A China Giant

Written by GSCR Staff   
Wednesday, 08 May 2013 08:16

Hello!  Our stock profile for today is Giant Interactive Group, Inc. (NYSE – GA- $7.92).  The growing Chinese company offers multiplayer online role playing games which includes 15 games to date.

  Its existing portfolio includes ZT Online, ZT Online PTP, ZT Online Green Edition, ZT Online 2, ZT Online Classic Edition, King of Kings III, My Sweetie, Giant Online, Dragon Soul, XT Online, and The Golden Land.  It markets the games through pre-paid game cards and game points through a variety of retail outlets and websites.

The first point to make here is that just like here in the U.S., the Chinese online gaming industry has exploded.  Since 2003 the industry has gone from less than $160 million to $9 billion in 2012, with some surprising backing from the Chinese government who view the games as an opportunity to educate the country’s youth.

The Company continues to innovate, releasing its latest multiplayer online game, World of Xianxia, which completed beta testing in the middle of April.  Additionally, Giant Interactive released its first web game, The Sky, which is currently under roll-out.

GA released earnings for 1Q13 yesterday after the close.  EPS for the quarter was in line with estimates of $0.22, and revenue beat estimates coming in at $92.2 million versus the $91.6 million estimate.  The Company is expected to earn $0.91 per share in 2013 and $0.98 per share in 2014.

To be redundant, the short-term technical analysis is ‘off the charts’ with very bullish signals.  With the great news and the key drivers for growth in place the stock could climb to $10 by the end of 3Q13.

Have a great day!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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