Shanda Games Q3 Profit Declines, But Tops View

(RTTNews) - Chinese online-games provider Shanda Games Ltd. (GAME) reported late Tuesday a profit for the third quarter that declined from last year, reflecting lower margins amid higher costs. Adjusted earnings per share came in above analysts' expectations, while quarterly revenues missed their estimates by a whisker.

"We continued our solid start to the year by growing our mobile game revenues 50.3% sequentially, accounting for 13.6% of our total revenues during the third quarter of 2013," CEO Xiangdong Zhang said in a statement.

The Shanghai, China-based company reported net income of RMB 398.9 million or $64.9 million for the third quarter, down from RMB 405.2 million in the prior-year quarter. Earnings per ADS increased to RMB 1.50 or $0.24 from RMB 1.46 in the year-ago quarter. Earnings per share was RMB 0.75 or $0.12, up from RMB 0.73 last year.

Excluding the items, adjusted net income for the quarter was RMB 429.0 million or $69.9 million, compared to RMB 441.3 million in the same quarter last year. Adjusted earnings per ADS was RMB 1.60 or $0.26, compared to RMB 1.60 a year-ago. Earnings per share was RMB 0.80 or $0.13, compared to RMB 0.80 last year.

On average, three analysts polled by Thomson Reuters expected the company to report earnings of $0.23 per share for the quarter. Analysts estimates typically exclude special items.

Total net revenues for the quarter increased 3.3 percent to RMB 1.12 billion or $182.9 million from RMB 1.09 billion in the same quarter last year. Six Wall Street analysts had a consensus revenue estimate of $183.67 million for the quarter.

On segment basis, net revenues from the company's major revenue contributor, massively multi-player online or MMO, games for the quarter soared to declined 10.1 percent to RMB 959.8 million or $156.1 million from RMB 1.07 billion in the prior-year quarter.

Other revenues decreased 36.7 percent to RMB 11.9 million or $1.9 million from RMB 18.8 million in the year-ago quarter. Mobile game revenues totaled RMB 153.0 million or $24.9 million. The company began reporting mobile game revenues separately from the first quarter of 2013.

Operating margin contracted 230 basis points to 39.5 percent from last year's 41.8 percent as gross margin was down 370 basis points from last year, partially offset by a 140 basis points improvement in operation expenses, as a percentage of total revenues.

"In addition to 'Million Arthur's successful launch in Korea, Taiwan and China, we are now in the final stages of preparation for its launch in Singapore and Malaysia. We look forward to building upon its success with a number of new mobile games in the pipeline including 'Guardian Cross,' 'Dragon Nest: Labyrinth' as well as 'Hell Lord.' We will continue to add to our mobile games pipeline going forward," Zhang added.

GAME closed Tuesday's regular trading at 4.11, down $0.21 or 4.86% on a volume of 2.22 million shares. The stock lost a further $0.12 or 2.92% in after-hours trading.