The leading second-tier online travel agent, alongside rival services operated by Alibaba and Meituan, are being investigated by China’s market regulator

Key Takeaways:

• Tongcheng, along with second-tier online travel services operated by Alibaba and Meituan, are being probed for anti-competitive behavior
• The probes come just two months after industry leader Trip.com was fined 5.3 billion yuan for similar anti-competitive behavior

By Doug Young

Just when you thought China’s market regulator was finished punishing companies for anti-competitive behavior on the internet, it turns out its work is still in progress. In this case we’re talking about the online travel industry, where industry leader Trip.com was fined and ordered to make refunds totaling a massive 5.3 billion yuan ($789 million) in July for anti-competitive practices.

Many thought that was the end of the story, since China’s market regulator, the State Administration for Market Regulation (SAMR) typically targeted industry leaders like Alibaba and Tencent for its earlier anti-competitive investigations in areas like e-commerce and online music. But now we’re learning the SAMR wasn’t finished with its work in the online travel industry, with word that it’s now investigating most of the largest operators behind Trip.com.

Specifically, the regulator is looking into anti-competitive practices by Tongcheng Travel Holdings Ltd. (0780.HK), as well as similar services operated by Alibaba (BABA.US; 9988.HK) and Meituan (3690.HK), according to a Reuters report last week. It’s also looking at Tujia, which operates a domestic homestay service similar to Airbnb (ABNB.US), according to the report.

All four companies acknowledged an ongoing investigation, mostly by saying they were cooperating with regulators. The China Hotel Association said on its website that the SAMR was investigating four companies for unfair anti-competitive actions, but didn’t provide any names or additional details.

It’s not surprising that the Hotel Association would welcome such probes, as many of its members are probably the most unhappy with the current situation. Trip.com was notorious for demanding concessions from hotels for their placement on its network, often requiring them to work with Trip.com exclusively. The SAMR earlier levied a record 18.2 billion yuan fine on Alibaba for similar anti-competitive practices in e-commerce, as it often forced merchants to work with it exclusively.

What’s interesting in this instance is that the market regulator is now going after second-tier companies in the travel sector, which means perhaps it might start reopening some of the other sectors that were subject to similar investigations.

Here, we’ll zero in on Tongcheng to try to better understand what’s happening, as the company’s business practices are more transparent than the others because of its publicly traded status. Tongcheng is 24% owned by Trip.com and 21% owned by Tencent, which may be part of the reason it’s being investigated.

That cross-ownership gives Tongcheng status as effectively the exclusive travel agent on Tencent’s platforms, most notably WeChat. It may also receive preferable terms from Trip.com, which provides Tongcheng with hotel booking services. Notably, in its anti-trust ruling against Trip.com in July, the SAMR didn’t require Trip.com to sell its stake in Tongcheng, nor did it demand Tongcheng end its use of Trip.com’s hotel booking services.  So, this latest probe could potentially result in Trip.com and Tencent being forced to sell their stakes, and Tongcheng possibly losing its preferred status on WeChat and any preferential terms from Trip.com’s hotel booking services.

Slumping shares

Investors certainly weren’t too happy about the latest development, with Tongcheng’s stock slumping 5.7% over the five trading days after the Reuters report. The shares are now down 55% this year, outpacing a 45% decline for the similarly battered Trip.com. The selloff has dropped Tongcheng’s price-to-earnings (P/E) ratio to a lowly 8.4, similar to Trip.com’s similarly depressed 7.6. Both of those are well behind the 11.3 for the much smaller Tuniu (TOUR.US), and are half or less of the 18.2 and 16.6 for global leaders Booking Holdings (BKNG.US) and Expedia (EXPE.US).

Here we should also note that China’s travel industry isn’t exactly booming these days due to the nation’s slumping economy, though lately it has shown some signs of rebounding slightly from a weak 2025. But this type of investigation certainly isn’t helping things. For Tongcheng, a loss of its preferred status on WeChat could be devastating. While it doesn’t provide specific figures, Tongcheng repeatedly describes the WeChat ecosystem as a “vital traffic source” for the company in its financial reports.

Tongcheng appears to be lessening its reliance on Trip.com for hotel bookings. Most notably, the company is rapidly emerging as a hotel manager, complementing its core hotel booking and transport ticketing businesses. That gives Tongcheng preferential access to the 3,500 hotels it managed at the end of June, with another 2,000 in the pipeline, according to its second-quarter report issued last month.

We wouldn’t be surprised if Tongcheng demands the same type of preferential booking arrangements from its managed hotels that Trip.com once demanded of many of its partners. Thus, the company may be required to end such demands and open its network of managed hotels more widely to rival online travel agents as a result of the probe.

Tongcheng already operates on lower margins than many of its rivals as a result of its heavy reliance on Trip.com for hotel booking services and Tencent for preferential placement on WeChat. The company’s gross margin in the second quarter was just 66.3%, compared with 80.6% for Trip.com last year and an even higher 85.8% for Expedia. Less reliance on middlemen like Tencent and Trip.com would help to boost its margins, but at the expense of the large business volume that WeChat and Trip.com bring.

There’s also the question of fines. Trip.com was fined about 7.5% of its 2025 revenue, which would translate to about 1.5 billion yuan if Tongcheng gets fined at a similar rate on its 19.4 billion in revenue last year. That looks relatively affordable, but would still represent a sizable portion of the company’s 6.8 billion yuan in cash at the end of June.

All this shows there are many uncertainties currently hanging over Tongcheng, any of which could result in quite significant impact on its business depending on the market regulator’s final verdict. The one consoling factor for Tongcheng is that it isn’t the only company being targeted in this latest series of probes. That could indicate the SAMR is mostly interested in sending a signal that anti-competitive practices won’t be tolerated by any company, rather than seeking systemic changes in Tongcheng’s key relationships with Tencent and Trip.com.

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"If you want to ensure the success of a company that is still very much regional Southeast Asia when going to market, it's probably a bit easier in Hong Kong than in the U.S." — Explaining why a Southeast Asian consumer brand would prefer a Hong Kong listing over Wall Street.

Key Takeaways:

• A U.S.-developed AI tool's mock breach of WeChat highlights escalating cybersecurity risks and could trigger tighter oversight from Beijing
• Jollibee's decision to list in Hong Kong over the U.S. underscores the city's growing appeal for regional consumer brands seeking Asian capital

By Rene Vanguestaine and Doug Young

A couple of recent stories are reflecting a shift in the trans-Pacific business landscape. On one hand, a mock AI attack on China's premier WeChat messaging app has exposed the vulnerabilities of the country's digital ecosystem to U.S.-developed technology. On the other, a major Southeast Asian fast-food conglomerate has decided to bypass Wall Street in favor of Hong Kong for its international listing. Both events underscore the evolving regionalization of Asia's digital and financial infrastructure — and the intricate push-and-pull dynamics with the U.S.

We're learning that a group of benign researchers in California recently used U.S. AI to build a tool that could breach millions of accounts on WeChat, the ubiquitous app owned by Tencent (0700.HK), in just hours. Their tool, dubbed WeWorm, can hijack a user’s account, call their contacts, and spread from phone to phone without anyone ever answering a call.

For a platform boasting 1.4 billion users that essentially functions as a telecoms carrier in its own right, this is deeply alarming. We believe Beijing isn't reacting well to this development. Usually, the shoe is on the other foot, with the U.S. accusing Chinese hackers of infiltrating its digital spaces. WeChat is the nexus of communication for the Chinese population. The ability to control this network and reach such a massive audience carries severe risks of abuse by anyone seeking to incite social instability and spread disinformation.

While Beijing doesn't directly own the network, it maintains heavy indirect control, likely communicating with Tencent on a daily or even hourly basis. Beijing has consistently demonstrated its ability to control the internet in ways previously thought impossible. If the Chinese security apparatus believes Tencent isn't doing enough to contain this AI threat, we're sure the government will step in with heavier oversight to bring the situation under control.

The AI angle is equally compelling. Until just a few days ago, the major tech heads pushing AI were essentially telling the world not to worry — assuring us that while there might be a minuscule chance of disaster, everything would generally be okay. Then, they suddenly reversed course, warning that the technology might be getting out of control and require immediate slowing down.

We're sure WeChat is working to fix this specific vulnerability that was uncovered by the California team. But as we've seen with social media companies losing control or maliciously manipulating users, this certainly isn't the last time we're going to talk about this kind of risk.

In response to offshore threats, we expect Beijing to crack down and implement stronger oversight on domestic AI companies. While China's public focus has largely been on AI applications to boost manufacturing productivity and counter a shrinking working-age population, it's highly probable the government is heavily involved in behind-the-scenes military and defense applications.

Shifting tides in Asian IPOs

Shifting gears to the capital markets, we're seeing another interesting regional play. Jollibee, a Philippines-based fast-food giant that owns brands like The Coffee Bean & Tea Leaf, recently announced a change of direction for its international operations. The company scrapped plans to spin off and separately list the international operation in the U.S., choosing to move the listing to Hong Kong instead.

Wall Street has long held the upper hand in attracting major Asian listings, but Hong Kong is gaining momentum. Much of this is driven by Mainland Chinese companies that currently face a hard time getting Beijing's approval to list in the U.S. But Jollibee's case highlights a different trend. Fast food doesn't typically boast the high margins or name recognition required to excite U.S. retail investors, who already have no shortage of domestic food and beverage IPOs to choose from.

In contrast, Hong Kong hosts a sizable, dedicated pool of investment money — including funds from the U.S. and Europe — focused specifically on Asia and Southeast Asia. These investors have a much better understanding of local economies in the region and why this company is successful. There are some cases where consumers have tried the brand in Hong Kong and responded positively, reflecting this deeper regional familiarity. Going to market in Hong Kong is simply easier for a regional Southeast Asian business.

This presents a vital test for Hong Kong: can its stock market attract more Southeast Asian companies to diversify away from solely Mainland firms? We think Hong Kong is far better equipped for this than Singapore. Despite being the financial capital of Southeast Asia where Jollibee is strongest, the Singapore Stock Exchange just doesn't seem to have the liquidity depth and trading volumes to satisfy companies of a certain size. Hong Kong's advantage is further bolstered by having China as its massive financial benefactor. That doesn't mean Wall Street is losing its crown entirely. For unproven, early-stage high-tech companies, the U.S. remains the better market. U.S. investors better understand the tech sector and are more willing to risk capital, offering sustained valuations beyond just the current AI hype. But for the regional consumer sector, Hong Kong is proving to be a much more welcoming home.

The video platform is planning a $700 million capital restructuring that turns Tencent from a core shareholder into a creditor through an equity-to-debt deal

Key Takeaways:

• Bilibili’s move would pretty much cancel out Tencent’s 9.6% equity stake, but the tech giant would get $200 million of convertible notes
• Paired with a share placement and buyback, the transaction aims to cushion Bilibili’s share price and limit dilution, but growth remains a concern   

By Lee Shih Ta

Despite pulling out of the red, Bilibili Inc. (9626.HK; BILI.US) has yet to put investor concerns to rest. Doubts remain about whether the video platform dubbed “China’s YouTube” can accelerate revenues and boost its profit potential.

At this point, the company’s longtime strategic investor, Tencent Holdings Limited (0700.HK), has opted to make an almost complete equity exit. Under a $700 million capital restructuring, the tech giant will switch from being a core shareholder in Bilibili to a major creditor, albeit with an option to convert its holdings back into equity if the stock makes healthy gains in the future.

Bilibili, meanwhile, is using part of the proceeds to ease downward pressure on its share price and limit dilutive effects.

The transaction announced on Sept. 4 combines convertible notes, a share placement and stock repurchases. Bilibili plans to issue $700 million of zero-coupon convertible senior notes, using $300 million of the proceeds for a simultaneous share buyback. Tencent will sell its roughly 9.6% stake and subscribe for $200 million of the notes, which will mature in 2031.

Institutional investors are to be offered $500 million of the notes, with Tencent taking the rest. The notes, which will not pay regular interest, have an initial conversion price of HK$155.79, a 28.3% premium to Bilibili’s close on the day of the announcement and 35% higher than the equity placement price. Holders may opt for early conversion and have the right to require Bilibili to repurchase the notes at principal in September 2029.

Tencent originally held about 40.01 million ordinary shares in Bilibili. Under the proposed plan, about 26.37 million shares are to be sold to other investors through a secondary placement at HK$115.38 per share, while Bilibili will repurchase another 13.59 million shares for $200 million. Upon completion, Tencent would be left with about 48,000 shares, reducing its stake to virtually zero.

Supporting share value

Tencent is selling shares worth nearly $600 million and will effectively cash out about $400 million after taking its portion of the notes, with the subscription cost offset against the repurchase price payable by Bilibili. Some market observers have interpreted the elevated conversion price as a sign of confidence, but if Bilibili shares languish below that level Tencent can keep hold of the notes and get the principal back in 2029.

Convertible-note investors typically short the underlying shares as a hedge, which in this case would mean underwriting banks would borrow about 6.98 million shares. To mitigate the selling pressure, Bilibili is spending about $100 million to repurchase roughly 6.8 million shares. If both transactions are completed, the company will have repurchased and cancelled around 20.39 million shares, equivalent to about 4.9% of its existing share capital.

If the notes are fully converted, Bilibili could issue up to 35.24 million shares, equivalent to about 8.4% of its existing share capital. After taking the concurrent repurchases into account, the potential net increase would be about 14.85 million shares, implying net dilution of roughly 3.5%. The stock could also face additional hedging-related pressure if the shares approach the conversion price.

Bilibili expects net proceeds of $690.4 million. After deducting the $300 million earmarked for share repurchases, about $390.4 million will remain to invest in AI-driven growth and general corporate operations.

Nomura believes Tencent’s orderly exit should help remove technical selling pressure, but it maintained a “neutral” rating on Bilibili’s U.S.-listed shares and a price target of $18. On the first Hong Kong trading day after the announcement, Bilibili fell as low as HK$116.4 before reversing course to close 1.98% higher at HK$123.8. The stock is still down about 35% this year, reflecting continued caution over its outlook.

Growth in question

Bilibili has the financial means to support its capital restructuring. At the mid-year point, it held 24.3 billion yuan ($3.62 billion) in cash, time deposits and short-term investments, while $336.7 million from convertible notes it issued last year remains unused. The bigger question is whether the new financing can generate returns that outweigh the costs of dilution and debt repayment.

Bilibili’s revenue rose 8% to 7.94 billion yuan in the second quarter from the year-earlier period, while net profit jumped 55% to 339 million yuan. Gross margin rose for the 16^th straight quarter, reaching 37.2%. Advertising revenue grew 28% to 3.13 billion yuan, becoming the company’s largest revenue source for the first time. Daily active users increased 7% to 116.5 million, while average daily time on the platform reached 113 minutes, driving a 14% rise in total time spent.

But the growth mix remains uneven. In the second quarter, value-added services grew just 5%, while revenue from mobile games fell 14% to 1.39 billion yuan, leaving advertising as the main growth engine. AI can improve content recommendation, creation and advertising efficiency, but the company has not separately disclosed the amount of its AI investment or its expected returns. Projecting advertising growth to slow in the second half while AI investment rises, Nomura previously cut its price target to $18 from $22.50.

If everything goes to plan, Bilibili will retain about $400 million in funding and will dampen the potential ongoing selling pressure. The returns will depend on Bilibili’s ability to find new growth drivers and reap rewards from its AI investment. The capital transaction may have bought the company time, but the ultimate value has yet to be determined.

