Cap spending increase with Alibaba
Hong Kong Stock Exchange requires that all commercial relationships with a parent company and their subsidiary put a limit or a cap on fees that a subsidiary pays to use the resources of the parent company. This cap is to protect the minority shareholders of the subsidiary companies from getting screwed.
Back in January, AGTech and Alibaba Group set up a Cap agreement that AGTech will pay for the use of various resources of Alibaba Group for the distribution of Lottery and other products and services including technology.
AGTech is looking to increase these caps by 250%.
Cap spending set up with Tmall
I believe this is specifically to boost online/mobile gaming platform of AGTech. This agreement will allow gamers to monetize their winnings uniquely and differentiate AGTech from all the other online/mobile gaming companies.
When you play online games, you use cash to purchase weapons, lives, and other supporting functions to help you play a better game. In exchange, you win virtual currencies or nothing at all. But, when you play games in AGTech platform, your cash spent will go towards credit for participating merchants on Tmall platform where you can purchase any merchandise with your winnings. (Tmall is one of China's biggest online e-commerce site for consumers) I believe this differentiation will attract gamers very quickly to AGTech game platform.
What does this all mean?
We will get more details before SGM but this is great news because it means that AGTech is making fast progress. Even the circular that lawyers drafted says, "Such growth is mainly due to the positive market feedback on the provision of Other Services resulting in the increase in the revenue generating from the provision of Other Services. Given such fast and consistent growth of transaction amount for the sale and distribution of the Other Services, the Board expects that the Original Channel Caps will not be sufficient and proposes to increase the Original Channel Caps to the Revised Channel Caps."
Think happy thoughts...
PS. I am hearing that Paytm (India's JV) will be launching online/mobile games in October. Just in time for Diwali. India's biggest holiday.
Disclosure: I am/we are long AGTEF.