(GA) Giant Interactive Group, Inc. – Growth And Income – Zacks Rank Buy

May 6th, 2009

Giant Interactive Group Inc. (GA) is seeing upbeat earnings forecasts ahead of reporting tomorrow. The company has done well in the past, exceeding analysts’ estimates by an average of 10% over the past 4 straight quarters.

Company Description

Giant Interactive Group, a Chinese online gaming company, boasts some of the widest revenue streams in the industry. The industry has been hot lately and GA’s share price was no exception, outpacing the market as it surged nearly 20% over the past 3 months.

Focusing on multiplayer online role playing. Giant’s first game, ZT Online, was voted the most popular online game in China in 2006 according to the International Data
Corporation. The Company’s second game, Giant Online, entered into open beta testing on March 28, 2008. Giant has three additional online games that it intends to launch, including King of Kings III, Empire of Sports and ZT Online II.

Giant built a nationwide distribution network to sell prepaid game cards and game points required to play its games, which as of December 31, 2008 consisted of over 280 distributors, and reached over 116,500 retail outlets.

Bullish Forecasts

Analysts have revised earnings estimates to the upside ahead of tomorrow’s first-quarter eport. Current full-year projections of 59 cents per share were increased from the 3 months-ago level of 54 cents. For 2010, estimates are up from 64 cents to 71 cents over the past 3 months.

Favorable Industry Comparisons

Giant Interactive’s return on equity (ROE) of 21% soars past the industry average of 5%. The company’s net profit margin crushes the industry average of 5%. Giant rewards shareholders with a dividend yield of 2% in an industry that offers very little income.

Strong Earnings

The company posted stellar results in the fourth quarter. Earnings per share of 18 cents, jumped ahead of analysts’ estimates by 64%. Net revenue grew 33% on a year-over-year basis.

Management noted that fourth-quarter results showed a marked improvement on a sequential basis.

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