Time to take another look at Chinese gaming stocks

Gaming is traditionally a favorite way to get exposure to the Chinese consumer economy. This is a good time to revisit a few of the big names.

Traders had already baked in extremely good earnings for Macao casino operator Melco Crown Enterprises (MPEL, quote) by the time that company reported its fourth quarter numbers last week. Now that the post-earnings depression has kicked in, it is worth taking a look.

Revenue doubled and EBITDA was up something like 4,800% in the fourth quarter. And analysts have been behind the curve, so keep watching for upgrades – especially now that the stock is 5% cheaper than it was a month ago.

For a perhaps less sophisticated Chinese gaming experience, Netease (NTES, quote) is focusing its online game development efforts squarely at the Chinese market.   In addition to gaming, Netease has an advertising component which pushed over a 25% gain for the quarter.   The online advertising segment is competing on some levels with search portals SINA and SOHU.

The company is exposed to massive growth opportunities — and gross margins were a whopping 71% last year — but the stock is still only trading at 15 times 2011 expected earnings.  It is up a solid 7% over the last month and has interesting potential.

The company launched Wrath of the Lich King in August, an expansion pack for the Activision. NetEase’s fourth-quarter online game revenue jumped 31 percent from the last year.

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