenue increase and potentially resulting in net profit losses in 2012.

Trading comparables of related companies

Other News Headlines:

n Weibo’s Over 300 Million Users; A potential Revenue Generator

n Country Garden: 2011 Net Profit at CNY 5.8 Billion

n China’s Iron Ore Import Dependency Drops Further

n Negative Growth in Fixed Asset Investments in Cement Industry, First in Five Years

Monday, February 27, 2012

Feb 27 - Qihoo 360 to Enter Search Engine Market

Source: Caijing, ChinaScope Financial (Data)

+ On February 23, Qihoo 360 Technology Co., Ltd. (NYSE: QIHU) released the Q4 and annual reports for 2011. Given the rapid growth in both operating revenue and net profit, Qihoo announced that its focus will shift from video business to vertical search engine.

+ As shown by Qihoo’s financial reports, in the fourth quarter of 2011, the company’s operating revenue was USD 62.32 million, a 214.5% year-on-year growth; net profit was USD 15.03 million, a 274.1% year-on-year increase. Throughout 2011, Qihoo’s operating revenue was USD 168 million, among which USD 123 million was from internet advertising, and USD 43.57 million was from internet value added services led by web games; net profit was USD 15.6 million.

Qihoo 360’s market share is increasing after the IPO.

Qihoo 360’s advertising revenue, mainly generated from the browsers’ home page advertisements, has amplified in the past two years.

After claiming significant internet browser market share in China, Qihoo 360 is now eyeing the internet search market dominated by Baidu.

Trading comparables of related companies

Other News Headlines:

n Minsheng Bank Wins Approval to Issue H Shares

n Collective Note Attracts SMEs

n Shanda Literature Resubmits IPO Application

n Qihoo 360 to Enter Search Engine Market

Feb 27 - Collective Note Attracts SMEs

Source: China Economic Net, ChinaScope Financial (Data)

+ Since the launch of small and medium-sized enterprise collective notes (SMECN) by the National Association of Financial Market Institutional Investors back in 2009, 49 SMECNs have been issued on the interbank bond market, and a total of CNY 13.80 billion have been raised.

+ For small and medium enterprises (SMEs), the cost of fund for SMECN is three to four percentage points lower than the debt costs. Furthermore, the liquidity of these notes is higher on open market.

Issuance of collective notes and bonds is surging and is expected to further grow this year.

Other News Headlines:

n Minsheng Bank Wins Approval to Issue H Shares

n Collective Note Attracts SMEs

n Shanda Literature Resubmits IPO Application

n Qihoo 360 to Enter Search Engine Market

Feb 27 - Minsheng Bank Wins Approval to Issue H Shares

Source: 21st Century Business Herald, ChinaScope Financial (Data)

+ China Minsheng Banking Co., Ltd. (SSE: 600016; HKEX: 1988) announced on February 24 that that China Securities Regulatory Commission (CSRC) has approved its plan to issue 1.65 billion new H shares, roughly CNY 9 billion in financing.

+ As of the third quarter last year, the 7.89% core capital adequacy ratio of the bank was below the regulatory standards. The completion of the new shares issuance can raise the ratio by 2 percentage points, bringing it up to regulatory standards.

+ A new round of refinancing among Chinese banks will happen in the A share market this year. Bank of Beijing Co., Ltd. (SSE: 601169), China CITIC Bank Co., Ltd. (SSE: 601998; HKEX: 998), Bank of Communications Co., Ltd. (SSE: 601328; HKEX: 3328), and China Everbright Bank Co., Ltd. (SSE: 601818) have all released refinancing plans for this year. The total financing scale in the banking industry is expected to exceed CNY 90 billion.

Minsheng Bank: Core CAR still lower compared to the new CBRC regulation.

Summary of Banks’ Refinancing Activities in 2012

Trading Comparable

Other News Headlines:

n Minsheng Bank Wins Approval to Issue H Shares

n Collective Note Attracts SMEs

n Shanda Literature Resubmits IPO Application

n Qihoo 360 to Enter Search Engine Market

Friday, February 24, 2012

Feb 24 - China’s Urban Social Safety Net Will be Expanded in 2012

Source: Xinhua, ChinaScope Financial (Data)

+ HU Xiaoyi, Vice Minister of the Ministry of Human Resources and Social Security (MHRSS), said at a conference on February 23 that the social safety net coverage will be expanded in 2012, as a part of which the urban basic pension insurance will cover 305 million people.

+ At the end of 2011, the coverage of basic pension insurance for urban employees, as well as basic health insurance, unemployment insurance, work-related injury insurance and maternity insurance for urban residents was 284 million, 473 million, 143 million, 177 million and 139 million people, respectively.

