CMGC (8081 HK) - Oriental Patron Financial Services

``
Mon, 17 Nov 2014
CMGC (8081 HK)
Equ it y Re s ea r ch
M obile G a me / C hin a
Mobile game coming to the stage
Lindsay Hu / Yuji Fung
The group changed its name from “Computech Holdings Ltd” to “China Mobile
Game and Culture Investment Ltd” in June 2014, with core business shifting from
IT hardware to medical diagnostic service in 2013 as well as mobile online games
in early 2014.
+852 2135 0209/+852 2135 0236
[email protected]
[email protected]
Aggresively tapping mobile game industry. CMGC tapped mobile game
industry by acquiring HK SBT in 2014. As of Nov, CMGC hold effectively 24%
interest in HK SBT (大事科技), a mobile game developer and operator, and
CMGC announced to further increase its stake in HK SBT from 24% to 49%, total
consideration for 49% stake is HK$462mn, representing 9.5x/8.0x 2014/2015E
acquisition PE based on RMB78mn/RMB93mn guaranteed net operating profit
We estimate HK SBT alone may contribute HK$60mn profit for CMGE in 2015.
OP Express
Not Rated
Close price:
HK$0.207
Key Data
HKEx code
8081
12 Months High (HK$)
12 Month Low
0.29
(HK$)
0.11
3M Avg Dail Vol. (mn)
36.55
Issue Share
(mn)
Market Cap
(HK$mn)
2,496.12
516.70
Fiscal Year
12/2013
Major
(s)
Mr. Zhang Xiongfeng
shareholder
(15.27%)
Source: Company data, Bloomberg, OP Research
/losing price are as of 14/11/2014
Price Chart
8081 HK
MSCI CHINA
HK$
0.3
0.3
0.2
0.2
0.1
0.1
Nov/13
Feb/14
May/14
Aug/14
0.0
Nov/14
1mth
3mth
6mth
Absolute %
-16.5
21.8
53.3
Rel. MSCI CHINA %
-20.7
25.6
44.8
Compan y Profile
China Mobile Games and Cultural Investment
Limited engages in software related services
(incl. mainly mobile games) , health check
services, and money lending business
Exclusive NBA theme game distributorship to ride the NBA season kick-off.
CMGC plans to launch 5 mobile games in 2H14, mainly hard-core RPG and SLG
(tower defense & Strategy), of which NBA Heros, a NBA theme RPG by HK SBT
and to be launched in 4Q14, is likely the key earnings growth driver in 2015.
Currently NBA theme games in China are exclusively granted to DeNA and HK
SBT. Based on NBA MyDream by DeNA which achieved ~RMB20mn monthly
income in 2013, we expect NBA Heros to generate similar monthly sales from
1Q15 onward riding on 2014-15 NBA season kick-off in Oct 2014. We estimate
NBA Heros to contribute HK$10mn profits to CMGC in 2015. We have not yet
taken into account NBA Heors in our earnings forecast for HK SBT; however, we
see it, along with potential cooperation with Tencent mobile platform, as a
near-term catalyst
Earnings growth driven by games launched under WildHammer, Shanghai
Wang Yan and Shanghai Jixiang. CMGC currently holds 12.5% stake in
WildHammer, 100% in Jixiang and potentially 20% in Wang Yan. The three
companies are expected to launch total of 3-4 games in 2015, mainly RPG with
hot themes such as Xiyou(西游) and Matial (武侠). We estimate total HK$10mn
earnings contribution from the three companies for CMGC in 2015.
Bottom line turned around in 3Q14, mobile game profit ramp from 4Q14E
onwards The group recorded HK$8.8mn/HK$9.1mn loss in FY13/9M14 mainly
due to business transition with high employee cost in health check business
along with accelerated depreciation expenses for medical devices. We expect
bottom line to turnaround in 2H14 thanks to loss making health check business
back to profits in 3Q14. Looking forward, we expect mobile game business to be
the key earnings growth driver for CMGC with HK$80mn net profit in 2015 based
on our back-of envelope estimates. CMGC currently trades at 9.5x FY15E PE, 28%
discount to peers. We believe the fair value of CMGC is HK$0.28 per share based
on 13x FY15E fully diluted PE.
Risks:
1)
lower-than-expected
performance
of
NBA Heros,
2)
higher-than-expected operating expense, 3) potential miss on M&A targets, 4)
regulatory suspension on mobile game business due to VIE structure, and 5)
delay in game launch
Mon, 17 Nov 2014
CMGC(8081 HK)
Transforming from IT Hardware Business into
Mobile Online-Game
The group mainly engaged in providing IT hardware services before 2013. In Oct.
