GGRAsia – AGTech 3Q revenue up, loss widens

AGTech 3Q revenue up, loss widens

Nov 11, 2015 Newsdesk Industry Talk, Latest News

AGTech Holdings Ltd, a Hong Kong-listed supplier of equipment, software and services to mainland China’s regulated lottery market, reported a 44.4-percent year-on-year increase in revenue for the third quarter of 2015 to HKD76.7 million (US$9.9 million). But the firm’s loss for the period widened to HKD53.2 million from HKD49.0 million a year earlier, on higher operational expenses and costs related to share options.

Total revenue for the nine-month period ended September 30 amounted to HK$177.8 million, up 45.0 percent in year-on-year terms. The increase in revenue was attributable to the sales of newly added hardware and technical services, the firm said in a Tuesday filing.

According to data from China’s Ministry of Finance, the mainland China lottery market recorded sales of RMB242.8 billion (US$38.2 billion) in the first eight months of 2015, a year-on-year decrease of 1.8 percent.

AGTech noted in its filing that the year-on-year growth rate of lottery sales in mainland China had fallen from 35.8 percent in January and February to -10.6 percent for the period March to August. “The sharp reduction in sales is attributable to the strong and decisive action taken by the authorities to prohibit all Internet lottery ticket sales activity and which came into effect in early March,” it stated.

Online sales of mainland China lottery products are currently suspended, a move described by the authorities as temporary but which has hit several companies.

AGTech said in its filing it welcomed the suspension. “This enforcement is ongoing and is seen as a precursor to a more clearly regulated operation, management and distribution model. It is expected that selected lottery products will gain approvals for trial sales in certain provinces [for distribution via]… smartphone.”

The firm added: “The pronouncement by China’s State Council on October 11, 2015 regarding an increased level of provincial autonomy with respect to the promotion of approved lottery games is an important measure to support lottery sales growth and is likely to benefit approved products such as the group’s ‘Lucky Racing’ and ‘e-Ball Lottery’.”

The State Council confirmed last month its commitment to reducing the time required for the approval and administration of lottery sales and payouts, cancelling 62 central authorisation requirements and devolving responsibility to provincial finance departments.

AGTech said it expected to see “significant regulatory progress” in the China lottery industry in the months and quarters ahead. “Relevant laws and regulations are becoming clearer (particularly on Internet and mobile distribution) which will further regulate and professionalise lottery supervision,” it added.