Daily Archives: September 16, 2007

NYSE Gets Slapped Hard On Chinese Listings

Shares of Chinese companies listed on the NYSE (NYX) have sub-standard earnings. That is the conclusion of a study by RateFinancials, an independent research firm, covered in the FT. Since the NYSE views itself as the blue chip global exchange, it is unlikely to be happy with the news.

The study covered "the 10 largest Chinese companies with total market capitalisation of about $750bn and an average price/earnings multiple of 24.7 that implies they will generate strong earnings growth." What it found was firms with insufficient cash flow, negative working capital, and "managed earnings" (a term that would indicate that the companies are less than forthcoming about their actual prospects.

The evaluation gets worse. “These companies are government-controlled enterprises masquerading as independent public companies and it is virtually impossible to assess their financial condition given their poor level of disclosures,” said Victor Germack, founder and president of RateFinancials.

This opens the door to the question of whether the NYSE was willing to list companies including. Petro China (PTR), China Telecom (CHL), and China Life (LFC) while turning a blind eye to the potential that the Chinese government may be willing to cut financial corners at the firms. It is not as if the communists have a spotless history of being transparent.

If more evidence appears that would support the news study,the exchange has a very hard decision. Does it delist the Chinese companies and force them to list elsewhere, or does it keep them on to maintain its global image while knowing that they really do not belong?

Douglas A. McIntyre

Posted on: September 16, 2007 – 6:51 pm in Exchange News, , ,

Is Baidu’s Biggest Competitor In China? (BIDU)

According to MarketWatch, Chinese news portal, Sina (SINA), plans to launch an advertising program with bloggers who post content on its site. "Sina’s move to monetize its massive blog page view inventory (more than 200 million page views a day), which has been building its "Ad Alliance," sites that run Baidu advertisements."

Baidu’s (BIDU) currently trade at $235 up from a 52-week low of $82. It has widely been assumed that the Chinese search engine’s biggest competitor is Google (GOOG), which currently holds the No.2 spot in search market share in the world’s most populated country.

But, if Chinese company’s like Sina can take advertising from Baidu, its shares might come under pressure. Sina has ample reason to want to take a piece of Baidu’s hide. SINA trades at 10x revenue, while BIDU is at 50x. From that height, it’s a long way down.

Douglas A. McIntyre

Posted on: September 16, 2007 – 6:36 pm in Internet, , ,

Has Nasdaq Unloaded Its Interest In LSE?

Nasdaq (NDAQ) has not had much luck in the M&A markets. Its most embarrassing attempt at increasing its presence overseas was it run at the London Stock Exchange. NDAQ ended up with 31% of the UK operation, but nothing else to show for it. Nasdaq has put that holding on the market and it appears that Qatar’s state investment fund will buy it for $1.72 billion.

NDAQ needs the money. The exchange said on Friday that it may consider sweetening its bid for the company the Swedish exchange OMX AB. The US exchange operator is locked in a battle for OMX with Borse Dubai, the owner of the Dubai stock exchange.

Now that NYSE (NYX) has picked up Euronext, Wall St. wants to know whether NDAQ can at least find one foreign exchange that wants to be acquired. After a tough year, its shares have rallied, perhaps on the perception that it is about to break-through as an international operator.

With NDAQ stock trading where it was in late 2005, Wall St. hopes that the exchange will not fail to land another fish.

Douglas A. McIntyre

Posted on: September 16, 2007 – 5:26 pm in Exchange News, ,

Business Objects Goes On The Block

Le Figaro has run a story saying that business intelligence software provider Business Objects (BOBJ) has put itself up for sale, retaining Goldman Sachs. The company would probably draw interest from Oracle (ORCL) or SAP (SAP). On Friday, the company’s shares were downgraded to "neutral" from "buy" by First Albany. The analyst may look a little silly when the shares open on Monday.

But, it may be a difficult time to sell the company. At times during the last two weeks, BOBJ share have been up as much as 40% on the year. Finding a buyer who would pay a premium over that may be a nice trick. The company currently has a market cap of $4 billion.

In the most recent quarter BOBJ revenue grew year-over-year to $363.2 million from $294.5 million. The company earned $21.6 million, or 22 cents per ordinary share and American Depositary Share, compared with $7.9 million in the same quarter a year ago. The company did say that the next quarter would be weak and lowered guidance.

With the stock near a five-year high and signaling some near-term weakness, BOBJ will be hard to shop.

Douglas A. McIntyre

Posted on: September 16, 2007 – 4:46 pm in Mergers and Buy Outs, , ,

Leap Wireless Turns Down MetroPCS

Leap Wireless (LEAP) has turned away a takover offer from competitor MetroPCS (PCS).

According to Reuters "Leap said the bid was too low because it did not reflect the company’s strong growth prospects and said Leap was better positioned than MetroPCS within the industry."

