One of China's leading online game developers,
Giant Interactive Group Inc.
) fourth quarter 2013 adjusted earnings of 29 cents increased
23.1% year over year (on a local currency basis) on the back of
top-line growth. Earnings also beat the Zacks Consensus Estimate
of 23 cents by 26.1%.
Net revenue of $99.9 million was in line with the Zacks
Consensus Estimate and increased 5.8% year over year (on a local
currency basis), driven by an increase in the demand for online
games. The company witnessed a 2.7% increase in active paying
accounts (APA) for online games and a 3.7% increase in average
revenue per user (ARPU) for online games during the quarter.
Gross profit also increased 8.9% year over year to $88.7 million
on account of higher sales.
Full Year 2013 Results
In 2013, the company delivered adjusted earnings of $1.03 per
share, which increased 10.7% (on a local currency basis) from the
prior-year period driven by higher revenues. Earnings also beat
the Zacks Consensus Estimate of 93 cents by 10.8%.
Net revenue grew 9.5% (on a local currency basis) to $389.1
million in 2013, driven by double-digit annual growth in online
game revenues. Revenues also beat the Zacks Consensus Estimate of
In 2013, the company launched World of Xianxia, an online
game, which has successfully expanded the portfolio without
cannibalizing the sales of existing games. In addition, the
company successfully diversified into new growth areas such as
web games and mobile games in 2013.
The company is optimistic about expanding its portfolio in
2014 and hopes to launch several new mobile games. The company
has a prudent expense management system and it continues to
explore other cost effective distribution channels to enhance
In late Nov 2013, the company received a buyout offer from its
chairman Yuzhu Shi and an affiliate of BaringPrivate Equity Asia
(collectively called 'consortium'). The consortium proposed the
acquisition of all of the company's shares, including American
Depositary Share (ADS) for $11.75 per share/ADS. Each ADS
represents one ordinary share of the company. The consortium will
pay about $2.82 billion in cash, which will be financed using a
combination of debt and equity capital.
Giant Interactive is currently evaluating the preliminary
offer and has formed a special committee, comprising three
independent directors of the company, to review the proposal.
They will assess the offer and negotiate terms to provide maximum
value to the company's shareholders.
Giant Interactive is a leading online game developer and
operator in China in terms of market share and focuses on
massively multiplayer online role playing games. Giant
Interactive holds a Zacks Rank #2 (Buy). Investors interested in
Internet retailers can also consider stocks like
WebMD Health Corp.
China Distance Education Holdings Limited
). While WebMD Health and YY sport a Zacks Rank #1 (Strong Buy),
China Distance Education Holdings holds a Zacks Rank #2.
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