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The social-app operator is boosting its paid user base at home, but weaker spending and setbacks overseas are prolonging its long-awaited turnaround

Key Takeaways:

• Hello Group’s revenue fell 5.1% in the second quarter of 2026, and management now expects a steeper full-year decline than previously anticipated
• The dating app operator’s overseas quarterly revenue grew 52%, but setbacks at its SoulChill app are likely to leave the business short of its annual target

By Hu Minghe

Hello Group Inc. (MOMO.US) is getting more people to pay for Momo, its core offering once known as the “Tinder of China,” but now trying to become a more mainstream dating app. The problem is that some of its biggest spenders are buying less in a sluggish Chinese economy filled with uncertainties.

That retreat helped push the company’s revenue down 5.1% year-on-year to 2.49 billion yuan ($366.4 million) in the second quarter, according to its latest financial report released last Thursday. Even rapid overseas growth wasn’t enough to offset falling sales in China.

Hello said the declines would continue and even accelerate in the third quarter, forecasting a year-on-year drop of 5.7% to 9.4%. CFO Peng Hui said full-year revenue would likely fall by a mid-single-digit percentage, marking a setback from the roughly 2% decline envisioned in June.

Hello’s shares fell about 7% on the results day as investors fretted about the downward adjustment, before rebounding 5.3% the next day.

Once China’s leading “hook up” app, Hello built its business around Momo, which launched in 2011 to help strangers meet other people nearby. The app later added live broadcasts and chatrooms, earning money from memberships and virtual gifts that users could send to hosts or one another.

But Hello has struggled to retain its early momentum. Its annual revenue has fallen every year since 2020, a slump that has outlasted the pandemic. Its current market value of about $700 million is more than 90% below the more than $10 billion it reached in 2018.

When the big spenders retreat

The latest quarter shows why attracting more paying users has not been enough – a reality many companies are discovering in the current environment of growing consumer caution. The company’s China revenue fell about 17% year-on-year, even as Momo’s paying users rose to 3.9 million from 3.5 million a year earlier.

The weakness was concentrated among the biggest-spending customers who historically spent hundreds of thousands of yuan a month, management said. Spending by other customers remained relatively stable.

For Momo, weaker spending has coincided with tax scrutiny of its hosts and their agencies. That prompted some agencies to scale back their operations on the app, forcing Hello to offer subsidies and a larger share of revenue to win them back. The pressure was visible in the company’s operating profit, which fell 41% year-on-year to 238 million yuan.

Hello did return to profitability on its bottom line, but its year-ago loss was largely due to a separate tax charge during that period. Its net income reached 237.4 million yuan in the latest quarter, against a 140.2 million yuan loss a year earlier that included a 547.9 million yuan dividend-tax charge.

Hello’s other major domestic app, Tantan, is also struggling. Acquired in 2018, Tantan generated just 156 million yuan in second-quarter revenue, down 18%. And unlike Momo, the app’s, paying users fell notably to 500,000 from 700,000 a year earlier. Management blamed disrupted subscription renewals following a rule change on the Alipay payment service. In one slightly positive sign, Tantan’s overall audience in China held steady from the preceding quarter for the first time since it began paring back its user acquisition spending in early 2022.

While Hello works to steady its domestic business, domestic rivals are offering different ways to get people talking. Milian, which has filed for a Hong Kong IPO, uses human hosts on its Yidui app to introduce strangers and keep conversations moving, while group activities such as karaoke give hesitant users something to do together. Milian’s revenue rose 73.7% to 4.12 billion yuan in 2025, according to its listing application – sharply contrasting with Hello’s 1.9% decline that year to 10.37 billion yuan.

Soulgate, which has also filed for a Hong Kong listing, takes another approach with its Soul app. It puts virtual identities and shared interests at the center of socializing, using AI to suggest conversation starters. Users pay to personalize avatars, send gifts and unlock membership perks. Those services generated more than 90% of its 1.68 billion yuan revenue in the first eight months of 2025, according to its listing application.

Hello is trying to make introductions easier too. Tantan uses AI to suggest opening lines based on users’ photographs, a feature management says has helped retain female users. Such tools could help its apps appeal to younger adults, but their value depends on whether those first exchanges become conversations people want to continue.

Finding an audience abroad

With its domestic business still shrinking, Hello is increasingly looking overseas for growth. Its revenue outside China rose 52% to 672.7 million yuan in the second quarter, supplying 27% of sales, up from 17% a year earlier. Newer regional apps and dating businesses acquired last year drove the increase.

In the Middle East, Hello offers voice chatrooms through SoulChill, games through Yaahlan and video through Amar. It said Yaahlan reached breakeven during the quarter, while Amar continued to lose money.

But regulatory and political setbacks have complicated that expansion. In February, a Turkish court approved a regulator’s request to remove a range of apps, including SoulChill, from local app stores, according to Hello’s latest annual report. Management said the loss of App Store access in Turkey, and the recent Middle East conflict were holding back SoulChill’s business.

As a result, CFO Peng said the company’s overseas revenue would likely fall 100 million yuan to 200 million yuan short of its 3 billion yuan target this year.

Outside the Middle East, Hello is also buying established dating communities in other markets. It acquired French app Happn, which introduces users who have crossed paths, for 537.7 million yuan in cash in September 2025, according to its latest annual report.

That purchase takes Hello deeper into a global dating market facing its own growth problems. Global giant Match Group (MTCH.US), owner of Tinder, reported a 1% revenue decline and 6% fewer paying users in the second quarter. Yet its Hinge app’s revenue grew by 22%, suggesting there is still room for individual services to grow even as the wider business struggles.

Hello’s results show why a larger audience, be it at home or abroad, is only part of the answer. At home, it needs users to keep spending as well as chatting. Abroad, its new apps and acquired communities must earn enough to justify the cost of expansion. So far, overseas growth has softened the impact of Momo’s decline, but has yet to deliver a company-wide turnaround.

That could change soon, as analysts finally see the company returning to revenue growth next year, according to the average of seven polled by Yahoo Finance. But a simple return to low single-digit growth may not be enough to bring investors back to Hello Group’s languishing stock.

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The marketing services company has abandoned its listing on Beijing’s NEEQ market and is looking to Hong Kong in a bid to attract international capital

Key Takeaways:

• Shanghai Vision Star has applied to list in Hong Kong, reporting its profit surged by 186% in the first quarter of 2026
• The market services company's gross margin remained low at just 4.1% in the first quarter

By Bai Xin Rui

The rise of social media platforms like Douyin,  Weibo and RedNote, with their short video capabilities, has replaced traditional media, driving a parallel change in marketing services over these newer channels. One company from that new generation of marketing services providers, Shanghai Vision Star Media Co. Ltd., is now seeking a place in the financial spotlight with its recent application to list in Hong Kong.

Established in 2011, Star Media started off in IP-based brand marketing, before expanding into social media, performance-based advertising placement, livestream e-commerce and overseas cross-border marketing to offer more comprehensive services.

The company was previously listed on the thinly traded, over-the-counter-style National Equities Exchange and Quotations (NEEQ) board in Beijing from 2015 to 2023. But it terminated that listing in April 2023, and hopes to re-list in Hong Kong, citing working capital requirements and a desire to raise its global profile and pursue international capital.

Two major revenue streams

Vision Star derives its revenue from five major areas, including: IP-based brand marketing services; celebrity and influencer marketing services; performance-based marketing services; livestream e-commerce marketing services; and overseas marketing services, according to its listing document. Among these, IP-based brand marketing services and performance-based marketing services are its two biggest cash cows, accounting for 49.2% and 38.4% of its revenue, respectively, in the first quarter of 2026.

IP-based brand marketing services are not only Vision Star's original business, but also accounted for more half of its revenue in both 2024 and 2025 before dipping below the 50% threshold this year. Its IP-based brand marketing services involve assisting clients in embedding their brands into various IPs. Throughout the process, the company matches suitable IPs based on different brand positionings and product characteristics, and coordinates the planning and execution of marketing campaigns across multimedia channels to further enhance brand exposure and recognition.

That business segment has logged impressive revenue growth, including a 34% year-on-year increase in the first quarter of 2026 to 1.13 billion yuan ($168 million).

The second top revenue source provides performance-based marketing services to clients seeking customer acquisition and quantifiable conversion results. Revenue from such services, which typically involve the placement of ads on domestic media platforms, has grown even faster, rising 67% year-on-year to 884 million yuan in the first quarter of this year.

Strong growth from those two core segments helped to lift Vision Star's total revenue by 44.1% in the first quarter to 2.31 billion yuan, while its net profit nearly tripled to 20.83 million yuan. Despite its status as an asset-light company, Vision Star’s reliance on third-party platforms to serve its clients translates to low gross margins – a common feature of marketing services companies. Its gross margin stood at just 4.1% in the first quarter of this year, which is even lower than asset-heavy industries like infrastructure stocks, which typically range from 8% to 10%, and property stocks, which average 9% to 14%.

Subpar gross margins

Vision Star’s core revenue generator, its IP-based brand marketing service business, had an especially low first-quarter gross margin of just 3.8%. Its performance-based marketing services segment, its second biggest breadwinner, was even worse with a gross margin of just 1.7%.

The low margins also owe to the hugely competitive market for such services, since barriers to entry are low. Despite ranking fifth in China for integrated marketing solutions Vision Star holds just 0.4% of the market, reflecting the high degree of fragmentation and stiff competition. The industry leader holds just 3.7% of the market, and the top 10 players collectively hold just 8.2%. Price wars are common in such a fragmented, competitive landscape, which will only further squeeze Vision Star's gross margin and bottom-line profit.

Fortunately for everyone, China's marketing solutions market continues to grow at a healthy pace, rising from 1.18 trillion yuan in 2020 to 1.87 trillion yuan in 2025, equal to nearly 10% annual growth. Boosted by ongoing development of social media, short-video platforms, and content e-commerce, as well as rising demand for marketing services over those channels, the market is expected to further grow to 2.95 trillion yuan by 2030.

In such a low-margin and highly competitive landscape, one of Vision Star’s greatest assets is its full suite of marketing services. That, combined with its relatively large size, helps it secure advantageous position for its clients in the sea of short videos and social e-commerce now flooding the Chinese market. With China's marketing services market fast approaching the 3 trillion yuan threshold, the company looks well positioned to profit from a rising tide that lifts all boats, especially the larger ones.

Its new pivot to a Hong Kong listing could help to bolster its position if it can leverage the global capital market to extend its reach beyond just China. How the company manages to improve its gross margin through more efficient operations, while simultaneously growing its revenue, will be the key to determining whether it can command a long-term valuation premium over its listed peers.

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The struggling marine theme park operator’s revenue slid in the first half of the year and its loss widened, as its massive debt load continued to swell

Key Takeaways:

• Haichang Ocean Park reported its revenue tumbled over 20% year-over-year in the first half of 2026
• The marine theme park operator’s short- and long-term interest-bearing debt neared 5.5 billion yuan at the end of June

By Lau Chi Hang

Some might say it’s desperately treading water in a race against time.

Marine theme park operator Haichang Ocean Park Holdings Ltd. (2255.HK) has weathered quite the storm these last few years. Beyond its steadily deteriorating financials and frequent ownership shake-ups, its core business continues to erode. The company’s latest financial scorecard, released last week, contains more of the same, painting a bleak picture of sinking revenues, ballooning losses, and stubbornly high debt.

Haichang booked revenue of 536 million yuan ($80 million) in the first half of this year, down 22% year-over-year. Its net loss for the period grew by 12.7% to 332 million yuan from 295 million yuan a year earlier.

The company’s core theme park operations remained dismal, with ticket sales down 17% year-over-year to 265 million yuan. Food and beverage sales retreated 12.3% to 60.11 million yuan, while merchandise sales plunged an alarming 50% to 39.58 million yuan.

Despite the falling revenue, the company’s selling and marketing expenses surged 47% year-over-year to 75.35 million yuan. And even as Haichang scrambled to slash costs across the board, its gross profit margin for the period shrank by half to just 5%, down 5.4 percentage points from the prior year.

Gearing ratio soars

Beneath its sinking parks, Haicheng’s debt is its most glaring red flag. Its net gearing ratio jumped to 209.9% by the end of June from an already-high 171% just six months earlier. Its short- and long-term interest-bearing bank and other borrowings totaled 5.45 billion yuan midway through this year. And while its interest-bearing debt due for repayment this year fell by 25% from six months earlier, the overall figure still sits at a high 1.28 billion yuan. Compounding its pressure, the company’s cash and cash equivalents dwindled to just 460 million yuan by the middle of this year, down by more than half from 1.06 billion yuan at the end of last year.

Adding to its woes, and in a sign of its growing distress, Haichang was accused of missing payments from some of its suppliers in the first half of the year. As a result, several of its bank accounts with 24.13 million yuan were frozen, forcing Haichang to make full provisions for the sum.

Yet, despite being cash-strapped and buried under heavy debt, the company’s capital  commitments showed no signs of easing. It spent 330 million yuan in that regard during the latest six-month period, nearly matching its capital commitments for all of last year.

Many may be scratching their heads at the company’s growing woes. China's tourism industry has rebounded sharply post-pandemic, with domestic travel still strong as Beijing heavily backs the cultural tourism sector. Reflecting that, domestic tourist trips reached 1.9 billion in the first quarter of 2026, up by 107 million year-over-year, according to the Ministry of Culture and Tourism. Given such strong industry fundamentals, why has Haichang faced such difficulty?

Cultural tourism real estate stumbles

Haichang's founder Qu Naijie started out in oil trading and maritime transport in his early years. He established his Haichang Group in the 1990s, and, in 2001, began operating theme parks in the Northeastern city of Dalian. As the business grew and more Chinese began traveling for leisure, the company rolled out theme parks across the country. It had 10 locations at its peak, including parks in Shanghai, Zhengzhou, Sanya and Chongqing.

Qu Naijie's template was straightforward: leverage the promise of economic benefits from theme parks to acquire land at low prices from local governments. The ability of well-planned parks to stimulate regional tourism and elevate a city's profile led governments to make the types of concessions Qu was seeking.

As that happened, he snapped up cheap land surrounding the parks to build sprawling residential developments, seeking to capitalize on China’s soaring property market at that time. A portion of the profits from property sales would then be funneled back into theme park operation and construction. In essence, Haichang was really as much a property developer as a theme park operator.

But all that came to an end in 2020 when the government cracked down on easy credit for property developers, causing the real estate market to nosedive. Despite its theme park credentials, Haichang wasn’t spared, as it was forced to record impairment losses on its investment properties.

It’s also worth noting that marine theme park operation is quite cash intensive. Rearing marine life requires large amounts of food, stringent water quality management, and dedicated professional care, all of which come with hefty price tags. Deprived of real estate revenue and profits, the parks have struggled to stay afloat by purely relying on ticket sales and in-park consumption.

When it rains, it pours

In 2024, Qu Naijie found himself in even deeper water. Found guilty in court of misusing government subsidies to purchase vineyards in France, his assets were seized and he was fined by a French court. Crushed under all that pressure, Qu went in search of a white knight. Last October, he raised nearly HK$2.3 billion ($293 million) for his company by selling shares to Sunriver Holding, which got a controlling 38.6% of Haichang in exchange.

But that wasn’t the end of the story. Sunriver chief Yu Faxiang was subsequently subjected to criminal measures on suspicion of illegal “self-financing.” With Yu out of the picture, hopes of a rescue vanished, sending Haichang back to the drawing board to search for a new white knight.