2013, the group acquired Luck Key Group to participate in medical diagnostic and
health check business. The group reduced its stake in medical diagnostic
business from 100% to 90.1% in Sep 2014 and disposed IT service in Nov 2014
to focus on mobile game business. We expect the group to further dispose its
medical diagnostic and health check business once mobile game contribution
ramp up in 2015.
Exhibit 1: Revenue Breakdown 1H13/2H13/1H14
Medical
diagnostic &
health check
0%
Money
Lending
6%
IT
94%
IT
1%
Money
Lending
4%
Medical
diagnostic &
health check
95%
Money
Lending
0%
Medical
diagnostic &
health check
98%
2H13
1H13
IT
2%
1H14
Source: Company
Exhibit 2: Business Framework
Principally Engaged in Four Business Segments
Mobile-online Game Business and
its Related Services Offering
Medical Diagnostic and Health
Check Services
Money Lending Business
Securities Investments
CMG CUL INV has been striving to become one of the leading mobile gaming operators
in China through dynamic and organic growth strategy
Source: Company, OP Research
Page 2 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
Mobile game coming to the stage in 2015
The group currently operates mobile game business via three major mobile game
operators: HK SBT (wholly-owned by Mighty Eight), Shanghai WildHammer and
Shanghai Wang Yan.
Exhibit 3: Shareholding Structure of Online Mobile Game Segment
China Mobile Games and Cultural Investment Limited
24%
Mighty Eight
Investments Limited
and its subsidiaries
12.5%
100%
Youle Holdings
Limited and its
subsidiaries
Jixiang Information
Technology
(Shanghai) Co., Ltd.
51%
20% - upon completion
Wang Yan Network
Limited
20% - upon completion
Shanghai
Re Zhua Digital
Technology Co.
100%
Shanghai Wang Yan
Technology Co., Ltd
Shanghai Zhiqu
Advertisement Co.,
Ltd.
Source: Company
1) HK SBT ( 大事科技 ) or Might Eight – CMGC will own 49% upon
completion
CMGC currently own 24% stake in HK SBT via its parent Mighty Eight and CMGC
announced to further increase its stake from 24% to 49% by end of 2014 at a total
consideration of HK$462mn for 49% stake, of which HK$142mn will be settled by
646mn new share at HK$0.22, representing 17.5% of fully diluted share of
CMGC.
HK SBT has a strong capacity in mobile game development and operation and
mainly focuses on overseas market (70% revenue, mainly SEA, Japan and
Korea). Self-developed games contributed to ~60% of sales in HK SBT which
enjoys 70-80% revenue sharing. Distribution or licensed game accounted for
40% of sales which enjoy 40-50% revenue sharing. HK SBT current flagship
games include (1) Sanguo Mobile which is the core earnings contributor for the
RMB93mn guaranteed profit in 2015 and (2) NBA Heors is the flagship game for
2015 which already launch beta testing and we expect the official launch is likely
in 4Q14.
Sanguo Mobile( 手机三国 ) launched by HK SBT in 2012 realized RMB
50mn/76mn revenue in FY12/13 and RMB 25mn in 1Q14 with ARPU ~ RMB300,
Page 3 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
showing a 3-year strong life cycle vs. 3-6 months in general. Leveraging on its
overseas exposure, HK SBT has realized 112% revenue growth CAGR during
2011-2013. It plans launch 2 self-developed games in 2014 including Sanguo
Card (launched in Sep 2014) and NBA heros (S-level) in 4Q14, and a third-party
licensed game named Tian Tian Gua Ji(天天掛机) which has been launched in
Sep 2014.
NBA Heros (NBA 英雄 ), an official license mobile game of the National
Basketball Association developed by HK SBT, is likely a key earnings growth
driver for FY14/15E given 1) only two companies (DeNA and HK SBT) are
granted by National Basketball Association the license to launch NBA theme
game, and 2) NBA MyDream run by DeNA achieved ~RMB20mn monthly income
in 4Q13, once ranking TOP 8 in iOS. NBA Heros has further incorporated
Chinese Sanguo elements with originally NBA features and allows multi-scenario
competitions, which well adapts to the taste of Chinese players. The game is
expected to officially launch in 4Q14 and is in negotiation with Tencent for
cooperation. The game is receiving growing positive feedbacks through its public
showcasing in Beijing, Shanghai etc. We expect NBA Heros to ride on 4Q14 NBA
season and generate RMB20mn monthly income after the launch by end of 2014.
We estimate HK SBT to contribute HK$60mn profit to CMGC as a profit share
from associate in FY15E.
