(By Salman - iStockAnalyst Writer)Shanda Interactive Entertainment Ltd. (NASDAQ:
SNDA) is scheduled to release financial results for the second quarter ended June 30, 2009 on Thursday, September 3, 2009 after the market close. Analysts on average expect the company to report earnings of 83 cents per share on revenue of $178.82 million. In the year ago quarter, the company reported earnings of 28 cents per share on revenue of $122.1 million.
Shanda Interactive Entertainment Limited is a leading interactive entertainment media company in China. Shanda offers a portfolio of diversified entertainment content including some of the most popular massively multi-player online role-playing games (MMORPGs) and advanced casual online games in China, as well as online chess and board games, e-sports game platform and a variety of cartoons, literary works and music. Shanda's interactive entertainment platform attracts a large and loyal user base, of which more and more is coming from home. Shanda Interactive was ranked seventh in the 2009 list of 100 fastest-growing companies and second in the list of fastest-growing entertainment companies by Fortune Magazine.
The Shanghai, China based-company's first quarter net income rose to RMB 361.0 million or US$52.8 million, compared to RMB 288.8 million in the same quarter last year. On a per ADS basis, net income was RMB 5.28 or US$0.78, compared to RMB 3.94 per share in the year ago quarter. Quarterly revenues jumped 42.0% to RMB 1.1 billion or US$162.0 million from RMB 779.8 million in the prior-year period. Analysts on average expected the company to earn $0.74 per share on revenue of $155.66 million. Online games related revenues, including MMORPGs and casual games were RMB 1.062 billion or US$155.4 million in the quarter, up 40.3% from RMB 757.4 million a year ago. MMORPGs related revenues increased 47.4% year-over-year and 8.0% quarter-over-quarter to RMB 944.5 million or US$138.2 million, accounting for 85.3% of net revenues. The sequential growth in MMORPG related revenues was primarily driven by the continued release of expansion packs for the existing games as well as newly launched games in the first quarter of 2009.
Gross margin was 72.3% in the first quarter of 2009, compared with 69.5% in the first quarter of 2008 and 72.1% in the fourth quarter of 2008.
Online gaming in China represents one of the largest and fastest growing Internet business sectors in the country. With about 18% of total global Internet users, China had the largest online audience with 180 million Internet users in December last year, ComScore reported early this year. According to San Jose, California-based research firm Niko Partners, China will have 64.9 million online gamers by the end of 2009, in a market that is growing at an incredible rate. Each of these players will spend $52 on average, the firm said.
Late in May, the company announced that it plans to submit registration documents to the SEC for a possible Initial Public Offering of Shanda Games Limited. The potential spinoff of the online game portion of the company’s business could help sharpen its focus, and give it flexibility to pursue strategic opportunities in the online-games sector. Shanda expects to remain Shanda Games' majority shareholder after the completion of the proposed IPO.
The company has been quite active on the acquisition front. Early in June, Shanda Interactive agreed to acquire a majority of shares in Hurray! Holding Co. Ltd for $46.2 million. Hurray! specializes in artist development, music production and wireless music distribution and other wireless value-added services in China. It also organizes concerts and other music events in China through its affiliated music companies.
Shares of the company are currently trading at roughly 12 times 2010 EPS estimates. In terms of stock performance, Shanda shares are up 48% since the beginning of the year. On Tuesday, shares of the company rose 49 cents or 1.01% to $49.43.
Disclosure: Author doesn’t own any of the stocks discussed here.
