Perfect World plunges on first day back trading since acquiring cinema assets

The Chinese video game maker halted trading in July for restructuring that included the purchase of Antaeus’s movie theatres

PUBLISHED : Monday, 10 October, 2016, 5:34pm
UPDATED : Monday, 10 October, 2016, 5:34pm

Chinese gaming-to-movie conglomerate Perfect World plunged as much as 9 per cent on its return from a three-month halt in trading, as data showed the country’s golden week holiday box office takings had dwindled for the first time in 10 years.

The Beijing-based entertainment group saw its shares in Shenzhen slump to a near five-month low of 33.39 yuan on Monday morning. The shares settled down 5.11 per cent at 35.09 yuan at the close.

Perfect World shares became active again today after the company suspended trading in early July citing critical asset restructuring as it transformed itself from a video game maker into a company that also operates in the movie market.

Today’s sharp decline came on the first day of trading since the company agreed in September to acquire the culture and cinema units of Chinese private conglomerate Antaeus for a combined 1.35 billion yuan, one of the biggest deals in the domestic media landscape this year. Antaeus Cinema operates 227 complexes and 1,200 screens, predominantly in lower-tier cities in the mainland.

This year, fewer people are opting to go to movies because the tickets cost more
Tao Ye, analyst, Minsheng Securities

Earlier this year, Perfect World came under Hollywood’s media spotlight with an agreement to invest US$250 million in filmmaking giant Universal Movies to cover a quarter of production budgets of most movies made by the studio for the coming five years.

Perfect World is one of the scores of high-flying Chinese businesses that have been on a buying spree of movie theatres and film makers in an all-out effort to profit from the burgeoning movie industry.

However, official figures released on Saturday showed that China’s box office receipts during last week’s seven-day golden week national holiday shrank 15 per cent to about 1.57 billion yuan from 1.85 billion yuan in 2015, pointing to new signs of weakness during a period that traditionally triggered a spike in domestic consumption.

Analysts reckoned a lack of blockbusters and an official clampdown on inflated prices had dented the revenues of China’s flourishing movie market, which had enjoyed a compound annual growth rate of more than 40 per cent for the five years through 2015.

“This year, fewer people are opting to go to movies because the tickets cost more, and therefore it is the most excellent films that are poised to draw decent box office revenue,”said Minsheng Securities analyst Tao Ye.

According to government statistics released for July — traditionally the peak season for movie releases during the summer holiday — movie ticket sales tumbled 18.2 per cent to 4.5 billion yuan against the same period a year ago, the first year-on-year dip since 2011.

While the latest figures prompted market watchers like Southwest Securities analyst Liu Yan to scale back their annual forecast for Chinese box office revenue to 53 billion yuan from 60 billion yuan, they failed to deter the country’s richest business tycoons from pouring millions of yuan into studios and cinema chains.

Dalian Wanda Group, controlled by China’s richest man Wang Jianlin, recently splashed out US$3.5 billion to take over Hollywood filmmaker Legendary Entertainment, before announcing in September a new partnership with Sony Pictures Entertainment.

And over the weekend, Alibaba Pictures Group, the film arm of China’s internet giant Alibaba Group Holding, that owns the South China Morning Post, struck a deal with Steven Spielberg’s Amblin Partners to jointly produce and distribute films for both audiences both globally and in China.