We recently introduced an exciting bet on the fast growing Chinese mobile gaming market – China Mobile Games and Entertainment Group (CMGE) (http://nordicinvestor.net/2014/04/04/mobile-gaming-cmge-china-place/). Many of our readers contacted us and wanted to know more about the company, so we reached out to the Chief Financial Officer, Mr Ken Chang, who agreed to do an exclusive interview with Nordic Investor:
Nordic Investor: How come you are listed in the US?
Ken Chang: It is the largest capital market in the world. Famous and good for branding. We appreciate US investor’s professional understandings in mobile internet sector. It has been a dream for high-tech companies to get listed in the US. It is our honor to get listed on Nasdaq.
NI: What are you top-3 games right now in terms of revenues?
KC: They are Joyful Da Ying Jia (poker game), San Guo Zhi Weili Jiaqiang Ban (card games) and Wu Xia Q Zhuan (card games + RPG).
NI: With Apple’s deal with China Mobile, do you expect iOS to catch up to Android during 2014 or is Android likely to remain the undisputed champion in China?
KC: In my personal opinion, I think Apple can likely catch up. Because as Chinese people become more affluent, more people can afford an iPhone. In general my Chinese friends like iPhone.
NI: How about Windows? Is this a platform you are considering to enter anytime soon or is it simply to inferior in China?
KC: It does not matter to us. As long as there are many platforms on Window or Android, our role as a publisher exists as this is an important role in the value chain of the mobile game industry. We are in neutral position to distribute games all across iOS/Android/Window platform.
NI: Do you think the typical Chinese player differs a lot from the American or European in terms of game preference and spending habit?
KC: There are similarities and differences. Chinese players, similar to American/European, enjoy playing poker games, RPG games and casual games. In addition, Chinese also like card games and heavy type of RPG games which we call the “MMORPG”. On the other hand, American and European seem to also like strategy and war games, which have been building interests in China too. The good 3G/4G network shall affect the user experience; so an improving network environment in China including WIFI shall let people to enjoy more complicated games which require extensive data transmission. In general the ARPU in China is still low compared with the western countries, there should be still a lot of upside.
NI: You had revenues of almost USD 60m in 2013. What do you expect CMGE to turnover in 5 years time?
KC: We are the #1 mobile game publisher in China. In 5 years time, the whole mobile game market in China which is currently at 12bn RMB (as of 2013) will probably overtake PC online game market at around 80bn RMB. We endeavor to keep up with our leading position in five years time.
NI: You recently completed a directed share issue, which gave the company almost USD 80m before expenses. Can you briefly describe what you intend to do with the money?
KC: We intend to focus on intensifying R&D efforts, expanding in international markets, licensing additional game titles and acquiring important and unique Intellectual Properties (IP) to build our games.
Following the issue, who are your top5 main shareholders? VODone, Mediatek, Zennon Capital, PRC National Social Security Fund and management.
NI: Which areas are growing most for you at this point?
KC: Major areas: self developed games, publishing business and our distribution platform.
NI: We hear a lot about a slowing growth in the Chinese economy in the media. What is your personal impression and view?
KC: My personal view is it maybe. It is normal for an engine to cool down a bit after running at high rate for many years. But mobile gaming is different, it is starting from a low base and set to explode. Our sector has low or even no correlation to the overall economy. Look at Japan mobile game market, it had grown so much over the past five years, but what had happened to the Japanese economy? We all know the answer.
NI: Do you consider to enter the US and European markets with your games?
KC: Yes, we do have the ambition. Now planning and hopefully very soon.
NI: What is the biggest challenge for you right now?
KC: Execution. We have a full blueprint and strategy layout that we are very confident about. We need to execute them very well and efficiently. I think we got a trustworthy management team here which has good execution record – so the challenge can also be our advantage against other competitors.
In our opinion, CMGE is ticking all the boxes when it comes to attributes we are looking for in a growth investment. The company has a great position in a fast growing market and a unique distribution system with its pre-installed game center on many handsets sold in China. With its finances in place, CMGE should be well positioned to continue to expand both domestically with new games but also internationally.