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Buffett Brightens Solar Prospects 巴菲特进军太阳能 行业美好前景可期

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The solar world is all abuzz this morning with news that billionaire Warren Buffett is taking a big bet on solar energy with his decision to buy a $2 billion solar power plant in California, a 550-megawatt project called Topaz, and what it might mean for the embattled sector. (English article) What it says is that under current conditions, which include healthy government incentives, this kind of investment will yield solid enough returns to satisfy someone like Buffett, who known to carefully analyze all of his investments before plunking down his shareholders’ dollars. That decision should prove encouraging to other potential investors in and builders of solar energy farms, and theoretically could provide huge new demand for solar panel makers who would supply those projects. The main problem, of course, is that this particular project is in the United States, where last week a trade panel made a preliminary ruling that China unfairly subsidies its solar panel makers — a decision that could result in big punitive tariffs for Chinese firms like Suntech (NYSE: STP), Trina (NYSE: TSL) and Yingli (NYSE: YGE), which collectively supply over half of the world’s solar panels. (English article) That uncertainty was apparent in shareholder reaction to Buffett’s move, with Trina shares unchanged in Wednesday trade, while Yingli was up slightly and Suntech gained a healthy 6 percent. Beijing has lobbied strongly against the punitive tariffs, and considering the importance both Beijing and Washington place on developing alternate energy, I’m fairly confident they will find a solution that will avert a prolonged solar trade war. That said, this latest Buffett investment looks like good news all around for solar cell makers in the longer term, though they could suffer in the shorter term when the US issues punitive tariffs, which looks almost inevitable.

Bottom line: Warren Buffett’s new investment in solar energy bodes well for panel makers in the long term, but they will still suffer short-term when the US issues punitive tariffs in a trade dispute with Beijing.

Related postings 相关文章:

◙ China Retaliates With Own US Solar Probe 中国启动对美可再生能源补贴调查

◙ Solar Slips Squarely Into the Red 太阳能行业陷入全线亏损

◙ Beijing, Yingli Send Mixed Solar Signals 英利和中国政府似乎“背道而驰”

 

 

News Digest: December 8, 2011

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The following press releases and media reports about Chinese companies were carried on December 8. To view a full article or story, click on the link next to the headline.

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◙ Alibaba Wants to Buy Back Yahoo (Nasdaq: YHOO) Stake For $13 Bln – Source (Chinese article)

◙ China Approves Nestle’s (Switzerland: NESN) Candy Maker Purchase (English article)

◙ Apple (Nasdaq: AAPL) Loses iPad Trademark Lawsuit in Shenzhen (English article)

◙ Buffett Makes a Big Bet on Solar (English article)

◙ China Factory Unrest Spreads Amid Economic Uncertainty (English article)

China Mobile 3G: Where Are the Subscribers? 中国移动3G：订户在哪里？

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A leaked memo from China Mobile (HKEx: 941; NYSE: CHL), if it’s true, is providing an embarrassing look at the spectacular failure of the company’s sputtering 3G service. According to the memo, the country’s dominant mobile carrier now has a paltry 3.5 million data card users, representing a tiny portion of its 640 million total users, even though data services are supposed to be a key future growth driver. (English article) Making the situation even more embarrassing, only about half of those data card users were using China Mobile’s 3G service, while the rest were using its older 2G network. So that means that even though China Mobile reported having 45 million 3G subscribers at the end of October, only 1.7 million of those, or less than 4 percent, were using the service primarily for its Web surfing capabilities, which is what data cards are designed for. So my question to China Mobile is: what exactly are the other 43 million 3G users subscribing to? My guess is that many of them are really just 2G users who have paid a minimal fee, or possibly no fee at all, to upgrade to 3G packages that China Mobile is promoting less to build up the business and more to satisfy Beijing that it is working to justify its expense of more than $10 billion to build its 3G network. To be fair, China Mobile has been handicapped from the start in 3G by Beijing’s decision forcing it to build a 3G network based on the homegrown TD-SCDMA standard, which is only used in China and suffers from a wide range of technical problems, not to mention a scarcity of handsets that can operate on the system. The company has shown recent signs of stepping up its 3G campaign as a new generation of leadership moves in with the expected retirement of longtime Chairman Wang Jianzhou. If these new leaders are smart, they will aggressively work to fix the 3G glitches and improve coverage to build up China Mobile’s data card users, which would help to not only provide a lucrative new revenue source but also convince consumers that the company has a viable 3G offering to compete with rival products from China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE: CHU).

Bottom line: A leaked memo from China Mobile showing very low 3G data card subscribers underscores the company’s pathetic progress in promoting 3G to date.

Related postings 相关文章:

◙ China Mobile Tries 4G Back Door in Shenzhen 中国移动试图绕过监管机构于深圳秘密规划4G网络

◙ China Mobile’s TD 3G Fading Fast 中国移动3G网络前景黯淡

◙ China Mobile: Poor 3G Approach Yields Weak Results 中移动3G策略不当 拖累公司三季度业绩

 

Qihoo, Vancl Fend Off New Attacks 奇虎、凡客和人人承受压力

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Chinese Web firms continue to come under attack as they stare at a Web bubble that is showing early signs of bursting, with listed companies fending off assaults from short sellers and others struggling to retain employees amid the latest rumors of cash crunches and layoffs. The latest trio to face such assaults include web security software firm Qihoo 360 (NYSE: QIHU), leading clothing retailer and IPO candidate Vancl, and struggling social networking services site Renren (NYSE: RENN), which are all putting out various fires in their ranks. Qihoo, after coming under attack from a small research house called Citron last month (previous post) questioning many of its user numbers, has come under assault again by Citron with more similar allegations. Qihoo has come out with its own statement blasting Citron and explaining to worried investors why all its numbers are accurate. (company announcement) I previously said I wouldn’t be surprised if Citron’s claims are at least partly accurate (previous post), though investors so far seem to be giving Qihoo the benefit of the doubt. The company’s stock still trades at around $18, not far from the level it was at when Citron issued its first report and far higher than the $5 per share that Citron estimated Qihoo shares were worth. Meantime, Vancl is fending off reports from an anonymous blogger that it is facing a cash crunch as it repeatedly delays its planned New York IPO. (Chinese article) Vancl has denied the posts, which apparently carry some credibility due to the recent departure of a company vice president and reports in September that it was cutting 5 percent of its workforce. (previous post) Reports earlier this week that Vancl has just received $230 million in new venture funding (previous post) would seem to indicate the company has ample cash for now, but clearly it is feeling pressure to raise even more as competition rages in China’s e-commerce space. Last but not least there’s Renren, which is reportedly getting ready to offer its shares to all employees to let everyone “enjoy the company’s success.” (Chinese article) The only problem is that Renren’s shares now trade at about $3.50, or one-quarter of their $14 IPO price in May. To me this plan looks like desperation in a bid to retain Renren workers, many of whom are probably having doubts about their company’s future.

Bottom line: Assaults on Qihoo 360, Vancl and Renren are the latest signs of turbulence as China’s Internet bubble starts to burst, with many more to come.

Related postings 相关文章:

◙ Report Takes Wind Out of Inflated Qihoo 奇虎遭遇Citron釜底抽薪

◙ China Internet Bubble Sees Vancl Dressing Down 中国互联网泡沫见证凡客裁员

◙ Renren Results: A Mixed Bag for Everyone 人人网业绩：苦乐参半

Internet Investors Seek Refuge in Big Names 互联网投资者选择性支持中国市场领头羊

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Financing for Chinese web firms may have slowed as the country’s Internet bubble starts to burst, but a couple of major new deals show it certainly hasn’t stopped, with investors simply becoming more selective about who they support. The latest deals have seen Internet heavyweight Tencent (HKEx: 700) raise a hefty $600 million in its first US dollar bond offering, while leading clothing retailer Vancl has reportedly raised $230 million in new venture funding. Let’s look at the Tencent deal first, whose $600 million was at the lower end of its original plan to raise anywhere from $500 million to $1 billion. (English article) The fact that the figure came in at the low end shows investors are still somewhat wary of Chinese Internet firms, which have been the source of a series of recent accounting scandals on Wall Street. Concern is also no doubt high that China’s overheated Internet sector could be nearing a correction. Lastly, some investors might also be concerned about potential overseas acquisitions that Tencent might be eying for this new money. The company has previously courted dubious overseas acquisitions including News Corps’ (Nasdaq: NWSA) faded MySpace social networking service, even though it ultimately lost out in that bidding war. But that doesn’t mean that Tencent won’t bid for more troubled overseas Internet assets. Meantime, Vancl’s securing of this latest funding probably comes as a welcome relief for a company that has had to repeatedly delay a planned US initial public offering due to very weak sentiment towards China Internet stocks amid the recent string of reporting scandals. (English article) Several companies have gone ahead with IPOs despite the current negative climate, mostly with poor results. Vancl clearly isn’t as badly in need of cash as these other companies, and its receipt of these new funds should help it to buy more time until the IPO climate hopefully improves next year. All this shows that investors are still willing to support premium Chinese Internet names, though don’t look for many start-ups to receive major funding or make public offerings in the next 6 months.

Bottom line: New major fund raising by Tencent and Vancl show investors are willing to fund premier Internet names, though younger firms are likely to see far less investor interest in the next 6 months.

Related postings 相关文章:

◙ China Internet Bubble Sees Vancl Dressing Down 中国互联网泡沫见证凡客裁员

◙ 360Buy $5 Bln IPO Plan Looks Like Desperation 京东商城50亿美元上市计划凸显绝望

◙ Xiu.com Funding Puts Glamor in Online Fashion 服饰类网站前景看好

Saab Rescue Gets New Life With Bank of China Role

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The never-ending saga of a plan by 2 obscure Chinese firms to rescue dying Swedish automaker Saab has taken an interesting twist, with foreign media reporting that one of the Chinese partners has dropped out of the rescue group and been replaced by banking heavyweight Bank of China (HKEx: 3988; Shanghai: 601988). Under the original plan that stood little or no chance of success (previous post), the 2 Chinese firms, Youngman Lotus Automobile and Pangda Automobile (Shanghai: 601258), had been working for months on securing hundreds of millions of dollars in financing to rescue Saab, even as the Swedish company’s former owner, GM (NYSE: GM), was threatening to veto such a deal. I had said that even Youngman and Pangda could secure the necessary funding, their plan would ultimately get vetoed by Beijing due to inexperience of the 2 Chinese companies and Saab’s highly complex situation. But now the exit of Pangda and entry of Bank of China has completely changed the complexion of this rescue plan, and indicates that someone in Beijing may actually want to see the deal succeed. Foreign media say that under the deal now being discussed, Bank of China would replace Pangda, and collectively with Youngman would own just under 50 percent of Saab after providing their rescue financing. (English article) This new deal contains two elements lacking in the previous deal, giving it a much higher chance of success. From a financing standpoint, Bank of China’s participation guarantees the availability of needed funds, which are likely to run in the hundreds of millions of dollars. But perhaps more important, the participation of well-connected Bank of China gives the deal a much better chance  of winning necessary government approval. Clearly Beijing has taken an interest in this deal, though I’m not sure why as Saab still  has many structural issues that GM and others with much more experience failed to solve. Perhaps Beijing is just interested in Saab’s intellectual property, following the purchase 2 years ago of several older Saab model designs by Beijing automaker BAIC. Regardless of the reasoning, this latest rescue package looks to have a much better chance of success, meaning Saab may yet survive to see at least the end of 2012.

