Business

Gome Electrical Appliances Holdings Ltd seems to be the final winner of a 9.02-percent stake in Sanlian Commercial Co, reinforcing its domination of the company.

Beijing Zhan Sheng Investment Co bought 22.76 million shares in Sanlian at 5.94 yuan (87 US cents) apiece in an auction on Tuesday to become Sanlian’s second-largest shareholder after Gome.

Sanlian Group, the former second-largest shareholder of Sanlian Commercial, has offered five auctions for the 9.02-percent stake.

Although Gome’s spokesman He Yangqing said Zhan Sheng is an independent company and Gome has no connection with the 9.02-percent stake, Gome is still widely seen as the real owner based on the previous closeness of the two companies.

Last year, Gome financed Zhan Sheng’s 3.6-billion-yuan acquisition of Beijing Dazhong Electronics Ltd, with an option to buy Dazhong later for itself. Acquiring existing appliance retailers through a third party has been one of Gome’s strategies for grabbing the lion’s share of China’s market.

In February, Shandong Longjidao Construction Co bought a 10.7-percent stake in Sanlian for 541 million yuan to become the largest shareholder, and Gome acquired all of Longjidao several days later to become the real owner of the Sanlian stake.

“We will audit Sanlian Commercial’s assets after forming a new board of directors since the ownership of stakes is clear now,” Gome’s He told Shanghai Daily.

He said a listed company should be responsible for the completeness of its assets, including brand and logistics, so they will be called to account if an audit uncovers problems.

Gome has complained before that Sanlian only owns the rights to use the brand of franchised stores, but doesn’t have other quality assets in areas like procurement and after-sales service.

Sanlian was suspended from trading pending an announcement and closed at 9.25 yuan a share on Monday.

(Shanghai Daily July 31, 2008)

Suning Appliance Co plans to give senior executives share incentives.

The Nanjing-based appliance retailer will grant 43.76 million stock options, accounting for 2.93 percent of its total shares, to directors, excluding outside directors and independent directors, middle-level and senior executives and key staff, it said in a statement to the Shenzhen Stock Exchange yesterday.

A total of 40.76 million options will enable the holders to buy shares at an exercise price of 58 yuan, a 26-percent gain on yesterday’s close, while the remainder, for special staff nominated by the chairman, will be priced when granted, according to the draft.

“The scheme is to improve the company’s executive incentive review system and encourage executives to develop with the company to secure a long-lasting and stable growth,” Suning said.

The incentive scheme will be valid for five years but it still needs approval from a shareholders’ meeting and the country’s securities regulator.

The plan could help Suning stabilize its management group, save labor costs and raise its value with a clear expectation of business growth, Shenyin Wanguo Securities Co said in a report.

“The scheme is positive news for Suning as the exercise price will enhance investors’ confidence in the company’s development,” according to Haitong Securities Co.

The two stock houses both suggested investors buy the company’s shares. Suning rose 1.79 percent to close at 46.11 yuan yesterday.

(Shanghai Daily July 30, 2008)

Xi’an Aircraft International Co surged 4.51 percent yesterday after reporting a 146-percent jump in its net income in the first half of this year, boosting its share price.

Its earnings rose to 138 million yuan (US$20.15 million) during the period, or 0.13 yuan a share, and its sales revenue soared 314 percent to 4.25 billion yuan, the company said in a statement to the Shenzhen Stock Exchange yesterday.

The aircraft maker attributed the better financial performance to its expanded business scope after issuing non-publicly traded shares in February.

It sold 370 million shares at 9.18 yuan apiece to its parent AVICI Xi’an Aircraft Industry (Group) Co Ltd and 129 million shares to nine other institutional investors at 25.18 yuan each.

The company focused on production and sales of homemade aircraft rather than making aircraft parts after selling the new shares, the statement said.

It predicted that its net income would soar 200 percent to 250 percent in the first three quarters on an annual basis and its third-quarter profit would jump 550 percent to 600 percent.

Shares of the company rose 4.51 percent to 18.08 yuan while the benchmark CSI 300 Index added only 0.69 percent to 2,721.69 points.

