Company Overview Lianzhong was founded in 1998 and publicly listed on the main board of the Hong Kong Stock Exchange on June 30, 2014. Lianzhong is a leading online board game developer and operator in China. It has more than 400 million registered users and more than 200 chess, mahjong, and casual games. The product line covers user terminals, websites, and mobile terminals. Online gaming is growing rapidly, and Lianzhong's revenue growth comes mainly from its online PC and mobile games. Most of this revenue (2015H1 over 90%) comes from the three major games, namely Texas Hold'em, Mahjong, and Daredevil. Revenue is driven by virtual currency that game users spend on virtual goods. Virtual currency is purchased by paying users with real money. Payment channels mainly include online banks, mobile operators, and prepaid cards. In 2011-2014, Lianzhong's revenue ranged from 154 million yuan to 476 million yuan, a compound growth rate of 46%, while net profit increased from 121 million to 97 million, a compound growth rate of 66.5%. In 2011-2014, the company's average gross margin level was 67.8%, the average operating profit margin was 19.1%, and the average net profit margin was 15.8%, reflecting the characteristics of the high profitability of online games. Among them, thanks to the explosive growth in mobile user revenue, Lianzhong's revenue and net profit increased by 101% and 178%, respectively, in 2014, mobile user revenue increased 882% year over year, active users increased 27% to 26 million, and paid users increased 159% to 940,000. Over the past few quarters, Lianzhong's PC and mobile billing rate (monthly paying users divided by monthly active users) continued to rise. The PC payment rate rose from 2.1% in Q1 '13 to 3.5% in Q2 '15, while the mobile payment rate rose from close to 0 in Q1 '13 to 8% in Q2 '15. The increase in payment rates has effectively contributed to the growth of the company's performance. As a comparable competitor of Lianzhong, Liberal Arts Interactive (434.HK) has a significantly lower PC payment rate than Lianzhong (2% vs. 3.5%), but its mobile payment rate is as high as 12%, surpassing Lianzhong's figure by about 50%, which means that Lianzhong's mobile payment rate still has great potential to rise.