Greater China Appraisal ('GCA'), a leading professional valuation services provider in Hong Kong, was appointed by New Sports Group Limited - Buyer ('New Sports'; Stock Code 299.HK), to value the business of Kingworld (Beijing) Technology Company Limited - Seller ('Kingworld (Beijing)') in supporting of the entire indirect equity acquisition project with HK$ 450 million. The valuation report prepared by GCA was on a Discounted Cash Flow ('DCF') basis under the income approach.
Source from HKEx http://www.hkexnews.hk/listedco/listconews/sehk/2015/1204/LTN201512041223.pdf
The buyer, New Sports, is engaged in the provision of software outsourcing development and technical support services, and design, development and operation of the mobile and web-games. The Seller, Kingworld (Beijing), is engaged in publishing, selling, developing and investing internet and mobile interaction entertainment products.
According to the 2015 China Mobile Game Report issued by IResearch, China mobile games market has made its revenue record highs of RMB 10 billion and RMB 11.4 billion in 2015 Q1 and Q2 respectively. Under the current momentum, the related market is expected to achieve a size of over RMB 50 billion in 2016, representing the fifth consecutive year of growth.
Following the rapid development of the mobile games market in China, the numbers of capital market activities included Initial Public Offerings (IPOs) and Mergers and Acquisitions (M&A) activities have taken place in the related market during 2014 and 2015. Industry players generally favour to get listed in the Chinese stock market given the higher valuation compared with the US stock market. According to the economic condition of the previous year, capital raising activities and related business strategy of the mobile game business will continue to steadily boom compared with the other business sector in China.
Responding to the acquisition, management of New Sports have considered that the project not only provides an immediate opportunity for the company to expand its mobile gaming business, but it also enables them to reallocate its resources and focus on the mobile sports-related gaming business.
Commenting on the valuation project, Mr. Max Tsang, Head of Business & Intangible Asset Valuation Division of GCA, said "We are pleased to have this opportunity to contribute our expertise in mobile games business with this strategic acquisition project and we appreciate the trust from the management of New Sports. We have considered different approach of valuation for this project. Because of the availability of the historical and projected cash flows, the economic benefit streams of Kingworld (Beijing) can be identified with the given data. We have therefore applied the income approach in this project. I expect many more companies are looking for opportunities to expand their business portfolio in high potential sectors, especially the mobile games business."
GCA was engaged in discussion with the management of the both companies for full understanding of the background, technical capability and vision towards the mobile game development. GCA liaised with the auditor and the related regulatory authorities and addressed the queries regarding on the data and methodology applied; and also provided detailed analysis and research of China economics and market condition in order to address the auditors' requirements on the accuracy of our valuation report.
About Greater China Appraisal
Established in 1997, Greater China Appraisal provides business and intangible asset valuation, real estate and industrial assets valuation, financial instruments valuation, mineral and energy valuation as well as business consulting services. It has undertaken valuation for over 400 companies listed on the Hong Kong Stock Exchange and other clients over the world.
Greater China Appraisal is a corporate member of The International Valuation Standards Council (IVSC), a regulated firm under The Royal Institution of Chartered Surveyors (RICS), an associate member of China Appraisal Society (CAS) and a Valuation Institutes for Engagement by State-owned Enterprises under State-owned Assets Supervision and Administration Commission of the State Council (SASAC).
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