Bloomberg News

Sohu Sinks on Go-Private Denial as Ambow Jumps: China Overnight

March 06, 2013

Sohu Sinks on Go-Private Denial as Ambow Jumps

A file photo shows a man waiting in the lobby of the headquarters of Sohu.com Inc. in Beijing, during February 2007. Photographer: Doug Kanter/Bloomberg

Sohu.com Inc. (SOHU:US) fell in New York after denying a report that it’s looking to go private, while Guangshen Railway Co. (GSH:US) led gains in Chinese stocks on government plans to build new railway lines.

The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. was little changed at 93.9 yesterday, as 29 stocks rose and 26 fell. Sohu had the biggest tumble in a year and Internet security software provider Qihoo 360 Technology Co. dropped 7.6 percent after Jefferies Group LLC downgraded the stock. Guangshen surged to the highest level since 2008 while Ambow Education Holding Ltd. (AMBO:US) rallied the most since September.

Sohu soared 12 percent March 5 in New York as the South China Morning Post reported the company was talking to investment banks and private equity funds about a potential buyout. The Beijing-based company fell yesterday after saying it’s currently not considering privatization. Sohu, which services range from online news, games to web search and video, is down 8.2 percent this year, after slumping a combined 25 percent in 2011 and 2012.

“The market is giving back almost all gains yesterday following that report on its privatization talks,” David Riedel, president of Riedel Research Group Inc., said in a phone interview in New York yesterday. “Sohu’s business model is more complicated and harder for investors to understand because of its different operations.”

The iShares FTSE China 25 Index Fund (FXI:US), the largest Chinese exchange-traded fund (FXI:US) in the U.S., advanced 0.7 percent to $38.50, rising for a second day. The Standard & Poor’s 500 Index (SPX) was little changed at 1,541.46 as the Dow Jones Industrial Average extended gains to a record high.

Sohu’s Plunge

Sohu dropped 11 percent to $43.44 in New York, the biggest slump since February 2012. Its online games unit Changyou.com Ltd. (CYOU:US) also fell 8.3 percent to $29.55. Sohu’s shares have plunged 64 percent from a record high of $106.28 reached in April 2011.

Qihoo’s American depositary receipts sank to $32.19, the steepest retreat since May. Its ADRs have climbed 8.4 percent this year after surging 89 percent in 2012. The company traded (QIHU:US) at 33 times estimated profit, the highest level since October 2011.

The company, which started an online search engine last year, saw profit margin drop to 12.4 percent in the fourth quarter from 24.1 percent as efforts to expand its search and mobile Internet business raised costs, Beijing-based Qihoo said in a March 5 statement. The margin will “see the bottom” in the first quarter before gradually improving, Chief Executive Officer Alex Xu said in an earnings conference call.

‘Rich’ Valuation

Jefferies cut the rating on the stock to hold, the equivalent of neutral, from buy, citing slower profit growth and “rich” valuation. She also reduced its price target by 18 percent to $31.

Qihoo’s fourth-quarter net income of $12.8 million beat the $7 million mean forecast (QIHU:US) of eight analysts compiled by Bloomberg, and sales of $103 million also exceeded the $93.8 million predicted by analysts.

Vipshop Holdings Ltd. (VIPS:US), an online fashion discounter based in Guangzhou, slipped 6.6 percent to a two-week low of $23.58. The slump trimmed its gain this year to 32 percent.

Goldman Sachs Gao Hua Securities Co., Goldman Sachs Group Inc.’s China partner, lowered Vipshop’s price target by 5 percent to $31.7 on March 5.

Youku Tudou Inc. (YOKU:US), operator of China’s largest video websites, slumped 6.8 percent to this year’s low of $18. Sina Corp. (SINA:US), owner of China’s largest Twitter-like service, slid 3.8 percent to $48.55, also the lowest price this year.

Railway Plans

Guangshen Railway, which runs the only train line linking mainland China to Hong Kong, soared 7.5 percent to $26.34, the highest level since May 2008. Trading volume on the stock was three times the daily average over the past three months, data compiled by Bloomberg show.

China aims to open more than 5,200 kilometers (3,232 miles) of new railway lines and build 80,000 kilometers of highways this year, according to a report by China’s top planning agency posted on the government’s website on March 5.

Ambow, a Beijing-based tutoring services provider, jumped 7.6 percent to $1.13, the largest gain since September. Ambow’s ADRs had slid 38 percent over nine days to a record low of $1.05 on March 5.

NQ Mobile Inc. (NQ:US), a security service provider for mobile phones, climbed 3.2 percent to an eight-month high of $8.77.

The Beijing-based company boosted its sales forecast for 2013 to as much as $183 million, from $155 million previously, in a statement after markets yesterday.

The Hang Seng China Enterprises Index (HSCEI) jumped 1.7 percent to 11,359.04 yesterday in a second day of gains, while the Shanghai Composite Index of domestic Chinese shares added 0.9 percent to a three-day high of 2,347.18.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • SOHU
    (Sohu.com Inc)
    • $53.68 USD
    • -0.32
    • -0.6%
  • GSH
    (Guangshen Railway Co Ltd)
    • $19.73 USD
    • -0.23
    • -1.17%
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