Events:
On May 3, 2017, Hongbo shares signed an equity transfer framework agreement with Yingtan Qianxi and Shenzhen Palm to acquire a 100% stake in Shenzhen Palm Game Technology Co., Ltd. at a price of 536 million yuan.
Comments:
1. Merger and acquisition of high-quality assets of palm games to increase the company's profitability. The actual controller and core team come from the most famous mobile game development companies and Internet giants in the industry, such as CMGE Mobile Games and BABA. The team has rich experience in game development, distribution and operation, especially in the operation and management of games is the company's core competitiveness. The main game products are "palm mahjong", "happy mahjong", "arcade golden toad fishing thousand cannon version". The company's games are mainly chess and card, mahjong and fishing games, the general life cycle is about 5 years, longer than other mobile games, customer stickiness is higher, running water and profits are more stable. In this acquisition, Palm Game made a performance commitment that the net profit after deducting non-profit in 2017 and 2020 was not less than 50 million yuan, 60 million yuan, 72 million yuan and 86.4 million yuan respectively, bringing a significant increase in the company's performance. According to the agreement, after the initial 40 per cent purchase payment is completed, palm shareholders need to buy Hongbo shares with 30 million yuan, realizing the long-term interest binding of both sides.
2. Improve the structure and layout of the company's mobile lottery games and enhance the cash realization ability of the lottery games. The company has accumulated rich in lottery research and development, and has rich experience in developing lottery games. At present, the Internet end-sale lottery is still banned. The expectation for the policy is not clear. We believe that mergers and acquisitions are of great significance in the field of corporate lottery games. On the one hand, if the mobile lottery can be opened in a short period of time, and the lottery games developed by the company that adapt to mobile sales can go online to contribute profits, handheld games can use their own experience in the field of mobile game distribution and operation to provide technical and experience help for the company's lottery game operation. On the other hand, if the mobile lottery cannot be opened in the short term and the policy drags on for a long time, the company's lottery game can also be adjusted and launched on the palm platform to contribute to the flow and profits and enhance the company's cash ability of the lottery game.
3. Lottery thermal paper leader, pay attention to the promotion of Internet lottery policy in the future, maintain "prudent recommendation-A" rating company is the traditional lottery thermal paper leader, the company completed a fixed increase of 780 million yuan in September 2016, further promoted the lottery industry chain strategy process, the company's follow-up development is closely related to the Internet lottery sales policy, considering the merger table after this acquisition The company's net profit from 2017 to 2019 is expected to be 0.35,0.63 and 78 million yuan respectively, with year-on-year growth rates of 173%, 83% and 23%, respectively. For the first time, it covers the rating of "prudent recommendation-A".
Risk hint: the performance of palm games falls short of expectations, and the promotion of Internet lottery policy is slow.