Touch Technology Puzzle: Dissatisfaction with Low Valuation

Huaxing was originally one of the underwriters of Touch Technology. However, now it seems that Huaxing is unable to flex its muscles for touch technology, and touch is temporarily unable to add another medal to Huaxing.

On May 21, Touch Technology founder Chen Yuzhi published an internal e-mail, announcing that he and another founder Liu Guanqun had made a choice, and touch-control technology will be suspended for listing in the United States.

Chen Zhizhi believes that the value of touch technology has been underestimated by the capital market: “Only the game business is larger than the mid-hand tour’s market value of more than $670 million. Only the engine business that Amazon gave us an engine purchase a year ago was 600 million US dollars.” At the time, we were not the first in the world. We added more than US$1.3 billion worth of company value to both parties. We can only be considered as a pure game company and the profit is lower than that of our peers and listed at a price of 540 million U.S. dollars. ”

The touch technology prospectus will remain open for delivery. "That is, we will be able to get back on the road at any time, but we will give ourselves a few Q (quarter) hours to sort out the business and profit quality." Chen Yuzhi said in an email.

Money Weekly (WeChat public money-week) reporter on the matter call touch technology brand director Ge Xin, the other said that "it is not convenient to answer the phone," and quickly hung up.

In 1 month, from filing the application until the suspension of the listing of Touch Technology, it submitted its US listing application to the US Securities and Exchange Commission for the first time on April 18. It plans to raise a maximum of US$150 million through listing.

The positioning of touch technology is not a simple game company but an innovative mobile entertainment platform. In the prospectus, touch technology claims to create value for three groups: mobile content developers, mobile users, and mobile entertainment ecosystem members including mobile content distribution channels and mobile operators. Correspondingly, its platform includes three core components: mobile content development solutions, mobile entertainment content, mobile content distribution and cash.

On April 28, touch technology updated the prospectus and disclosed the first quarter 2014 results and the latest operational data.

Touch Technology's operating income for the first quarter of this year was RMB 237 million, an increase of 125.71% from RMB 105 million in the same period of last year, which was mainly attributable to the growth of mobile game revenue. The net profit reached RMB 12.8 million, which is more than ten times that of RMB 1.2 million in the same period of last year.

As of the end of March this year, Touch Technology released a total of 121 mobile games, of which 20 were self-developed and 101 were agents. In the first quarter of this year, touch technology had 58.7 million monthly active users and 10.2 million active users per day.

Since 2010, touch-enabled Cocos has accumulated more than 1.1 million downloads worldwide. This data can be compared with the data in Touch Technology's first prospectus 10 days ago. At that time, it was stated that since 2010 Cocos Engine has downloaded more than 700,000 times worldwide.

On May 15th, touch technology updated the prospectus again, and the disclosure will be listed on Nasdaq (4185.81, 31.47, 0.76%) with the trading code of “NEXT”.

However, less than a week later, with the announcement of Chen Qizhi’s internal mail, the listing process stopped short.

Dissatisfaction with low valuations "The capital market is only valued as it is a CP (content provider) vendor. The entire Keco stock is also not very good. The capital market gives it a conservative valuation, and it is reasonable." A hand tour CEOs told the Financial Weekly reporter.

"The valuation is not particularly unexpected and may be low, but they chose not to go public. It is a bit unexpected." Analysys analyst Gu Hao once told the Money Weekly reporter.

More than a month ago, when touch technology first submitted a listing application, it was estimated that touch technology's valuation should exceed that of middle hand. The reason is that touch technology has a larger body than mid-sized players, and this year is the window period for Chinese stocks listed in the United States. Therefore, the valuation should be more than 1 billion US dollars.

According to the touch technology prospectus and the middle hand 2013 annual report, in 2013 the two operating income were respectively 91.64 million US dollars and 58.31 million US dollars. In February of this year, the market value of China Mobile Games exceeded US$1.1 billion and fell to US$454 million on April 24. As of May 22, the market value of China Mobile Games was US$608 million.

"Touch is just a game company can not sell a good price, after all, a fishing expert can not regenerate new users. I used to talk to them before, the engine is the highlight of their main push, they are also trying to capital The market talked about this story, but it was a bit late to start, and many investors did not understand it or did not agree with it,” said one investor in the investment circle.