AGTech Holdings Ltd, a Hong Kong-listed supplier of equipment and services to mainland China’s lottery market, says it expects new regulations for the industry to be introduced this year.
“We expect that during 2016 the People’s Republic of China lottery industry will see further significant policy developments including the introduction of relevant laws and regulations (particularly related to Internet and mobile distribution) which will further regulate and professionalise lottery supervision,” wrote Sun Ho, chairman and chief executive of AGTech, in his firm’s annual report filed on Tuesday.
The mainland authorities last year ordered a suspension of online sales of tickets for China’s two official lotteries – the welfare lottery and the sports lottery. Reasons given were the need to streamline government oversight and to curb fraud by unlicensed sellers. The central government said the ban was temporary but would be in place until further notice.
AGTech’s Mr Sun said in the firm’s annual report: “In light of the proven potential of the mobile and Internet channels and the reported comments of senior Lottery Agency and regulator officials at a recent annual lottery strategy meeting regarding the lottery’s active pursuit of preparatory work for an Internet sales pilot scheme, we believe that new online and mobile channels for lottery sales in the People’s Republic of China are likely to be approved.”
The firm also gave some commentary on its proposed tie-up with Alibaba Group Holding Ltd and others to allow AGTech’s sales system access to taobao.com, the mainland’s largest online shopping portal. The deal, announced earlier this month, will see Alibaba take a majority stake in AGTech and anticipates there will be a resumption of online lottery sales within China.
Upon completion of the US$300-million deal, AGTech would become the exclusive partner for lottery business with taobao.com. Mr Sun confirmed to shareholders he would stay on after the anticipated closure of the deal.
“If completed, we believe that the transaction will enhance AGTech’s technical ability to develop and expand our existing lottery business and in particular we expect that our mobile and Internet lottery business will benefit from significant potential synergies,” said Mr Sun.
In its audited final report for the year ending December 31, 2015, AGTech confirmed its loss widened to HKD280.2 million (US$36.1 million) compared to HKD189.2 million in the prior year. It said the deterioration was due to factors including: a loss of fair value on contingent consideration in relation to the acquisition of another listed company; a share option scheme; and an increase in major expenses linked to the firm’s growth.
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