Shanda Interactive Entertainment Expects 4Q10 GAAP EPADS Of RMB1.86 Vs. Consensus Of RMB2.58

According to Deutsche Bank, Shanda Interactive Entertainment SNDA expect 4Q10 GAAP EPADS of RMB1.86 vs. consensus of RMB2.58. Deutsche Bank reported that the difference is mainly due to tax rate assumption. “We assume a 38% tax rate for 4Q as we expect Ku6 to contribute similar loss in 4Q vs. 3Q. Nonetheless, we highlight that there could be downside risk to our tax rate assumption given that one of Shanda's subsidiaries, Shanda Computer (Shanghai) Ltd., Co, recently obtained Key Software Enterprise status, which allows it preferential tax treatment for 2010 (10%). We estimate that Shanda Computer accounted for 34% of pre-tax profit in 2008, and that it prepaid income tax at the rate of 15% in the first 3 quarters of 2010. We estimate 4Q10 rev totaled RMB1, 471m vs. consensus of RMB1, 438m. Our 4Q10 operating profit est is RMB155m vs. consensus of RMB158m. The co will announce its 4Q earnings at 10:30AM HKT on March 2nd.” Shanda Interactive Entertainment closed yesterday at $42.53.