Game maker casts net for more women| Jeannie Tang 15 Apr 2019
Female-oriented mobile game developer FriendTimes intends to list in Hong Kong.
The Jiangsu-based company ranked third in the Chinese female-oriented mobile game market in 2017 in terms of revenue, according to Frost & Sullivan.
It has been currently operating four ancient games, of which Royal Chaos has achieved No.15 in the best-selling games board on Apple's AppStore.
"We believe our success is attributed to our strong integrated abilities in game development, publishing and operations," the company says.
All revenue was generated from the self-developed games in 2018 through selling in-game virtual items. FriendTimes has a research and development team with 757 employees to develop new games.
Almost all of its 2018 revenue relied on only four games and the company said its games had a limited lifecycle.
"We cannot assure you that our players will not lose interest in these games over time as a result of the changing market trend or their interests and preferences," the company adds. Nevertheless, It has nine new mobile games in the pipeline, of which three will be launched in 2019.
Royal Chaos generated 47.2 percent of revenue as the bestseller in 2018, followed by Legend of Empress and Rise of Queendom, with 30.3 and 18.8 percent respectively.
China is its major market, contributing more than 80 percent of revenue.
Also, the company relied on a small portion of players for almost all of its revenue. The average monthly paying players accounted for 8.1 percent of the average monthly active users in 2018.
So, its sustainable growth largely depended on the ability to satisfy the demands of its paying players and increasing the number of paying players. Its average monthly paying players jumped by 82.53 percent to 340,600 in 2017 from 2016, followed by a decline of 5.02 percent to 323,500 in 2018.
Its cumulative registered players jumped by 54.38 percent to 86.72 million in 2018 from 2017, but its average monthly active users fell by 5.15 percent to 3.99 million.
Most of the games were distributed through three major platforms on a free-to-play basis and those platforms typically charge the company 30 to 55 percent of its sales proceeds.
In 2018, the distribution cost charged by the platform amounted to 504.1 million yuan (HK$588.53 million), representing more than 90 percent of the cost of sales.
"Any material change on the fee arrangements or contract terms or the business relationship with these business partners would have a significant impact on our results of operations," the company says in the prospectus.
Revenue more than doubled to 1.46 billion yuan in 2018 from 2017, due to a new game, Rise of Queendom, launched in 2018. The gross profit margin remained stable at 62.7 percent in 2018.
The company's net profit jumped 1.86 times to 336.7 million yuan in 2018 from 2017.
Although it posted a net profit of more than 300 million yuan in 2018, its net cash used in financing activities was 123.58 million yuan, including profit distribution to current shareholders of 118.8 million yuan.
FriendTimes plans to use the proceeds for further expansion by enhancing its game portfolio and research and development, creating its own original intellectual property to extend the lifecycle of games, and the strategic acquisition of upstream and downstream game-related businesses.
Meanwhile, the Chinese government suspended approval of game registration in March 2018, but resumed it in batches periodically since December 2018.
"It is still unclear as to whether and when any suspension of filing for operations of mobile games will be lifted. It may take some time for all of the existing game registration applications to obtain the game publication numbers," the company says.