Chinese companies at a glance

Shanda earnings rise

Chinese online game operator Shanda Interactive Entertainment Ltd posted a 22 percent increase in fourth-quarter earnings as it attracted more players, new titles and fresh content.

Net income rose to 292.6 million yuan on revenues that increased 52 percent from a year ago to 714.2 million yuan, Shanghai-based Shanda said last week.

The growth in the quarter was mainly driven by Shanda's expansion packs for its existing games like the Legend of Mir II and a new title, World Hegemony, a multi-player Web game based on the Three Kingdoms period in ancient China.

"Our MMORPG (massive multiplayer online role-playing game) business continued to post impressive results and we have seen solid improvement in expanding the active paying user base," said Chen Tianqiao, chairman and CEO of Shanda, the nation's largest online game operator.

Despite the recent heavy snowstorms across China that caused massive blackouts, Chen expects the impact will be limited and the company's first-quarter revenue will be more than $100 million, although some players were not able to play their games for a time

There were 3.47 million active paying accounts for MMORPGs in the fourth quarter, compared to 2.29 million a year ago, increasing 13 percent over the third quarter.

Jeweler plans expansion

Hong Kong-listed jeweler Luk Fook Group plans to open more stores on the mainland to cash in on the rising demand for luxury jewelry.

"We plan to open six more self-operated shops this year in first-tier cities such as Beijing and Shanghai," said William Wong, the company's chief executive.

The company now has 335 shops on the mainland, but only nine are self-operated, with the rest franchised outlets. Wholly owed stores generate more profit than franchises, Wong said.

The fast-growing mainland economy and the rising purchasing power of the middle class have resulted in strong demand for luxury goods.

"The market is big enough for us to expand the number of shops 10 times there," said Wong.

By quickening the pace of expansion, Wong said, the mainland turnover will "hopefully rise 30 to 40 percent".

"I hope the turnover from the mainland exceeds Hong Kong's in the foreseeable future," Wong said.

Luk Fook posted a 40 percent surge in net profits to HK$118.5 million in the first half of its 2007 to 2008 fiscal year.

Its Hong Kong stores also did well and growth will continue despite rising gold prices, Wong said.

Largest plastic bag maker closes

Huaqiang, China's largest plastic bag manufacturer, has closed down due to a national environmental drive that has imposed limits on plastic bag use, a local source said Tuesday.

The factory in Henan province stopped production in mid-January, leaving its 20,000 employees out of work. All machines in Huaqiang's two factories, in Suiping county and Luohe city, are to be sold. Details about the future of the factories and its workers are unknown, according to the official.

A notice in front of the Luohe factory recently read: "1,600 plastic film blowing machines and over 1,000 packing machines are for transfer. The two factories in Luohe and Suiping are to be transferred at a price of 280 million yuan to 350 million yuan."

The factories, belonging to the Guangzhou-based Nanqiang Plastic Industrial Ltd, were able to produce 250,000 tons of plastic bags valued at 2.2 billion yuan annually.

A management official was quoted by the local Henan Business Daily newspaper as saying the closure was caused by the environmental drive against the use of plastic bags.

"Over 90 percent of our products are on the limit list," the official said. "As a result, the only way forward for the factory is closure."

Real estate portal

Chinese portal Sina.com will form a new venture with online real estate agency E-House (China) Holdings Ltd to develop the country's largest online real estate portal, the companies said last week.

Sina will spin off its real estate and home decoration segments and contribute advertising to the new firm, in which it will hold about a two-thirds stake. A new Web address will be launched soon for the combined business.

The new portal will use E-House's China Real Estate Information Circle system, which contains transaction data on land and residences, offices and commercial buildings in 30 major cities in China.

E-House will also develop online products and fee-based services for the new firm.

"This partnership is an extension of Sina's pursuit to provide the best quality content and services to high-end Internet users in China by cooperating with industry leaders in vertical areas," said Charles Chao, CEO of Sina.

Real estate advertising ranks second as a revenue source for Sina, China's most popular portal, following automobiles.

China Eastern rebuffs alliance offers

China Eastern Airlines Corp (CEA) last Tuesday rejected a wide-ranging alliance proposal from China National Aviation Corp (Group) (CNAC).

Analysts said the move could close the door to an alliance between the Shanghai-based carrier and Air China, respectively the country's third- and second- largest airlines by fleet size.

"Our board of directors has decided not to give further consideration to CNAC's proposal after prudent and sufficient discussions and advice from the legal and finance consultants," CEA said in a statement to the Shanghai Stock Exchange last Tuesday.

"The company will continue (the plan) of bringing in a strategic investor to make its main air transport business more competitive," the statement noted.

"In the whole process of proposals and methods of communication, CNAC never showed any sincerity and deep and thorough planning for our cooperation," it said.

CEA stated the proposal does not have the legal status of a formal offer and carrying legal and official uncertainties.

It added the purpose of bringing in a strategic investor is to improve corporate management, operational efficiency, profitability and the international competitiveness.

China Railway Construction IPO

China Railway Construction Corp (CRCC), the country's leading rail builder, is expected to raise as much as 22.25 billion yuan in its initial public offering (IPO) in Shanghai this month.

In a recent statement to the Shanghai Stock Exchange the State-owned company said it has cut the number of A shares it is offering to 2.45 billion from 2.8 billion after reconsidering its capital demand.

The 2.45 billion shares represent 23.44 percent of CRCC's outstanding capital. The firm had laid nearly 34,000 km of railway by the end of 2006, equal to more than half of the total length built nationwide since 1949.

On February 14, CRCC was given green light by the China Securities Regulatory Commission to issue up to 2.8 billion A shares on the Shanghai Stock Exchange.

The IPO price range was set between 8 to 9.08 yuan, translating into earnings multiples of 26.92 to 30.56 after the domestic share sale, according to the statement.

CRCC also plans to sell up to 1.71 billion H shares in Hong Kong.

(China Daily 03/03/2008 page7)