In addition to the big names I want this blog to spotlight some smaller up-and-comers that don’t necessarily receive as much ink, bringing me to Camelot Information Systems (NYSE: CIS) which just released 2010 results that were quite impressive but 2011 outlook that hinted it may soon be sparring with harder times. The IT services provider, whose shares have largely traded sideways since its IPO late last year, reported more than 60 percent growth in 2010, banking in particular on strong demand from China’s fast-growing financial services sector. (results release) Perhaps in light of growing warnings that the same financial services sector may be poised for a significant correction, Camelot forecast its growth would slow sharply this year to about half of 2010’s level, though it failed to provide any explanations. In any other situation 30 percent growth wouldn’t be all tha
t bad. But in Camelot’s case, its current PE ratio of more than 50 times means this company may need some time to fill its richly valued new shoes in New York.
Journalist China
Motel 168: Hot Property in Budget Chains
NPC: Same Old Same Old, China Mobile Hypes 4G, More Handouts for Bank of China
The annual party for top execs of state-run behemoths, also know as the National People’s Congress, is officially up and running in Beijing and — surprise surprise — we’re hearing more of the same old stuff from China’s top capitalist communists. China Mobile (HKEx: 941; NYSE: CHL) Chairman Wang Jiianzhou was out talking up 4G, as he dodged questions about his company’s weak showing in a national 3G race that has seen rivals Unicom (HKEx: 762; NYSE: CHU) and China Telecom (NYSE: CHA; HKEx: 728), armed with better 
technology, gain significant market share. Wang says his company has significantly expanded trials for its untested 4G technology. Still, I wouldn’t hold my breath that China’s telecoms regulator — after dragging its feet forever to get 3G up and running — will be in any hurry to issue 4G licenses anytime soon. Meantime, Bank of China’s (HKEx: 3988; Shanghai: 601398) President Li Lihui told reporters at the NPC his bank could do even more fund raising to arm itself against future downturns. (English article) I honestly can’t see the government giving a green light to this one after allowing all its banks — including BOC — to raise billions in new funds less than a year ago. And the fact that they’re even talking about doing something like this again so soon could be a warning flag to investors that trouble could be brewing below the surface of those hunky dory quarterly reports that Bank of China and its peers are always issuing.
Watch Out Youku: Google-backed Xunlei Marching to Market
Shares of recently listed video-sharing site Youku (NYSE: YOKU) got a nice bump earlier this week on better-than-expected earnings as it moves closer to profitability; but some of the wind could soon come out of its sales on reports that rival Xunlei is also planning its own overseas IPO (English article). What’s interesting here is less the fact that Xunlei may be revving 
up for a second-to-market IPO, and more the fact that the company counts Google (Nasdaq: GOOG) among its backers. Many of you may recall that search giant Baidu (Nasdaq: BIDU) was in a similar situation a few years back, revving up for its Nasdaq IPO when Google zoomed in at the last second and made an offer for the company which Baidu ultimately refused. Google is no slacker when it comes to web technology, and, especially given its recent retreat from the China search market, I wouldn’t be at all surprised to see if make a bid for a bigger stake or even outright purchase of Xunlei in the run-up to an IPO. Who knows: Maybe history willl turn out differently this time, as Google could certainly use a China video-sharing site to complement Youtube.
Mindray, HiSoft See Slowdown in 2011
Medical Device maker Mindray Medical (NYSE: MR) and software outsourcer HiSoft (Nasdaq: HSFT) have just reported year-end results, with both forecasting significant slowdowns in the year ahead. (Mindray release; HiSoft release) First Mindray: despite’s its China pedigree, the company’s 2010 results were hardly mind-blowing, with 2010 growth of about 11 percent and set to drop slightly to 10 percent this year. HiSoft, which boasts a client list of major western names, posted a more China-worthy 60 percent growth rate in 2010, but forecast that figure would come down sharply this year to 35 percent top line and 25 percent bottom line growth. Is this reason for alarm? For Mindray, the status quo in 2011 seems to indicate this company may not be set for steroid-like growth anytime soon, but may be a dependable play for longer term slow-but-steady returns (including a dividend). In HiSoft’s case, it’s a bit harder to say. Chinese companies are notorious for lowballing their outlook to give themselves plenty of room for error. But such a major lowballing could be a bit of a warning flag for this upstart firm trying to take on the Indian giants.
Sina Puts Cash Pile to Work in Mecox
An interesting deal coming out of Sina (Nasdaq: SINA), which is using a modest $66 million from its large cash pile to buy 19 percent of fashion e-commerce site Mecox Lane (Nasdaq: MCOX) from venture capital firm Sequoia Capital. (English press release) After thwarting a hostile takeover attempt by Shanda Interactive (Nasdaq: SNDA) several years back and stumbling in its own bid for Focus Media (Nasdaq: FMCN), Sina finally seems to have found success in a hodgepodge formula of building up and partly spinning off side businesses, like it did with its real estate arm, China Real Estate Information Corp (Nasdaq: CRIC), and now buying strategic stakes in other assets. In the course of doing this, Sina, arguably China’s best known Web portal, is quietly building itself into a truly diversified Internet media giant: something many of the country’s other net firms have tried to do but as of yet have been largely unsuccessful. Nice moves, Sina.
