The recent Mobile Internet (China) (01439) is a big joke, but fortunately, the trend of the company's share price has not caused too much concern in the market.
As previously speculated, Mobile Internet has steadily emerged from the high stock price pattern before the third volume breakthrough, although the company's share price fell by nearly-5.19% on March 23 under the influence of the market correction triggered by the trade war events. however, judging from the poor trading volume of the day, there seems to be no capital flight.
Then, on the evening of March 25, the company suddenly issued an announcement saying that the previous Yingxi announcement was wrong and that the company actually lost 51 million yuan compared with Yingxi's previous profit of nearly 88 million yuan attributable to shareholders. According to the contents of the announcement, the change in the fair value of the company's contingent consideration in 2017 is actually a substantial increase rather than a decrease compared with 2016. The company said that the fair value of the contingent consideration as high as 144 million yuan was generated through share settlement, so considering the change in the fair value of this one-off non-operating item, the company changed from the previous Yingxi to an earnings police.
However, this mistake, which looks "scary" at first glance, also did not cause too much volatility in the market. Judging from the trend of the company's stock price on March 26, the trend of the mobile Internet on that day was basically stable, and the trading volume did not show any signs of magnification. It seems that the mobile Internet, which is growing strongly in the game business, still does not worry the market too much, but investors are more concerned about the causes and consequences of this farce, so Zhitong Financial APP communicated with Hu Zongming, the company's financial director.
Source: Futu Securities
The following is a record of communication
Zhitong Financial APP: can you specifically describe the reasons for the emergence of the fair value of 144 million of the contingent price payable? Is it related to previous performance betting agreements, or other additional agreements?
Hu Zongming:The change in the fair value of contingent consideration in 144 million in 2017 is mainly because accounting standards require us to calculate the market price of stocks that are paid for by stocks, and those with differences should be included in the fair price changes. We had 90 million of the performance bet against the price in 2017, which was paid for by issuing about 128 million shares at HK $0.70 per share in July.
However, at that time, the market price of the stock was more than HK $2, resulting in this accounting loss. In fact, there is no real loss to the company, because this 144 million will also become the company's stock premium, and there will be no reduction in net worth.
Because we have paid all the consideration for the performance bet, so this part is only an one-off, in addition, we do not have any other performance bet agreement, this also asks investors to rest assured.
Zhitong Financial APP: why is it easy to make mistakes in this part of the change calculation?
Hu Zongming:In fact, this is a relatively technical mistake, just as the company's Yingxi announcement mentioned that the data was an unaudited preliminary judgment. After we had a meeting with the auditor's technical department, we learned that fair values would be used and had an impact on profits. the company immediately issued an announcement to clarify the specific data changes that led to the error.
As just mentioned, this does not cause any actual loss to the company, nor will it reduce any net worth, and the profit of our main business is indeed more than 80 million higher than that of last year, in line with the previous Yingxi announcement.
Zhitong Financial APP: how long will the performance betting agreement last?
Hu Zongming:The performance betting agreement concluded at that time was valid for one year, which was basically completed in 2017.
Zhitong Financial APP: what is the general growth of the company's game business profits?
Hu Zongming:This is still not convenient to disclose for the time being, as mentioned in the announcement, it is only that the fair value of our contingent consideration has changed, and the situation of our main business has not changed with that expressed in the previous Yingxi announcement. Of course, there will be a detailed explanation in our upcoming results announcement on March 28, and investors are welcome to check it carefully.