Giant Interactive Beats on Q4 Earnings; Sales In Line - Analyst Blog
March 06 2014 - 9:30AM
Zacks
One of China’s leading online game developers, Giant
Interactive Group Inc.’s (GA) fourth quarter 2013 adjusted
earnings of 29 cents increased 23.1% year over year (on a local
currency basis) on the back of top-line growth. Earnings also beat
the Zacks Consensus Estimate of 23 cents by 26.1%.
Net revenue of $99.9 million was in line with the Zacks
Consensus Estimate and increased 5.8% year over year (on a local
currency basis), driven by an increase in the demand for online
games. The company witnessed a 2.7% increase in active paying
accounts (APA) for online games and a 3.7% increase in average
revenue per user (ARPU) for online games during the quarter. Gross
profit also increased 8.9% year over year to $88.7 million on
account of higher sales.
Full Year 2013 Results
In 2013, the company delivered adjusted earnings of $1.03 per
share, which increased 10.7% (on a local currency basis) from the
prior-year period driven by higher revenues. Earnings also beat the
Zacks Consensus Estimate of 93 cents by 10.8%.
Net revenue grew 9.5% (on a local currency basis) to $389.1
million in 2013, driven by double-digit annual growth in online
game revenues. Revenues also beat the Zacks Consensus Estimate of
$386 million.
In 2013, the company launched World of Xianxia, an online game,
which has successfully expanded the portfolio without cannibalizing
the sales of existing games. In addition, the company successfully
diversified into new growth areas such as web games and mobile
games in 2013.
The company is optimistic about expanding its portfolio in 2014
and hopes to launch several new mobile games. The company has a
prudent expense management system and it continues to explore other
cost effective distribution channels to enhance profitability.
Buyout Offer
In late Nov 2013, the company received a buyout offer from its
chairman Yuzhu Shi and an affiliate of BaringPrivate Equity Asia
(collectively called ‘consortium’). The consortium proposed the
acquisition of all of the company’s shares, including American
Depositary Share (ADS) for $11.75 per share/ADS. Each ADS
represents one ordinary share of the company. The consortium will
pay about $2.82 billion in cash, which will be financed using a
combination of debt and equity capital.
Giant Interactive is currently evaluating the preliminary offer
and has formed a special committee, comprising three independent
directors of the company, to review the proposal. They will assess
the offer and negotiate terms to provide maximum value to the
company’s shareholders.
Giant Interactive is a leading online game developer and
operator in China in terms of market share and focuses on massively
multiplayer online role playing games. Giant Interactive holds a
Zacks Rank #2 (Buy). Investors interested in Internet retailers can
also consider stocks like WebMD Health Corp.
(WBMD), YY Inc. (YY) and China Distance
Education Holdings Limited (DL). While WebMD Health and YY
sport a Zacks Rank #1 (Strong Buy), China Distance Education
Holdings holds a Zacks Rank #2.
CHINA DISTANCE (DL): Free Stock Analysis Report
GIANT INTERACTV (GA): Free Stock Analysis Report
WEBMD HEALTH CP (WBMD): Free Stock Analysis Report
YY INC-ADR (YY): Free Stock Analysis Report
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