Mainland gaming firm CMGE gains from greater smartphone penetration

China Mobile Games and Entertainment Group (CMGE) is on track to pre-install its gaming application in more than 80 million smartphones this year and launch its own original game every month from September, following a strategic corporate restructuring.

Ken Xiao Jian, chief executive at CMGE, said in a conference call with analysts that the restructuring was made to "streamline the company's operation to [achieve a] better position for profitable and long-term growth", after its games business shifted to smartphones from basic mobile phones over the past two years.

Nasdaq-traded CMGE, the mainland's largest publisher of mobile games in terms of gross billings, reported on Monday in the United States a second-quarter net profit of 54.9 million yuan (HK$69.01 million), rebounding from a 12.6 million yuan loss a year earlier, on the strong performance of recently released games and its publishing business.

Revenue jumped 281 per cent to 274.6 million yuan from 72 million yuan the previous year. Its overall gross margin reached 61 per cent, compared with 45.7 per cent a year ago.

"We view the results as relatively solid. With its enriched game pipeline in the second half of 2014 and into 2015, we believe CMGE will continue to execute in capturing the fast growth of mobile gaming development in China," Alicia Yap, the head of China internet research at Barclays, said in a report yesterday.

Yap said growth was mainly driven by the CMGE-developed game, Joyful Da Yin Jia, and the publishing of licensed third-party single player and social games, led by the popular Super Hero on various Android app platforms and Apple's online App Store on the mainland.