With the completion of shareholding, the "esports giant" Zhu Yihang has successfully completed the placement of 0.1 billion shares of cmge (00302) for HKD 0.168 billion, with a premium of up to 87%, becoming the focus of the market's attention.

It is reported that on July 22, CMGE announced that Yuanchi Investment had completed the subscription of 0.1 billion shares of the company's stock at HKD 1.68 per share, accounting for 3.51% of the issued shares after completion. Yuanchi Investment is wholly owned by Zhu Yihang. After the private placement, Zhu Yihang's shareholding in CMGE increased to 0.276 billion shares, and the shareholding ratio rose to 9.68%. The company's stock price opened up 10% on the day after the announcement.

In fact, Zhu Yihang has increased his shareholdings in CMGE several times this year. On May 29, he increased his shareholdings by 24.326 million shares, with a total amount of about HKD 36.5547 million, and his shareholding ratio increased to 5.25%, surpassing the disclosure threshold. On June 13, he increased his shareholdings by another 8.0676 million shares, with a total amount of about HKD 9.477 million, and his shareholding ratio further increased to 6.01%. With the private placement, he has pushed his shareholding to nearly 10%, consolidating his important position as a shareholder in CMGE, as well as fully demonstrating his recognition of the future prospects of CMGE.

Why does Zhu Yihang fancy CMGE?

Bullish on AI games outlook and CMGE.

It is worth noting that Zhu Yihang, an e-sports enthusiast, has explored the game industry chain for more than 10 years, and his SuperGen covers multiple businesses such as e-sports, e-sports culture, e-sports education, and e-sports complexes. CMGE became his target in 2021 and became his opening move to perfect his industrial layout.

CMGE has three business segments: IP game research and development and global distribution, self-owned IP operation, and national style metaverse platform. Through its research and development advantages, CMGE continues to create explosive products, such as "Douluo Dalu: Shrek Academy," "Dou Po Cangqiong: Peak Battle," and the first domestic AI national style fairy tale open world game "Xianjian World." CMGE is a very high-quality target. On the one hand, its explosion of games brings performance expectations, and on the other hand, its development-driven project reserves are rich. It also complements SuperGen effectively, and can deploy the entire industrial chain ecology.

At the same time, as e-sports players who are highly sensitive to the development of terminal products, Zhu Yihang and his lieutenant Jiang Yukai (investment director of Zhujiang Investment Management) have clearly reached a consensus on the development of AI games, looking for high-quality targets to get the development opportunity of the next decade. CMGE is just the leading representative of AI games. Jiang Yukai once commented that as a Hong Kong stock game company with the core advantages of AI+IP+game products, CMGE's self-developed first-class product "Xianjian World" will also be launched this year. He firmly believes that the company's long-term growth value will be gradually recognized and will bring rich returns to investors.

Since AI and large models have matured in various industries this year, such as in the field of autonomous driving, this has also accelerated the research and development investment of major game developers in the AI field, trying to seize the opportunity. Zhu Yihang's increased holdings in CMGE are not only for long-term holdings as a strategic investor, but also to increase his voice in CMGE, integrate targets and resources, form significant synergies, and seize the opportunities of AI game development.

It is worth noting that in this announcement, CMGE stated that it plans to raise approximately HKD 0.167 billion in net proceeds, and plans to acquire or invest in leading game developers with good research and development capabilities, as well as strong IPs related to popular animation, literature, games, and movies in Greater China, to further enhance its IP game distribution and development business.

It is not difficult to see from the intended use of the announcement that the company is expected to announce an acquisition in the future.

The three giants may play a big game next.

Although there is currently no target under negotiation, relationship networks are often given top priority in investments. Just like what Lei Jun said, "only invest in people I know."

The Zhitong Caijing APP found in its development history that in addition to Zhu Yihang and Bilibili, CMGE also has a deep relationship with Century Huatong Group in A shares.

In December 2015, Century Huatong issued a restructuring plan with assets of nearly 13.5 billion yuan, mainly to acquire the entire equity of three game companies, including "CMGE Mobile Technology," "Point Cayman" and "Point Beijing." However, the CSRC focused on tightening regulations on cross-border mergers and acquisitions of listed companies at that time, so the acquisition was not successful, but Century Huatong did not stop its acquisition and restructuring ideas.

