Morgan Stanley · NYSE:MS
Morgan Stanley — Investor Presentation (October 2004)
24 slides from Morgan Stanley's investor presentation, October 2004
Slide 1: The Internet in China
The Internet in China Mary Meeker – October 2004 Full report online at http://www.morganstanley.com/institutional/techresearch/2004_China_Report.html Morgan Stanley does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
Slide 2: Internet as Change Agent for China
Internet as Change Agent for China • Most populous country – 1.3B people (21% of world) − 1850 – 33% of global GDP − 1991 – < 2% of global GDP − 2003 – 4% of global GDP (or 13% using PPP) • Top priority for China’s leaders is long-term, sustainable economic growth with relatively high levels of empl
Slide 3: Technology Adoption
Technology Adoption Illustrated for Global Market / Innovators… Not All Made in America • China Internet – 87MM+ users; #2 in world, likely #1 within 5 years • S. Korea – Broadband penetration of 70%+ is higher than any other country • Shanda Networking – 236MM registered gamer accounts (non-unique)
Slide 4: Internet & China Points
Internet & China 11 Points 4 Please see analyst certification and other important disclosures starting on page 41.
Slide 5: Number of Connected Users Is Significant / Growing Rapidly
1 Number of Connected Users Is Significant / Growing Rapidly China Global China China TMT Category Ranking 2002 Units (MM) 2002 Growth Mobile Phones 1 207 43% Cable TV Subscriptions 1 100 10 Telephone Lines 1 214 20 Internet Users 2 59 75 Installed PCs 4 29 21 Source: Morgan Stanley Global Market Si
Slide 6: Relative Web Site Usage Momentum Is Strong
2 Relative Web Site Usage Momentum Is Strong ~Half of Alexa’s Top 25 Trafficked Global Sites are in China Rank Site Name Country Rank Site Name Country 1 Yahoo! USA 14 Newsgroup.com.hk HK 2 MSN USA 15 eBay USA 3 Sina China 16 Tom Online China 4 Google USA 17 Offeroptimizer.com USA 5 Sohu.com China 1
Slide 7: Next-Generation Very Active on Internet
3 Next-Generation Very Active on Internet… 70% of Internet Users in China are Below Age 30 (vs. ~30% in US) 31-35 51-60 Above 60 36-40 41-50 3% 12% 1% 7% 7% Under 18 17% 25-30 16% 18-24 37% Source: CNNIC, 13th Statistical Survey Report on the Internet Development in China (Internet User Demographics
Slide 8: Online Media Development in Early Growth Stages
4 Online Media Development in Early Growth Stages • Historical governors on media (from TV to print to entertainment) have created an especially fertile environment for emerging online media • Internet (with / without mobile phones) able to deliver info that simply could not be sent / received / int
Slide 9: Wireless Messaging Services Ramping Quickly
5 Wireless Messaging Services Ramping Quickly, Although Transitions Occurring… China Leads in Ratio of Mobile Phones to Internet Users Mobile Mobile Internet Phone to Installed Phones Users Internet PCs Country (MM) (MM) User Ratio (MM) China 207 59 3.5 : 1 29 US 141 162 0.9 : 1 198 Japan 79 53 1.5
Slide 10: China Leads in SMS Messaging
…Wireless Messaging Services Ramping Quickly, Although Transitions Occurring… China Leads in SMS Messaging 200 200 SMS Messages Sent in China (B) 150 100 90 50 16 1 0 2000 2001 2002 2003 Source: Morgan Stanley Research. 10 Please see analyst certification and other important disclosures starting on
Slide 11: Broadband Acceptance Is Growing Rapidly
6 Broadband Acceptance Is Growing Rapidly… 24MM Chinese Broadband Subscribers (up 118% Y/Y) for 2004E (Subscribers in Thousands) 45,000 40,000 Broadband Subscribers 35,000 30,000 25,000 20,000 15,000 10,000 5,000 2001 2002 2003 2004E 2005E 2006E • 15MM estimated online gamers in China are key users
Slide 12: eCommerce in Very Early Stages and Governors Exist
7 eCommerce in Very Early Stages and Governors Exist… China lags in eCommerce: 1) Poor credit / payment systems 2) Inefficient logistic / distribution / transportation systems 3) Low levels of trust 4) Low PC installed base 5) Low levels of disposable income 12 Please see analyst certification and o
Slide 13: Challenges for Multinational Companies Create Opportunities for Chinese Companies
8 Challenges for Multinational Companies Create Opportunities for Chinese Companies • Chinese market is complex, especially for non-China companies • Foreign investment is restricted and structuring and legal issues can be daunting • Internet is highly regulated • Entry into WTO is helping, but stil
Slide 14: 3rd Generation Internet Entrepreneurs Are Impressive
9 3rd Generation Internet Entrepreneurs Are Impressive, though Broad-based Experience/Leadership Still Not Abundant • Chinese Internet leaders have proven to be fast followers relative to their global peers • When will we see China’s Bill Gates, Michael Dell or Larry Ellison? 14 Please see analyst c
Slide 15: Sustainability of Internet-related Revenue and Profits Still Unproven
10 Sustainability of Internet-related Revenue and Profits Still Unproven, but Market Opportunity Is Large… • Wireless messaging has been a blessing for the Internet pure-plays 15 Please see analyst certification and other important disclosures starting on page 41.