Exhibit 4: Business History of HK SBT (Something Big Technology)
Apr-2011
Business Start
Nov-2011
Launch of SanGuo-Mobile
2012
2011
2012-2013
Further exploration of SanGuo-Mobile
in the overseas market
Japan in 2012
Dec-2013
Accumulated
over 3 millions
players
• Keitaisangoku 攜帶三國
2013
North America in 2012
Korea in 2013
• Titans Mobile
• Phonesamgukji Phone 三國志
2014
Sep-2014
Obtained the distribution license for “Tian
tian Gua Ji” in the regions of HK, Macau
and Taiwan.
 published in Sept 2014
Apr-2014
Launch of “VoyageMobile”
Sep-2014
Launch of “SanGuo
Card”
And Coming Soon……
NBA Hero
Sep-2014
Obtained the distribution rights of 2 single
player games:
Corn lianliankan & Priate Adventure
Source: Company
Page 4 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
Exhibit 5: NBA Heros (NBA 英雄) by SBT – 2015 flagship mobile game
Source: Company, OP Research
Exhibit 6: Sanguo Mobile (手机三国) by SBT – Launched in 4Q11
Source: Company, OP Research
Page 5 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
Exhibit 7: Mobile Voyage (手机大航海) by SBT – Launched in 2Q14
Source: Company, OP Research
Exhibit 8: Sanguo Qcard (Q 卡三国) by SBT – Launched in 3Q14
Source: Company, OP Research
Page 6 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
2) Shanghai WildHammer (上海蛮锤) – CMGC owns 12.5% stake
The group controls Shanghai WildHammer via 12.5% stake in Youle Holdings,
and has the option to increase stake to the max of 36.5% at 8.5x acquisition PE.
Shanghai WildHammer is fund in 2013 with core team members from Perfect
World (PWRD US) and its subsidiaries with over 10 years of game developing
experience. It was granted 3-year exclusive global distribution license for
Monster Master (怪物也嚣张) from Shanghai Re Zhua (上海热爪) and National
Martial(全民武侠) from Shanghai Ji Ku (上海极酷).
The Rune Rush (嚣张大冒险/战略传奇) is developed by WildHammer within 19
months and achieved strong market appeals on its first global testing in 2Q14.
The game is an integration of Clash of Canes, defense and construction of the
city, with fierce battle of PVP/PVE. WildHammer is the sole owner of the copyright
and other intellectual property rights of “The Rune Rush”, which will be officially
launched via HK SBT’s platform covering South and East Asia, HK and Macau
etc. We expect it to realize 7 digit monthly incomes after the launch.
CMGC got options to further increase its stake in Shanghai WildHammer from
current 12.5% to max 36.5% based on 8.5x PE which depends Shanghai
WildHammer mobile game revenue ramp.
We estimate Shanghai WildHammer to contribute around HK$3mn profit share
from associate in FY15E.
Exhibit 9: The Rune Rush(嚣张大冒险)
Source: Company, OP Research
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Mon, 17 Nov 2014
CMGC(8081 HK)
Exhibit 10: Monster Master (怪物也嚣张)
Source: Company, OP Research
Exhibit 11: National Martial Arts（全民武侠）
Source: Company, OP Research
Page 8 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
3) Shanghai Wang Yan (上海网岩) – CMGC will own 20% upon completion
In Sep 2014, the group entered the subscription agreement to acquire 20% stake
in Shanghai Wang Yan, a mobile game developer with keen game developing
capacity as several of its management have engaged in the launch of Tencent’s
start product Kart Rider (跑跑卡丁车).It expects to launch a new RPG game
called Kicking Journey to the West (踢爆那西游) in 1H15. CMGC also got an
option to further increase its stake in Shangahai Wang Yan to the max of 49% of
Wang Yan Limited at 8x acquisition PE.
We estimate Shanghai Wang Yan to contribute around another HK$3mn profit
share from associate in FY15E.
Exhibit 12: Kicking the Journey to the West (踢爆那西游)
Source: Company, OP Research
4) Shanghai Zhiqu Advertisement (上海智趣广告) – CMGC owns 51%
The group controls Shanghai Zhiqu via its wholly foreign owned enterprise
Shanghai Jixiang Information Technology (迹象信息技术(上海)有限公司).
Shanghai Zhiqu
is established in 2013 which is a mobile advertising platform
for mobile game marketing service. We expect Shanghai Zhiqu to contribute
HK$4mn profit in FY15E.