Bottom line: A Chinese plan to save Swedish automaker Saab stands a much better chance of success following the new entry of Bank of China into the rescue partnership.

Related postings 相关文章:

◙ More Stumbles for Saab Rescue, 360Buy IPO 搭救萨博和京东商城IPO两计划注定命运多舛

◙ Message to Saab: Don’t Count on China 萨博不应指望中国注资

◙ BAIC – Scavenging for Parts in IPO Run-Up

Sinopec Latest Victim of Environmental Scrutiny 中石化管道工程因环保计划不足被叫停

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The days when China’s big state-owned energy firms could do whatever they wanted without regard for the environment may be in the past, as reflected by a new setback for Sinopec (HKEx: 386; NYSE: SNP), China’s top oil refiner. China’s environmental protection agency, exercising its newfound authority following a new call to protect the environment, has officially ordered Sinopec to halt work on a 2 billion yuan pipeline it was building in the southern city of Zhanjiang, citing lack of a sufficient environmental protection plan. (government announcement) The news will hardly be welcome for Sinopec, and spotlights the growing risk that the company and fellow energy majors PetroChina (Shanghai: 601857; HKEx: 857; NYSE: PTR) and CNOOC (HKEX: 883; NYSE: CEO) will face in the future from an increasingly assertive regulator empowered by Beijing’s to clean up China’s badly polluted environment. This setback for Sinopec, which was first suggested in mid-November (English article), is just the latest in a growing string of government actions that have seen polluting factories, many of them inefficiently run using outdated equipment, shut down over the last year after their damaging ways were exposed. In one of the highest profile cases, CNOOC and US partner ConocoPhillips (NYSE: COP) have been dogged for much of the past half year by persistent leaks at their joint venture oil drilling operation in the Bohai Bay off the northeast Chinese coast. (previous post) A steady stream of reports about environmental damage from the leaks have appeared in the Chinese media, prompting CNOOC and ConocoPhillips to set up funds to clean up the mess and compensate victims. What all of this says is that all the energy majors will face the very real prospect of environmental liability in all of their future domestic operations, which will undoubtedly create major new costs that will put further pressure on their already-strained bottom lines.

Bottom line: The suspension of work on a Sinopec pipeline under government orders spotlights the growing exposure that energy firms are facing from environmental liability.

Related postings 相关文章:

◙ Pricey M&A, Cheaper Gas Undermine Sinopec 溢价收购和成品油降价 中石化面对双重利空

◙ Stumbling CNOOC Replaces Chief Executive 中海油换将李凡荣接棒CEO

◙ CNOOC Woes Spotlight Environmental Perils

HK’s Sitoy Targets China Taste For Luxury

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A Hong Kong manufacturer called Sitoy Group is trying to position itself as a play on China’s booming market for luxury goods, making handbags for an all-star line-up of big names like Coach and Prada (HKEx: 1913). But anyone wanting to buy into this company, which is revving up for a Hong Kong IPO expected to raise nearly $100 million (English article) might want to take a look at the fine print in its prospectus before plunking down their hard-earned investment dollars. In fact, Sitoy’s top line does look quite attractive, with revenue nearly doubling to an expected HK$2.49 billion this year from HK$1.35 billion in 2009 as the company and its peers ride a boom in demand from newly affluent consumers in China, which is expected to soon overtake Japan to become the world’s leading luxury goods market. (company prospectus) But a closer look at the fine print, on page 86 of the prospectus to be exact, shows that Sitoy’s fashionable handbags sell to its big-name customers for a relatively modest HK$80-$640 each, or about US$10 to $80. That contrasts quite sharply with what the big names charge, with the cheapest bag on Coach’s web site priced at $300, while the cheapest offerings on Prada’s site are mostly in the $1,500 range and higher. Clearly the big-name brands are making a lot more profit off the luxury goods boom than manufacturers like Sitoy, which instead are simply playing a volume game to fuel their top and bottom line growth. I suspect that Sitoy and others who manufacture for the big luxury brands may be able to keep their sales volume growing for another year or so, as millions of newly affluent young Chinese urbanites satisfy their appetite for luxury goods. But look for a sharp slowdown after that, probably in the next 2-3 years, after which Sitoy may look much more mundane than luxurious.

