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Shanda Games Limited (ADR) (GAME), Perfect World Co., Ltd. (ADR) (PWRD): Three Chinese Internet Companies Poised for Gains

Analysts expect Shanda Games Limited(ADR) (NASDAQ:GAME) to earn $0.67 per share this year, and $0.68 per share in 2014. With the stock trading slightly above $4.00 per share, Shanda Games Limited(ADR) (NASDAQ:GAME) represents a tremendous value. If the company is able to continue to generate revenue and expand into additional countries, the stock price could increase dramatically.

Chinese innovator

Perfect World Co., Ltd. (ADR) (NASDAQ:PWRD) is another profitable MMORPG operator. Several years ago, Perfect World Co., Ltd. (ADR) (NASDAQ:PWRD) created a revolutionary development platform that allows programmers to efficiently create games with top quality graphics. The platform also helps simulate physical properties such as gravity, to make the games much more realistic.
Over the past several quarters, Perfect World Co., Ltd. (ADR) (NASDAQ:PWRD) has reduced its investment in promotions, and has increased its investment in new game development. This summer, several games that have been in the development pipeline are being introduced to users. These games include “Swordsman Online” and “Dota 2,” along with a 3D game “Holy King.”
As these new games are released, Perfect World Co., Ltd. (ADR) (NASDAQ:PWRD) should realize a significant profit boost. It is also worth noting that the company is expanding beyond its traditional Chinese customer base, and will be releasing its most popular game in English, French, and German this year.
The turnaround

Finally, Renren Inc (NYSE:RENN) looks interesting as a turnaround opportunity. The company operates a social media platform that could be considered the “Facebook of China.”
The company has been allocating capital to expand functionality, offering a wider range of features available to users. The company has suffered losses as capital is allocated to these expansion opportunities. In particular, the company’s online gaming business has picked up dramatically. In the last quarter, this division saw a 51% increase in revenues.
Renren Inc (NYSE:RENN) represents a very speculative investment, but based on the strength of the Chinese gaming market, the expanding user base, and the demographic tailwinds, Renren could turn out to be a high-risk, high-return growth option for aggressive investors.
Foolish final word

The bottom line is that China’s online community is growing dramatically. Companies who are able to profitably cater to new internet users have a large and growing pool of potential customers, and should be able to aggressively grow business over the next several years.

The article 3 Chinese Internet Companies Poised for Gains originally appeared on Fool.com and is written by Zachary Scheidt.

Zachary Scheidt has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Zachary is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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