Hong Kong company reporting season

NetDragon returns to profit on higher online games revenue

Fuzhou-based internet firm is latest mainland online games provider to post strong financial results this year on the back of a huge domestic market

PUBLISHED : Wednesday, 30 August, 2017, 9:01pm
UPDATED : Friday, 01 September, 2017, 8:06pm

NetDragon Websoft, the mainland Chinese online gaming giant, returned to profit in the first half of this year on the back of the Hong Kong-listed company’s record high revenue posted in the quarter ended June 30.

“Our games business brought robust growth as we executed our strategy to leverage our successful intellectual property,” said Liu Dejian, the founder and chairman of NetDragon, in a statement on Wednesday.

NetDragon is the latest mainland internet company to record strong financial results from its video game operations in the past quarter, following, NetEase and Tencent Holdings.

Research firm Newzoo recently forecast the global video games market to cross the US$100-billion mark this year, driven by the huge appetite for online and mobile content from the estimated 565 million gamers on the mainland.

The mainland games market is predicted to be worth US$27.5 billion this year, making it the world’s leader as global market revenue hits US$109 billion from US$99.6 billion last year, according to Newzoo.

Fuzhou-based NetDragon said in a regulatory filing on Wednesday that it recorded an interim net profit of 25.8 million yuan (US$3.9 million), compared with a 42.9 million yuan net loss in the same period last year.

The company attributed the return to profit to a 34.9 per cent increase in second-quarter revenue to 1.1 billion yuan, up from 786.9 million yuan a year earlier, driven by its games business, which saw monthly average revenue per user rise 49.1 per cent year on year to 410 yuan.

That also marked the third consecutive quarter in which its games business achieved more than 20 per cent year on year revenue growth.

Total first-half revenue climbed 30.7 per cent to 1.8 billion yuan from 1.3 billion yuan a year ago.

Shares of NetDragon were up 3.79 per cent to reach HK$26 at the close of trading on Wednesday.

“Our games business continued its momentum during the second quarter, as evidenced by the popularity of our flagship games Eudemons Online and Heroes Evolved, Liu said.

“In addition, mobile versions of our games continued to be a major growth driver for our business with revenue increasing 53 per cent year-on-year.”

NetDragon expected its Eudemons franchise to continue its strong performance as more new games titles are launched under that brand.

Daiwa Capital Markets analyst Carlton Lai said in a recent report that NetDragon’s “two most important games are Conquer Online and Eudemons Online, both of which were launched more than 10 years ago, but remain the key revenue contributors and growth drivers for the company”.

The interactive education business of NetDragon, which rapidly grew after its US$130-million takeover of London-listed learning technologies provider Promethean World in 2015, saw a 22.9 per cent year on year increase in interim revenue to 934.1 million yuan.