“Its profit is similar to our expectations. In February, its parent AVICI Xi’an Aircraft Industry (Group) Co Ltd injected air-related capital into the listed company, which boosted its sales income,” said Li Xiaoguang, an analyst at Shenyin & Wanguo Securities Co.

“We expect the delivery of the ARJ21 jet will further boost the firm’s sales in 2009 as the firm processes 80 percent of parts and produces 35 percent of the jet,” Li said.

The ARJ21 is China’s first homemade commercial jet which is set to make its maiden flight in September or October this year. The jet has received 171 orders.

Li expected the company’s revenue at 9.3 billion yuan this year, 10.8 billion yuan next year and 12.2 billion yuan in 2010.

(Shanghai Daily August 7, 2008)

Singapore Airlines (SIA) does not plan to raise its offer for a stake in China Eastern Airlines (CEA), SIA’s vice president for public affairs Stephen Forshaw said on Monday.

SIA and Temasek, Singapore’s state-linked investment firm, signed a preliminary deal in September to take a 24-percent stake in Shanghai-based CEA for 923 million U.S. dollars, or 3.80 Hong Kong dollars per share.

The bid was voted down by CEA shareholders in January, however.

Stephen said SIA has not given up on the deal, despite the shareholders’ move.

“We are keeping in touch with China Eastern. The airline has said it wants to resume talks after the Olympic Games. We look forward to hearing more from them,” he said.

According to Forshaw, China is one of SIA’s most important markets. SIA has 66 weekly flights to China, of which 35 serve Shanghai.

(Xinhua News Agency August 5, 2008)

Starbucks, the world’s largest coffeehouse company, said yesterday that the recent closure of its 661 underperforming cafes in the US and Australia would not affect the company’s sustainable expansion in China.

The Seattle-based coffee giant has 660 chains in China, of which approximately 330 operate across 26 cities in China.

“China is now the fourth largest market of Starbucks outside the US, following Canada, Japan, and the United Kingdom,” said Li Jing, Starbucks’ public manager in Greater China, adding that the company aimed to extend its expansion into more second and third-tier cities in China later this year.

In Shanghai, the company has set up seven more chains giving it a total of 102 cafes so far this year.

The company also made aggressive inroads into central China this February in Wuhan, followed by another two openings in the city within three months due to the unexpected popularity, Wang Jinlong, its Greater China president, said.

Beset by shrinking sales in the US, Starbucks sees the country as pivotal to its overseas progression. “China is one of the most important markets and projected to be the largest market for Starbucks outside the North American market in the future,” Wang noted.

The famous coffee chain has opened “dozens” of operations in China last year, and “more stores will come in 2008″, Li said.

Starbucks, which has raised prices by 3 to 5 yuan for beverages last year, said it had no plan to lift its coffee prices further this year in spite of heavier pressure from increasing operation costs.

(China Daily August 6, 2008)

In response to the Hangzhou Intermediate People’s Court ruling in favor of Wahaha’s right to its trademark, Danone Group yesterday said it will pursue all legal options to protect its contractual rights and financial interests.

Wahaha spokesman Shan Qining said: “What we want to say to Danone’s statement is only one sentence: ‘We respect the decision of the court and we respect the law.’”

Hangzhou-based Wahaha Group had earlier said the Hangzhou Intermediate People’s Court had rejected Danone’s appeal of Hangzhou arbitration commission’s ruling in favor of Wahaha in a dispute over the ownership of the Wahaha trademark.

The Wahaha spokesman said the ruling was a key development in its prolonged dispute with its French partner, and should have a positive impact on another dispute that is now before an arbitration commission.

Danone Group argued that the Hangzhou arbitration commission’s ruling had “distorted the facts of the case, intentionally and maliciously misinterpreted and misapplied the laws of the People’s Republic of China, and was an award that completely ignored the facts and law”.

Danone had also said it hoped the Hangzhou court would carry out the substantive review, apart from the procedural review, of the legality of the arbitral procedures.