One Night in Bangkok: Finally an Interesting Move for China Mobile
After numerous bungled attempts at overseas m&a, finally we’re seeing something interesting coming from China Mobile (HKEx: 941; NYSE: CHL). Rather than go it alone, the world’s largest but still largely provincial telco is reportedly teaming up with Japan’s NTT DoCoMo (Tokyo: 9437) and South 
Korea’s SK Telecom (Seoul: 17670) in a bid for AIS, Thailand’s largest privately held telco which is also heavily in debt. (English article) While I’ve been a big doubter on China Mobile’s previous m&a attempts, believe it or not I think this one may make sense, or at least the way they’re going about it. Joining hands with two of the region’s biggest telcos should mean this deal could actually get done, and that once it’s done that AIS could also be run profitably. Of course, I’d love to see the region’s m&a master, Singtel (Singapore: STEL), in on the deal as well for an even bigger stamp of approval. But as deals go, this one could work if the trio can pull it off, giving China Mobile valuable exposure to a market with big potential.
Alibaba, Baidu Get Snagged in U.S. Piracy Report
As if Alibaba Group’s problems weren’t bad enough, now the company, along with fellow Chinese Web firm Baidu (Nasdaq: BIDU) have become ensnared in a U.S. report accusing them of hosting sites that are rampant with piracy. (English article; Chinese) The U.S Trade Representative’s office has branded Alibaba’s Taobao e-commerce site and Baidu as “notorious markets” for abetting piracy and counterfeiting — a move that won’t do much to boost Taobao’s prospects for an IPO that many suspect will come in the next year or so. As you may recall, Alibaba’s B2B site, Alibaba.com (HKEx: 1688), is embroiled in its own
scandal involving bogus vendors who defrauded buyers, resulting in the resignation of its CEO and COO. Chinese media are saying the report may be payback for China’s hard line towards Google (Nasdaq: GOOG) and other western Web firms in China. But regardless, investors might be well advised to avoid any Alibaba companies and also Baidu until the dust settles on this one. Investors in Yahoo (Nasdaq: YHOO), whose stake in Alibaba is one of its most lucrative assets, might also take note.
Fosun Pharma Offers Window to China Healthcare Reform
Those of you looking to catch a piece of China’s ongoing healthcare reform might want to examine the upcoming $1 billion Hong Kong IPO for China-listed Fosun Pharmaceutical (Shanghai: 600196). (English article; Chinese release) I’ll be the first to admit I don’t know too much about this company, but its diversified nature, coupled with parent Fosun’s reputation for being a savvy, entrepreneurial investor make this one look like a good bet as China embarks on a multibillion-dollar national healthcare overhaul expected to last for years. Fosun Pharma’s profit already grew around 70 percent last year, and that was just as healthcare reform was getting started. This company could also offer a more entrepreneurial play into the space, in contrast to more traditional firms like Sinopharm (HKEx: 1099), China’s biggest drug distributor, which come from a state-run background.
Wo! China Unicom OS Stumbles Onto the Wire
After masterfully working its status as sole seller of Apple’s (Nasdaq: AAPL) iPhone in China, No. 2 mobile carrier Unicom (HKEx: 762; NYSE: CHU) has put a major dud online with the launch of a new line of phones powered by its self-developed smartphone operating systems called “Wo” (English article; Chinese news release). Now I personally think this company is on the comeback trail, in part due to government support, but this Wo strategy is totally misguided and doomed to die on the vine. It comes on the heels of rival China
Mobile’s (HKEx: 941; NYSE: CHL) launch last year of its oPhone smartphone line. But those phones were powered by Google’s (NYSE: GOOG) Android, which has much stronger legs than Unicom’s, which appears to have no other support beyond Unicom itself. In fact, this move smells suspiciously like the latest effort in China’s near non-stop campaign to get its tech firms to develop proprietary technologies that they can sell to the rest of the world. I gives this latest Wo campaign a year or two at the most before the technology gets stopped in its tracks and dies a quiet death.
Groupon in China: Real Deal or Same Old Story?
Just a day after reports that a Chinese Groupon wannabe called Dianping was revving up for an IPO, we learn that Groupon itself is wheeling and dealing its way into China in a new tie-up whose partners include a fund run by local Internet giant Tencent (HKEx: 700) (English article). Never mind that Alibaba’s Taobao, Dianping and even Tencent itself already host their own Groupon-like sites that will compete with the new site, called Gaopeng.com. The question here is, in this relatively greenfield area in China does Groupon stand any chance of success against the established giants and start-ups? In a word, the answer is no. The Chinese Internet road is paved with ruins from the likes of Yahoo (Nasdaq: YHOO), Google (Nasdaq: GOOG) and eBay (Nasdaq: EBAY), all of whom tried but failed to crack the China Internut. Others like Microsoft (Nasdaq: MSFT) are still struggling after years in the market. Chinese officials pay lip service to having an open Internet market, but the reality is they stack the deck heavily against foreign firms through various means that favor the homegrown names. I see no reason why this time should be any different. Sorry, Groupon.
