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China’s Kingsoft back in black on hefty mobile games growth

PUBLISHED : Monday, 21 November, 2016, 6:44pm
UPDATED : Monday, 21 November, 2016, 7:33pm

Chinese software and internet services company Kingsoft Corp plans to further build up its mobile games portfolio next year after rebounding from a second quarter loss to post record quarterly revenue in the three months ended September 30.

“The mobile game segment has started to bring profit contribution to the company,” Kingsoft chairman Lei Jun said in a filing to the Hong Kong stock exchange on Monday. “Going forward, we expect our revenue to continue to grow steadily.”

Kingsoft’s share price reached an intra-day high of HK$17.94 following the firm’s earnings report that was released before the start of trading. Its shares closed at HK$17.76, up 4.59 per cent.

The Beijing-based company’s third-quarter net profit rose 198 per cent to 141.69 million yuan (HK$159.5 million), up from 47.55 million yuan in the same period last year, mainly on the back of its strong online games business.

That hefty profit missed the 144.35 million yuan consensus estimate from analysts surveyed by Bloomberg, but it was enough for Kingsoft to recover from its 807.5 million yuan loss in the second quarter.

Revenue increased 48 per cent to 2.23 billion yuan from 1.51 billion yuan a year earlier, surpassing analysts’ third-quarter estimates of 2.04 billion yuan.

The mobile game segment has started to bring profit contribution to the company
Lei Jun, Kingsoft chairman

Online games, which grew 139 per cent year on year to 791.92 million yuan, represented 35 per cent of Kingsoft’s total revenue in the third quarter.

Nomura analyst Rex Wu said in a report last month that Kingsoft revised its mobile games deal with Chinese internet giant Tencent Holdings, which has licensed Kingsoft’s swordsman-themed JX game titles. Those are now forecast to generate revenue of between 393.48 million yuan to 750 million yuan this year.

“We think this upward revision shows Kingsoft and Tencent’s confidence in the JX titles’ long lifespan,” Wu said.

Kingsoft said mobile games that it is jointly creating with developer 70yx.com and Hong Kong-listed NetDragon Websoft will be launched next year.

New York-traded security and mobile utility apps developer Cheetah Mobile made up 50 per cent of Kingsoft’s third-quarter revenue, while cloud services, office software and other businesses contributed 15 per cent.