In July this year, Haichang announced that Qu Naijie’s son, Qu Cheng, sold 1.2 billion Haichang shares, or about 9.08% of the company, to Mei Zhiming for HK$360 million. At the same time, Sunriver offloaded 1.68 billion of its Haichang shares to Mei Zhiming for another HK$754 million, representing 12.67% of Haichang’s total shares. The series of moves made Mei Zhiming Haichang's second-largest shareholder with a 21.75% of the company. Qu Cheng's holdings dropped to 19.13%, while Sunriver retained its controlling position with a 25.92% stake.

So, who exactly is Mei Zhiming? As it turns out, he brings serious credentials to the table. He is a co-founder of investment manager GLP, which oversees more than $80 billion in global assets. But investors were most impressed by Mei’s track record: he once engineered a rescue for Hong Kong’s Li & Fung Ltd., a local trading giant, and spearheaded the restructuring of Bicester Village Suzhou, ultimately transforming the latter into a cultural and tourism landmark in the Yangtze River Delta.

Haichang shares ticked up after the announcement about Mei Zhiming in late July, but have given back those gains and more since then. Now the billion-dollar question is whether Mei can work his financial wizardry with Haichang to bring it back from the brink.

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The plan would mark the third time as a public company for the resort operator, following previous listings in Paris, and later in Hong Kong as Fosun Tourism

Key Takeaways:

• Fosun International has applied to list its Club Med asset in Hong Kong, aiming to expand the company’s global resort operation to 85 properties from the current 69
• The IPO candidate doesn’t contain any vacation home element, distinguishing it from the previously listed Fosun Tourism, which privatized in early 2025,

By Doug Young

If at first you don’t succeed, then try again. That’s the mantra these days at Fosun International Ltd. (0656.HK), one of China’s most successful private conglomerates, which has announced a new plan to spin off and separately list its ClubMed Lifestyle Group, operator of the France-based Club Med resort chain.

Club Med was previously part of Fosun Tourism, a company that Fosun spun off and listed separately in 2018. The shares never traded much higher than their listing price of HK$15.60, mostly because the pandemic plunged the company into chaos just over a year after its listing. The stock later plunged as low as HK$3, before Fosun International took the company out of its misery last year with a privatization at HK$7.80 per share.

Even though its business largely recovered post-pandemic, anyone who bought the IPO shares still lost half their money at the buyout price.

So, why does the company think it can do any better with a new listing? The latest plan, contained in ClubMed Lifestyle’s new listing application submitted to the Hong Kong Stock Exchange on Friday, contains two key differences with the old Fosun Tourism.

Most critically, the new company doesn’t contain any vacation home assets. Such assets were once a major selling point for investors when China’s economy and real estate market were booming and newly wealthy Chinese were snapping up new homes as well as vacation properties at a rapid clip.

Many companies used similar real estate forays to boost their revenue and profits in those boom times, even when their core businesses had little or nothing to do with property development and management. But with the property market now in a prolonged slump, such assets are no longer desirable. And in Fosun Tourism’s case they were actually dragging down the company before its privatization.

The second big difference is the lack of the Atlantis mega-resort on South China’s Hainan Island in the new listing candidate. Atlantis Sanya was a relatively important piece of Fosun Tourism, contributing about 10% of its revenue and 20% of its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) before the privatization.

Fosun spent 11 billion yuan ($1.63 billion) to develop Atlantis Sanya, and was positioning it as a high-end family mega-resort complete with hotel, aquarium, water parks and restaurants, among other things. But with China’s economy now stumbling, it’s possible Fosun has decided this property is better left outside the new ClubMed. The new prospectus says that Atlantis is being spun off for a separate listing as a real estate investment trust (REIT).

That means the new company Fosun will list is roughly the same one it got when it completed its takeover of Club Med in 2015, in a deal that valued the French resort operator at about $1 billion. At the time, Fosun was hoping to leverage its connections to expand Club Med in China at a time when the Chinese economy was booming and there was still big growth potential there.

Stagnating company

Fosun tried a few different things to jumpstart growth at Club Med, which was stagnating at the time. In addition to the vacation home business, one of its main initiatives was development of two new sub-brands for the China market, Club Med Joyview and Club Med Urban Oasis, catering to urban and city-adjacent short-haul vacation needs.

But that initiative didn’t get too far, with Joyview currently hosting just four locations in China, while Urban Oasis has just three. The bottom line is that Club Med’s footprint hasn’t changed all that much since Fosun acquired the chain. It currently has 69 resorts worldwide, including both owned and managed properties, which is roughly what it had at the time of the acquisition.

ClubMed said it plans to use funds from the listing to expand that footprint to 85 resorts in the next few years. But truthfully speaking, the company has probably floated similar aggressive expansion plans in the past, and then failed to deliver, even though we should note it faced some major unforeseen challenges, first from the pandemic and then from China’s economic slowdown.

The company has hired the relatively high-powered trio of BNP Paribas, HSBC and JPMorgan as underwriters for the listing, showing it has relatively high hopes of attracting investors, especially international ones more familiar with the Club Med brand. But the truth of the matter is ClubMed’s financials hardly look too impressive, showing a company whose business has basically stagnated in the last three years after a sharp post-pandemic rebound.

ClubMed’s revenue reached 1.95 billion euros ($2.26 billion) last year, up just 1.6% from the 1.92 billion euros it reported in 2024. The figure plateaued in the first half of this year at 1.08 billion euros, identical with last year. The company still gets the majority of its revenue from the Europe, Middle East and Africa (EMEA) region, which has remained relatively steady at 60% over the last three years. The Americas are second at 24%, while Asia provides just 17%, despite all the company’s attempts to develop the China market.

Nearly all the company’s major metrics, including its overall number of guests, capacity and occupancy rates, have remained largely unchanged over the last three years. Its average daily room rate has done slightly better, rising from 220 euros in 2023 to 235 euros last year, which helped to lift its gross margin to 30.3% last year from 28.9% over that period. But even that change looks quite incremental.

Such small gains haven’t done much for its bottom line, with the company’s profit actually falling to 10.9 million euros last year from 29.6 million euros in 2024 due to unusually high tax expenses. The situation improved this year, with the company’s profit in the first half of the year falling to 57.1 million euros from 65.1 million euros a year earlier.

The bottom line is that Fosun is offering up a cleaner company under a globally familiar brand in this new IPO bid by getting rid of the vacation home element and the Atlantis mega-resort. But investors will hardly be excited by the company’s stagnating business, which was why the stock languished in its earlier life as a Paris-listed company before Fosun purchased and privatized Club Med in 2015.

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The company’s game revenue rose 11.6% in the second quarter, as its new mid-and hardcore titles begin to supplement its flagship chat and casual gaming apps

Key Takeaways

• Yalla reported its game services revenue rose 11.6% year-on-year to $34.2 million in the second quarter, accounting for 41.4% of total revenue to become its growth engine
• The Middle Eastern social media company said its average monthly active users rose 12.3% year-on-year to 47.6 million in the second quarter

By Teri Yu and Doug Young

After a highly anticipated buildup over more than a year, Yalla Group (YALA.US) began to deliver on its promise of moving beyond its legacy businesses into a new initiative for serious gamers in a bid to jumpstart its growth. While its total revenue slipped slightly in the second quarter, the company posted double-digit growth in its game services, where it is banking on new mid- and hardcore titles to take it beyond its traditional strength in casual games. That boost, combined with rising users and strong margins, suggest Yalla’s new products are revving up as a second growth engine.

The Middle East and North Africa (MENA)-focused social networking and gaming company reported revenue of $82.6 million for the three months to June, exceeding the top end of its prior guidance, according to its latest quarterly report released on Monday. It posted net income of $29.3 million for the quarter, lower than a year ago as it ramped up spending on the new gaming initiative. Its net margin came in at 35.5%, while adjusted net income reached $34.4 million, with an adjusted net margin of 41.7%.

The strong margins were notable because Yalla doubled its sales and marketing spending year-on-year to $17.8 million during the quarter to support user acquisition and its newer games. That investment may weigh on near-term profits, but is necessary as the company seeks to build a more diversified revenue base beyond its flagship Yalla and Yalla Ludo applications.

Yalla shares rose 4.1% on Tuesday after the report’s release, as investors welcomed the first tangible signs that the move into mid- and hardcore games was bearing fruit.

The quarter’s biggest takeaway was the growing contribution from games. Revenue from the segment rose 11.6% to $34.2 million a year earlier, lifting its share of Yalla’s overall revenue to 41.4% from 36.3%. That considerably narrowed the gap with the company’s legacy chat services, which generated $47.4 million, or 57.4% of total revenue.

New gaming bet

Yalla’s latest results reflect a transition that has been underway for several quarters. The company built its early success on a voice-centric chat platform and Yalla Ludo, a localized online board-game app. Those businesses remain central to its revenue and cash generation, but management is increasingly directing spending toward a wider gaming portfolio.

The company’s games services growth in the second quarter was enough to partly offset a reduction in paying users, which the company attributed to recent geopolitical events across the region. Its average monthly active users (MAU) rose 12.3% year-on-year to 47.6 million in the second quarter, while paying users totaled 10.9 million, down from 11.2 million a year earlier, but up 3.7% sequentially.

Yalla’s management attributed the sequential improvement to a recovery in its main products, particularly Yalla Ludo, as well as contributions from its new games. The company marked the 10th anniversary of its Yalla social app during the quarter, using locally tailored campaigns to strengthen engagement among its core MENA audience.

New games go global

The more important question for investors is whether Yalla’s new games can develop into material businesses on their own.

Its first self-developed match-three title, “Turbo Match,” continued to gain users and maintain “healthy” retention trends in the second quarter, according to management. Significantly, the game not only found users in the MENA region, but also in the U.S. and Europe, indicating appeal beyond the company’s traditional regional base.

“Turbo Match” received a feature placement in Apple’s MENA App Stores, including Saudi Arabia, in mid-July, helping the title gain visibility in a region where Yalla already has brand recognition and localized operating experience.

The company said it would focus on raising Turbo Match’s commercialization in the second half of the year, targeting high-potential global markets and accelerating overseas expansion. That means the company will now need to demonstrate that growing players can translate into durable monetization, rather than simply higher download and engagement figures.

Yalla’s other major release in the new gaming initiative, a desert-themed SLG game, is taking a more measured path. The company gradually increased marketing spending in the first two months of the quarter and used a cross-promotion campaign with Yalla Ludo to attract early users.

The SLG title is set for a major update that will add gameplay content and improvements intended to strengthen engagement, conversion and monetization. Management indicated that user acquisition may slow for the title in the third quarter before the new version’s expected fourth-quarter release, when the company could launch a fresh campaign.

That strategy reflects Yalla’s fiscally conservative nature, which has allowed it to maintain both profits and high margins throughout its history. In this case, Yalla appears to be prioritizing retention and monetization optimization before starting to spend big on user acquisition.

More than a game publisher

Yalla says it’s building an integrated social and gaming ecosystem, using cross-promotion to leverage its established user base that’s one of the largest in the region. Management cited its desert-themed SLG title’s campaign with Yalla Ludo as an early example.

The company said it has several internally developed products in the pipeline, including casual and hyper-casual games, social products and AI applications. It is simultaneously seeking partnerships with global developers, aiming to combine internal development, external distribution and local expertise to tailor products for regional users.

Yalla also raised its regional profile as an official partner of Saudi eLeague 2026 and presenting partner of Yalla Saudi eLeague Women 2026, and participated in the LEAP East technology and IT exhibition. Such efforts are designed to raise Yalla’s visibility among younger users, industry partners and regional authorities as Saudi Arabia and other Gulf countries put greater resources into gaming and digital entertainment.

Yalla forecast revenue of $78 million to $85 million in the third quarter. It said full-year revenue should remain broadly similar to last year, with a small decline in its core business offset by new gaming contributions. It also said its full-year GAAP net margin could remain around 30%, though strong positive feedback for its new titles could prompt it to spend more aggressively on customer acquisition.

That leaves Yalla in a familiar position of running on its traditional strengths, while looking for new engines to take its growth back to strong double-digit levels from earlier years. Its original social products are still producing substantial cash, while its games business is growing quickly enough to justify more investment. The next test will be whether it can use its regional strength and gaming background to lift its new serious gamer titles into scalable, higher-growth franchises.

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China's leading hotel group raised its full-year outlook after posting stronger-than-expected second-quarter results, as it added two new brands to its domestic portfolio

Key Takeaways:

• H World's revenue rose 10.8% in the second quarter, topping analyst forecasts, as it raised its full-year guidance for the second straight quarter
• The hotel operator unveiled a new three-year, $2.5 billion shareholder return plan, after largely completing its previous $2 billion program ahead of schedule

By Teri Yu

Investors are continuing to find a warm reception at H World Group Ltd. (1179.HK; HTHT.US), one of China’s leading hotel operators.

The company, parent company of the Hanting and Ji brands, and the China partner to French hotel giant Accor (AC.PA), delivered one of its strongest quarters in years in its latest financial results released on Monday. That report showed its profitability accelerated on the back of its multi-year pivot towards a “manchised” model of managing hotels for other property owners, along with more traditional franchising, which require far less capital than traditional hotel ownership.

But investors were probably most impressed by the company’s unveiling of a massive $2.5 billion new shareholder return plan, sparking a rally that saw the company’s U.S.-listed stock jump 11.4% on Monday after the announcement. We’ll return to that shortly, after looking at H World’s latest financial metrics.

Its revenue for the three months to June rose 10.8% year-on-year to 7.1 billion yuan ($1.1 billion), ahead of the $983 million average analyst estimate compiled by Zacks Investment Research. Revpar for its China hotels, one of the most widely watched industry metrics that combines room prices and occupancy rates, rose slightly to 238 yuan from 235 yuan a year earlier, in the latest signal that China’s hotel industry is starting to rebound from a period of sluggishness.

The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a widely watched profitability measure, climbed 20.0% to 2.7 billion yuan in the latest quarter, while its net income rose 2.1% to 1.58 billion yuan, more than double the previous quarter's 817 million yuan and also up from 1.54 billion yuan a year earlier.

The star of the show continued to be H World's manachised and franchised businesses, which see the company collect fees for management services, reservations and support systems and use of its brand. M&F revenue jumped 25.2% to 3.6 billion yuan, making up more than half of the company’s total, up from 44.6% a year earlier. That shift is also boosting H World’s profitability, as its operating margin rose to 31.1% from 27.8% a year earlier.

"During the second quarter, we delivered another quarter of Revpar expansion," CEO Jin Hui said in the earnings statement. “Looking ahead, we will continue to pursue ‘brand-led’ high-quality hotel network expansion, backed by our H Rewards membership program and technology development.”

China’s hotel industry initially boomed in 2023 after the end of the pandemic, as people engaged in “revenge travel” after two years of tight restrictions. That rebound later lost momentum amid growing consumer caution with China’s slowing economy, but H World’s new report provides the latest evidence that the situation has stabilized and is starting to rebound again.

Buoyed by the momentum, H World lifted its full-year 2026 revenue growth guidance to a range of 4% to 8%, up from a previous 2% to 6%, and raised its M&F revenue growth target to 16% to 20% from 12% to 16%. That marked the company’s second guidance upgrade this year.