Bottom line: Manufacturers like Sitoy that produce for big luxury brands may see strong growth for the next year on booming demand from China, but could see a sharp slowdown after that.

Related postings 相关文章:

◙ InBev Taps China’s Thirst for Luxury Brands 中国人重面子百威英博趁机引入高端啤酒品牌

◙ Youku’s Luxurious Dream 优酷网的奢侈品梦想

◙ Luxury Cars Zoom, But Who Profits?

China Telecom, Unicom Enter Contrition Mode 中国电信和中国联通悔过自新

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Following the landmark launch of a probe against them last month for their lock on the domestic broadband Internet market, China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA) have suddenly become quite contrite in their effort to avoid becoming the first major state-run firms to be found guilty of exploiting the masses through monopolistic practices. The Chinese media were buzzing over the weekend with reports that the 2 companies, China’s second and third biggest telcos, were both promising to end their monopolistic ways and to improve broadband speeds and lower prices if the government would end its investigation. (English article) As a customer of China Telecom, I can happily report that my snail-paced broadband service suddenly became much faster during last week, and that I suspect this new pledge to be more consumer-focused is at least partly and possibly completely behind the change. So what does all this mean for China Telecom and Unicom? The answer is probably a moderate hit to revenues and profitability for their lucrative broadband business in the short- to medium-term, as they are forced to put more resources into providing better service while at the same time lowering fees they charge to consumers. Considering that broadband is an important part of their business, this does look like relatively bad news for both companies, and, as I said when the probe was first announced, I would look for some fairly significant profit erosion in the next 1-2 years, especially for Unicom which has struggled to find its footing in the country’s fast-growing 3G mobile market. (previous post) Meantime, China Telecom continues to look impressive in its aggressive push to become a major player in the telecoms space, this time signing an interesting agreement with US telecoms giant AT&T (NYSE: T) to offer wi-fi roaming services in each others’ markets. (Chinese article) Roaming services for traditional voice services have been common for years now, but in the coming age where mobile companies get more and more of their revenue from data services this is exactly the kind of big global deal that China’s telcos need to be pursuing to position themselves as leaders in the new era of high-speed 3G and 4G telecoms services.

Bottom line: China Unicom and China Telecom will see moderate profit erosion after making concessions to try and end an anti-monopoly probe into their broadband services.

Related postings 相关文章:

◙ Telecoms Investigation Signals Profit Erosion 电信联通遭反垄断调查或侵蚀利润

◙ China Telecoms Faces Power Struggle, Half-Baked 4G 中国电信行业遭遇政府监管权利斗争

◙ Anti-Monopoly Regulator Makes Poor Choice in Chasing China Telecom 中国反垄断初试牛刀 选错对象

