Thursday, 12 March 2015

Sina and Weibo - part 1

Value in China-facing stocks: discuss.  I say that as a current Alibaba holder (link here) where I bought on the recent fall below US$90 and will add on a fall below US$80...but I also say it as an ex-shareholder of the Chinese media company Sina. 

Sina have appeared on these pages before.  Ten odd months ago I posted a link to an article that I wrote on Sina and its majority stake in the Twitter-esque Weibo.  I thought I saw some fledgling value in Sina in the mid-40s but today the stock sits just below the mid-30s (fortunately I came to my senses and currently have no position in the stock).



But is there theoretical value!  A little bit of maths will suffice to show this:

At Weibo's current market cap, Sina's 54% stake is worth US$1.66bn

And their own market cap?  US$2.2bn currently or an EV (after adjusting for net cash held) of...just under US$900m.

Hmm!

Of course it is not that easy.  There is a US$800m convertible bond so I think a fairer adjusted EV is about US$1.7bn or basically the value of the Weibo stake.

That is an interesting observation as Sina had their Q4/FY14 results earlier in the week and noted themselves that:

'Our portal business faced increased challenge, with accelerated user migration to mobile terminals and accelerated diversification of customer marketing spending to online verticals, online video and social media...our primary focus for Weibo for the year 2015 will still be accelerating growth in user base and user activities'

To attribute not a lot of value to the non-Weibo businesses to me seems unfortunately very reasonable...and therefore also interesting that the Weibo and Sina CFOs have swapped around.  

Sina CFO Herman Yu will become Weibo's CFO, and Weibo CFO Bonnie Zhang will become Sina's CFO.

So with the extra layer of complexity forget Sina.  So how about in investing in Weibo directly?  That's for part two tomorrow...

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