In 2012, most of China’s population will be covered by urban basic pension insurance or new rural old-age insurance.

Other News Headlines:

n High Interest Rate in the First Round of Treasury Deposit Bidding

n Special Financial Bonds for Small Micro Enterprise Attract Less Interest than Expected

n China’s Urban Social Safety Net Will be Expanded in 2012

n eLong: Net Operating Revenue Increased 27% YoY in Q4 2011

Feb 24 - Special Financial Bonds for Small Micro Enterprise Attract Less Interest Than Expected

Source: Caixin, ChinaScope Financial (Data)

+ Shanghai Pudong Development Bank Co., Ltd. will issue a maximum of CNY 30 billion special financial bonds on the interbank bond market on February 24. The bonds will have a five-year term and a fixed rate. Pudong Development Bank announced that all raised funds will be used to support its loans to small business.

+ The market’s reaction to such kind of bonds is rather moderate in comparison to the special financial bonds issued for small micro enterprises by large commercial banks. This type of financial bond is in essence an ordinary bank’s financial bond, but it has slightly lower yield and it is less liquid.

Summary of loans and financial bonds for small- and micro-sized enterprises

Other News Headlines:

n High Interest Rate in the First Round of Treasury Deposit Bidding

n Special Financial Bonds for Small Micro Enterprise Attract Less Interest than Expected

n China’s Urban Social Safety Net Will be Expanded in 2012

n eLong: Net Operating Revenue Increased 27% YoY in Q4 2011

Feb 24 - High Interest Rate in the First Round of Treasury Deposit Bidding

Source: People’s Bank of China, ChinaScope Financial (Data)

+ On February 23, the Ministry of Finance (MOF) and the central bank carried out the first bidding among commercial banks for the management business of treasury deposit.

+ The final bid rate was set at 6.80%, 80 basis point higher than the previous bidding. The total value is CNY 30 billion, and the term is six months.

The bid rate has been increasing as commercial banks trying to attract government deposits.

The quest for liquidity is also evidenced by a higher short tem interbank interest rates.

Other News Headlines:

n High Interest Rate in the First Round of Treasury Deposit Bidding

n Special Financial Bonds for Small Micro Enterprise Attract Less Interest than Expected

n China’s Urban Social Safety Net Will be Expanded in 2012

n eLong: Net Operating Revenue Increased 27% YoY in Q4 2011

Thursday, February 23, 2012

Feb 23 - Investments in Real Estate Development Increased 27.9% YoY in 2011

Source: Caijing, ChinaScope Financial (Data)

+ The National Bureau of Statistics (NBS) reported that in 2011, investments in real estate development totaled CNY 6.17 trillion, a 27.9% year-on-year increase. Residential buildings took a big chunk of that investment with CNY 4.43 trillion, a 30.2% increase; CNY 254.4 billion was invested in office buildings, a 40.7% increase; and CNY 737 billion was invested in commercial buildings, a 30.5% increase.

+ In 2011, the value added of the construction industry was CNY 3.2 trillion, a 10% year-on-year increase. General contractors realized a profit of CNY 424.1 billion, a 24.4% increase, in which CNY 117.2 billion was contributed by state-owned enterprises, a 36% increase.

The growth in fund sources for real estate development slowed down in 2011.

Construction industry maintained a development momentum.

Other News Headlines:

n HSBC China’s Feb. Preliminary PMI Rises to 49.7

n China’s 2011 R&D Spending Represents 1.83% of GDP

n PBOC Advocate for Further Opening-up of Capital Account

n Output Value of Machinery Equipment Totaled CNY 660.65 Billion in 2011

n Investments in Real Estate Development Increased 27.9% YoY in 2011

Feb 23 - China’s 2011 R&D Spending Represents 1.83% of GDP

Source: NBS, ChinaScope Financial (Data)

+ According to the National Bureau of Statistics (NBS), China’s spending on research and development (R&D) in 2011 was CNY 861 billion, a 21.9% year-on-year increase, accounting for 1.83% of GDP.

+ In 2011, China received 1.63 million domestic and foreign patent applications, of which, 90.5% or 1.48 million were domestic applications. At the end of 2011, there were 2.74 million effective patents, where 80.4% or 2.02 million were domestic.

R&D expenditure continues to increase at a rapid pace.

In 2010, China outranked Japan in patent applications.

Other News Headlines:

n HSBC China’s Feb. Preliminary PMI Rises to 49.7

n China’s 2011 R&D Spending Represents 1.83% of GDP

n PBOC Advocate for Further Opening-up of Capital Account

n Output Value of Machinery Equipment Totaled CNY 660.65 Billion in 2011

n Investments in Real Estate Development Increased 27.9% YoY in 2011