Exhibit 13: Zuma Hero – plan to launch
Source: Company, OP Research
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Mon, 17 Nov 2014
CMGC(8081 HK)
We estimate HK$70mn mobile game profit in FY15E. With licenses obtained
for operating ~5 titles to be launched in China, we expect mobile game segment
to enjoy robust growth from 4Q14 onwards following the launch timetable. All
together, we expect mobile game business related profit amounted to HK$70mn
profit to CMGC in FY15E.
Exhibit 14: CMGC current products pipeline
2014 Apr
2014 Sep
2014 Dec
1H15
Source: Company, OP Research
Page 10 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
Turnaround in 3Q14. Mobile game earnings
momentum pick up from 1Q15E onwards.
CMGC records positive HK$0.386mn profits in 3Q14 while still recorded
HK$9.14mn loss making for 9M14. We are confident on CMGC’s ability to narrow
down the net loss for FY14E and record positive earnings from 1Q15E onwards
thanks to 1) stable earnings growth and breakeven of health check business from
3Q14 onwards, 2) robust earnings contribution from mobile game especially
given the strong traction from NBA Heros, and 3) one off acquisition expenses are
booked in FY14E.
Stable earnings growth and breakeven of medical services business from
3Q14 onwards
The group recorded RMB8.84/9.14mn loss in FY13/9M14 mainly due to high
employee cost in health check business along with accelerated depreciation
expenses for medical devices. We expect depreciation to significantly scale down
when coming into 3Q14 which results in breakeven for medical services business
from 3Q14 onwards. We estimate a total of ~HK$180mn topline contribution from
health check during FY14E and expect it to deliver stable earnings contribution at
around HK$10mn in FY15E.
Robust earnings contribution from new mobile game business in 2015
We expect strong earnings contribution from Mighty Eight/HK SBT mainly driven
by its S-level game NBA Heros, which is now undergoing beta testing and expect
it to be officially launch in Dec 2014. We expect NBA Heros to generate
~RMB20mn monthly sales along with stable ~RMB 9mn monthly incomes from
Sanguo theme series. Together we are confident HK SBT to meet its RMB93mn
profit guarantee in FY15E and contribute HK$60mn profit to CMGC shareholders.
Meanwhile, we expect contribution from WildHammer to commence in 2015 as
the games are currently under further debugging and graphics enhancement. We
expect operating costs likely to drop as games operation enters a mature stage.
We estimate HK$3mn profit in FY15E from WideHammer and another HK$3mn
profit from Shanghai Wang Yan. Together with HK$4mn profit from Shanghai
Zhiqu Advertisment, we estimate total HK$70mn profit from mobile game related
business in FY15E.
Undemanding valuation with several off-take opportunities to fuel its
mobile game earnings growth
CMGC is entitled to increase its stakes in WildHammer and Shanghai Wang Yan
from current 12.5% and 20% to max 36.5% and 49% at 8.5x/8x acquisition PE.
We believe such off-take agreements enable flexibility and risk control for CMGC
to ramp up its mobile game business. We estimate total mobile game related
earnings to be HK$70mn in FY15E and we also estimate around HK$10mn profit
from medical service segment, together CMGC currently trades at 9.5x FY15E
PE based on fully diluted 3.687bn outstanding shares, 28% discount to peers. We
believe the fair value of CMGC is HK$0.28 per share based on 13x FY15E PE.
Page 11 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
Appendix I – Management profiles
Exhibit 15: Management Profile
Mr. Zhang Xiongfeng
Mr. Zhang Peiao
Chief Executive Officer
Chairman
Has extensive experience in the investment
banking industry specialising in the area of
corporate finance
Participated in the management, advisory and
consultancy work for the online and mobile
game industry of China Cultural Industry
Association
Has more than 7 years experience in the online
game industry in China
Mr. Hung, Kenneth
Executive Director
Previously Business Development Director
of Star Alliance Movies (Beijing)
Ms. Lam, Karen
Company Secretary & Financial Controller
Has extensive experience in accounting,
auditing and financial management
Has extensive experience in the
entertainment industry
Source: Company, OP Research
Page 12 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
Appendix II – Shareholding structure
Exhibit 16: Shareholding Structure
Mr. Zhang
Xiongfeng
(Basic)
After completion of subscription1
and acquisition2
Mr. Zhang
Xiongfeng
100%
China New
Economy Fund
Limited
Turbo Pointer
Limited
12.02%
100%
Public
Shareholders
15.27%
China New
Economy Fund
Limited
8.58%
72.71%
China Mobile Games and Cultural Investment Limited
Turbo Pointer
Limited
21.04%
Hydra Capital SPC
Public
Shareholders
18.47%
51.91%
China Mobile Games and Cultural Investment Limited
Source: Company
Exhibit 17: Shareholding Structure
Shareholders
(Fully Diluted Basis)
Existing structure
Immediately after completion of
subscription1 and acquisition2
Turbo Pointer Limited
381,078,000
14.18%
735,678,000
China New Economy Fund Limited
300,006,000
11.17%
300,006,000
8.14%
645,660,000
17.51%
Hydra Capital SPC for and on behalf of SP#1
Public Shareholders
Options
Total
19.95%
1,815,038,430
67.56%
1,815,038,430
49.23%
190,545,243
7.09%
190,545,243
5.17%
2,686,667,673
100.00%
3,686,927,673
100.00%
1.Being 354,600,000 new ordinary shares proposed to be issued to Turbo Pointer Limited pursuant to the subscription agreement entered on 10 October 2014.
