Earlier this week, Sina (NASDAQ:SINA), a leading Chinese online media company, announced a strategic partnership with AutoNavi Holdings Limited (NASDAQ: AMAP), a provider of digital map content and navigation and location-based solutions in China, in an effort to enhance the social, location and mobile offerings of both the companies.
Under the partnership, the 424 million registered users of SINA Weibo will have access to the content and functionality of AutoNavi’s mobile map application, AMAP. At the same time, the AutoNavi users will be able to sign on using Weibo Connect and access content directly from Weibo. AutoNavi Maps currently has over 90 million users, growing by approximately 6 million each month. 
Weibo is Sina’s microblogging website which is similar to a hybrid of Twitter and Facebook. It has been increasingly gaining popularity among users in China and is estimated to be used by 30% of Internet users in the country by 2013.  As Weibo continues to attract an expanding user base and register higher user activity, we estimate growth in the same to stabilize Sina’s declining advertising revenue, which accounts for over 60% of its valuation. (Read: Weibo Could Stabilize Sina’s Display Advertising Business)
Rapid Growth Opportunities In Chinese Mobile Internet Market
With the rapid adoption of mobile devices, an increasing number of users are using these devices to access the internet. As per a report by China Internet Network Information Center (CNNIC), China had 388+ million mobile internet users, which is almost 72% of total internet users in the country, by the end of June 2012. Additionally, the total number of mobile micro blog users stood at close to 170 million, as of June 2012.  China is one of the fastest growing economies in the world, and thus we expect a higher internet penetration as well as mobile internet penetration in the years ahead.
The number of mobile map users is also rising at a rapid pace. As per Analysis International, at 229 million, China’s mobile map users registered a 33% sequential and a 206% annual increase, as of June 2012. The growth is expected to continue in the future as well, with mobile map users in China estimated to reach around 600 million by 2015. ((Sina Partners AutoNavi, Zacks, December 11, 2012))
The Collaboration Could Help Monetize The Weibo Mobile Platform
With the increasing adoption of mobile devices among users, Sina is seeing a strong shift from its PC terminals to mobile terminals across its product lines. In its Q3 2012 earnings call, Sina declared that around 72% of its daily active users accessed Weibo either through mobile or through both mobile and PC in September, compared to 69% in June.
Expecting to see a continuous increase in mobile traffic in the future, Sina has adopted a strategy to make mobile the first priority for any product development as well as for its other future product initiatives. However, developing the mobile platform requires significant upfront investment and mobile monetization remains a big challenge.
Earlier in July this year, Sina has entered into a partnership with Baidu by collaborating on five key aspects namely search, content, platform, technology and resources. The recent partnership with AutoNavi is reminiscent of Sina’s increasing effort to increase its share in the mobile market. The partnership would enhance the social networking as well as navigational aspects of the company’s current mobile offering.
We believe that the collaboration with AutoNavi will be beneficial for Sina as it continues to look for new ways to monetize the increasing flow of mobile traffic. Sina’s growing efforts to focus on developing the Weibo mobile platform would augur well for its valuation.
Our price estimate of $67.51 for Sina marks our valuation at a premium of over 50% to the current market price. The stock price has declined by close to 16% in the last one month.
However, we believe that the decline is more on account of macro factors, namely the slowdown in the growth rate of Chinese companies on account of macro headwinds and the decline in Chinese web stocks on delisting concerns. We believe that Sina has strong fundamentals to support a higher valuation.Notes: