Contents page
Key investment themes 3
Assessing the Chinese Internet market 10
Online games sector 23
Risk and business models 33
Valuation and stock picks 35
Understanding online games in China 38
Online advertising: portal vs. search engine 42
Near-term headwinds for B2B 57
Online shopping: fastest growth within the Internet space 65
Company pages 71
— Shanda Interactive Entertainment ......................................................................72
— Investment Thesis........................................................................................73
— Key catalyst ...........................................................................................74
— Risks .....................................................................................................74
— Valuation and basis for our price target..................................................74
— UBS vs. consensus................................................................................74
— Sensitivity ..............................................................................................75
— NetEase.com .....................................................................................................89
— Investment Thesis........................................................................................90
— Key catalysts .........................................................................................90
— Risks .....................................................................................................90
— Valuation and basis for our price target..................................................91
— UBS vs. consensus................................................................................91
— Sensitivity ..............................................................................................92
— Financials ....................................................................................................98
— Tencent Holdings .............................................................................................107
— Giant Interactive Group ....................................................................................113
— Sohu.com Inc. ..................................................................................................118
— Investment Thesis......................................................................................119
— Key catalysts .......................................................................................119
— Risks ...................................................................................................119
— UBS vs. consensus..............................................................................120
— Valuation and basis for our price target................................................120
— Sensitivity ............................................................................................121
— Baidu.com Inc ..................................................................................................131
— Investment Thesis......................................................................................132
— Key catalysts .......................................................................................132
— Risks ...................................................................................................133
— UBS vs. consensus..............................................................................133
— Valuation and basis for our price target................................................133
— Sensitivity ............................................................................................134
— Alibaba.com.....................................................................................................145
— Investment Thesis......................................................................................146
— Key catalysts .......................................................................................146
— Risks ...................................................................................................147
— UBS vs. consensus..............................................................................147
— Valuation and basis for our price target................................................147
— Sensitivity ............................................................................................148