2.Being 645,660,000 new ordinary shares proposed to be issued to Hydra Capital SPC as part of the consideration for acquisition of 25% Mighty Eight Investments
Limited pursuant to the sales and purchase agreement entered on 9 October 2014
Source: Company, OP Research
Page 13 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
Appendix III – Business Structure for Mobile Game Segment
Exhibit 18: Business Structure for Mobile Game Segment
CMGC
24% in Mighty Eight
24% of Equity Interest
Jan 2014 : 5%
Apr 2014 : 13%
Aug 2014: 6%
*Additional 25% upon completion
Best Faith
(Wholly-owned
Subsidiary)
20% in Wang Yan
(upon completion)
12.5% in WildHammer
Golden
Weapon
(Wholly-owned
Subsidiary)
Options for Max 49%
Timely
Investment
(Wholly-owned
Subsidiary)
Shanghai
Wang Yan
Network
Holdings
12.5%I
Century Grand,
Hydra Capital
Mighty Eight
100%
HK SBT
100%
Off shore
Options for Max 36.5%
License
Agreement
(Share monthly
income from
service fees)
Youle
Holdings
Operation
Shanghai Jixiang
Information
Technology
(WFOE)
51%
100%
Shanghai
Wang Yan
Technology
100%
51% in Shanghai Zhiqu
Shanghai Zhiqu
(mobile game
marketing)
Shanghai
WildHammer
On shore
Contractual Agreement
Mr. Lu
50%
National Martial
Arts Game
Game
Operation
License
Mr. Mao
Shanghai Ji
Ku
50%
Service Fee = Net Profit
Shanghai Wanjia
100%
Shanghai SBT
20% upon
completion
Monster Master
Prime Vision
Exclusive Technology Services and
Mgmt Consulting Agreement
Business Cooperation Agreement
Shanghai
Re Zhua
Source: Company, OP Research
Page 14 of 21
Mon, 17 Nov 2014
CMGC (8081 HK)
Appendix IV – China mobile game industry
overview
According to Newzoo, global game market reached US$75.5bn in 2013 and is
estimated to reach US$103bn by 2017, with 6% 5-year growth CAGR in
2013-2017E driven by strong demand from Asia market and mobile game users.
Mobile game market is expected to grow with 15% 5-year CAGR in 2013-2017E,
reaching US$35.4bn by 2017 and accounting for one third of total game market.
Exhibit 19: Global Game Market
(US$ bn)
120
80%
102.9
95.2
88.4
80
70.4
30%
27%
23%
40
18%
34%
32%
30.7
26.3
21.8
17.6
12.7
60%
81.4
75.5
40%
35.4
20%
0
0%
2012
2013
2014E
Game Market
2015E
2016E
Mobile Game Market
2017E
Penetration
Source: Company
iResearch further predicts China online game /mobile game market to experience
robust growth with 20%/37% growth CAGR in 2013-2017E to reach RMB
22.57bn/70.57bn by 2017, while mobile game is expected to account for 31% of
total China online game market in 2017.
We expect China market continues to drive global market growth with above
average growth momentum; meanwhile we see mobile game as the main driver,
outpacing PC and console games with rising of smartphone penetration.
Exhibit 20: China Game Market
(RMB bn)
240
224.57
200
60%
183.66
146.8
160
40%
31%
25%
89.16
80
28%
114.95
120
53.8612%
70.57
6.77
20%
51.86
10%
40
6.24
21%
17%
67.09
36.1
14.85
23.64
0
0%
2011
2012
2013E
Online Game Market
2014E
2015E
Mobile Game
2016E
2017E
Penetration
Source: iResearch
Page 15 of 21
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CMGC(8081 HK)
According to iResearch, as of 2014Q2, China online mobile game market enjoyed
continuous growth with rising game number and game developers. While casual
game remains the mainstream, RPG game is showing a strong exposure by taking
13.3%/11.7% of total number of mobile games in Android/iOS App Platforms,
ranking as the 2nd heated game type in 2014Q2. Card Game and Tower defense
continue to be one of the types with high-exposure, with Card Game accounting for
6.1%/5.7% while Tower Defense Game accounting for 5.0%/5.7% in Android /iOS
App Platforms.
