Morgan Stanley Opens 60-Day Research Tactical Idea on Perfect World

Morgan Stanley has opened a research tactical idea on Perfect World

believing the share price will rise over the next 60 days. In the report, Morgan Stanley writes, "We highlight that: 1) Perfect World's 4Q sales jumped 32% YoY, 5% above its high-end guidance. Its 4Q EPADS soared 1.3x YoY, thanks to the higher operating leverage. 2) The company declared a US$2/ADS special dividend (16% yield). It intends to maintain a recurring dividend policy. 3) Perfect World has a high 2012e FCF yield of 15-20%, while its net cash of ~US$420mn accounts for ~70% of its market value. 4) Its valuation is at an industry-low 2012e P/E of 3-4x (2-3x ex-cash)." Morgan Stanley maintains its Overweight rating on Perfect World, which closed yesterday at $12.55.