De-emphasizing importance of membership growth After adding 12,702 new China Gold Supplier membership in 4Q10 to a total of 121,274 membership base, Alibaba reaffirmed that total CGS members in 2011 will be flattish from 2010, mainly driven by 1) its proactive focus on improving customer services and enhancing user experience and 2) factoring in the CGS 2011 launch of a 50% increase in new price package to Rmb29,800, up from Rmb19,800 previously.
Key metrics for both marketplaces also remained healthy:
International Marketplace: Revs were RMB881m (+4% QoQ, +28% YoY) in 4Q10. – China Gold Supplier (“CGS”): China Gold Supplier added 12,702 net adds, up 11.7% QoQ and 28% YoY to 121,274 paying members. The growth of net account addition has slowed as expected, as the company has switched its focus to customer retention and monetization. In 4Q10, VAS contributes over 25% of CGS revenue. CGS revenue
was Rmb857m in 4Q10, increased 28% from a year ago.
Low inventory in the channel — Our channel checks suggest that MGC has stopped taking new orders and has not given any specific date for resumption in production. According to our supply-chain checks, second-largest BT supplier Hitachi’s factories and facilities are not damaged significantly. Hitachi is said to be in a position to take orders but can’t arrange immediate shipments. Our checks with our Japan analysts indicate that MGC’s plants and machines were damaged by the quake, and it may take months for production to resume. Although Hitachi’s plant is less damaged, nuclear fears and the disruption of logistics may prolong the production and delivery of BT materials. Korea Memory Beat: Potential Supply Bottlenecks from the Earthquake The current inventory stock of BT in the Taiwan supply chain ranges from two to four weeks, in our view. Asia Macro Flash: Regional Macro Impact from Japan Earthquake
We see increasing polarisation within the Asia technology sub-sectors and classify stocks either Bullish or Bearish. We are Bullish on select end-products (ie, smartphones, tablet PCs) and Bearish on desktop PCs and feature phones.
We are Neutral on LCD-TVs (including LED-TVs) owing to severe oversupply and much weaker-than-expected demand. The solar industry (Bearish) appears to be entering oversupply in 2011 with reduced policy subsidies. We are Neutral on IT services & software amid expectations of moderating revenue growth in 2012F, increased supply-side risks, limited operational scope and increased taxation.
Top BUYs: SEC, HTC and TPK. Meanwhile, we are cautious on names with weak growth prospects, PC-related components, feature phone-related components and LCD and LED-related components, including MediaTek, Taiwan DRAM names and Seoul Semi (all REDUCE).
Irrespective of industry trends, we like PC player, Acer, for its cost control and customer mix. We also like HCL Tech in IT services & software for its competitive positioning vs MNC vendors, operational scope and earnings growth potential.
“Asset Light” and “Sony United” strategies starting to drive profit
On track for an electronics revival — Sales growth is modest but we newly factor in better margins. We think the key to profitability in TVs is the transfer of operations to Hon Hai at plants which Sony has sold to the Taiwanese firm. In cameras we expect Sony’s marketing muscle to succeed in emerging markets, where demand is growing. We think collaboration with network operations will also contribute to differentiation. The new PSP2 game machine should create a growth opportunity for the game business. In semiconductors, we think growthdirected investment in BSI CMOS will lead to earnings.