Paying it forward

As its business gained momentum, the big news for investors was what H World is doing with its growing cash reserve, which rose to 14.2 billion yuan by the end of June from 10.4 billion yuan at the end of last year. The company’s board approved a new three-year shareholder return plan worth up to $2.5 billion, effective immediately, alongside an ordinary dividend of $0.87 per American depositary share (ADS), worth about $275 million.

The new plan, combined with H World’s previous three-year, $2 billion return program, launched in July 2024, is equal to nearly a third of the company’s market cap of about $14 billion. The company had already returned most funds from the earlier plan to shareholders through dividends and buybacks by the time the second quarter closed, as its franchise-heavy model threw off large amounts of cash.

The company’s debt level is also quite low, totaling about 4.2 billion yuan at the end of June, leaving H World with net cash of 10.2 billion yuan – providing enough firepower to fund both the new payout plan and continued expansion of its hotel pipeline.

Away from the balance sheet, H World used the first half of the year to add to its growing shelf of brands, following a strategy seen by many of the world’s top players seeking to cater to a wide range of market segments. It launched Hanting Express, an addition to its flagship Hanting economy family built around flexible, multi-occupancy rooms for families and groups of friends – a play for a broader slice of budget travelers. It also introduced Grand Ji, a more upscale spinoff of the popular Ji Hotel brand aimed at travelers willing to pay for a more elevated stay while keeping Ji's contemporary Chinese design themes.

The new brands arrived as H World continued to expand its footprint, opening 498 new hotels in China during the quarter against 176 closures. The company said it remains "firmly on track" to hit its full-year target of 2,200 to 2,300 gross openings. Its pipeline of unopened hotels rose to 3,089 globally, up from both the prior quarter and a year earlier.

Overseas still finding its footing

H World's international arm, which runs hotels outside China under brands including Steigenberger and IntercityHotel, was the one soft spot in the company’s latest report. Revenue for that business slipped 5.8% to 1.3 billion yuan during the quarter, as the unit absorbed some disruption tied to the Middle East conflict and continued investing in newer, lower-rate Southeast Asian markets. CEO Jin reassured investors by pointing out the company’s direct exposure to the international market is limited and that cost discipline should help the international unit ride out the turbulence.

For the first half of the year, H World's revenue rose 11% to 13.1 billion yuan, with adjusted EBITDA up to 4.6 billion yuan from 3.8 billion yuan a year earlier. The higher guidance, accelerating cash returns and broadening brand lineup all suggest that H World is entering a new phase in China’s rebounding hotel sector, building on its strength as one of the industry’s leading operators.

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Once embraced by investors, the Tencent-backed online literature company’s shares now trade at just one-fifth of their peak

Key Takeaways:

• China Literature reported its revenue rose 11% in the first half of this year, but tax-related expenses dragged down its profit by more than 80%
• The company’s intellectual property business grew by over 40% during the six-month period, as seeks to better cultivate the area with help from AI

By Cheng Shui Tong

Nine years after listing with high hopes that never quite materialized, China Literature Ltd. (0772.HK) is hoping to open a new chapter for its long-suffering shareholders.

The country’s leading online literature provider’s bottom line certainly didn’t look too impressive when it released its results for the first half of 2026 earlier this month. Yet despite an 84.1% profit plunge, its shares leaped 10% the following day.

In fact, China Literature's top line revenue looked much healthier over the six-month period, up 10.7% year-over-year to 3.53 billion yuan ($524 million). The massive profit drop was mostly due to tax-related expenses, including about 300 million yuan in back taxes and late payment penalties the company made.

China Literature’s online business, historically its main breadwinner, actually retreated in the first half of the year. Instead, its intellectual property (IP) operation was the star of its new chapter, with revenue up 41.9% year-over-year to 1.61 billion yuan. Gross merchandise volume (GMV) from the IP derivative businesses was also strong, leaping 60% to 780 million yuan.

Also notably, revenue from the company’s short dramas and AI-animated dramas, mostly comic-style shorts generated using AI, surged 2.3 times to over 430 million yuan. Solid performance metrics aside, the warm investor reception for the latest report probably also owed at least partly to China Literature's current stock levels, now hovering near record lows.

China Literature enjoyed its moment in the sun when it launched its Hong Kong IPO nine years ago. The company was formed after parent Tencent acquired rival Cloudary in 2015 and combined the two, before listing the company two years later.

Basking in Tencent's halo during the IPO, the company attracted a massive HK$520 billion ($32 billion) in interest from retail investors, the second-highest amount ever for new listings in Hong Kong at the time. The stock doubled from its HK$55 listing price on its debut, pushing its market capitalization close to HK$100 billion with a meteoric price-to-earnings (P/E) ratio well over 100 times on big hopes.

But that stellar stock performance proved to be a flash in the pan. The shares quickly surpassed HK$100 after the IPO – a level that to this date remains their all-time high. More recently, the shares have moved steadily downward to hover near a post-IPO low of about HK$20. The protracted slump boils down to years of lackluster profitability and an absence of compelling new narratives to get investors excited.

Fleeting glory

In its early days as a public company, China Literature leaned heavily on its online paid-reading business, which accounted for 70% to 80% of its revenue. The IP operation later emerged as a second growth engine, and was roughly neck-and-neck with the online reading business by 2024. Yet the IP operation failed to mount the kind of explosive growth that gets investors truly excited, even as China's IP economy has boomed in recent years. As a result, the online business remains its primary top-line contributor, accounting for 52.1% of total revenue in the first half of 2026.

The intellectual property market generates money from the creation, licensing, adaptation and merchandising of IP rights. One of the best recent examples of milking such rights for massive profits comes from Pop Mart (9992.HK), which rode the popularity of its characters, led by the wildly popular Labubu, to a dizzying peak market value of more than HK$400 billion last year. That raises the question of why Pop Mart could achieve such phenomenal success, while China Literature, which boasts an equally massive trove of IP and a deep-pocketed parent in Tencent, could lag so far behind.

Commercialization race

Pop Mart’s strategy is built around trendy, visually based art IPs. By leveraging a formidable pop-retail formula and its own supply chain infrastructure, along with trendy marketing gimmicks like its “blind box” format, Pop Mart can create overnight sensations for its IPs. But because its visually oriented IPs trade on aesthetic appeal and creating community among collectors, rather than narrative depth, they remain highly vulnerable to shifting tastes.

By contrast, China Literature's IPs are content-driven. Backed by an extensive library of web novels, its characters possess richer backstories and have deeper emotional bonds with audiences. That said, the company is far less effective than Pop Mart in the trend-making and merchandising arenas. That commercialization gap has led investors to heavily penalize its stock, shrinking its market capitalization to HK$23 billion today — just 20% of its historic peak.

In all fairness, China Literature has produced some smash hits recently, such as the critically acclaimed “Joy of Life” drama series and the chart-topping 2024 domestic blockbuster film “Yolo.” Yet, such stellar performers have failed to move the needle for the company's overall financial performance, largely due to fragmented copyright ownership and opaque profit-sharing mechanisms. Blockbuster box office returns and sky-high viewership don’t automatically translate into lucrative merchandising either, explaining why the stock has remained in a perennial funk.

While China Literature's paid online reading business boasts a deep economic moat, growth for that segment has also hit a bottleneck. During the first half of this year, the division's revenue actually retreated by 7.3% to 1.81 billion yuan, while its active users slipped 5.1% to 134 million. The company’s ability to engineer a meaningful turnaround will ultimately hinge on its ability to successfully pivot to an AI-plus-IP business model.

AI as IP amplifier

Management has made it clear that a key future focus will revolve around finding synergies between IPs and AI. Armed with its huge text library, China Literature has been accelerating efforts to turn those text properties into visual formats, notably by rolling out smash-hit short dramas and AI-animated series. The company developed DramaBuddy, a proprietary AI tool for generating comic-style shorts, to streamline the process. Meanwhile, it has also launched IPBuddy, a system allowing its copyright team to evaluate individual literary works within minutes, greatly boosting the efficiency of IP adaptations and commercialization.

AI is bringing China Literature the ability to both visually adapt text-based works while also singling out IPs with the best commercial potential. Put differently, the company is turning to AI as a crucial amplifier to maximizing the value of its IPs.

Both AI and IP have been hot investor themes lately. A successful transformation from a traditional online reading platform into an IP-driven play could provide some major upside for China Literature’s business. But the company will need to show some stronger growth first, and also detail specific cases that demonstrate how it’s successfully using AI to squeeze more revenue and profits from its rich IP library.

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China’s leading online music site recorded its slowest growth in two years as it continued to lose market share to the Douyin parent 

Key Takeaways:

• Tencent Music’s revenue rose just 5.8% in the second quarter, down sharply from 15.8% growth for all 2025, as it loses audience to ByteDance’s Soda Music
• The company’s stock has lost half of its value this year, dragging its P/E ratio to just 10, less than half the 27 for global peer Spotify

By Doug Young

Internet stalwart Tencent understands the importance of social media, previously using its hugely popular WeChat platform to burrow its way into areas like online payments and e-commerce to challenge more established names like Alibaba and JD.com. Now, the company is getting challenged in the same way by newer arrival ByteDance, which is leveraging its equally popular Douyin video app in much the same way.

That challenge was on prominent display in the latest quarterly results from Tencent Music Entertainment Group (TME.US; 1698.HK), released on Wednesday, which showed the company’s core music business is rapidly losing market share to ByteDance’s newer Soda Music service.

At the broadest level, that challenge was reflected by some of Tencent Music’s slowest revenue growth since it was forced to restructure its business after China’s market regulator determined in 2021 that it engaged in monopolistic behavior. The company’s revenue rose just 5.8% year-on-year in the second quarter to 8.93 billion yuan ($1.32 billion), its slowest growth rate in two years, down from 7.3% growth in the first quarter and 15.8% for all of 2025.

The company is fighting back by trying to work more closely with Tencent’s broader ecosystem, including WeChat, the related WeChat payment services and Tencent’s domineering presence in gaming, which seems like a no-brainer that it should have begun leveraging earlier. It’s getting into offline events as well, which also seems like an area where it can leverage its huge user base better than its rivals. Lastly, it’s also using its recently acquired Ximalaya, China’s leading podcast platform, to expand beyond music into digital audio.

All of those seem like logical ways to fend off the ByteDance challenge, though investors don’t seem completely convinced. Tencent Music’s U.S.-listed stock has lost about half of its value this year, most of that since mid-March after it released its fourth-quarter and full-year results for 2025.

Investors were spooked by the company’s falling user base, which contracted throughout the year and stood at 528 million monthly active users (MAUs) by the end of December, down 5% year-on-year. The company further scared investors by declaring it would no longer regularly disclose MAU data, leading many to speculate the user declines might accelerate.

Still the leader

All that said, Tencent Music is still undeniably the leader in China’s online music market, making it the local equivalent of global giant Spotify (SPOT.US). Its user figure at the end of last year was still more than triple ByteDance’s 156 million MAUs in March, according to data tracking firm QuestMobile. But ByteDance’s June figure was up nearly 80% year-on-year, in sharp contrast to Tencent Music’s declines.

ByteDance’s rapid rise has also vaulted it past NetEase Cloud Music (9899.HK), whose 147 million users at the end of March was down 1.4% year-on-year, according to QuestMobile. Not surprisingly, NetEase Cloud Music, whose stock is also down nearly 40% this year, also doesn’t disclose MAU figures.

Following its big stock decline this year, Tencent Music trades at a lowly price-to-earnings (P/E) ratio of just 10. While that’s ahead of NetEase Cloud Music’s even lower 7.7, both figures are a fraction of Spotify’s ratio of 27.

With all that background in mind, we’ll take a deeper dive into Tencent Music’s latest report that shows it’s still the big kid on the block, despite the ByteDance challenge. The company was even more dominant before the 2021 antimonopoly ruling. Before that, Tencent Music had exclusive rights to the China market from most of the world’s major music labels, and could decide which rights to sub-license to its Chinese rivals and on what terms.

Even after it gave up that control, and despite the ByteDance challenge, the company still controls about 60% of the huge Chinese market for online music. While its total revenue only rose 5.8% in the second quarter, its core music services revenue rose by a stronger 11% to 7.61 billion yuan, accounting for 85% of total revenue. Still, even that growth rate was down from 12.2% growth in the first quarter and 22.9% growth for all 2025.

Social entertainment drag

The big drag on the company’s revenue lately has been its social entertainment services, which fell 16.4% year-on-year to 1.33 billion yuan in the second quarter, accelerating from an 11% decline in the first quarter.

The company detailed a number of steps it is taking to defend its position in the face of ByteDance’s challenge. Chief among those is better leveraging Tencent’s other areas to benefit its own services. Such initiatives during the second quarter included strengthening its music content distribution through WeChat’s video accounts service, and collaborating with WeChat’s payment service to drive traffic to its apps for more casual music users.

On its earnings call, executives pointed out the company’s biggest challenge is retaining those casual users, who are more likely to jump ship to rivals like ByteDance’s Soda Music and NetEase Cloud Music. By comparison, higher-spending VIP users are “stickier” and less likely to change.

The company is also holding more offline events, including fan meetings and concerts for some of its “strategically collaborated artists.” Such events are typically costlier than online activity, and the company said that difference was a factor dragging down its gross margin slightly to 44.2% in the latest quarter from 44.4% a year earlier.

It also drew attention to its ongoing integration of Ximalaya, which it began consolidating into its results in mid-May, or midway through the second quarter. That means the company is likely to get a revenue bump from Ximalaya in the third quarter, though that contribution will probably be relatively small.

On the bottom line, Tencent Music’s profit for the quarter rose just 2.5% to 2.47 billion yuan, though its adjusted profit was up by a bigger 4.4% year-on-year to 2.69 billion yuan. Still, neither of those growth rates is going to impress investors looking for strong double-digit gains. But gains of that size are probably in the past for now, which means the biggest catalyst for the stock over the next year or two will probably come from investors who believe the shares are undervalued. Meantime, more downside is always possible if the company fails to slow the ongoing ByteDance assault.

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A majority of the struggling ride-sharing company’s shareholders have agreed to sell their stock to one of China’s leading online travel agents

Key Takeaways:

• Nearly 52% of Dida’s shareholders have accepted an offer to sell their stock to online travel agent Tongcheng
• The struggling ride-sharing company could benefit from Tongcheng’s 250 million registered users, most of them in smaller markets that are also Dida’s main focus

By Doug Young

The wheels continue to turn in China’s crowded and evolving ride-sharing market, as online travel agent Tongcheng Travel Holdings Ltd. (0780.HK) nears completion of its offer to take over the sinking Dida Inc. (2559.HK). The deal, first announced in late June, crossed a major milestone this week as Tongcheng’s offer received valid acceptances from investors holding 51.74% of Dida’s stock as of Aug. 5, Tongcheng said in a public filing this week.

That acceptance level isn’t surprising, since five major investors holding 53.7% of Dida’s stock indicated they would sell their shares when the original deal was announced on June 29. Tongcheng offered to pay HK$1.3875 for each Dida share, representing a slight discount from its trading levels at the time, valuing the deal at HK$1.42 billion ($181 million). Tongcheng said it would also pay a special cash dividend of HK$1.1745 upon the completion of all conditions for the deal.

The purchase marks the second major acquisition for Tongcheng since it bought the hotel business from struggling real estate giant Wanda last year for 2.5 billion yuan ($370 million). Tongcheng got both assets for relative bargains as each seller is under big pressure. Wanda is struggling to repay a huge volume of debt, as it suffers in China’s prolonged real estate downturn.

