Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

China Lottery & Corruption

|Includes: AGTech Holdings Limited (AGTEF), BABA, WBAI

In this morning's political section of the South China Morning Post <SCMP>,  a headline reads  "China’s new inconvenient truth: how much lottery money corrupt officials stole"

The article focuses on the corruption of the officials at the Chinese Lottery Management.

My Take. 

When these sort of issues make it to the papers, it means that the decisions have already been made and that the process is coming to an end. In China, topics such as official corruptions are all done behind the scenes and behind closed doors.

Chinese Lottery business is managed by two separate group. The Welfare Lottery with the mandate to use the tax proceeds to create and run social welfare programs and the Sports Lottery with the mandate to set up and run sports programs nationwide. For some reason, corruption has always been more rampant with the Welfare Lottery officials. (personally, I believe is due to leadership. or lack thereof. "Everything rises and falls with leadership") SCMP article also focuses on the corruption problems at the welfare lottery.

Ever wonder why AGTech only work with Sports Lottery? It is not an accident. It is also not an accident that AGTech is the ONLY public company to pass the government audit back in 2013-2014 after Internet Lottery Sales were halted.

My sources tell me that as a result of the corruption at the Welfare Lottery, the Sports Lottery management has taken over about 20% of Welfare Lottery business in China which is excellent news for AGTech.

I am looking for few catalysts to bring investors back to AGTech stock.  

1. India's mobile game platform "GamePind" after reaching 1 million DAU back in August is about to launch play-for-cash card games like Rummy and Poker. Cricket Fantasy Sports League has launched and is starting to generate interest and revenue. sports betting and the lottery is also on the docket for introduction down the line. 

2. The company is working on a pilot of new Smart Lottery Terminal (SLT) in China. SLT will allow consumers to log into local business' website to purchase any lottery tickets, pay for it and pick up the tickets at the establishment. Not quite the Internet Lottery but it's the next best thing. Alibaba Group has over 1.5 million retail outlets. Consumers can log onto,, or whichever site to purchase lottery tickets and pick them up on your way to and from work, etc. Using an online tool like SLT will prove to be the best way to attract new players for the lottery industry. Young Urban Professionals will never walk into dingy, dirty, and smoke filled lottery shops.

After the pilot period, the Sports Lottery officials will present the result (no doubt it will generate enormous traffic and revenue) to the Central Government for official approval to roll out SLT nationwide. Once the trial begins, there will be more noise and the stock price will start to reflect the enormous opportunity for AGTech.

GamePind alone is worth multiple times the current market cap. But in this environment, investors are waiting to see the revenue come in as a "proof" of success. Currently, investors are saying Game-Pine and China's lottery opportunity is worth less than $300 million in Enterprise Value which is crazy cheap. Once the revenue starts to come in, the market will revalue the EV very quickly.

Disclosure: I am/we are long BABA. AGTEF.