Chinese online gaming company Giant Interactive (GA, Financial) is one of the best investments that one could make. The stock’s year-to-date appreciation of close to 5% despite a tough environment this year is impressive.
Strong performance
The company recently released results reflect strength in its business. Giant’s revenue and earnings didn’t grow at a rapid pace as they did last quarter due to the pause in launching any new games in the quarter in view of the Chinese New Year, when most of the gamers are away from their computers. However, despite this seasonal effect, Giant still managed to post growth in important metrics.
The company’s strongest title, ZT Online 2, and the game’s micro-client version led to a top line jump. Giant revved up these games by pushing out expansion packs during the quarter, and the company’s strategy of making this game a long lasting one is successful too. Giant is planning to release another expansion pack for the game later this year by taking feedback from gamers to develop the next version.
Better performance ahead
Going forward, Giant expects to make further advances this year with its next expected blockbuster, World of Xianxia that is performing ahead of the company’s expectations. The game is expected to accelerate Giant’s revenue growth. Thus, ZT Online and World of Xianxia are two solid catalysts to push up its revenue this year.
Also, Giant has made a huge leap into the fast growing market for web games by rolling out The Sky. The game includes features from ZT Online, and it’s receiving good reviews. Moreover, Giant has partnered with Qihoo 360 (QIHU) to distribute the game. There is strong business relationship between the two companies with Giant operating ZT Online 2’s micro-client version on Qihoo’s platform, and World of Xianxia is still to follow.
Giant has a big advantage regarding the huge active user base of Qihoo. Moreover, Qihoo is the largest provider of mobile security and internet products in China and possesses the second ranked internet browser as reported by iResearch.
In addition, Giant is looking to step into the mobile market as well. While the company believes that MMORPG (massively multiplayer online role-playing game) is the most important gaming trend in China due to its superior monetization as compare to mobile, but still is aggressive in the mobile segment. Giant expects to release one mobile game this year, and expects it to add further momentum to its top line.
Giant draws its revenue from online games which are doing pretty well. The mobile initiative would definitely help the company from the booming casual gaming market and Giant’s overseas expansion. The company is looking to partnerwith game publishers abroad and is also on the hunt for licensing opportunities.
Giant forecasts a sequential improvement in revenue for the ongoing quarter, driven by World of Xianxia, with more developments slated later in the year.
Conclusion
Apart from these, Giant has a track record of paying solid cash dividends annually. Giant has started paying a semiannual cash dividend, and with the company having a solid payout ratio of 44%, it is sure to be able to sustain its dividend going forward.
Therefore, Giant is an intelligent investment and its business seems all set to get better. So, investors must grab this opportunity and buy this solid online gaming company.