Slide 16: China Internet Portal Revenue Breakdown
…Sustainability of Internet-related Revenue and Profits Still Unproven, but Market Opportunity Is Large… China Internet Portal Revenue Breakdown (US$ in Millions) CQ2:04 % of Revenue Operating Company Revenue Messaging Gaming/Other Advertising Margin (1) Sina $49 67% 2% 32% 40% Shanda 35 -- 95 5 40
Slide 17: What's Next Blessing?
10 Sustainability of Internet-related Revenue and Profits Still Unproven, but Market Opportunity Is Large… • What’s next blessing? − Messaging extensions? − Gaming extensions? − Advertising and eCommerce? − eCommerce Verticals? − Cross-border trade? 17 Please see analyst certification and other impo
Slide 18: Government's Focused on Ramping Internet
11 Government’s Focused on Ramping Internet, in Part, to Boost Domestic and Global Trade… Internet Users Concentrated in Coastal Regions and Major Metropolitan Areas 2.8 % Beijing 5.0% 1.8 % 1.0 % 3.7% 1.5 % Tianjin 1.8 % 3.6% 0.4 % 1.9% 7.9 % 0.3 % 1.5 % 2.8% 7.7% 2.5 % Shanghai 0.1 % 4.8 % 2.3% 5.
Slide 19: Government's Focused on Ramping Internet (Opex and GDP per Capita)
…Government’s Focused on Ramping Internet, in Part, to Boost Domestic and Global Trade… Annualized Opex per Employee • $6.5K = China using Hang Seng Index – Labor surplus! • $73K = US using S&P500 • $333K = Microsoft GDP per Capita • $619 = China • $37K = US 19 Please see analyst certification and o
Slide 20: Summary
Summary… • Internet serving important role in helping modernize China and drive efficiencies • Still, small revenue / profit levels for China Internet companies • Like US in mid-1990s, we are at the beginning…but, in many respects, for China, impact may be greater • Lots of opportunity with lots and
Slide 21: China Internet Company Risks
China Internet Company Risks • General economic and social conditions • Messaging-related revenue – sustainability / consistency • Intramural competition – differentiation can be difficult • High operating margins – sustainability could prove challenging • Emerging business segments – competition /
Slide 22: China Internet Company Comparables
China Internet Company Comparables (US$ in Millions, Except per Share Data) 2004E % Price Change (2) 2004E Operating Company Price Equity Value Revenue (1) Income (1) 2003 2004YTD Shanda $23.98 $1,653 $140 $44 -- 119% Sina 25.49 1,397 188 70 419 (24) NetEase 37.94 1,253 108 51 222 3 51job 20.75 1,14
Slide 23: Disclaimer
Disclaimer Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific
Slide 24: Disclaimer
Disclaimer Other Important Disclosures For a discussion, if applicable, of the valuation methods used to determine the price targets included in this summary and the risks related to achieving these targets, please refer to the latest relevant published research on these stocks. Research is availabl
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