The $69 per share bid did seem low. In June, LEAP traded at $99. The companies stock was then hammered back to Earth by its latest earnings. Leap’s revenue rose 47 percent to $393.2 million in the quarter, up from $267.9 million during the same quarter a year ago. Net income fell to $3.2 million, or 5 cents per share, from $7.5 million, or 12 cents per share, during the same quarter in 2006.

LEAP shareholder now have to decide whether the last quarter was a "one time" miss or whether management is unable to get costs and subcriber churn under control.

Douglas A. McIntyre

Posted on: September 16, 2007 – 4:34 pm in Mergers and Buy Outs, ,

More Tainted Products From China, Drugs This Time

The Chinese are now poisoning their own population. With any luck, a new case of tainted drugs found in the big Asian country will not make it to the US. But, don’t count on it.

The Xinhua News Agency said that children being treated for leukemia were being given drugs that caused them weakness in their legs. One is methotrexate a medicine used to treating variety of cancers. The other is cytarabin hydrochloride, also a cancer treatment.

The drugs appear to have been mixed with vincristine sulfate which is used to treat AID related and brain cancers. But, its side effect include seizures, leg weakness, and, in some cases, death.

The US drug industry will probably be faced with an emerging crisis of confidence just as the toy industry has. One of these compounds only needs to find up here once.

Douglas A. McIntyre

Posted on: September 16, 2007 – 4:11 pm in Pharmaceuticals

With Oil At Record Highs, Talk Of $200 A Barrel

24/7 Wall St. has run three or four pieces recently that suggested there are strong cases for $100 a barrel oil. With the $80 mark reached last week, some oil industry experts do not discount the possibility that crude make get close to $100 this year. Jeff Currie, head of commodity research at Goldman Sachs, describes it as "a cyclical bull market for oil". "There is a risk that the oil price will spike to $95 per barrel by the end of this year if the market remains in significant deficit," he told The Telegraph.

Now part of the debate has begun to move to whether oil prices could hit $200. CNN Money recently ran a piece looks at a growing school of thought driven by analysts "who generally believe oil production has either topped out or will do so in the next couple of years."

One expert summarizes the case for CNN: The world will have to produce 118 million barrels of oil a day, up from its current 85 million barrels per day, just to satisfy projected demand by 2030, according to the Energy Information Agency. "That’s never going to happen," said Richard Heinberg, a research fellow at the Post Carbon Institute and author of three books on peak oil.

To justify projecting oil at $200, Wall St. would have to believe that oil production will not grow after the end of this decade. Oil companies and oil-producing countries tend to push statistics which say that there is much more oil in the ground. This means supplies will be abundant over the years to come.

If there is not a a growing imbalance between supply and demand, it is hard to justify the 8x increase in the price of oil over the last 10 years.

And, sometimes the past is prolog.

Douglas A. McIntyre

Posted on: September 16, 2007 – 11:36 am in Oil & Gas

The Stock Blog Wars Heat Up

For over a year, the two largest financial and stock market blogs have been Israel-based Seeking Alpha, which is partially owned by Benchmark Capital, and BloggingStocks, owned by Time-Warner’s (TWX) AOL.

Based on most available research Seeking Alpha has had the larger audience. It has several traffic relationships, perhaps the most important one a partnership with Yahoo! (YHOO) Finance.

All of Bloggingstocks content runs at AOL Finance.

Recently, BloggingStocks appears to have closed the audience gulf between the two websites, at least for now.

Among all websites, Alexa, the audience measurement service, puts the three-month average ranking of Seeking Alpha at 7,501. BloggingStocks average rank over the three month period is 25,445.

But, the rankings of both websites for the last week is just over 10,000. As the chart below shows, while Seeking Alpha’s traffic is off slightly, BloggingStocks has spiked up sharply.

Will the audience ranks of the two site remain close in the future? There is no way to say. But, for the first time, it’s a real horse race.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about. He has been a contributor to Seeking Alpha in the past and is currently contributes content to BloggingStocks.

Posted on: September 16, 2007 – 11:08 am in Media, ,

Apple: Keeping Macs Out Of Wal-Mart Has Hurt

Apple (AAPL) has decided to sell the Mac almost exclusively in its online store or in its small number of company-owned retail outlets. That may turn out to be a significant tactical blunder.

According to analysis done by a professor at San Jose State University, published by him in The New York Times, "the Mac’s worldwide market share was 3 percent as of June 2007." And, "based on the ratio of Windows and Macs actually in use, no gains can be seen for Apple."

Hewlett-Packard (HPQ) has had much of its success in PC sales because it has a huge network of retailers. This has not been lost on Dell (DELL), which recently cut a deal to sell its machines in Wal-Mart (WMT) and plans to expand into other large retail chains.

The Time piece makes a powerful point. The time for Apple to really go after the PC market was when Windows Vista came out and had enough problems and bugs so that some consumers were unhappy.