Meantime, Dida is also sinking, as it struggles with a difficult business model and stiff competition not only from other ride-sharing companies, but also from a rising new generation of robotaxis. Reflecting that, Dida’s revenue fell 36.2% last year to 502 million yuan, as it sunk into the red in the second half of the year. Its stock has lost about three-quarters of its value since its 2024 IPO when it sold shares for HK$6 apiece.

The deal really does look like a good fit for both Tongcheng and Dida, which may explain why Tongcheng’s shares have risen about 10% since the purchase was first announced.

Tongcheng is one of China’s leading travel agents, with 10% to 15% of the country’s massive travel market. Its positioning is relatively unique, focused on China’s smaller cities, compared with most rivals that tend to focus on more affluent top-tier markets like Beijing, Shanghai and Shenzhen. Tongcheng says that among its 250 million registered users, 87% come from such smaller markets.

Dida has a similar focus on those same smaller markets. The company is also relatively unique in the ride-sharing sector with its focus on shared carpooling services. By comparison, larger rivals like DiDi Global and CaoCao (2643.HK) offer mostly more traditional services with one driver and one rider per trip. The carpooling model means one driver typically stops to pick up several passengers on a single trip, and then drops off each at their destination.

That model offers far lower prices than the one-passenger-one-driver model, but it also means that travelers need significantly more time to reach their destinations. Dida calls those long travel times its main “pain point,” and has previously said it is developing technology that can better optimize routes for individual drivers. But its brand of cheap services is quite well-suited to smaller markets that are typically more price sensitive than big cities.

Sum greater than the parts?

Tongcheng says it can use its myriad resources, not only financial but also its large user base, to help Dida improve its technology and efficiency to better compete with larger ride-sharing companies, many with similar deep-pocketed backers. 

Tongcheng “intends to pursue a deep integration of its established mass travel ecosystem with (Dida’s) asset-light carpooling model, with the aim of building a comprehensive ‘door-to-door’ smart mobility platform covering both inter-city and intra-city transportation,” Tongcheng said in its original announcement. “By combining (Dida’s) mobility services capabilities with (Tongcheng’s) extensive user base, the enlarged group would be well positioned to offer seamless, end-to-end transportation and travel solutions to a broader user base with higher retention.”

Tongcheng is also inheriting a relatively solid company in terms of its balance sheet, even if Dida’s revenue is sinking. Dida had 967 million yuan in cash last year, equal to about two-thirds of its current market value. What’s more, the company had a far smaller 566 million yuan in indebtedness, most of that in trade and other payables.

The other place where Dida looks attractive is its gross margins, which are quite high thanks to its asset-light model that requires drivers to provide their own cars, combined with its carpooling system that yields higher revenue per trip. The company’s gross margin stood at 66.3% last year, compared with about 40% for U.S. giant Uber (UBER.US) and just 9.4% last year for CaoCao, which has much higher costs because it owns all of the cars in its fleet.

Toncheng’s gross margin last year was also 66.3%, making these two companies look quite compatible based on that metric. Still, we should also point out that Dida’s gross margin was an even higher 72% in 2024, showing the number is rapidly dropping and Tongcheng will need to move quickly to stabilize the situation.

Dida is also facing competition on a number of other fronts. One of the biggest is the rise of aggregating platforms operated by companies like Baidu (BIDU.US; 9888.HK) and Amap, which allow small ride-sharing companies to easily find customers while avoiding the high costs of developing expensive proprietary apps like Dida’s. Another challenge is coming from a growing new generation of robotaxis operated by the likes of Baidu, WeRide (WRD.US) and Pony AI (PONY.US). But for now, at least, most of those services are still in the pilot phase, and all should be mostly confined to big cities initially when they start to commercialize.

Then there’s always the chance that Tongcheng could attempt to privatize Dida completely, which could provide some upside for Dida shareholders if it offers a premium for the stock. But even without such a buyout, the Tongcheng investment could make Dida’s stock attractive again, with potential to halt its sliding revenue and return to growth and profitability, if the latter can take advantage of the resources and synergies offered by its new majority owner.

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The hotelier said its operating profit rose 35% in the first half of 2026, accelerating sharply from a 6% rise for all of 2025

Key Takeaways:

• Shangri-La Asia’s profit growth picked up sharply in the first half of this year, as the China market that accounts for about half of its business began to rebound
• Signals from other major Chinese hotel operators indicate the market began to recover in the last year’s fourth quarter, lifting most companies back to positive revpar growth

By Doug Young

It used to be that China was a profit booster for global companies, turbocharging their bottom lines with fat margins that outpaced the rest of the world. But lately that model has been flipped on its head, with a slowing Chinese economy dragging down profits for many multinationals, especially consumer-facing companies.

That dichotomy is nicely captured in regional hotel giant Shangri-La Asia Ltd. (0069.HK), whose revenue is evenly divided between Mainland China and a smattering of other markets, mostly in Asia. The company’s latest profit alert, released last Friday, shows that after a difficult year in 2025, the Mainland China hotel market may finally be making a comeback.

The company’s upbeat forecast, led by a return to strong double-digit profit growth, echoes similar signals coming from the rest of China’s sprawling hotel sector. The group, which includes local giants like H World Group (HTHT.US; 1179.HK) and Atour (ATAT.US), alongside global names such as Accor (AC.PA) and Marriott (MAR.US), reported that most of 2025 was a weak year in China, until things finally started to improve at the end of the year.

According to its profit forecast, Shangri-La expects to report an operating profit of $87 million or more for the first half of 2026, up 70% or more from the $51 million it reported a year earlier. The rise was smaller after excluding positive effects from changes in foreign currency exchange rates. But even excluding that, the company’s operating profit rose 35% or more in the first half of the year to $81 million or higher from $60 million a year earlier.

By comparison, the company’s operating profit rose by a far smaller 6% last year to $123 million from $116 million in 2024, as the weak China market dragged down much healthier performances for its properties in the rest of Asia. This kind of diversification is textbook “Business 101” material, making Shangri-La look especially attractive for investors who prefer a strong Asia-oriented hotel play versus one wholly reliant on a single market.

Shangri-La credited the strong start to the year to greater operational efficiency, as well as higher revenue per available room (revpar), the most widely watched metric for the hotel industry that combines occupancy rates with room prices. It also credited lower interest expense on better management of its finances.

Mainland China is easily Shangri-La’s largest market by hotel count, with 48 of its 82 owned and leased properties – or nearly 60% – in that market. But the Mainland market’s share of the company’s revenue is lower due to far lower room prices, reflecting China’s status as a developing market. In addition, Shangri-La has aggressively built up its portfolio in smaller Chinese markets, where revpar was as low as just $43 per night last year in third- and fourth-tier cities – less than half the $109 it recorded in tier-1 cities like Beijing and Shanghai.

The result is that overall revpar for Shangri-La in China was the second lowest of the company’s 13 major markets, totaling just $71 last year, ahead of only Sri Lanka at $65. What’s more, China was one of only two of the company’s markets where revpar declined last year, falling about 2.7%.

Difficult year

China’s hotel industry has been through some major ups and downs since the turn of the century, mostly thriving in the first two decades of the 21^st century as millions of newly affluent tourists and travelers from growing businesses took to the road. But the industry hit a brick wall during the pandemic, with most operators suffering huge losses as people stopped traveling.

The industry rebounded sharply in 2023 after pandemic restrictions were lifted, with hotels emerging as one of the big beneficiaries of “revenge travel.” But that rebound began to peter out in 2024 as China’s slowing economy led both consumers and businesses to rein in their spending.

Most companies reported weak conditions through the first three quarters of last year before things began to look up. H World was typical of the sector, reporting its revpar fell or was flat through the first three quarters of last year before becoming positive again in the fourth quarter. Atour’s revpar fell throughout the year, though the figure was down only slightly by the fourth quarter.

Shangri-La doesn’t release quarterly data, though its China revpar for all last year was down 2.7%. And while it only specified a return to systemwide revpar growth in the first half of this year, without getting more specific, that also mirrors previous signals from its peers. Atour previously reported it returned to 2.6% revpar growth in the first quarter of 2026, while H World’s revpar rose 2.9%. That means we can probably expect Shangri-La to report 2% to 4% revpar growth for the first half of 2026, assuming the recovery was steady in the second quarter.

One other place where Shangri-La stands apart from fast-growth, younger companies like Atour and H World is its preference for hotel ownership. By comparison, Atour and H World are expanding their hotel portfolios much faster by focusing on a “manchise” model, which sees them manage hotels on behalf of other property owners.

Shangri-La’s approach reflects its more conservative nature, which is quite a common distinction between older Hong Kong companies and their newer Mainland rivals, which tend to be more growth oriented. Some argue the self-ownership approach is more capital intensive, though Shangri-La seems to be doing quite well these days in terms of cash. It had $2.24 billion in its coffers at the end of last year, up 23% from $1.82 billion a year earlier.

The company currently trades at a price-to-earnings (P/E) ratio of 17, the same as Atour and just slightly behind the 18 for H World. But all of those are well behind the multiples of 30 or higher for most of the big global operators. That could imply some potential upside for the Chinese-focused companies if the market continues to improve, with Shangri-La well positioned to benefit from its China-centric diversified geographic footprint.

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Regulators have ordered China’s top online travel platform to pay more than $780 million after an anti-monopoly probe, but the firm’s wider business is left intact 

Key Takeaways:

• Trip.com is required to end exclusivity deals and other anti-competitive tactics in its hotel dealings, potentially weighing on future earnings
• But regulators stopped short of mandating a breakup of Trip.com businesses or requiring the sale of its stake in the Tongcheng Travel platform

By Lee Shih Ta

China’s market regulator has told the country’s leading online travel platform to pay heavy fines and clean up its act. But executives and investors were still able to breathe a sigh of relief that the antitrust penalty was not even worse.

Trip.com Group Ltd. (TCOM.US; 9961.HK) must stump up about 5.3 billion yuan ($783 million) in fines and refunds, while undertaking steps to “rectify” its business. But the company was spared the structural measures most feared by the market, including a breakup of its business or divestment from industry peers.

With the worst-case scenario off the table, Trip.com’s Hong Kong-listed shares leapt 7.7% after the outcome of the six-month probe was announced, before closing the session 3.79% higher at HK$355.60. However, the ruling could have a long-lasting impact on Trip.com’s hotel-related income, flowing through into earnings.

Regulators found that Trip.com had abused its dominant position in China’s market for online hotel bookings since 2020. Through platform rules, traffic allocation and technical tools, the company pushed some hotels into exclusive terms and imposed price limits on those operating on multiple platforms, restricting their scope to freely set rates and choose sales channels.

The regulator imposed a fine of 3.52 billion yuan, equivalent to 7.5% of Trip.com’s China revenue in 2025, and confiscated nearly 1.66 billion yuan in gains from the irregular practices, bringing the penalties to just under 5.18 billion yuan. The company must also refund 122 million yuan in security deposits taken from hotel operators, putting its total liability at about 5.3 billion yuan.

In a statement on July 27,Trip.com said it accepted the decision by the State Administration for Market Regulation, vowing to comply with all the requirements and strengthen its governance mechanisms.

The 7.5% fine was higher than the 4% imposed on Alibaba Group (BABA.US; 9988.HK) and the 3% levied on Meituan (3690.HK) in their 2021 antitrust cases. Still, Trip.com has plentiful resources to settle its bill, sitting on 104 billion yuan in cash, deposits and financial investments at the end of March.

The one-off financial hit is less significant than the repercussions for Trip.com’s business model. The company will stop requiring exclusivity deals with hotels, remove its lowest-price-across-all-platforms requirements, discontinue certain pricing tools and refrain from changing room rates without hotel consent. Its existing mechanisms for traffic allocation, fees and commissions will also need to be redesigned.

Together, those tools formed the moat around Trip.com’s hotel business, limiting its accommodation partners’ room for maneuver and curbing the competitive power of rival platforms.

Following the changes, hotels will have greater freedom to allocate rooms and set prices across travel sites and lifestyle apps such as Meituan, Fliggy and Tongcheng Travel (0780.HK). Trip.com is unlikely to lose its market-leading status any time soon, but its competitive edge will increasingly depend on member loyalty, technological prowess, customer support and the ability to convert interest into bookings, rather than price and traffic controls.

Trip.com CEO Jane Sun said automated pricing tools were already switched off in March, with an impact on the company’s second-quarter outlook. She also acknowledged that the firm’s financial performance could fluctuate during the transition to the new partnership model.

Empire left intact

Accommodation reservations rank as Trip.com’s biggest source of revenue, totaling 26.1 billion yuan in 2025, or about 42% of total turnover. The booking income rose another 17% to 6.5 billion yuan in the first quarter from the same period a year earlier. If the new model cuts commission rates or forces greater spending on hotel subsidies and marketing, margins in the accommodation business could be squeezed even if volumes keep growing. Analyst estimates compiled by Visible Alpha show Trip.com’s adjusted net profit could fall 15% to 13.5 billion yuan in 2026.

The anti-monopoly probe, which began in January, sparked concerns that Trip.com might be forced to sell off stakes in other travel businesses, diluting the power it has built up through M&A and investments in the industry. But the regulatory ruling focused only on hotel partnerships, pricing and online traffic. Trip.com was not required to sell its interest in Tongcheng Travel, a digital platform. Nor was it ordered to spin off the travel site Qunar, accommodation reservations or transportation ticketing. Regulators appear to have focused on correcting business practices rather than restructuring the company.

Trip.com still owns about 24% of Tongcheng Travel, which could expand its business network with the removal of restrictions on hotel partnerships. A more immediate challenge will come from Meituan and Fliggy. Trip.com still controls about 56% of mainland China’s online travel market, but once hotels are free to offer the same rooms and prices across platforms, rivals can leverage their vast user traffic and extensive local-services ecosystems, chipping away at Trip.com’s dominance.

Trip.com currently trades at about 14 times forward earnings, above Tongcheng Travel’s 7.7 times and slightly higher than the roughly 13 times for Expedia (EXPE.US), indicating that investors are still willing to pay a premium for its industry position, membership base and international business.

That could continue if growth in booking volumes and profits is sustained during the rectification period. But the upside for the stock will be limited if falling commission rates, fiercer competition and rising costs weigh on earnings. Trip.com has preserved its corporate structure, but whether it can hold into its valuation will depend on its results in the quarters ahead.

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"It's always all about money. Anything AI requires a tremendous amount of investment." – on Kuaishou’s decision to spin off its Kling AI video unit

Key Takeaways:

• Kuaishou's Kling spinoff reflects a growing trend of tech giants seeking massive standalone valuations for their AI units to fund rapid development
• A recent light aircraft crash in Beijing has exposed the severe safety risks of China's heavily hyped low-altitude economy, likely triggering intense regulatory scrutiny

By Doug Young and Rene Vanguestaine

China's technology landscape contains a tale of two vastly different frontier sectors. On one hand, we're witnessing an astronomical rush into AI, underscored by a massive new strategic spinoff plan. On the other, an actual small plane crash has brought the heavily hyped low-altitude economy firmly back to earth. While both of these lie at the cutting edge of innovation, they're currently on completely different trajectories.

We’ll start with the high-flying AI sector. Kuaishou (1024.HK) is preparing a major strategic move to spin off Kling, its AI video unit. The short video operator announced it will bring in around 20 new investors to support the service. This group will pump around 20.5 billion yuan — or nearly $3 billion — into Kling in exchange for 17% of the company, valuing the AI unit at around $18 billion. Kuaishou will continue to hold a majority 68% stake, while the remainder will go into various incentive plans.

