Tencent mulls acquisition of HK noted Fire Rock to bulk up South East Asia market

Just recently, a game industry giant, Tencent (HKSE:700) has actually rebooted its acquisition plan.

Seeking to broaden its gaming organization, Tencent has gone on an acquisition binge by nabbing up Canadian video game developer Klei Home entertainment and Hong Kong listed business BAIOO Family Interactive Limited (” Baioo”) (HKSE:2100). It is also rumored that Fire Rock Holdings Limited (” Fire Rock”) (HKSE:1909), another Hong Kong listed company, is one of its acquisition targets.

On 25 January 2021, BAIOO revealed that Tencent consented to buy an overall of 326 million shares of the business. Upon conclusion of the acquisition, Tencent will own roughly 12% of the business’s provided share capital and end up being the business’s significant shareholder. This news spurred the increase of the stock rate of BAIOO by as high as 85%, and the total day-to-day turnover reached HKD1.329 billion (around USD170 million). There was market news emerged previously on that Tencent was negotiating with banks to obtain USD6 billion in funding, which the loans gotten would be used to obtain potential game services. The expected acquisitions will target on game companies in the United States or South Korea. To put it simply, the two above-mentioned acquisitions are simply an acquisition start to more targeted purchase. The grand mergers and acquisition strategy of Tencent is still underway, while massive mergers and acquisitions that worth billions of dollars are about to bring additional effect to the market

Information website Superdata revealed that the 2020 video game and interactive media market information report shows that in the midst of the COVID-19 Pandemic, the international game and interactive media market has grown by 12% in 2020 compared to the previous year, of which the total worth of the video game market has reached as much as USD126.6 billion.

Amongst them, complimentary video games represented 78% of the total profits of the video game market, reaching USD98.4 billion and it is expected to go beyond the USD100 billion-mark next year. Amongst the totally free games, Tencent’s “Honor of Kings” income has actually reached USD2.45 billion, which is the most lucrative totally free video game this year. Meanwhile, the appeal of “League of Legends”, which has actually entered its 11th year of launch, has likewise persisted to grow. Its earnings has actually continued to grow to USD1.75 billion this year.

Obviously, Tencent wishes to more take the marketplace through acquisitions. Some analysis explained that not only game developers, but Tencent likewise plans to supplement the group’s blind areas in the South East Asia market and therefore, Fire Rock, a Hong Kong noted company, is one of its targets. Fire Rock at first started as a web game designer. Upon listing on the Hong Kong stock exchange around 5 years ago, it shifted to concentrate on its development on mobile device games. Some of its video games include Royal Fish Catching, Kings & Legends and Sweeties Battling and they all attained exceptional outcomes in emerging markets such as Thailand and Vietnam.

On 18 January 2021, Fire Rock announced a profit alert. It is expected that the earnings for the year ending 2020 will increase by more than 60% when compared to 2019, and the earnings will increase by more than 50%. The boost is attributable to the better overall market feedback, as compared to 2019, for game series commercially launched by Fire Rock throughout the duration; and the business launch of many new video games and proprietary abroad operations during 2020.

In the interim outcomes of Fire Rock in 2020, Fire Rock has actually accomplished exceptional development figures, with a turnover of RMB285 million, a boost of 177.3% year-on-year; net earnings of RMB 192 million, a boost of 213% year-on-year.

The profits from the Asia-Pacific region (except China) increased 114 times y-o-y, generally due to the Thai video games Royal Magnate, Royal Fish Catching, and Jungle Treasure achieved good outcomes in Thailand. The performance of Fire Rock for the 2nd half of the year is definitely worth looking forward to.

For its interim lead to 2020, Fire Rock’s net revenue margin is 68.89%, return on net assets is 71.83%, and debt-to-asset ratio is 10.51%. All 3 indications are the highest amongst Hong Kong noted peers. It is no surprise that some articles mentioned that Tencent is mulling acquisition of Fire Rock to bulk up its video gaming business. Yet, significantly and interestingly, the two companies have never clearly denied the news.

File: Tencent mulls acquisition of HK listed Fire Rock to bulk up South East Asia market.

03/02/2021 Dissemination of a Marketing Press Release, transferred by EQS Group.

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