But, Microsoft is addressing much of that. Lenovo and Acer are becoming more aggressive by pushing harder in the US and European markets. Dell knows it needs retail to get back some of its lost market share.

And, it may be too late for the Mac to take advantage of the stumbles at Dell and Microsoft (MSFT).

Douglas A. McIntyre

Posted on: September 16, 2007 – 7:09 am in PC Companies, , , ,

This Week on Stockhouse September 10 to 14

For a fast review of the top Bullboards, blogs and Stockhouse posters, please check out this week’s Top Five (http://www.stockhouse.com/shfn/article.asp?edtID=20208.)

Publisher, Executive Editor Darin Diehl turned the focus of his weekly Publisher’s Notebook to recent community content contributions, and reported that Stockhouse members have two new ways to track updates (http://www.stockhouse.com/shfn/article.asp?edtID=20200) to editorial content on the site using their iGoogle or Facebook pages.

This week, Stockhouse member nwatson wrote glowingly about Crocs (NASDAQ: CROX), the company that makes those brightly coloured outdoor shoes (http://www.stockhouse.com/shfn/article.asp?edtID=20210).

A new article from Stockhouse member Stacey Laliberte appeared this week. Stacey’s got an appetite for junior oil company Canoro Resources (TSX: V.CNS, Bullboards), [http://www.stockhouse.ca/bullboards/forum.asp?symbol=CNS&table=list] and he presented his in-depth analysis of the company in Not Cannoli, Canoro. [http://www.stockhouse.ca/shfn/article.asp?edtID=20220]

New contributor John Lee, CFA hit the site this week with his take on what the Central Banks have in store for us given the recent credit turmoil. Fire up the presses for Money Printing, Brazilian Style. [http://www.stockhouse.ca/shfn/article.asp?edtID=20218]

And from our regular contributors…

On Monday, Danny Deadlock reported (http://www.stockhouse.com/shfn/article.asp?edtID=20196) that satellite communications company International Datacasting (TSX: T.IDC) gained more than 44% after reporting financial results last week. As well, the Microcap Monday columnist noted that should gold continue to trade above the $700 threshold, junior resource companies like Gryphon Gold (TSX: T.GGN) could continue to see their share prices appreciate.

But Steven Saville warned that gold prices look bearish (http://www.stockhouse.com/shfn/article.asp?edtID=20207) in the near term.

The folks at Institutional Research Partners spent some time with China Direct (NASDAQ: CHND) CEO, Dr. James Wang, who detailed the company’s strategy (http://www.stockhouse.com/shfn/article.asp?edtID=20201) to take direct ownership stakes in small and medium sized Chinese businesses.

Dave Galland of Casey Research addressed the likelihood that the U.S. Federal Reserve would respond to the current credit crisis by injecting lots of cash (http://www.stockhouse.com/shfn/article.asp?edtID=20209) into the economy.

The charts for oil prices and oil stocks could be interpreted in different ways, depending upon your point of view, argued Greg Silberman. There’s a bear case and a bull case (http://www.stockhouse.com/shfn/article.asp?edtID=20215), and that’s what makes a market.

The Financially Fit staff examined how the actions of the U.S. Central Bank can affect your investments. (http://www.stockhouse.ca/shfn/editorial.asp?edtID=20221)

And John J. De Goey wrote that active investing is not unlike legalized gambling. (http://www.stockhouse.ca/shfn/editorial.asp?edtID=20219)

Posted on: September 16, 2007 – 6:52 am in Uncategorized

Yahoo!’s New Business Plan

The best business plan for Yahoo! (YHOO), the one probably most likely to succeed, does not come from CEO Jerry Yang and his new management team.

Widely regards Bernstein Research suggested late last week that YHOO out-source its search to Google (GOOG) and fire 25% of its staff. Each move has been suggested before. The famous "Peanut Butter Manefesto", written by a Yahoo! manager last November, insisted that the company focus on few businesses and sharply cut staff. Just last week, the media caught wind of the fact that Yahoo! had recently considered allowing Google technology to handle its search. Because the Google product is more efficient at finding results it gets a better ad yield from each search. Yahoo! could make more money by turning to its rival.

But Bernstein has put a number to it. The big portal could "boost 2008 operating income by $565 million" by giving Google its search franchise. "Cutting a quarter of the staff could add another $658 million in operating income", according to the research report, covered in Barron’s.

For a company with $1 billion in operating profit a year, the Berstein plan could push up the Yahoo! share price to $40 or more, which is where it traded in early 2006.

The fact is that nothing Yang is doing now will help Yahoo! very much. Buying companies with better display advertising target gets the portal further into a part of the industry where growth is slowing.

If Yahoo! has a grand plan to dig itself out of its current mess, no one at the company has articulated it. Some times the best plans for companies come from outside. This is clearly one of those cases.

Douglas A. McIntyre

Posted on: September 16, 2007 – 6:50 am in Internet, ,