Sky-mobi (MOBI) Upgrade to Buy; Progress in Smartphone Services and Ecosystems Upgrade to Buy (1H) from Hold on smartphone services progress and market overreaction on Chinese ADRs — MOBI made progress in smartphone services and we see more certainty that white-box companies will enter into the smartphone market. Although MOBI still has near term revenue growth challenges due to slowdown of White-Box shipments, we believe smartphone service progress and the recent sell down of Chinese ADRs on VIE and accounting concerns (which we think is overdone) provide entry opportunities for MOBI, still a well-positioned mobile Internet pure play in China. We upgrade MOBI to Buy (1H) from Hold. Maintain TP US$7.5, on 1.5x EV/Revenue. Any major progress in smartphone services, SNS services and strategic partnerships will likely be key catalysts. Progress of smartphone services — MOBI launched an Android-based Card & Board game platform in September, which can connect with its feature phone users based on MOBI’s existing account and billing systems. MOBI plans to launch an Android-based apps store in December. We believe progress of MOBI’s smartphone based services and smartphone user growth will be more meaningful from yearend, although revenue opportunities from smartphone will likely be limited within the year due to low smartphone penetration and prevalence of pirated apps in China. Early signs of MTK’s success in low-cost smartphone chipset solution, benefiting White-Box and MOBI — Lenovo has launch a popular 3G smartphone A60 priced at Rmb1,000 (US$150) based on MTK single-chip solution. We believe MTK will gain a meaningful share in the 3G smartphone chipset solution, and smarphone costs will decline fast as Chinese telecom operators are aggressively promoting low-cost smartphones (priced below US$150). We expect White-Box companies (MOBI’s key partners and service marketing channels) will be able to ship smartphone in large scale by the end of 2012, as MOBI finds new catalysts for smartphone services growth.
TheFlyOnTheWall: News Breaks October 3, 2011 06:04 EDT MOBI theflyonthewall.com: Sky-mobi upgraded to Buy from Hold at Citigroup Citigroup upgraded Sky-mobi citing the recent pullback in shares and the company's progress in smartphone services. The firm thinks the sell-off along with other Chinese ADRs on accounting concerns is overdone and keeps a $7.50 price target for shares. :theflyonthewall.com