BofA Merrill Lynch to raise target price to 9.2 US dollars

Sina Science and technology news Beijing time August 7, the Bank of America Merrill Lynch today released a study to maintain the giant network (NYSE:GA) shares of the "buy" rating, while the target price from 8.2 U.S. dollars to 9.2 U.S. dollars.

The following is a summary of the report:

The giant network launched the cartoon MMO Game "The Fairy World" later this April, but the new game has been offset by a maturing "journey" to the Giants ' network. The journey has been trying to get users to upgrade to their version of the migration. We believe that the "fairy World" is expected to add 10% players to the company's game product line in other games that make significant revenue contributions to the Giants ' networks. Although the operational data of Journey 2 is largely stable, the journey is likely to slide.

The cost of the company's marketing may continue to climb as the giant network invests in the release of the "Journey" and "Journey 2", plus several new web games. On the other hand, a rebate subsidy of 70 million yuan for the whole year of 2013 (27 million yuan in the second quarter) will help offset the adverse effects of increased costs. As a result, we maintain the expected earnings per share for 2013, while the 2014 and 2015 earnings forecasts for each share are cut by 4% and 2% respectively.

The giant network announced that it would distribute a 0.23-dollar semi-annual cash dividend to shareholders who were registered at the end of the New York Stock Exchange on December 12, 2013. Including dividends distributed in May this year, the giant network's annual dividend amounted to 0.65 U.S. dollars, dividend rate of 7.6%.

Valuation：

We have raised the target price of giant web stocks from $8.2 to $9.2, while maintaining a "buy" rating. Our valuation is based on earnings forecasts for the second half of 2013 and the first half of 2014, which bodes well for the giant's online shares, which will grow at a rate of 10% per cent for 2014 and 2015. We believe that, given the low valuations and dividends and the maturing of old games, giant networks are more like value stocks than growth stocks.

Second quarter earnings:

In the second quarter of this year, the giant network revenue for 588 million yuan, the year-on-year growth of 11%, the chain growth of 3%, basically in line with the average of 580 million yuan analysts expected. As the "journey" downturn offset the contribution of the "Fairy World", the second quarter giants network average number of online players (ACU) rose by only 2% in the chain. Both the paid users and the ARPU value increased by 3% on a month-on-month basis, reaching 2.3 million and 244 yuan respectively.

The second quarter, the giant network operating profit of 358 million yuan, the year-on-year growth of 9%, the chain down 2%. Thanks to a return of 27 million yuan, the second-quarter giants ' net earnings per share was $0.24 trillion, an average of more than $0.22 trillion analysts expect. The giant network expects revenue to be flat or slightly up in the third quarter of 2013.

Downside risk:

The downside risks to the Giants ' networks include weak performance in old games such as the journey, government regulation, uncertainty over long-term growth due to slower PC-user growth, increased competition between page and hand travel, and excessive concentration of revenue. Sail)