Exhibit 21: mGameTracker-2014Q2 Android/iOS Mobile Game Distribution
mGameTracker - 2014 Q2 Android Game by type
Others
14%
Casual
21%
War Strategy
3%
mGameTracker - 2014 Q2 iOS Game by type
Simulation
3%
Others
12%
Casual
28%
Action
6%
Action
5%
TowerDefense
6%
TowerDefense
5%
RPG
13%
Card Game
6%
Card Game
6%
RPG
12%
Racing
6%
Shooting
7%
Racing
6%
Shooting
7%
Casual Card
Game
10%
Parkour
10%
Casual Card
Game
3%
Parkour
11%
Source: iResearch
In terms of distribution of game IP, we notice Sanguo theme ranks Top1 among all
IPs, accounting for 20.2%/7.4% of total number of mobile games in Android/iOS
platforms. Among TOP20 android games with fastest growth in June, four are
related to Sanguo theme. Among the TOP 20 iOS Card /Strategy games, five/three
are with Sanguo theme. Also, we notice Sanguosha Online has captured market
eyes by continuing ranking TOP20 in 1Q/2Q14.
Apart from that, Journey to the West theme remains TOP 5 in Android distribution
platform, accounting for 4.4% of all IPs. Quan Min Xiyou(全民西游) is among the
TOP20 games with fastest growth in 2Q14; meanwhile we notice the presence of
games related to Journey to the West in both TOP20 RPG and Strategy Game list
in Android platforms.
Exhibit 22: mGameTracker-2014Q2 Android/iOS Mobile Game IP Distribution
mGameTracker - 2014 Q2 Android Game by IP
mGameTracker - 2014 Q2 iOS Game by IP
Sanguo
8%
Sanguo
20%
Plant & Zombie
12%
Others
40%
Plant & Zombie
8%
Angry Bird
6%
Others
44%
Angry Bird
7%
Jin Yong
3%
Boonie Bears
3%
Minion Rush
3%
DOTA
7%
WoW
6%
Puzzle Bobble
6%
Where is
Dad go
3%
Journey to the
West
KOF
4%
3%
Smash Brothers
3% Spiderman Minion Rush
3%
4%
Zuma
3%
Where is Dad go
4%
Source: iResearch
Page 16 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
Exhibit 23: mGameTracker-2014Q2 Top20 Card Games (Android)
Turrent Legend(刀塔傳奇)
My name is Mtonline 我叫Mtonline)
Sanguosha Online (三國殺online)
Road To Endymion (魔法禁書)
放開那三國
超級英雄
三國志威力加強版
搶你妹
無雙三國
秦時明月
拜見主公
天天愛西遊
神之刀
我是火影
暴走武俠
主公快逃
NBA MyDream
LOL
迷你西遊
鬥戰神就
396
336
325
316
237
150
149
145
143
137
136
128
124
121
116
113
92
82
75
75
0
100
200
300
400
500
Source: iResearch
Exhibit 24: mGameTracker-2014Q2 Top20 Card Games (iOS)
Turrent Legend(刀塔傳奇)
My name is Mtonline 我叫Mtonline)
超級英雄
Sanguosha Online (三國殺online)
放開那三國
全民英雄
爐石傳說:魔獸英雄傳
龍紋三國
神之刃
啪啪三國
迷你西遊
全民水滸
超級七龍珠
魔神之塔
三國殺online(國慶專版）
口袋神獸Online
LOL
英雄殺
忍將OL
秦時明月
289
225
79
66
61
44
37
34
30
28
26
23
21
20
19
17
17
14
13
11
0
100
200
300
400
Source: iResearch
Exhibit 25: mGameTracker-201406 TOP20 Fast Growing Games (Android)
足球經理2014
合金彈頭無限幣版
蠟筆小新跑酷
絕殺2014
火柴人足球
公路競賽
迷你衝撞
英雄殺
奇怪的大冒險
冰封前線1941
神魔大陸
全民西遊
曹操去哪兒
天天街機捕魚
瘋狂的麥咭
凱撒大帝online
浪漫修仙
哥斯拉：攻擊去
足球大逆襲
僵屍日記2
75
70
63
61
59
56
49
49
48
46
45
44
44
43
42
42
41
41
41
40
0
20
40
60
80
Source: iResearch
Page 17 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
For individual game series, besides the dominance of Turrent Legend, we notice
that NBA MyDream ranks TOP20 Card/Simulation games in Android/iOS platforms
in 2014Q2, showing ~1 year life cycle since its launch in 3Q13. We are confident
that NBA IP will attract strong market appeal riding on 3Q14 NBA sentiment.
