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研究部 (Research Team)
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Kingsoft Corp (3888.HK) Focuses on online game business

Friday, January 4, 2008

5236

Kingsoft Corp(3888)

Recommendation on 4 January 2008
Recommendation	hold
Price on Recommendation Date	$3.900
Target Price	$4.200

Weekly Special - 000157.SZ Zoomlion

Kingsoft Corp (3888.hK) is a software developer, distributor and service provider in China. The revenue mostly come from entertainment software and application software.

The entertainment software portfolio currently includes various MMORPGs (大型多人線上角色扮演遊戲), which allow thousands of users to interact online through personalized role-playing characters

The company produced the first domestically personal computer games in China in 1996 and produced the first online game in 2003. Currently, they offer 3 in-house developed MMORPGs and 2 licensed MMORPGs. Their in-house research is developing 6 additional MMORPGs, as well as casual game and they expect the games can be launched from 4Q07 to 2009.

The application software includes Kingsoft internet security(金山毒霸), Kingsoft PowerWord(金山詞霸) and WPS Office (WPS 辦公軟件).

In 2006, Internet population increased 19.3% to 128.7 million in 2006. In the meantime, broadband penetration reached 90.7 million, representing a 41.1% increase. The fast-grow internet population and broadband penetration enhance Kingsoft growth.

Although the share-based compensation cost skyrocketed, it is just an accounting loss. More importantly, the administrative expense as a percentage of revenue dropped from 19.64% in 2004 to 9.78% in 1H07. We expect the administrative expense as a percentage of revenue will continue to drop so that the profit margin will increase.

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Kingsoft Corp (3888.HK) Focuses on online game business

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