MOC (Ministry of Culture of China) issued the latest ban on ten popular mobile gaming operator, including "我叫MT" and "大掌门" last Friday.
CMGE primary cash cow "Joyful Zha Jinhua" -- "炸金花" was reported violation of "anti-gambling" rules as it may lead gamers to invest into lucky draw to win access of the game.
Joyful Zha Jinhua was pull off from app store and google play when we release this note.
As one of leading mobile gaming providers in China, CMGE involves three lines of business, 1) content provider - Joyful zha jinhua was independently developed by CMGE and currently contributes one third of its revenue, over RMB 10 mn per month. 2) distributor for smaller game studio, CMGE helps game studio with less reach and less quality to distribute. 3) platform, CMGE operates gaming center for other games.
We believe CMGE is on the uptrend to its peak of revenue coming from game developing, which is the foundation of its publishing and platform business. As Joyful zha jinhua is off the shelf for three days, we believe CMGE revenue stream may be impacted.
Recommendation: Sell and buy back when share price hits lower level.
Will keep watching on updates!
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in CMGE over the next 72 hours.