In September of the following year, based on regulatory considerations, Zhejiang Century Huatong Group decided to withdraw its intention to acquire shares of CMGE from Liu Yiqian. However, through Chang Pei Shanghai, Zhejiang Century Huatong Group still holds shares of CMGE and has formed a concerted action relationship with CMGE chairman Xiao Jian, whose related rights are exercised by Xiao Jian and others. According to data from Qichacha, Chang Pei Shanghai holds 44.67% of the shares of CMGE Mobile Technology, of which Zhejiang Century Huatong Group is the controlling shareholder with 100% ownership.

Subsequently, in February 2017, Zhejiang Century Huatong Group received conditional approval from the China Securities Regulatory Commission for the acquisition plan of Dian Dian Interactive (Beijing) and Dian Dian Cayman, and subsequently issued a revised version of the acquisition report. Currently, Zhejiang Century Huatong Group holds 100% equity of Dian Dian Interactive. At that time, Wang Miaotong, Wang Yifeng and Wang Ji led the acquisition.

By 2021, Wang Miaotong transferred his equity in Zhejiang Century Huatong Group to Wang Ji, who subsequently became the main leader of the company. In the same year, Zhu Yihang and Bilibili, together with Hubei Century Network Technology Inc., made a strategic investment in CMGE, forming an alliance of the three industry leaders: Wang Ji, Xiao Jian and Zhu Yihang. In addition to this tacit strategic cooperation, Wang Ji and Xiao Jian were also invited to serve as guest judges of the tenth Game Industry Golden Mouth Award in October 2023, and their close relationship over the years was self-evident. At the same time, Zhu Yihang has increased his shareholding in CMGE several times this year, and together with Xiao Jian, has demonstrated their high degree of consistency and consensus in the company's development. These three industry leaders are not only rich in human resources, but also have unique advantages in project reserves, making CMGE never short of "project resources" in acquisitions.

Apart from this informed strategic cooperation, can we speculate that the next cooperation between Zhejiang Century Huatong Group and CMGE will also be full of imagination, and even boldly speculate whether Dian Dian Interactive will become the targeted project of cooperation? After all, Dian Dian Interactive and CMGE are both in the mobile game field, and their performance is excellent. According to Zhejiang Century Huatong Group's 2023 annual report, Dian Dian Interactive's revenue increased by 56.96% year-on-year, and it maintained a high double-digit growth rate in the first quarter of 2024. In the games developed by Dian Dian Interactive, there are also many popular games, such as "Whiteout Survival". It is understood that "Whiteout Survival" has successfully ranked first in China's gaming overseas revenue list and maintained its position as the champion of the global SLG mobile game best-selling list. If a strategic alliance can be formed, it will undoubtedly bring infinite imagination to CMGE.

Can we speculate that the next cooperation between Zhejiang Century Huatong Group and CMGE will also be full of imagination? Can we even boldly speculate whether Dian Dian Interactive will become the targeted project of cooperation?

After all, Dian Dian Interactive and CMGE are both in the mobile game field, and their performance is excellent. According to Zhejiang Century Huatong Group's 2023 annual report, Dian Dian Interactive's revenue increased by 56.96% year-on-year, and it maintained a high double-digit growth rate in the first quarter of 2024. In the games developed by Dian Dian Interactive, there are also many popular games, such as "Whiteout Survival". It is understood that "Whiteout Survival" has successfully ranked first in China's gaming overseas revenue list and maintained its position as the champion of the global SLG mobile game best-selling list. If a strategic alliance can be formed, it will undoubtedly bring infinite imagination to CMGE.

In summary, Zhu Yihang's continuous increase in shareholding and his use of actual gold and silver to indicate his attitude towards the market are a great recognition of the value of CMGE. Since the era of AI, AI games will become a feast in the market, and as one of the leaders in AI games, CMGE's strong R&D capabilities will also make it have a place in this feast. At the same time, a series of data shows that Zhu Yihang's investment in CMGE is not blind, or the next big move under the joint leadership of Wang Ji and Xiao Jian.

Recently, the valuation of CMGE has continued to decline due to the influence of the market, and the current PB value is only 0.4 times. Based on the price at which Zhu Yihang increased his stake earlier, there is no possibility of further increased stake at the current price level.