Shanda Games Profit Tops Estimates - Update

(RTTNews) - Shanda Games Ltd. (GAME) Wednesday posted a 21 percent increase in second-quarter profit, helped mainly by an income tax benefit that offset a drop in revenue and operating margins. Both earnings and revenue for the quarter topped Wall Street estimates.

Looking ahead to the third quarter, Shanda expects revenue to climb 3 to 4 percent sequentially, led mainly by the launch of its mobile game "Million Arthur" in China. Mobile game revenue are projected to grow about 50 percent sequentially.

Shares of the company gained about 3 percent in after-hours trade on the Nasdaq.

Shanda's net income to shareholders for the quarter was 374.4 million yuan or $60.6 million, up from 308 million yuan last year.

On a per American Depositary Share or ADS basis, earnings for the quarter were 1.40 yuan or $0.22, compared with 1.10 yuan in the prior year.

Results for the quarter reflect an income tax benefit of 26 million yuan or $4 million, compared with tax expense of 99 million yuan last year.

Excluding one-time items, adjusted earnings per ADS for the quarter were 1.50 yuan or $0.24, compared with 1.20 yuan a year ago.

On average, three analysts polled by Thomson Reuters estimated earnings of $0.20 per ADS for the quarter. Analysts' estimates typically exclude special items.

The Shanghai, China-based online gaming company posted second-quarter revenue of 1.09 billion yuan or $175.6 million, compared with 1.13 billion yuan in the prior year. Analysts estimated revenue of $174.74 million for the quarter.

Revenue from its key "massively multi-player online or MMO games" segment slid 11 percent year-over-year. Revenue from its mobile games segment were 101.8 million yuan or $16.5 million, while there was none a year ago.

Gross margin for the quarter expanded to 64.6 percent from 62.4 percent a year ago, while operating margin dropped to 26.9 percent from 31.4 percent.

The company's stock closed Wednesday at $4.55, up $0.17 or 3.88%, on a volume of 1.3 million shares. In after hours, the stock gained $0.13 or 2.86%.