Exhibit 26: mGameTracker-2014Q2 TOP 20 Simulation Games (iOS)
我的世界
全民小鎮
藍精靈村莊
QQ農場
我愛我家
和風物語
摩爾莊園
農場主
餐廳物語
橋樑構造者
模擬建築2014
冰川時代：村莊
足球大逆襲
幻想世界
過山車大亨4
航空公司大亨3
波音公司飛行模擬器2014
卡通農場
NBA MyDream
238
99
41
25
19
19
15
14
12
11
10
9
9
9
8
6
6
6
5
0
20
40
60
80 100 120 140 160 180 200 220 240 260
Source: iResearch
Based on the above data, we are positive that HK SBT will capture market attention
by its star Sanguo series and NBA Heros in 2H14. Also, we expect the RPG/Tower
Defense/Simulation games by WilderHammer and Wang Yan (e.g. National Martial,
Monstar Master, Kicking Journey to the West) to ride on current popular trend and
deliver good results in the years to come.
Page 18 of 21
Mon, 17 Nov 2014
CMGC (8081 HK)
Exhibit 27: Historical financial summary
Year to Dec (HK$mn)
IT
Money Lending
Medical diagnostic & health check
Mobile Game
Turnover
COGS
Gross Profit
Other revenue
SGA
Other exp
Operating profit
Non-operating income/loss
Share of profits from JV&Asso
Finance costs
Income tax
Profit from continuing operations
Discontinued business
Minority interest
Net income
Balance Sheet
PPE
Investment Properties
Goodwill
Investment in an associate
Investment in fish breeding business
Loan receivables
Available for sale assets
Deferred tax assets
Non-current assets
Inventories
Debtors, deposits and prepayments
Financial assets at fair value through PnL
Loan receivables
Income tax recoverable
Cash and cash equivalents
Assets held for sales (disposable group)
Current assets
Creditors, accruals and other payables
ST borrowing
Income tax payable
Liabilities held for sales (disposable group)
Current liabilities
Covertible notes
Deferred tax liabilities
Non-current liabilities
Share capital
Share premium and reserves
Minority interest
Total equity
Cash Flow
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Net change in cash
FY2012
101.846
4.758
0.000
0.000
106.604
(99.631)
6.973
(1.065)
(7.361)
(17.136)
(18.589)
0.186
0.000
(2.673)
0.000
(21.076)
0.000
0.000
(21.076)
FY2013
48.487
4.936
46.134
0.000
99.557
(54.787)
44.770
1.060
(38.852)
(21.228)
(14.250)
8.933
0.124
(4.048)
(0.362)
(9.603)
0.000
0.756
(8.847)
5.899
0.000
0.097
0.000
15.500
4.816
0.000
0.000
26.312
0.000
19.501
6.744
30.363
0.000
77.156
0.000
133.764
6.951
0.000
0.000
0.000
6.951
39.587
0.000
39.587
55.770
57.768
0.000
113.538
35.835
38.700
0.000
1.561
0.000
0.000
0.000
1.211
77.307
2.277
41.483
0.000
0.000
0.044
42.125
14.214
100.143
13.318
0.000
0.166
1.214
14.698
0.000
0.010
0.010
93.086
68.825
0.831
162.742
(53.375)
(26.710)
145.452
65.367
38.164
(83.878)
13.343
(32.371)
9M13
0.000
0.000
4.081
0.000
4.081
0.000
4.081
0.311
(4.211)
(4.970)
(4.789)
1.267
0.000
(3.125)
(0.222)
(6.869)
0.000
0.000
(6.869)
9M14
0.000
0.131
138.359
9.250
147.740
(28.823)
118.917
1.335
(92.259)
(36.462)
(8.469)
