Weibo and Renren highlight troubles facing Chinese web groups

May 22, 2014 9:19 am

Weibo and Renren highlight troubles facing Chinese web groups

By Sarah Mishkin in San Francisco

Two of China’s biggest tech companies have unveiled weak numbers in an echo of some of the earnings disappointments coming from their US peers.

Weibo, a microblogging platform that listed in New York last month after being spun out from its parent Sina, reported a first-quarter net loss of $47.4m, widening from $19.3m in the same period a year ago, as it spent more on marketing and staffing.

Revenues doubled, in line with expectations, to $67.5m on the back of increased advertising sales. Shares were down 6.2 per cent in after-market trading in New York.

Renren, a Facebook-like social network, said its user count in March fell to 51m, from about 57m the same month last year, with first-quarter revenues down 40 per cent year on year at $24.9m.

Renren forecast that its second-quarter revenues would be about $21m-$23m, roughly halving year on year.

However, the numbers did little to stunt appetites for China’s latest tech offering. Investor interest in Chinese internet companies has been rising with the spread of internet throughout the country, most recently due to the increasing affordability of entry-level smartphones.

JD.com, one of the nation’s largest ecommerce sites, raised $1.8bn in its listing on Wednesday, more than initially expected, as investors bet on the future growth of online shopping. Alibaba, its much larger competitor, is expected to list in New York later this year in what could be the year’s largest initial public offering.

Renren’s net profit rose to $32.3m, compared with a net loss of $3.1m the same time last year, but this was due to a $57.1m gain on the sale of Renren’s stake in Nuomi, an ecommerce website.

Renren started out as a social network popular with college students, but saw its popularity decline as it moved slowly in adapting to the shift towards mobile internet usage. Last year, it closed its popular Happy Farm game, similar to the popular US game FarmVille.

Users had been migrating away from the mostly PC-based game to mobile games being developed by groups such as Tencent, which now has a market capitalisation of $135.4bn.

Weibo has also struggled, albeit less so, as it moved more slowly than Tencent in developing its mobile presence. When it listed in in April, it sold fewer shares than it had initially planned, and priced at the lower end of expectations.

The group’s user growth had been slowing, but more recently has picked up. Management said the microblog counted 144m monthly active users at the end of March, up 34 per cent from a year earlier.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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