Solid Report Of the Sector

By: TraderMark Tuesday, May 20, 2008 5:36 PM

Sectors: Computer and Technology

Symbols: GA, NCTY, NTES, PWRD, SNDA

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We had another solid report out of this sector today, from The9 (NCTY) which actually licenses a game I am familiar with, World of Warcraft. Here are some details.

For the first quarter of 2008, The9 reported total gross revenues of RMB463.8 million (US$66.1 million), which increased by 4% compared to RMB447.5 million (US$63.8 million) in the fourth quarter of 2007 and by 63% compared to RMB284.7 million (US$40.6 million) in the first quarter of 2007.
For the first quarter of 2008, online game services gross revenues were RMB462.2 million (US$65.9 million), representing a 2% increase from RMB451.4 million (US$64.4 million) in the fourth quarter of 2007 and a 64% increase from RMB281.3 million (US$40.1 million) in the first quarter of 2007. The increase was primarily because of continued revenue growth from Blizzard Entertainment's World of Warcraft despite the holiday impact during the quarter
Gross profit for the first quarter of 2008 increased by 3% quarter-over- quarter and 60% year-over-year to RMB208.0 million (US$29.7 million). The sequential increase of gross profit was largely in line with the increase in net revenues. Gross profit margin for the first quarter of 2008 remained relatively stable at 47% compared to the previous quarter and the same period of last year.
For the first quarter of 2008, net income was RMB89.7 million (US$12.8 million), which increased by 4% from RMB86.0 million (US$12.3 million) in the fourth quarter of 2007 and by 36% compared to RMB66.1 million (US$9.4 million) in the first quarter of 2007. The sequential increase in net income was a result of the cumulative effect of the foregoing factors.
Fully diluted earnings per share and per ADS for the first quarter of 2008 was RMB3.21 (US$0.46), compared to RMB2.93 (US$0.42) in the fourth quarter of 2007 and RMB2.65 (US$0.38) in the first quarter of 2007.

This was a strong beat, 46 cents versus analysts 32 cents but frankly Perfect World (PWRD) grew much faster, and has far superior gross margins (near 90% versus NCTY's sub 50%) I take it this comes from owning your own games versus licensing them.

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