Why HSBC Hiked SINA's Price Target Today

In a report issued Thursday, HSBCHSBC analysts Chi Tsang and Alice Cai boosted their price target on shares of SINA Corp SINA from $47 to $67, while reiterating their Buy rating.

According to the note, the stock is a “hidden treasure.” The analysts feel particularly encouraged by the binding agreement in which CEO Charles Chao recently entered, by which he committed to invest $456 million in cash for 11 million newly issued shares. The transaction is expected to be closed by the end of the third quarter, with the CEO’s stake surging from 2 percent to 18 percent.

The experts interpret the move as a significant vote of confidence, since the Chinese Internet company does not seem to be in need of cash. In fact, they say they believe “this move is a reflection of the value of SINA’s portfolio of assets (…) [and that] management is moving aggressively to enhance the value of its verticals.”

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While the stock has already traded up from the $41 per share that the CEO paid, HSBC still sees upside left. The firm finds SINA attractive from a sum-of-parts perspective, “with the current share price assigning negative value to the portal.”

The analysts mention three main variables in their sum-of-parts valuation:

1) The value of Weibo (majority-controlled by SINA), which they estimate at $35 per SINA share

2) The value of the company’s core business, estimated at, at least, $4 per share, based on a conservative revenue estimates

3) 30 percent conglomerate discount, which they now “remove in anticipation of announcements of spin-offs and jvs as management moves to unlock value.”

Shares of SINA rose more than 1.5 percent on Thursday trading, and roughly 61 percent in the past three months.

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Posted In: Analyst ColorEmerging MarketsPrice TargetReiterationMarketsAnalyst RatingsMoversTechAlice CaiCharles ChaoChi TsangHSBC
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