The rationale here is simple: It's all about money. Anything related to AI requires a tremendous amount of investment. While Kuaishou is already public and could theoretically do a follow-on offering to raise such funds, investors wouldn't necessarily be interested pumping more capital into the parent company. But a pure AI play? Given the current technological climate, that could appear to many investors as the most valuable investment of their lifetimes.

By raising money specifically for the AI-related business, Kuaishou can deliver a much higher valuation than it would get for the company as a whole. And as long as it retains a substantial 68% majority, it's a meaningful way to raise the capital needed to build that business as quickly as possible. In this sector, you want to move fast and keep potential competitors in the rear-view mirror. Without enough money, moving fast is impossible.

Interestingly, this spinoff includes a clause stating that private investors are entitled to a refund if Kling doesn't go public by 2031. While five years down the road might not seem long to some, in terms of AI, that's like an eternity. In the U.S., major players like OpenAI and Anthropic want to move to market with IPOs very quickly. It's too soon to tell exactly how attractive a Kling IPO will be, as the company could either become wildly successful or be entirely out of business by then.

We believe there are going to be more companies doing this. This is one of the first times we've seen this sort of spinoff for an AI company with a wealthy parent, mirroring discussions we've seen surrounding Baidu (BIDU.US; 9888.HK) spinning off and separately listing its AI chip unit. Even highly capitalized giants like Alibaba (BABA.US, 9988.HK) or Tencent (0700.HK) might eventually follow suit. They may not financially need to, but at some point, the market might offer such a high standalone valuation for their AI businesses that it becomes an offer they simply can't refuse.

Grounding the low-altitude economy

While AI soars, China's low-altitude economy is facing a major setback. The sector was already quite slow to lift off despite massive industry and government hype, and a recent incident in Beijing has only deepened those troubles.

On June 26, a light aircraft crashed into Beijing's tallest skyscraper, Citic Tower, known to locals as China Zun. The crash killed the pilot and injured 13 people on the ground. While Beijing hasn't said much publicly, we think central leaders are likely quite alarmed that this type of accident could happen in such highly restricted airspace. The pilot reportedly received his license a few years ago and was known to have mental issues.

This is undeniably bad news for the makers of electric vertical takeoff and landing aircraft (eVTOLs), that were already facing commercialization difficulties. EHang (EH.US), the only publicly traded Chinese company in this space so far, scored a huge milestone last year when it became the first to win a type certificate for its eVTOLs from China's aviation regulator. Its stock initially shot up, but has since fallen back to earth as people realize the skies won't be filled with flying taxis anytime soon.

The Chinese government has long pushed this industry, liking the high-tech aspect that enhances China's global reputation. But putting flying objects into crowded urban environments is a massive risk. We understand that this emerging business needs tremendous amounts of regulation. Historically, aviation everywhere has been extremely regulated, requiring regular physical and mental fitness tests for pilots.

There's a massive disconnect between the hype — delivering packages and conducting building inspections by drone, and offering air taxi services — and reality. On the ground in China, there are very few products actually in use. Like helicopters in the U.S. that occasionally suffer mechanical or human failures despite a century of development, eVTOLs rely on mechanics that can fail. Putting tens of thousands of these objects into the hands of people with varying levels of flying and maintenance skills could be a recipe for disaster. The technology does have valid applications, such as delivering goods faster to inaccessible countryside locations. But mass urban commercialization is currently an illusion best left for the movies. For now, we'll have to wait a little longer for the Jetsons to come to China.

The social media company’s revenue rose over 30% in the first half of the year, as it wrung more money from individual spenders in the face of decelerating user growth

Key Takeaways:

• Newborn Town said it expects to report its revenue grew 34.3% to 38.8% in the first half of the year
• The social media company’s monthly active user growth is decelerating after years of rapid expansion

By Lee Shih Ta

As it approaches saturation, the social media market is entering a new phase that’s increasingly testing providers’ operational abilities. Escalating traffic acquisition costs, combined with stiff competition, are leading platform operators to shift from aggressively chasing new customers toward leveraging AI to improve efficiencies in areas like recommendations, cross-market operations and paid conversion.

In effect, the race to sign up a dwindling pool of unserved people is slowing, ushering in a new era of trying to squeeze more money from each existing user.

New data from Newborn Town Inc. (9911.HK), which operates social media sites outside China, reflects that trend, showing the company's revenue continued to grow by more than 30% in the first half of 2026, even as its user growth rate slowed markedly.

Newborn Town expects to report its revenue landed between $595 million and $615 million in the first half of the year, up 34.3% to 38.8% year-on-year. Social networking remains the company’s core business, generating revenue of $530 million to $545 million, or nearly 90% of the first-half revenue total. Meanwhile, revenue from innovative businesses, which include short dramas and games, is expected to range from $65 million to $70 million.

Traffic growth vs user monetization

Average monthly active users (MAU) for Newborn Town's social business in the first half of the year totaled 35.83 million, up 7.5% year-over-year. At the end of June, cumulative downloads of the company’s related products stood at roughly 1.08 billion, up 5% from the end of March. While the user base continues to expand, the pace of growth has slowed notably.

Historic quarterly data shows the company’s average MAUs rose from 28.55 million in the first half of 2024 to 33.34 million in the first half of 2025, representing a year-over-year gain of about 16.8%. While the figure continued to climb this year, the 7.5% growth rate for the first half of 2026 was notably slower. The company didn’t directly break out figures for the second quarter. But calculations using first quarter and midyear data show Newborn Town’s second-quarter MAUs totaled about 35.77 million, down about 0.3% sequentially.

The company’s social business revenue swelled by 34.2% to 38% year-on-year in the first half of 2026, notably outpacing MAU expansion, indicating that growth is increasingly coming from better monetization per user. Calculations using data from the announcement show the company’s monthly social revenue per active user in the first half of this year totaled $2.47 to $2.54, up roughly a quarter from $1.97 in the prior-year period.

The better monetization likely owes to several factors. Newborn Town has been integrating AI into its social products to improve user matching, content recommendations and paid conversion efficiency. Its flagship product, SUGO, generates money through services linked to voice chatrooms, instant messaging and virtual gifts. Meanwhile, its TopTop product fuses social networking with casual gaming to boost in-app spending on virtual items and gifts. AI also supports content moderation, translation and customer service, lowering human labor costs in the overseas markets that are Newborn Town’s main focus.

While boosting per-user monetization can cushion revenue growth as new additions slow, even that avenue could ultimately face a ceiling. That means the company will still need to rely on new markets and products to maintain its growth momentum. Better use of AI-driven recommendations and targeted advertising could help by lowering customer acquisition costs, which could help the company improve its profitability alongside top-line revenue growth.

Newborn Town's social business growth rate in the 30% to 40% range looks notably stronger than its peers. JOYY Inc. (JOYY.US) reported its first-quarter social entertainment revenue inched up by just 3.2% year-over-year, with livestreaming revenue up just 2.4%. Meanwhile, Hello Group’s (MOMO.US) revenue fell 15.1% in China in the first quarter, though its overseas revenue surged 44.1%.

Short drama efficacy remains to be seen

Beyond its core social products, Newborn Town has also been building up its short drama business in recent years. Its innovative businesses segment, which includes short dramas, achieved revenue growth of 35.4% to 45.8% in the first half of the year, driven primarily by its AI-powered short drama operations.

Clocking in at just a few minutes per episode, short dramas are highly tailored for mobile viewing, drawing in users through video clips across other platforms such as Facebook, TikTok and Google. AI tools can be used for script analysis, subtitle translation, voice dubbing and ad production, paring down manufacturing costs of multi-lingual content.

Its years of experience operating social products have given Newborn Town well established localized teams, payment channels, and ad placement expertise — resources it can leverage in the short drama segment, helping the company to gage content preferences across diverse markets and improving advertising efficiency.

But the innovative business segment that includes short dramas currently accounts for just 10% of Newborn Town’s revenue, roughly the same as last year. Short dramas also rely heavily on blockbuster content, meaning profitability depends on creative performance, which is a hit-or-miss business that can also be costly. While AI can trim certain production expenses, it can’t erase inherent uncertainties surrounding content returns.

Investors remain dubious on the quality of Newborn Town's growth. The company's stock is down 24.7% over the past six months, and currently trades at a price-to-earnings (P/E) ratio of just 10.9 times — above Hello Group's 9 but trailing JOYY's 16 times. That valuation is squarely in the middle of the pack, even as the company’s 30%-plus top-line growth far outpaces its peers, showing it has yet to command a tangible premium.

Investor concerns revolve around the quality of Newborn Town’s growth. The company's sales and marketing expenses swelled by 75% last year, easily outstripping its 35.3% revenue bump that year. Its social revenue growth rate this year is also significantly above its MAU expansion, showing its financial performance relies increasingly on better user monetization. Investors are still waiting for the company to prove that strong top-line growth can translate into stronger operating leverage and sustainable profits. While Newborn Town has proven its capacity for long-term expansion, its valuation will struggle to keep pace with revenue growth if customer acquisition and traffic-buying costs remain stubbornly high.

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The short video giant is preparing to cut the financial cord with its Kling unit, opening up new valuation room for the popular AI video asset

Key Takeaways:

• Kuaishou is promoting financial independence for Kling, with outside investors set to inject up to 20.45 billion yuan into the AI video unit to better gage its value
• Terms of Kling's financing include a listing deadline, indicating expectation for a separate IPO for the company

By Lee Shih Ta

AI can do amazing things, but those things also come with huge costs. That combination is leading some companies to separately capitalize their AI business, insulating parents from constantly needing to pump new funds into their AI offspring.

Short-video and livestreaming e-commerce platform Kuaishou Technology (1024.HK) is the latest to take that approach, as it pushes its Kling AI video generation platform into the capital markets. The business, which generates short videos using text or image prompts, is being restructured into an entity that can be independently financed and valued, and could even be separately listed.

Kuaishou unveiled that roadmap earlier this month, including a new financing plan for Kling. Under the plan, announced July 2, a group of initial investors will inject 13.8 billion yuan ($2.04 billion) into Beijing Keling Intelligent Technology Co. Ltd., Kling’s formal business entity, under a capital increase agreement. The same day, 15 more investors committed to injecting another 5.22 billion yuan into the company, bringing the total capital increase to 20.45 billion yuan.

External investors will hold about 16.67% of the company after the capital infusion. Kuaishou's stake in Kling will fall from 100% to about 68.33% after adding in impact from a concurrent share incentive plan. That allows Kuaishou to continue consolidating Kling’s results into its own financial statements.

The announcement said the restructuring will allow investors to “independently and clearly assess” Kling’s performance and potential. Put differently, the move lets Kuaishou separate its AI video assets from its older video platform for better independent valuation.

Alibaba, Tencent, and Baidu were among the new investors, Reuters reported. The Wall Street Journal said the financing valued Kling at about $18 billion. An annualization of Kling’s March revenue of about $500 million gives the AI video unit a price-to-sales (P/S) ratio of about 36 times – far higher than figure of slightly over 1 for Kuaishou.

The announcement disclosed that Kling’s pro forma 2025 revenue totaled about 1.1 billion yuan. But reflecting its rapid growth, revenue for the first quarter of this year alone exceeded 650 million yuan, up more than 300% year-on-year and already more than half of revenue for all 2025.

That demonstrates Kling’s big commercial potential, unlike many AI companies that are still struggling to build up their business. That said, AI video generation remains a capital-intensive and computing power-intensive business. Kling’s net asset value at the end of 2025 was a negative 9 million yuan, and its net losses for 2024 and 2025 stood at 500 million yuan and 1.9 billion yuan, respectively.

From a broader perspective, Kling's scale looks somewhat limited. Kuaishou's total revenue for the first quarter of this year was 33.7 billion yuan, meaning Kling’s 650 million yuan accounted for less than 2% of the total. While Kling is growing quickly, it could still be some time before it contributes enough to have a meaningful impact on Kuaishou's fundamentals.

Startup qualities

For Kuaishou's shareholders, Kling's independent financing also brings equity dilution. That dilution could grow if Kling continues to raise more money by bringing in new investors or listing in the future, meaning the benefits from Kling’s growing value will increasingly flow to others besides Kuaishou.

The financing includes a repurchase clause, stipulating that if Kling fails to complete an IPO before Oct. 30, 2031, or if it fails to satisfy other conditions within a specified timeframe, investors are entitled to a refund at the original investment price, plus 8% annual interest. That indicates that Kuaishou is already eyeing a separate listing for Kling over the next five years.

Kling's equity incentive arrangement is also worth a closer look, allowing for up to 15% of its enlarged share capital to be distributed as incentives. Additionally, CEO Gai Kun was granted a 3% equity reward and enjoys 10 times the voting rights for a maximum of 4% of his stake. Such a model closely resembles that of a startup to ensure that Kling can retain its top management and core team.

Four days after the financing, Kuaishou announced that 273 million of its Class B shares were sold by major stakeholder Tencent through off-exchange block trades. Tencent sold the stock for HK$43.25 per share, cashing out approximately HK$11.8 billion ($1.51 billion), which reduced its Kuaishou holdings from 15.68% to 9.37%.

But Tencent remains an active investor in the Kuaishou system through participation in the Kling financing through its Shanghai Qishan Investment Co. Ltd. and Parallel Mars Investment Ltd. units, which each invested about 682 million yuan. Thus, the share sale and concurrent new investment are the equivalent of Tencent shifting funds from a mature platform business to a newer AI asset with better growth potential.

Kuaishou's stock briefly rose by nearly 7% after the initial announcement of the Kling financing, but later gave back the gains and ultimately closed unchanged that day. But news of Tencent's stake reduction sparked a selloff that saw the stock plunge by 12% in one day, marking its largest single-day drop since late March. In response, Kuaishou announced it would repurchase 175 million Class B shares for HK$8.35 billion, while concurrently emphasizing it will fully implement the remainder of its current share repurchase quota.

Kling's restructuring also reflects an emerging new capital logic from internet companies in the AI era. Their mature main businesses provide the cash flow, data, and usage scenarios, while the AI subsidiary raises external capital and gets valued separately, offering the type of employee equity incentives often seen in startups.

All this raises a key question for Kuaishou investors. After high-growth AI assets are priced independently, exactly how much value remains within the listed company's core business? For Kuaishou, the ultimate test is whether Kling can find a commercial model able to cover its massive computing power and development costs in a space where AI giants are continually challenging technological thresholds. Whether Kling can become Kuaishou's next growth engine, or simply becomes another cash-burning black hole, is a core question that will only become clear as this restructuring story unfolds.

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The online video company will repurchase up to $20 million worth of its shares, as it sits on a cash pile and a major investment that combined are worth more than twice its market value

Key Takeaways:

• Xunlei announced it will repurchase up to $20 million worth of its stock, sparking a one-day rally for the shares
• The company has found a major new engine in international livestreaming services, but warned that growth is likely to slow after a period of rapid expansion

By Doug Young

It’s not often that you see investors get too excited about share buyback programs, even though they’re meant to be confidence boosters when management thinks a company’s stock is undervalued. But at least in one case, a newly announced $20 million share repurchase plan by online video site Xunlei Ltd. (XNET.US) seems to have brought the desired effect, sparking a 6.6% rally in the company’s shares after the announcement last Friday.

