July 29, 2008
One of our special focuses this week is on gaming and online games. As a part of this special focus, TWST spoke to analyst Tian Hou- who talked to us a little bit about the online games part of this space- and specifically in her region of coverage: China. She gave us a few ideas about what company’s to look at in this space:
- Perfect World (PWRD)- “The name I like the most is Perfect World because this company has become the biggest game exporter of all the Chinese game developers. They develop what we call 3D games, and normally they can come out with a game in six months with a $0.5 million R&D cost. It is the best R&D team in the world. 3D games take other game developers two or three years and $3 million to $5 million to develop worldwide, so you can see how fast this company is and how good they are. They have been exporting games to many countries. One game they export to 14 countries, another game they export to seven countries — you add them all together, it’s 37 countries. Nineteen of them have already had a commercial launch. There are 18 more to come, and next year if all those games can be fully operational, we’re looking at a huge licensing revenue for this company that has been underestimated by the Street.”
- Netease (NTES)- “The other company I like is NetEase. They run games with the time-based model and they have figured out how to grow a time-based model game recently. It grew rapidly in 1Q08. In addition, they also have some smaller games added to the portfolio, so we expect the existing games along with the newer games to make contributions to growth going forward. “
- Shanda Interactive Entertainment (SNDA)– “The other company we like is Shanda. It is not strong in in-house R&D, but it is very strong in operating a game. We do think that eventually this company may
become an operator rather than a game developer, as the China game market becomes more segmented or specialized”
For the complete interview with Ms. Hou, including a complete overview of this space, its growth potential in the immediate future, and more stock picks, click here.
