Dec. 3, 2009 (Chinavestor) Shanda Interactive (NASDAQ:SNDA) and its spun-off online game unit, Shanda Games (NASDAQ:GAME), reported third quarter financial results on December 1st. GA Interactive (NYSE:GA), Perfect World (NASDAQ:PWRD), Changyou.com (NASDAQ:CYOU) and NetEase.com Inc. (NASDAQ:NTES) have reported earlier in November.
Looking at latest numbers of Shanda Interactive (NASDAQ:SNDA), total revenues grew 12% QoQ to RMB 1,382.9 million while net profit was RMB 519.6 million, representing an increase of 17% QoQ.
As the following summary table suggests, Shanda Interactive (NASDAQ:SNDA) is not only the largest but grew that fastest in the third quarter.
Table 1: Chinese online game developers and operators 2009 Q3
| Revenue [RMB] | Change [QoQ] | Profit [RMB] | Change [QoQ] | |
| Shanda Int. (NASDAQ:SNDA) | 1,382.9 mil | +12.0% | 519.6 mil | +17% |
| Changyou.com (NASDAQ:CYOU) | 469.36 mil | +3% | 258.25 mil | +9% |
| NetEase.com (NASDAQ:NTES) | 879.4 mil | +0.1% | 398.8 mil | -16% |
| Giant Interactive (NYSE:GA) | 290.2 mil | -21.4% | 197.7 mil | -14.7% |
| Perfect World (NASDAQ:PWRD) | 590.0 mil | +13.2% | 288.3 mil | +9.8% |
As the following two chart testify, industry leaders got bigger while smaller players, notably Giant Interactive (NYSE:GA), lost market share.
The9 ltd. (NASDAQ:NCTY) is not mentioned in the 2009 Q3 chart due to its flagship game, World of Warcraft (WoW), lost its operating licence in China.
When it comes to valuation, Giant interactive (NYSE:GA) looks attractive by the first sight. As the following chart testifies, valuation of Shanda Games (NASDAQ:SNDA), NetEase.com Inc. (NASDAQ:NTES) and Changyou.com (NASDAQ:CYOU) increased from last quarter while Giant Interactive (NYSE:GA) is now trading at only 13 times earnings, less then half the competition.
The stock price deviation of Shanda Interactive (NASDAQ:SNDA) from Shanda Games (NASDAQ:GAME) in the last few days following earnings announcement puzzled many investors. There are two reasons why SNDA has been outperforming GAME for this short period of time:
- SNDA is sitting on a $1.4 billion cash pile, most of it is net proceeds from the GAME IPO. This gives SNDA a high leverage when negotiating for possible takeovers of smaller online game developers, further enhancing its game pipeline and portfolio.
- SNDA reported a total revenue growth of 12% QoQ, surpassing GAME's reported 10% growth. It's too early to tell if this trend is here to stay, but investors have to pay close attention to that basic measure.
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