Truth be told, the rally looks more like investors searching for a reason to buy the stock rather than any real change in the company’s outlook. Xunlei is a bit of a corporate chameleon lately, starting out as one of China’s earliest online video sites at its founding in 2003 when the Chinese internet was in its infancy.

The company was later overtaken by more aggressive and better funded rivals like iQiyi (IQ.US) and Youku, and then thought it found a better business as a cloud services provider. Then it decided several years ago that livestreaming offered even better potential, with a focus on emerging global markets. In March this year, it abruptly jettisoned its cloud business to focus on its other two areas, namely, the foreign-focused Hiya livestreaming business and its original domestically focused subscription business.

The brief Friday rally for Xunlei’s stock was part of a broader series of big ups-and-downs for the stock over the last year and a half as investors try to decide what to make of the company. At one point its shares rose by nearly five times from their levels at the end of 2024, only to give back much – but not all – of those gains. At its latest close of $5.36, the stock is still more than double the $2 level where it traded at the end of 2024.

After the latest rally last Friday, the stock now trades at a fairly respectable price-to-earnings (P/E) ratio of 18, which is more than double the 8 for Kuaishou (1024.HK), another popular livestreaming site. Other players like iQiyi and Huya (HUYA.US) are actually losing money, which shows how difficult it is to succeed in China’s tough online video market.

That may be why investors are showing some favor to Xunlei these days over its domestic peers, as the company is focusing heavily on its livestreaming business that offers services like sports events almost exclusively to people outside China. That business has been growing much faster than the company’s older subscription business that sells mostly to Chinese viewers, which seems like a prudent diversification.

The livestreaming business overtook subscriptions last year to become Xunlei’s biggest revenue source, fueled in part by its acquisition of Hupu, a provider of sports media and data, in June last year. That acquisition helped Xunlei to log 89% year-on-year revenue growth for the livestreaming business in the first quarter of this year, as the figure rose to $53.6 million, according to its latest quarterly report released in late May.

The company didn’t say how much of the latest livestreaming revenue figure came from Hupu, which wasn’t contributing anything yet in last year’s first quarter. But previous indications around the time of the acquisition appear to show the service was earning about $10 million in quarterly income at that time, meaning livestreaming revenue without the acquisition would still be up by around 40% in the first quarter.

Looming overseas slowdown

By comparison, the company subscription revenue rose by a slower 26% in the first quarter to $45 million. Those two categories combined gave Xunlei $98.6 million in first-quarter revenue, up 54% year-on-year, which presumably excludes contributions in the year-ago period from the company’s cloud services that were sold in March this year.

One factor that may have spooked investors this year is company signals that the golden days for international expansion may be limited. That’s not too surprising, since a growing number of Chinese companies are using a similar strategy these days as their home market slows after years of strong growth. Thus, it seems almost inevitable that these companies will start competing with one another overseas as well, especially in the Southeast Asian and Middle Eastern markets that have become two of their favorite places to expand.

“We will continue to intensify our overseas expansion, exploring new markets, and optimizing service offerings to sustain momentum,” said Chairman Li Jinbo, on the company’s latest earnings call a month ago. “That said, given the ever-changing competitive landscape, our rapid growth may experience a modest slowdown in future quarters.”

The growing role of the livestreaming business, which carries higher costs than the subscription business, is weighing on Xunlei’s gross margin, which dropped to 58.5% in the first quarter from 61.9% a year earlier. Still, the company managed to sharply boost its non-GAAP income, which excludes certain non-cash items, to $4.1 million in the first quarter from $900,000 a year earlier.

One other slight overhang for the company is pending litigation alleging Hupu’s unauthorized use of NBA content in its livestreaming services. CFO Eric Zhou declined to comment on pending litigation in response to a question on the company’s earnings call. He did say the claimed damages were relatively small at about $12.1 million. But perhaps more importantly, Hupu could be forced to give up its streaming of NBA content if it loses the case. And this type of unauthorized usage, which is quite common in China, could also hint that more similar skeletons lie waiting to be discovered in Hupu’s closet, causing future headaches for Xunlei.

One other noteworthy feature for Xunlei is its longtime investment in Arashi Vision, a maker of popular 360-degree action cameras, which listed in Shanghai a year ago. Arashi’s stock soared by about five times right after the listing, but has come down somewhat since then. Still, Xunlei’s stake of 7.8% at the end of last year was worth about 4.1 billion yuan at the current price, which is nearly twice Xunlei’s current market value of about $350 million.

The company had another $304 million in cash at the end of March, meaning its cash plus the Arashi investment alone are worth quite a bit more than its market value. That makes it easier to understand how Xunlei can afford the latest $20 million share repurchase, and hints that perhaps even more repurchases could follow if the stock doesn’t perk up from its current levels.

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The Q&A site is trying to stay ahead of AI by focusing on leading topics where online material is still relatively rare, as well as real-world events that cater to desire for human interaction

Key Takeaways:

• Knowledge-sharing site operator Zhihu reported its rate of revenue decline slowed sharply in the first quarter, as it focuses on areas where it believes it has an edge over AI
• The company’s focus on discussion for leading-edge topics and offline events could have big potential, though its online novel and video initiative could face stiff competition

By Doug Young

How do you outfox AI? You get to the source of the original information first, before AI can find it. That’s one of several new approaches being tried by Zhihu Inc. (ZH.US; 2390.HK), a knowledge-sharing community sometimes called the “Quora of China,” as it tries to stay one step ahead of AI large language models (LLM) that are stealing its business.

While Zhihu can’t offer much advantage over AI for people seeking things like weekend trip suggestions, it believes it can offer an edge in emerging topics like next-generation large model development, AI-assisted video generation and model iteration. It does that by hosting discussions and bringing related experts onto its platform as the topics are still emerging, creating a category of “verified honored creators” just for such people.

Zhihu is also turning to a few more “human-centric,” activities where AI has difficulty competing to boost its sagging businesses whose revenue have been falling for the last two years. Its most advanced initiative on that front is building up a new platform, called Yanyan Story, separate from its core Q&A business, offering user-generated short-form novels and videos that compete with a lot of similar platforms already out there.

Last but not least, Zhihu is also drawing on offline events to appeal to users who crave real human connections. In a nod to this need, the company repeatedly referred to terms like “real people,” “real users” and “real user community,” in its first quarter results released last week. Somewhat ironically, in that regard, opening remarks usually delivered by Zhihu founder and Chairman Zhou Yuan were delivered by his AI doppelganger “Victor Zhou” on the call, though the real Zhou Yuan answered questions during the analyst Q&A that followed.

“Building on this solid foundation, our core businesses are showing encouraging signs of recovery, while our new business initiatives continued to gain momentum and to deliver meaningful incremental growth,” said Victor Zhou in the prepared remarks.

The multi-pronged strategy seems to be showing some early good results, reflected by a sharp improvement in the company’s rate of revenue decline during the first quarter. At the same time, the report also contained a few potential red flags, including a steep cut to R&D spending that is critical for internet companies like Zhihu, as well as a big provision for potential non-payments from some of its struggling customers.

But on the whole, the report looked quite upbeat, especially for a company whose existence was being questioned by some just a year ago due to AI’s ability to replicate Zhihu’s original core knowledge-sharing functions.

Investors greeted the latest report with indifference, as Zhihu’s shares were largely unchanged after the release of the results. Those yawns may represent a “wait and see” attitude, as people wait for data on some of the new initiatives that seem to have promise. While Zhihu talked up the new initiatives, it gave out very few actual numbers, especially in terms of revenue, indicating they have yet to start making a significant contribution to its top line.

Revenue nears turning point

Zhihu is quite well known in China, and has always enjoyed a reputation as the place to go for quality content. But it faced difficulty in monetizing that popularity, with the result that it was still losing money at the time of its IPO in 2021. It finally reached profitability in the fourth quarter of 2024, but then fell back into the red in the second half of last year. It continued in the red with a net loss of 8.5 million yuan ($1.25 million) in this year’s first quarter, though executives pointed out the company was profitable on an adjusted basis.

Zhihu’s revenue peaked in 2023, before declining over the last two years as AI began to eat into its business. Compounding the declines, the company’s newer education services, which previously showed big promise, also began to fall sharply.

Zhihu reported its revenue fell 10.7% year-on-year in the first quarter to 652 million yuan from 730 million yuan a year earlier. That marked a big improvement from the 25% decline in the fourth quarter, and a 25% decline for all of 2025. The company’s two biggest revenue generators, marketing services and paid content and IP operations, both recorded low single-digit declines, falling 3% to 191 million yuan and 4.5% to 402 million yuan, respectively. Its “other revenues” category, which includes education services, continued to struggle, with revenue down 48% year-on-year to 57.8 million yuan.

The company’s average monthly subscribers during the first quarter totaled 13.1 million, which was down from 14.3 million a year earlier, but up sequentially from 12.2 million in last year’s fourth quarter. The company also noted its average daily time spent per daily active user (DAU) reached 42 minutes, noting that figure was up both year-on-year and quarter-on-quarter, without being more specific.

As we noted earlier, one slight cause for concern is R&D spending, which dropped to 16.9% of revenue in the latest quarter from 19.5% a year earlier. Another was a sharp rise in its general and administrative expenses, as it cited an allowance for expected credit losses on trade receivables for customers not paying their bills.

We’ll close with some more detail on the three new initiatives, which seem to offer potential to revive the company but are clearly still in the early stages. In terms of hosting discussions and tapping experts on emerging topics, the company said that during the quarter it saw “deep discussions” on a number of such topics, and noted that a “substantial cohort of core experts from top-tier labs has joined the platform and remains highly active.”

As to Yanyan Story, Zhihu said total creator earnings on the short-form novel and video platform surged 5.6 times year-on-year during the quarter, though it didn’t provide figures. And in offline events, the company noted that its Xinzhi Youth Conference this year attracted more than 80,000 onsite participants and 100 onsite partners, and featured both workshops related to AI, as well as on lower-tech topics like handicrafts.

We have to give Zhihu credit for not just sitting by idly while its core business gets stolen by AI. Its new initiatives look relatively well thought-out, especially the hosting of cutting-edge discussions to stay ahead of AI and offline events where AI can’t replicate the social interaction. The Yanyan Story initiative also looks potentially promising, though Zhihu will face stiff competition from a crowded field in that area.

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The lifestyle retailer’s first-quarter report showed impressive headline profit growth, but a closer look reveals the increase owed to stock investment gains

Key Takeaways:

• Miniso reported its first-quarter profit nearly tripled year-over-year, but much of the rise was due to investment gains unrelated to its core business
• The lifestyle retail operator’s Top Toy chain recorded more than 50% revenue growth during the quarter to 515 million yuan

By Lau Chi Hang

The latest financial report card from Miniso Group Holding Ltd. (9896.HK; MNSO.US) looks quite eye-catching at first glance. The operator of retail chains selling lifestyle and pop toy products reported its revenue grew 28.5% year-over-year to 5.69 billion yuan ($839 million) in the first quarter, while its profit nearly tripled to 1.25 billion yuan.

Benefiting from a high-single-digit increase in same-store sales, revenue from the company’s core China operation rose 29.6%, while its overseas revenue also rose by 21.9%. Top Toy, the company’s pop toy subsidiary, saw an even greater year-over-year surge of over 50%, as revenue reached 515 million yuan.

Miniso’s progress in expanding its store network also looks impressive. At the quarter’s end, the company’s store count reached 8,565 outlets, up by 797 from a year earlier, with a net addition of 80 stores in the first quarter alone. Overseas the company currently operates 3,617 stores, up by 404 year-on-year, with a net 34 new additions year-to-date.

The strong performance led founder and Chairman Ye Guofu to boldly proclaim that Miniso’s current valuation has yet to reflect the company’s true potential. That remark comes as the company’s stock price has shown little sign of life these days. Despite the seemingly strong first-quarter results, the company’s Hong Kong-listed shares unexpectedly dropped 6% the day after the announcement, closing at HK$24.36.

Lackluster operating profits

A deeper dive into the company's financial results shows that, excluding foreign exchange gains and losses, the company’s adjusted operating profit rose just 14.3% year-over-year to 838 million yuan in the first quarter. Furthermore, its adjusted net profit, also excluding foreign exchange gains and losses, grew by an even smaller 8.1% to 633 million yuan. Such increases are far less dazzling than the headline net profit growth on its income statement.

Closer examination also reveals the steep surge in the company's first-quarter profit came entirely from an investment in AI company MiniMax, whose stock has soared since its Hong Kong IPO at the start of this year. As a result, Miniso logged 875 million yuan in fair value changes of its investments during the quarter, resulting in its huge profit increase for the period.

In addition, supermarket operator Yonghui (601933.SH), which Miniso acquired last year, brought the company income of 77.5 million yuan during the first quarter. In other words, stripping out paper gains from investments and contributions from other non-core businesses, Miniso only recorded average profit growth for its own core business, despite its nearly 30% revenue growth during the period.

The slower rate of profit growth compared with revenue owes primarily to a significant surge in Miniso’s expenses during the period. Its general and administrative expenses totaled 297 million yuan, up 22.7% year-on-year. Its selling and distribution expenses jumped by an even larger 44% to 1.47 billion yuan.

Lackluster IPs

As growth for its core lifestyle stores slows, Miniso has turned to Top Toy as a second growth engine. The chain applied for its own separate listing in Hong Kong last year, but failed to complete the deal within the required six-month timeframe. And while Top Toy's first-quarter revenue growth was quite strong, we should point out it still accounted for less than 10% of the company’s total, meaning its scale remains too small to make a meaningful impact.

Part of the problem lies in trendy toy sensation Pop Mart (9992.HK) whose big success has changed people's understanding of toys. What were once playthings for children are now imbued with a halo of emotional value, even considered works of art, resulting in a sudden, exponential leap in the toy values. A single figure from Pop Mart’s popular Labubu series could fetch more than 1 million yuan at auction at its height, valuing such products more like artworks than toys.

Pop Mart’s huge success has drawn a steady stream of imitators hoping to copy its example. With his strong background in the market, Ye Guofu was clearly hoping to get a piece of the action with his launch of the Top Toy brand back in 2020. At the same time, he leveraged Miniso's own extensive network of stores and suppliers to buy and sell products with an eye to developing his own intellectual property (IP).

And yet after six years as a standalone entity, Top Toy has yet to create a single blockbuster toy of its own. The company’s relatively well-known Nommi characters surpassed 200 million yuan in sales last year. But that IP came under the company's umbrella only after Top Toy acquired a 51% stake in HiToy, the character’s creator, in the middle of last year.

Meantime, Top Toy’s “Yoyo” series, which was launched last year, has yet to achieve sales of 100 million yuan. When compared to Pop Mart's “Monsters” series, which includes Labubu and raked in an astronomical 14.1 billion yuan last year, Top Toy's proprietary IP looks quite piddly.

Reliant on licensed IPs

Top Toy's gross margin was only 32% last year, exactly half that of Pop Mart’s, which owes to its lack of blockbuster breakouts, as it relies primarily on licensed IPs from established names like Disney and Sanrio. That means it not only has to pay considerable licensing fees, but must also compete directly with other retailers who have licensed the same IPs, limiting the premiums it can charge for its products.

The bottom line is that even though Top Toy expanded to 355 stores in the first quarter, with revenue up 50% to over 500 million yuan, it’s still most likely viewed as a pop toy retailer that makes its money selling licensed IP toys. In effect, it’s merely a distributor rather than banking on its own creativity, limiting its growth potential to opening new stores rather than charging premium prices like Pop Mart’s.

