Acquiring the global rights to the IP of "The Legend of Sword and Fairy", CMGE (00302) accelerates the promotion of the strategy of "cultural IP" going abroad.

On September 11, CMGE (00302) announced that its wholly-owned subsidiary SuperNova will acquire and Da Yu will transfer the target IP rights. This follows the complete acquisition of Beijing Softstar and the ownership rights of "Chinese Paladin" IP in mainland China in August 2021. CMGE once again conducted asset acquisitions of the "Chinese Paladin" IP global rights. After the transaction is completed, the company will have all intellectual property rights of the IP globally. The acquisition cost of CMGE will be paid in two ways: first is to pay Da Yu 20.13 million Hong Kong dollars in cash; second is to issue and distribute 38 million shares of consideration shares to Da Yu at a price of 1.68 Hong Kong dollars per share. These two payment methods can not only reduce the company's capital expenditure, but also obtain international strategic shareholders through equity swaps, deeply bind cooperation for future resource integration and globalization. Furthermore, the consideration shares in this transaction are at a high premium. Compared to the average closing price per share of 0.701 Hong Kong dollars in the previous 10 consecutive trading days before the announcement date, the premium is approximately 139.66%. It can be seen that Da Yu has a positive outlook on CMGE's future. After the issuance is completed, Da Yu will hold 1.31% of CMGE's shares. Da Yu is a Taiwan-listed company, a leading game developer and IP-based entertainment provider, mainly engaged in computer games, online games for clients, web-based online games, mobile game development, IP licensing, and game distribution. The last strategic investment in CMGE at 1.68 Hong Kong dollars per share was made by the e-sports giant Zhu Yihang. After multiple increases in holdings, Zhu Yihang now holds 9.68% of the shares, becoming the third largest shareholder after Fairview Ridge Investment Limited and Pegasus Network. In the illiquid Hong Kong stock market, CMGE's market value is considered distorted by industrial investors. Therefore, both Zhu Yihang and Da Yu can accept high premium subscriptions and swaps. Da Yu's business is highly similar to CMGE's, and there is great potential for integration. Taking Zhu Yihang as an example, according to CMGE's first-half financial report, Zhu Yihang's esports industry chain has gradually integrated resources with CMGE. In the first half of 2024, the two parties jointly expanded the cross-border flow innovation mode of online and offline, bringing more low-cost player growth to the company's IP games and expanding the player base. In addition, "Chinese Paladin World" is collaborating with He Sheng Business to plan a series of activities to cultivate and build offline traffic bases for the "Chinese Paladin World." However, why does CMGE value the "Chinese Paladin" IP so much? Since CMGE became a major shareholder of Beijing Softstar in 2018, it has been strategically laying out the entire industrial chain of the "Chinese Paladin" IP. After 6 years of refinement, the vitality and influence of the "Chinese Paladin" IP continue to rise. It has won numerous championship awards for well-known IPs from official organizations and societies in mainland China, embodying both influence and commercial value. For many years, the company has planned to enhance the IP value of the "Chinese Paladin," cultivate the vitality and influence of the IP, and expand its business based in mainland China on a global scale. The "Chinese Paladin" matrix covers a wide range, including games, comics, literature, content experiences, entertainment scenes, film and television, animation, music, virtual idols, derivative products, forming a strong IP ecosystem to meet the needs of IP fans in different fields. As of now, "Chinese Paladin" has a global reach of over 600 million, including over 100 million core fans, 500 million familiar with "Chinese Paladin," and over 1 billion netizens highly interested. The commercial value of the "Chinese Paladin" IP is enormous. Among the "Chinese Paladin" IP matrix, "Chinese Paladin World" is the most market-attractive. This game is the world's first Chinese-style martial arts open-world cross-platform AI game masterpiece, polished for over three years. It received PC and mobile dual-platform licenses in June 2023, underwent the third round of testing in May this year, and is about to enter the fourth and final testing phase, planning for official launch in 2024. So why did CMGE acquire the global rights of the "Chinese Paladin" IP at this time? In fact, "The Myth: Wu Kong" has swept the world, sparking a wave of learning Chinese culture. At the national level, the emphasis on cultural heritage and the creation of IP has begun. By spreading Chinese culture to the world through high-quality IPs with cultural value, CMGE is closely following policy trends to firmly grasp high-quality IPs, promoting the expansion of the global market while passing on cultural heritage. According to the company, the comprehensive acquisition of the global intellectual property rights and interests of "Chinese Paladin" will consolidate the group's IP game ecology competitiveness and ensure the long-term stable implementation of the group's IP game strategy. The company also stated that it is closely following national guidelines and policies, focusing on the inheritance of traditional culture, deeply exploring the outstanding cultural value of the IP, and delivering inspiring positive values to the public. It will build "Chinese Paladin" into a Chinese game brand with top global influence, reaching new heights of influence for the IP game, allowing Chinese stories and culture to reach further and deeper into the hearts of people. It is worth noting that CMGE has multiple IP ecosystems, in addition to the "Chinese Paladin" IP ecosystem, there is also the "Douluo Continent" IP ecosystem, with popular products such as "Douluo Continent: Shrek Academy" and "Battle Through the Heavens: Peak Showdown." The former achieved over 100 million yuan in monthly revenue in its first month online, and there is also a small game ecosystem, such as "Smash a Hammer," which ranked first in the tower defense and elimination category of small games after launching. The company stated that it will increase investment in all aspects to create more high-quality content and interactive experiences by combining entertainment forms favored by young users. In summary, CMGE's acquisition of the global rights of the Chinese Paladin IP will bring anticipated development for the future, especially in terms of going global, driving cultural IP products to go international, which is of great significance in spreading Chinese culture, forming a synergy between policy and market. With a solid foundation, CMGE has gained recognition from industry chain investors for its advantages in research and development and IP. Its market value is underrated with a high potential for value appreciation.