Chip Merger Near, More Consolidation Ahead? 华虹NEC和宏力半导体合并预示未来或有更多整合

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As a longtime tech reporter, I was intrigued to see that one of China’s longest running M&A deals that never quite seems to happen has once again popped  into the headlines, perhaps paving the way for an even bigger and sorely needed consolidation in the foundering microchip sector. Industry followers will know that of course I’m talking about a merger between Hua Hong NEC and Grace Semiconductor, both midsized players that hoped to become major forces in the contract chip-making business but never achieved the scale necessary to do that. The 2 sides, and more importantly their impatient investors, have been talking for years about a merger, but this time foreign media are reporting they have actually reached a deal, which should close by year-end. (English article) The new company will have total assets of about $1 billion, according to the report, or roughly equivalent to China’s biggest contract chipmaker, SMIC (HKEx: 981; NYSE: SMI). But considering that SMIC’s market cap now stands at about $1.4 billion and the new company would have a similar profile, this newly merged company will still be a tiny player compared with industry leader TSMC (Taipei: 2330; NYSE: TSM), with a market cap of $63 billion, and even compared to number two player UMC (Taipei: 2303; NYSE: UMC), with a market cap of $5.8 billion. A more interesting proposition would be to see this newly created company merge with SMIC to create a player that  could seriously challenge UMC, at least in terms of scale. SMIC is suffering from its own issues, including a power struggle earlier this year that saw its reputable CEO get ousted (previous post), and an industry downturn that saw it slip back into the red after reporting a year of profits. (previous post) But if the Hua Hong NEC-Grace merger finally does go through, I wouldn’t be surprised to see talks begin within a year for another merger of that company with SMIC as the two companies’ backers look to create a serious new global competitor. I would still have my doubts about whether such a new company could really compete with TSMC and UMC, but at least it would have the size and customer base to make a serious attempt at putting China on the global microchip map.

Bottom line: The merger of Hua Hong NEC and Grace Semi signals consolidation in China’s chip sector may finally be underway, paving the way for a potentially even bigger merger with SMIC.

Related postings 相关文章:

◙ SMIC: Under Fire From All Directions 中芯国际亏损显示其内外交困

◙ SMIC Makes the Right Move With New CEO 中芯国际终於明智换帅

◙ SMIC: Consolidation Ahead 中芯国际任命新高管 或有助於业内合并

 

NetEase Makes Buzz With Buyback, Pigs 网易回购股票和养猪重大决策或在即

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There’s a mini-flurry of news out about online game specialist NetEase (Nasdaq: NTES), as the normally low-key company generate some buzz, perhaps in the prelude to a bigger announcement about the future of its portal business. None of the latest news is that exciting, but it’s all interesting nonetheless. In perhaps the biggest news, the company has joined many of its US-listed peers in announcing  a share buyback program worth up to $50 million, a relatively small amount but still significant enough to blip onto investor radar screens. (English article) The news helped to lift NetEase shares nearly 3 percent on Wall Street, outpacing the broader market but still a relatively modest move for this kind of company. In a more intriguing piece of news, the company’s soft-spoken founder Ding Lei has said an IPO is in store for his separate pig-raising business next year. (Chinese article) He made the comments in the city of Ningbo at an event centered on agriculture, which seems to be Ding’s relatively newfound passion as he also invests in red wine. The pig venture could actually be an interesting investment proposition, considering China’s love for pork and the country’s recent concerns about food safety. This kind of big publicly-listed pork company could easily become an industry leader, as this kind of massive producer  can better guarantee food quality and safety. In one additional tidbit, NetEase is also reporting on its own news page that it has officially launched a social networking site (SNS) called Lofter. This is probably the least interesting news, as Sina (Nasdaq: SINA) launched a similar product earlier this year to complement its Weibo microblogging service (previous post), and both products will have to compete with more established sites operated by Renren (NYSE: RENN) and Kaixin. From my perspective, this recent flurry of news could be a prelude to a decision on what NetEase plans to do with its Internet portal, which was its main business many years ago but later took a back seat to games that now make up the bulk of its revenue. The company said earlier this year it is aiming to revitalize its portal and spin it off (previous post), and I expect this new flurry of news could presage an announcement soon about the portal’s future.

Bottom line: A recent flurry of news from NetEase could presage an announcement about future plans for its portal business, involving a potential sale or  public listing.

Related postings 相关文章:

◙ NetEase Sharpens Up Messaging in Run-Up to Portal Spin-Off 网易剥离门户网站 再度磨砺电邮服务

◙ NetEase Looks to Reinvigorate Portal 网易似要重振门户

◙ Renren Discovers Microblogging Too Late