Shanda Games Q2 Profit Down 38% On Lower Revenues

(RTTNews) - Chinese online games provider Shanda Games Ltd (GAME) on Friday reported a 38 percent decline in profit for the second quarter from last year, hurt by a double-digit decrease in revenue and weak operating margin.

The Shanghai-based company reported second-quarter net income attributable to shareholders of RMB300 million or $48.8 million, down from RMB486.1 million in the prior-year period. Earnings per American Depositary Share, or ADS, decreased to RMB1.10 or $0.18 from RMB1.82 in the year-ago quarter.

Excluding items, adjusted earnings for the quarter were RMB325.8 million or $53 million, compared with RMB512.2 million in the prior-year period. Adjusted earnings per ADS were RMB1.20 or $0.20, compared to RMB1.92 a year ago.

Total net revenues for the quarter declined 12 percent to RMB964.4 million or $156.7 million from RMB1.09 billion in the same period last year. Analysts polled by Thomson Reuters expected revenues of $161.3 million for the quarter.

Revenue from massively multi-player online, or MMO games fell 11 percent year-over-year to RMB868.7 million and revenue from mobile games declined 16 percent to RMB85.8 million. Other revenues decreased 33 percent to RMB9.9 million.

Operating margin declined 500 basis points to 34.5 percent, while gross margin expanded 120 basis points to 75.6 percent.

In January, Shanda Games received a $1.9 billion offer to be taken private by a consortium comprising its controlling shareholder Shanda Interactive Entertainment Ltd and an affiliate of investment firm Primavera Capital Ltd. Shanda Games is evaluating the proposal.

The consortium has proposed to acquire Shanda Games for $3.45 per class A or class B ordinary share, or $6.90 per ADS. Each ADS represents two class A ordinary shares. The consortium members already beneficially own about 76.2 percent of the company's outstanding shares.

In early September, China-focused FountainVest Partners and Chinese private equity firm Primavera Capital withdrew rom the consortium. Shanda Games said later that it has reconstituted the special committee of independent directors formed by its board to assess the preliminary, non-binding proposal from Shanda Interactive.

GAME closed Thursday's trading at $6.58. In Friday's pre-market activity, the stock is up $0.19 or 2.89 percent to $6.77.