In its latest statement, Danone said: “The Hangzhou court only carried out a procedural review for this case (specifically, the Hangzhou court failed to conduct a substantive review of the accuracy and legality of the determination of facts and application of law) and rendered its ruling based on a procedural review only.”

Although the Hangzhou court ruling is final, Danone said it would report the matter to the appropriate superior judicial authorities in China. It also said the arbitration proceedings in Stockholm would begin hearing in January.

Last year, Danone filed its first lawsuit against Wahaha on May 9 in Stockholm, and on June 4, Danone filed another lawsuit in Los Angeles against two Wahaha-related companies and two individuals.

Since 2006, the two companies have filed numerous complaints and lawsuits against each other under various Chinese and foreign jurisdictions.

Danone, which owns a 51 percent stake in 39 Danone-Wahaha joint ventures, has accused Wahaha of setting up independent companies and selling products identical to those sold by the joint ventures. Danone had demanded a 51 percent stake in the non-joint-venture companies, which Wahaha rejected.

(China Daily August 6, 2008)

Living between 3,000-5,000 meters high on the Qinghai-Tibetan Plateau, grazing on pastureland and drinking glacier water, yaks are revered as a life source for Tibetan people.

As the bison was for American Indians, in Tibet for centuries the hardy pack animals have produced milk, butter, wool, meat and dung for fuel. Now some resourceful Tibetans are literally milking it as a cash cow.

Tibet Treasure of Plateau Yak Milk Co Ltd, the only modern milk processing enterprise in the Tibet autonomous region, unveiled its Feifan brand high-end yak milk product line nationwide on July 18. It’s the first time that fresh, pasteurized yak milk has been sold outside of Tibet.

According to Wang Shiquan, chairman of the Lhasa-based Treasure of Plateau, the dairy can process 30 tons of fresh milk a day from two yak farms in Tibet and Ruo’ergai in neighboring Qinghai province.

It’s only two hours from udder to the Tetra Pak processing and packaging line for the guaranteed fresh Feifan - which means “unique” or “uncommonly good” in Chinese, says Wang.

Yak milk business

Yak milk - higher in fat and protein than cow milk - is a daily drink for people on the Qinghai-Tibet Plateau and also churned into butter or cultured as a sour-milk cheese that is something of an acquired taste.

“We believe yak is a gift offered by nature to the Tibetan people,” says Wang.

He adds that Tibet’s tourists inspired the business opportunities for yak milk.

“They asked us, ‘Why don’t you take the rare, natural yak milk to the market? It might be a good way to make money and along with diary farming it will help protect the plateau,’” recalls Wang.

With government support, Treasure of Plateau was set up in 2005 with registered capital of 35.57 million yuan. The company started to buy raw yak milk from herders at 4 yuan per kilogram, a relatively high price in the area.

But there were literally some bugs to work out. Wang remembers that yak milk sent to the factory had some too-natural ingredients in it - insects and yak hair among them.

“I told them if you don’t clean it up, you will be forbidden to send milk to us,” he says. New stainless-steel pails were given to yak herders, along with instructions on how to keep the milk clean.

Before going to market, a series of food safety examinations are required, but initially the company also failed due to outdated processing technology and equipment.

China’s biggest Web portal Sina Corp reported its profit jumped 74 percent in the second quarter of this year backed by soaring advertising income.

Its net income grew to US$25.2 million, or 42 cents a share, and its revenue soared 53 percent to US$91.3 million in the period, beating its estimate of US$90 million, Sina said yesterday.

The Shanghai-based company’s online ad income grew 58 percent to US$64.9 million and non-ad revenue rose 42 percent to US$26.4 million.

“We are very proud of our record revenue and earnings in the second quarter. Our online advertising business in China, in particular, continues to be robust, growing 58 percent year on year, and was a major driving force in allowing us to achieve a net income growth of 74 percent year on year,” said Charles Chao, CEO of Sina. “We expect Sina’s advertising momentum to further accelerate in the third quarter, as we are prepared to provide an unprecedented online media coverage of the Beijing Olympic Games.”