(0.655)
2.058
(1.498)
(0.216)
(8.780)
0.000
(0.357)
(9.137)
Source: Company
Page 19 of 21
Mon, 17 Nov 2014
CMGC(8081 HK)
Exhibit 28: Peer Group Comparison
3-Yr
Mkt
Company
Cmg Cul Inv
Ticker
8081 HK
3-mth
cap avg t/o
PER
Price (US$m) (US$m)
Hist (x)
0.21
HSI
24,087.38
HSCEI
10,761.51
CSI300
2,581.09
67
1.1
Adjusted sector avg*
Tencent
700 HK
PER
131.90 159,333
EPS
EPS
EPS
FY1
FY2
Cagr
(x) FY2 (x) YoY%
YoY%
(%)
FY1
PER
Div yld Div yld
Net
Gross margin
ROE
ROE
Sh px
FY1
Hist
FY1
Ebitda
Ebitda
Hist margin
Hist
Hist
FY1
1-mth
(x) FY1(x) FY2(x)
(%)
(%)
(x)
(x)
Hist
Cur Yr
(%) Hist (%)
(%)
(%)
(%)
(70.2)
N/A
(8.9)
N/A
N/A
EV/
Net
Hist
P/S
P/B
EV/ gearing
P/S
PEG
P/B
0.0
45.3
Sh px
% 3-mth %
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1.62
N/A
(8.8)
N/A
(16.5)
22.5
10.4
11.2
10.4
(6.8)
7.6
3.3
3.37
3.7
3.6
1.35
1.33
13.0
11.9
4.5
(2.9)
7.4
7.3
6.8
1.6
7.8
6.5
1.13
4.1
4.4
1.13
1.09
15.2
14.8
4.9
(2.8)
11.2
10.5
9.1
6.9
15.2
12.4
0.84
2.3
2.8
1.61
1.51
14.4
14.4
5.5
10.5
24.0
16.3
13.2
87.2
28.0
44.1
0.48
4.57
3.84
1.79
1.09
2.51
2.26
17.74
11.83
0.00
71.15
12.32 21.46 20.59
8.52
(11.32)
299.0
61.6
40.4
30.8
52.5
31.0
36.1
1.12
12.82
12.35
0.2
0.3
13.06
12.23
46.0
28.1
0.0
54.0
25.6
34.2
34.1
16.3
1.4
Igg
8002 HK
3.64
643
5.7
60.2
8.9
7.2
579.5
22.6
120.8
0.07
4.78
3.12
2.0
1.9
4.70
2.90
21.6
6.8
0.0
74.7
7.9
N/A
32.0
11.0
(25.7)
Kingsoft Corp
3888 HK
19.62
2,997
23.6
26.7
27.1
21.6
(1.6)
25.5
23.9
1.14
6.81
5.63
0.6
0.7
3.95
3.86
23.3
21.8
0.0
86.3
30.9
18.6
17.4
9.2
(17.6)
Boyaa Interactiv
434 HK
7.32
714
2.0
13.3
14.4
10.6
(7.9)
36.7
18.7
0.77
2.64
4.68
2.6
2.1
3.51
2.98
17.1
8.9
0.0
61.1
19.9
17.9
22.3
0.0
(24.5)
Forgame Holdings
484 HK
16.66
273
0.9
N/A
N/A
19.4
N/A
N/A
(148.2)
N/A
0.52
2.04
N/A
N/A
1.19
1.23
1.6
10.7
0.0
84.7
(40.2)
N/A
(0.6)
17.5
(7.8)
Ourgame Internat
6899 HK
3.94
398
0.6
36.6
14.4
9.2
154.7
55.3
80.4
0.18
5.43
4.81
N/A
1.3
N/A
2.54
29.0
10.2
0.0
66.2
14.8
29.3
30.2
(6.9)
5.3
Netdragon Webs
777 HK
13.22
868
1.8
0.9
16.3
14.8
(94.7)
10.6
(60.0)
N/A
9.67
5.55
3.0
1.9
1.14
1.11
7.9
3.7
0.0
90.8
694.3 182.0
6.7
0.6
(15.8)
Sungy Mobile Ltd
GOMO US
6.61
221
1.8
24.2
18.4
12.6
31.7
45.3
29.8
0.62
N/A
3.52
N/A
0.0
1.53
1.52
10.5
26.6
0.0
71.4
27.9
N/A
10.8
(11.6)
(39.5)
China Mobile-Adr
CMGE US
23.48
739
14.7
146.9
17.7
10.2
732.0
73.4
160.5
0.11
5.37
3.55
N/A
0.0
2.66
2.81
1,411.8
12.5
0.0
55.8
6.5
11.9
21.2
26.9
59.6
2432 JP
1,575.00
2,041
38.6
6.5
13.4
13.4
(51.5)
0.1
(21.2)
N/A
1.33
1.68
2.3
1.6
1.41
1.36
2.8
5.2
0.0
66.5
17.5
16.9
10.8
22.1
22.3
Dena Co Ltd
* Outliners and "N/A" entries are in red and excl. from the calculation of averages
Source: Bloomberg, OP Research
Page 20 of 21
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Rating and Related Definitions
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