Quicky on Fire Rock Hold. (1909 HK) – interesting year end ahead!

I recently (March 2020 😀 ) run a stock screener on high returns on equity or RoE (and some other metrics: net cash, P/E, yield it was, I believe) and ended up with a list of a few hundred company names. I quickly read through the first about one hundred names and noted ten stock tickers to take a further look. Frome these ten, I already knew four ticker symbols.

This is not investment advice. Please read the disclaimer.
I might currently or at a later point in time own shares (economic interest) in mentioned or related companies.

Fire Rock Holdings Limited develops browser and mobile games to licensing around the world. (http://en.firerock.hk/)

The stock (1909 HK) price quadrupelt since mid July 2020, and traded at HKD 6.20, (there was a stock split) but net income is up 10x as well, increasing from CNY 22m in 2016 to 209m in 2019. The ROE of hit-and-miss game developers could be a tricky metric, and because the stock already popped, I decided to let it go. Now, in December 2021, I revisited some of my written down stock tickers.

This is another part of my series of Quickies on new companies.

The company’s website is not accessible for me. An issue I experience with various companies. Its interim report for 6m ending June 2021 is accessible via other websites (i.e HKX, webb-site).

Recent 6 month (H1’21)

The good fundamental developments were mostly caused by the major acquisition of Tak Shing International, which is ‘principally engaged in online games operating service in the PRC, whose subsidiary is one of the Company’s licensed operators that distributed several premium online games developed by the Company’. The acquisition might give Fire Rock more control of its distribution channels.

The company’s fundamentls (if to be trusted!?) look quite strong, though online games can be very cyclical business if they are en vogue until the next more interesting/newer game comes along. More risk comes from the fact, that 50%+ of its revenue is from one game series. More, IP is depreciated, and thus activated. As of June 30, 2021, the company has significant intangible assets (HKD 385m) and goodwill (768m), and debt (total promissory notes of 729m) despite high cash (645m).

Anyway, more important than recent company fundamentals are recent news.

Recent news

On Dec 1st, the company announced ‘a meeting of the Board will be held on Monday, 13 December, 2021 (…) for the purpose of considering and approving the declaration of a special dividend (…) and transacting any other business (if any).’

On Dec 9th, there was a trading halt for Summit Ascent.

  • Neither the most recent interim report nor the annual report mention ‘Summit’.
  • Summit Ascent Holdings Ltd. develops, owns, and operates casino gaming and entertainment resort facilities.
  • Further, Summit is listed in Germany which is probably a bad omen!

A Dec 10th news headline (unfortunately unaccessible for me) reads ‘Summit Ascent Ho: Possible Loan Default By An Associate Of The Ultimate’ and another one informed about the Boardmeeting is postponed to Friday, Dec 31st.

  • These news read very bad, and the market does clearly see it this way with the current share price movement. The chosen date (Fri, Dec 31st) is probabaly one of a few days out of 365 days during a year with minimal interest in financial news. Further, the CEO departure sets expectations for worse news to come.
  • On the other hand, the declaration of a (high) special dividend might restore trust and make for an interesting trade.

As of Dec 20th, the company’s CEO left.

I hope you enjoyed this post.

Addendum Dec 21st: It got more interesting still. Today’s news revealed the chairman (indirectly) bought 2m $1909.HK shares on the open market on Dec 21st for HKD 1.6m and the beaten down price popped a nice 52% today🚀

Further reads

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