Sina predicts its third-quarter revenue between US$100 million and US$104 million, with ad income at US$75 million to US$77 million.

Credit Suisse said in a report that Sina’s ad business will continue to grow next year backed by its status in the industry, excellent sales team and brand value.

(Shanghai Daily August 8, 2008)

Most people will not be able to watch the Olympics live but many have embraced new technology to enjoy the once in a lifetime experience. Yao Min, Liu Xiang and Roger Federer will be appearing on screens sized from two inches to 100 inches.

It’s a rush now with more than 3,000 people installing IPTV every day, flat-panel TV sales surging and fans using laptops or PDAs to access the Olympics everywhere from hotels and shopping centers to airports.

High Definition TV

This is first time HD technology has been in use for a major international event ?? it has only been on the market for the past two years.

The CCTV HD channel’s image quality is four times higher than that of DVD and HD truly enhances sport, say experts.

Though the HD content is relatively limited, it has fuelled the sales of TVs.

In the second quarter, large LCD panel sales jumped 23 percent to 117.9 million units, a new record, according to research firm DisplaySearch.

Shanghai Telecom’s IPTV services, with two HD channels and replay functions, have attracted 510,000 users already, and the user base is expected to hit 800,000 by the end of this year.

In Shanghai there are three ways to access HD if you have an HD TV with definition of 720P (pixels) or 1080P.

You can subscribe to the Shanghai Media Group’s cable-based service, which includes three HD channels and several standard definition (DVD quality) channels. The hotline number is 96877.

You can buy a HD TV set-top box to receive free wireless CCTV HD signals.

You can subscribe to Shanghai Telecom’s IPTV (Internet protocal TV) service - but only certain parts of Shanghai can receive this HD signal. The hotline number is 10000.

Mobile TV

Mobile TV is good for viewing shorter events like swimming and sprinting or the replaying of highlights.

China Mobile launched its mobile TV program for 2G and 3G phones.

It takes about 20 seconds for customers to receive selected videos on 2G phones (test model: Nokia N82) and 10 seconds for 3G phones (ZTE U908), according to Shanghai Daily’s tests.

Shanghai Mobile is also giving users a discounted data traffic charge of 0.01 yuan (0.15 US cent) for one megabyte, one-thousandth of the normal fee.

“The bargain prices will probably remain even after the Olympics is closed,” said Wang Hua, Shanghai Mobile’s data division director.

China Mobile’s program is available for 53 handset models. Customers can access TV services through Wap Websites. China Mobile allows users to choose “Favorite” for content they are interested in and the related content will appear in the top position.

(Shanghai Daily August 8, 2008)

The Lenovo Group Ltd, China’s biggest personal-computer maker, reported fiscal first-quarter profit rose 65 percent on increased sales to businesses in Europe.

Net income climbed to US$110.5 million, or 1.15 cents a share, in the three months ended June 30, from US$66.8 million, or 0.74 cent, a year earlier, the North Carolina-based company said in a statement yesterday. Profit matched the US$110-million median of six analyst estimates in a Bloomberg News survey.

Lenovo gained market share in Europe through distributors, including Ingram Micro Inc and Tech Data Corp, helping to compensate for a decline in sales in the United States.

The maker of Thinkpad notebooks, which derives most of its revenue from corporate clients, is adding lower-priced products amid slowing economic growth.

“In the PC business, it is important for companies to have good sales channels, and Lenovo has focused on this and got good results in Europe,” Wang Wangli, who rates the computer maker’s shares “overweight” at HSBC Holdings Plc, said before the announcement.

Revenue in Europe, the Middle East and Africa increased 20 percent to US$903.8 million, according to the statement. Lenovo’s PC shipments in the EMEA region rose 26 percent in the three months ended June, beating the 24.5-percent growth in the overall market, as the company increased sales to business customers, research company IDC said.

Sales from continuing operations rose to US$4.21 billion from US$3.81 billion, compared with the US$4.13-billion median estimate.

Lenovo said this week it will offer low-cost notebooks from October, after Acer Inc began selling the products in June.

(Shanghai Daily August 8, 2008)