How Advertising Revenue Is Likely To Drive Sina’s Growth In 2016

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SINA
Sina

Sina (NASDAQ:SINA) generates a significant portion of its revenues from online brand advertising and marketing on Sina.com and Weibo.com. According to our estimates, advertising revenue will be the key area of growth for the company’s top line through 2016. The contribution of advertising revenue to Sina’s net revenue has increased from 79% in 2013 to 84% of net revenue last year. Comparatively, the company’s Mobile Value Added Services segment includes revenues generated by SMS, IVR (Interactive Voice Response) and other such services. Since internet penetration has increased in China, complemented by a higher mix of smartphones sold, revenues from this division has fallen from about $120 million in 2009 to just about $30 million in 2015.

sina_2016_1

Sina has witnessed a strong demand from SME customers in the advertising segment, due to which the company has set up a nationwide SME distributor network to meet the marketing requirements in this segment. [1] This could help in scaling up revenues without a similar hike in cost of goods sold. Moreover, the company has observed healthy gross margins for both its advertising and non-advertising revenue streams over the last few quarters due to a lower revenue contribution of low-margin businesses. [2] Additionally, improved operating efficiency and cost management has led the company’s cash operating profit margin to improve in the same period.

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sina_2016_2

Sina’s adjusted EBITDA margin stood at around 8.5% for 2015, which means that even a small improvement in profits for the year could help EBITDA margins increase by 2-3 percentage points due to the small base factor. Correspondingly, a limited increase in expenses complemented by a 12% revenue growth could lead to a 40% increase in the adjusted operating profit for Sina as demonstrated below. Consequently, its EBITDA margin for 2016 could improve by up to 3 percentage points for the full year.

sina_2016_4Have more questions about Sina? See the links below:

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Sina.

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Notes:
  1. Sina 20-F 2015 Filing, SEC, April 2016 []
  2. SINA Q1 2015 Earnings Call Transcript, Seeking Alpha, May 2016 []