Snakebit!

Date: Tue, 20 Jul 2010 11:54:04 +0800
Subject: Snakebit!

 

Even though I was born in the year of the snake, I did not expect to be bitten by a venomous reptile this morning. But hey, every day is different and, no kidding, I was attacked by the the green and nasty bamboo pit viper. I like to go running in the mornings before work when the temperature is only 80 degrees and humidity hovers around 90%. Here is the snake that bit me:

And here is the shoe that saved me:

It was my fault as I came up Repulse Bay Rd at 5:00 am wheezing, snorting and expelling noxious fumes. This little guy is nocturnal and was probably heading home himself after a night out with the boys when stupid, heavy me stepped right on him. He, in turn, whirled around and bit the only leather part of my Asics. After jumping 15 feet straight up or so, I came down to see him coiled and ready to strike again.

Can’t really blame him but vipers are aggressive and he wouldn’t back down. After checking to make sure I was just high on adrenaline and not poison I apologized to Mr. Snake and continued my run home. Vipers are ambush hunters and therefore don’t move out of the way.

They are found on all continents except Antarctica and Australia – which is interesting since Oz reportedly, has 10 of the most poisonous snakes in the world, including the inland taipan, or fierce snake, whose venom is 400 times more toxic than a rattlesnake and they say one bite can kill 100 men. (Has anyone tested this?) Another good reason not to go to Australia – if the flies don’t get you, this guy might!

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Sohu cares? We do! 

Internet savant, Eric Wen, is not a huge fan of Sohu (SOHU US) but he thinks it is now a value stock and worth accumulating. China’s fourth largest internet portal has de-rated the last 4 years from 40X PER to today’s 10X. Earnings growth, however, is still a healthy 20%.

This makes Sohu about the cheapest China internet stock out there, compare: Sina (SINA US) trades at 18X 2011 PER with 20% earnings growth, Net Ease (NTES US) trades at 11X with 16% growth and Ctrip (CTRP US) trades at 26X with 28% earnings growth.

And Sohu isn’t going broke; 36% of their US$1.7 bn market cap is in cash. The catalyst to performance may be next Monday’s earnings results announcement which Eric thinks will beat top line guidance of US$139-$144 mn. However, due to higher marketing costs and licensing fees he expects the bottom line to only match consensus. Note attached.

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Finally, soothing words from our global economist, Mr. Bill Belchere:

“This is the normal growth pattern coming out of any recession. At some point, the growth baton must be passed from government stimulus and inventory restocking to private sector demand. During this transition, growth always slows.” In other words, even though the outlook is worrisome (or as Jim Morisson puts it, “The future’s uncertain and the end is always near.”), this is a normal recovery and things will pick up again.

Bill continues, “Growth looks to accelerate over the the course of 2011 in G-2. If we are wrong then we get another dose of QE and rather than a growth bump Asia gets a liquidity bump.”

Again, I am just a lowly snakebitten stockbroker, but my view is stocks are cheap and earnings should be solid going forward given low inflation, low interest rates and nascent demand recovery.

 

You can get our research by typing MASR <Go> on Bloomberg.

Cheers.

Derek Hillen, CAIA

Mirae Asset Securities: Risk is to the Upside

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