As the recent speculative hype around pop toys subsides, Pop Mart’s stock has fallen to trade at a forward price-to-earnings (P/E) ratio of just 14 times. Bloks (0325.HK), which uses mostly licensed IPs, trades a little higher at about 17 times. Miniso is below both of those with a P/E ratio of just 12 times, making it look quite cheap. That could hint at some potential upside for the stock if the company continues to show steady improvement throughout the year.

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The video platform is using AI and a maturing user base to post strong advertising growth in a weak market, but that higher monetization push is also testing its signature community culture

Key Takeaways

• Bilibili’s advertising revenue rose 30% in the first quarter, far outpacing its total revenue growth, while games and IP-related revenue declined
• The ad strength reflects better monetization of the company’s loyal users, AI-assisted ad tools and a more commercially valuable audience

By Hu Minghe

China’s video platforms are not short of attention from their loyal customer bases. Their harder problem is converting that attention into profitable growth, as advertisers stay cautious, content remains expensive and AI becomes another major cost they can’t avoid.

That’s what makes the latest quarterly report from Bilibili Inc. (BILI.US; 9626.HK) all the more worth watching. The company only recently crossed into annual profitability, reporting its first full-year profit in 2025. Now, it has to prove that profit wasn’t just a cost-control story, but is something that can keep growing. The company’s revenue rose 7% to 7.47 billion yuan ($1.08 billion) in the first quarter, led by a 30% rise in advertising revenue to 2.59 billion yuan. Daily active users rose 8% to 115.2 million, with average daily time on the service at 119 minutes. 

The rest of the report was less impressive. Value-added services, Bilibili’s largest segment, rose just 4% to 2.91 billion yuan. Mobile games revenue actually fell 12% to 1.52 billion yuan, mainly because last year’s comparison was lifted by a hit game that has since entered a more mature part of its cycle. Intellectual property (IP) derivatives and other revenue also fell 4% to 448.2 million yuan. Put simply, advertising was the star of the quarter, while the rest of its business was much less impressive.  

A more selective ad market

Bilibili’s ad growth stands out because other major Chinese internet names are still showing falling ad revenue as advertisers rein in their marketing budgets in China’s slowing economy. Baidu (BIDU.US; 9888.HK), still heavily exposed to advertising tied to its search business, reported a 22% decline in online marketing revenue in the first quarter. Online video site iQiyi (IQ.US) also reported its online ad revenue fell 7% during the quarter.

Bilibili’s ability to post strong growth for that important segment, even as many others record declines, suggests the market is splitting. Advertisers are still spending on platforms with clearer user signals, stronger communities and better conversion tools, to the detriment of platforms lacking those qualities.

Part of Bilibili’s ad growth came from the growing amount of time its users spent on the service. But its edge may come from the quality of the attention of those users.

Bilibili users often watch longer videos centered on games, technology, animation, product reviews, knowledge content and creator-led discussions. That makes the platform useful for ad categories that require more detailed explanation and trust, rather than just quick exposure. Its users are also getting older. Management said the average user is now about 26.5 years old, an age when personal spending power and household decision-making influence begin to rise.

That puts Bilibili in a demographic sweet spot: its users are young enough to shape trends, but increasingly old enough to spend on big-ticket items like electronics, cars, home appliances, AI tools and home decoration.

AI helps on both sides

AI is another factor working in Bilibili’s favor, with AI-related advertisers increasing their budgets by more than 170% year-on-year in the first quarter. AI is also helping Bilibili sell ads more efficiently. The company said deeper AI use improved ad matching, driving a 25% year-on-year increase in click-through conversion rates (CTCVR), an important metric for measuring an ad’s performance. Bilibili also said AI generated content (AIGC) creative tools are helping advertisers produce materials better suited to its community, improving click-through rates.

Bilibili isn’t the only youth platform with loyal users. ByteDance’s Douyin has greater scale and a feed system where users are accustomed to ads, livestreaming, e-commerce and local services. Xiaohongshu has strong appeal to advertisers because many users go there for lifestyle advice, product discovery, travel ideas and shopping research.

Bilibili’s edge is different. Users often see it less as a shopping guide or entertainment machine and more as a video community built around creators, fandoms, games, technology and shared cultural language. Its bullet-comment feature, where viewer comments stream across the screen as users watch videos, makes the experience feel more participatory. That helps explain the site’s loyalty, but also makes monetization a delicate balancing act.

The sensitivity is not new. In 2016, pre-roll ads on some licensed anime titles triggered user backlash, leading Chairman Chen Rui to apologize and promise that certain licensed anime would not carry such ads. This April, Bilibili again tested the boundary by rolling out pause ads on its mobile app. The format is more restrained than pre-roll or mid-roll ads, with ads only appearing when users manually pause a video, and creators allowed to opt out. But it still shows the company is looking for new places to insert advertising into the viewing experience. 

Cost pressure remains

Bilibili also needs to keep growing advertising to protect margins, especially as its other revenue sources post slower growth and even start to contract. At the same time, the company is trying to keep its expenses under control. Its operating expenses rose only 3% in the quarter, helped by a 1% decline in sales and marketing costs. R&D spending rose 9%, mainly because of AI investment, and management also said full-year AI-related capital expenditure could rise by about 1 billion yuan. 

Earlier this year, a Chinese media report cited online rumors about major layoffs at Bilibili, including a widely discussed claim of a 60% headcount cut and R&D disruption. While the 60% figure was almost certainly highly exaggerated, the episode is still worth mentioning as its spread fits the industry mood: China’s internet and entertainment companies are trying to fund AI, while simultaneously defending margins and trimming weaker businesses.

This helps explain why Bilibili’s investment story now looks more attractive than that of traditional video peers such as iQiyi. Bilibili has a clearer ad monetization story, a young but maturing user base with greater spending power, improving profitability and some differentiation from its peers due to games in its revenue mix. In addition to its 7% revenue growth, its adjusted net profit rose 62% to 585.4 million yuan in the latest quarter. iQiyi, by contrast, reported a 13% revenue decline for the period and swung to a net loss. 

But Bilibili’s biggest advantage is also its constraint. Its ad growth depends on users believing the platform is still different from its peers. The first quarter showed Bilibili can sell more ads, especially when those ads are tied to categories that fit its content culture. The harder question is how much more advertising the platform can absorb before it starts to feel less like the Bilibili that many of its loyal users have grown to know and love.

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The online travel agent’s revenue rose 14% in the first quarter, but its latest report lacked discussion of an anti-trust probe into Trip.com, its top stakeholder and a key supplier

Key Takeaways:

• Tongcheng reported its revenue rose 14.4% in the first quarter, led by a 14.7% gain for its accommodations unit and a 60% jump for its hotel management business
• The online travel agent’s latest report failed to discuss an anti-monopoly probe launched in January against Trip.com, Tongcheng’s main supplier of hotel booking services

By Doug Young

Double-digit revenue and profit growth weren’t enough to hide the big elephant in the room that online travel agent Tongcheng Travel Holdings Ltd. (0780.HK) failed to mention in its latest quarterly report released last Thursday.

That elephant is an anti-monopoly probe into leading online travel agent Trip.com (TCOM.US; 9961.HK) announced in January, which will almost certainly have a major impact on Tongcheng when a final decision comes in the case. That’s because Tongcheng is part of Trip.com’s market dominance that is under investigation. Trip.com currently holds about 24% of Tongcheng’s shares, and is also the main supplier of hotel booking services that are one of Tongcheng’s top three revenue sources.

And yet despite that big overhang, Tongcheng makes no mention of the relationship in its latest quarterly report, which looks relatively positive, including 14.4% revenue growth and 16.4% profit growth in the three months to March.

But investors weren’t fooled by the positive numbers, with Tongcheng’s shares slumping 5% on Friday, the day after the latest report’s release. With the Friday selloff, Tongcheng’s shares are now down 33% since the start of the year, almost as bad as Trip.com’s 36% decline. Most of the slump has come since Trip.com confirmed on Jan. 14 that it was being investigated by China’s State Administration for Market Regulation (SAMR). Other reports said the probe was focused on the company’s dominance in China’s hotel booking market.

The selloff has sent Tongcheng’s price-to-earnings (P/E) ratio down to just 13, though that’s still roughly twice the 6.6 for Trip.com’s battered valuation. By comparison, the much smaller Tuniu (TOUR.US) trades higher at 16, while global giant Expedia (EXPE.US) trades at 19.

Truth be told, Tongcheng could ultimately benefit from this anti-monopoly probe, which almost certainly will result in it being partly or completely cut free from Trip.com’s dominance. Its reliance on Trip.com for its hotel booking services is depressing its gross margin, which stood at just 66.3% last year, compared with 80.6% for Trip.com and an even higher 90.1% for Expedia. But achieving such higher margins will force Tongcheng to develop its own separate sources for completing hotel bookings made over its platform, which takes time.

The company is already taking steps in that direction through the development of its hotel management business. That was one of the highlights of its latest report, following Tongcheng’s acquisition last year of the hotel management business of embattled property developer Wanda. That acquisition saw revenue from Tongcheng’s “other businesses,” which include mostly hotel management, rise about 60% year-on-year to 961 million yuan ($141 million) in the first quarter, accounting for nearly a fifth of its 5 billion yuan in revenue. By comparison, that business accounted for just 14% of revenue a year earlier.

With the acquisition and rapid growth of its hotel management business, the number of hotels in Tongcheng’s network of managed properties reached 3,200 at the end of March, with another 1,900 in the pipeline. That makes the company a leading Chinese top hotel operator, outpacing Atour’s (ATAT.US) 2,088 hotels at the end of March, though still well behind the more than 13,000 for leading hotelier H World Group (HTHT.US; 1179.HK).

Rebuilding a business

The 3,200 hotels in Tongcheng’s managed property network lays a foundation for building its own direct room booking services without having to use Trip.com as a middleman, though it’s still a tiny fraction of the 4 million hotels and alternative accommodations now on its network. That means the company is probably already starting to talk directly with the big names like H World Group, as well as many of the smaller chains, about forming its own direct relationships for room booking services.

The company’s latest annual report shows just how closely it is tethered to Trip.com, which helped to create Tongcheng in its current form by engineering a merger between two large online travel agencies about a decade ago. Trip.com owned a controlling stake of one of those agencies, while internet giant Tencent owned the other. Following the merger, Trip.com emerged with its controlling 24% stake in Tongcheng, while Tencent isn’t far behind with 20%. Tencent is also a key partner for Tongcheng, which derives a big portion of its business through a preferentially placed portal on Tencent’s hugely popular WeChat platform.

Tongcheng’s latest annual report shows it received a massive 3.21 billion yuan in commissions and other income from Trip.com in 2025, presumably mostly for providing hotel booking services, equal to about 16.5% of its revenue for the year. In its latest quarter report, accommodation services rose 14.7% year-on-year to 1.36 billion yuan, accounting for 27% of overall revenue.

Tongcheng’s largest revenue source is transportation ticketing services, which rose 6.2% in the first quarter year-on-year to 2.12 billion yuan, accounting for 42% of overall revenue. That portion of its revenue shouldn’t be affected by the anti-monopoly probe, since Tongcheng works directly with airlines, rail and bus operators for that part of its business.

Growth in accommodations and transport ticketing revenue, combined with the big gains for its hotel management business, helped Tongcheng to boost its profit by 16.4% to 779 million yuan in the first quarter, up from 669 million yuan a year earlier.

Tongcheng positions itself as serving customers in China’s smaller cities, and points out in its latest report that 87% of its users in the first quarter were from non-Tier 1 cities. Such a strategy is common in many of China’s consumer sectors, where top operators often directly provide services in Tier 1 cities where margins are highest, and then work with partners to develop smaller markets where margins are thinner. 

Notably, Tongcheng’s sales and marketing spending grew 16.4% year-on-year in the first quarter to account for 42.2% of its revenue, up from 40.8% a year earlier. That could indicate the company is starting to take more aggressive steps to develop its own hotel relationships for the day when the regulator ultimately orders it to sever or severely curtain its relationship with Trip.com. Still, its silence on such an important issue – both in its latest quarterly results and its annual report released in April – doesn’t seem like the best approach for such a critical issue that could ultimately help the company improve its margins, but will also bring some pain in that transition.

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The company expects to start generating meaningful revenue in the second half of this year from two new mid- to hardcore games, including an SLG title launched in April

Key Takeaways:

• Yalla expects its new mid- to hardcore gaming initiative to contribute to total revenues gradually starting in the second half of this year
• The new initiative could lift the company back to double-digit revenue growth as early as 2027, according to management

By Doug Young

Do more happy days lie just around the corner?

That’s the big question hanging over social media and gaming company Yalla Group Ltd. (YALA.US), which dangled the tantalizing possibility of a return to double-digit growth from an earlier era as soon as next year. The engine for that jumpstart is two new mid- and hardcore games that are currently revving up, representing the company’s first major move beyond its legacy casual games business.

The coming buildup for Yalla’s two new titles was most apparent in its growing spending on the initiative in its latest financial report released on Monday. Leading that charge was a 40% jump in its sales and marketing expenses during the first quarter, lifting that part of its spending to 12.3% of revenue from 8.3% a year earlier. Such an increase is quite aggressive for the fiscally conservative Yalla, showing it sees the new gaming initiative as key to its future development.

At the same time, the company acknowledged recent uncertainty in its core Middle East and North Africa (MENA) region. To broaden its base, Yalla noted its new mid- and hardcore gaming initiative is likely to include a diversification drive into other global markets like the U.S. and Europe later this year.

Yalla posted double- and even triple-digit revenue growth for much of its early history, feasting off a fast-growing Middle Eastern market where local governments strongly encouraged development of the social media and gaming services that are its specialty. But that growth has slowed considerably as its business matures, even as strict fiscal discipline has helped the company to keep its profits stable and cash reserves growing.

The company’s latest financial report shows Yalla’s revenue fell slightly in the first quarter. But as the company’s new gaming initiative takes hold, it expects that business to start contributing significant revenue in the second half of this year. That should offset slowness for its legacy social media chat services and casual gaming business, helping the company to post roughly flat revenue for all of 2026 compared with last year, CFO Karen Hu said on Yalla’s earnings call.

“Looking into 2027, as the two new titles mature in terms of scale and revenue generation, there is potential, if everything progresses well, for us to move toward double-digit year-over-year growth,” she said.

Yalla’s stock fell 6.7% after the results came out. The stock is down slightly this year, but has rallied since late March as the new gaming initiative gets closer to bearing fruit. At its current levels, the stock trades at a price-to-earnings (P/E) ratio of 8, ahead of the 5 for Chinese social media site Weibo (WB.US; 9898.HK) but behind the 12 for the larger Pinterest (PINS.US). The relatively low figures reflect growing maturation for social media companies in general, which is accelerating for some as they lose advertising traffic to AI.

Yalla is looking to midcore and hardcore games to combat the slowdown, banking on serious gamers’ greater willingness to pay for their hobby than the titles under its legacy casual games business. That part of its business recorded a small gain in the first quarter, rising to $30.3 million from $30.1 million a year ago.

‘Encouraging early feedback’

On the mid- to hardcore gaming front, a highlight from the latest report was the official launch of Yalla’s desert-themed SLG game. It also introduced BlazeAerie Interactive Entertainment as its development parter for the title, with Yalla providing customization and marketing for the game. Yalla described Hong Kong-based BlazeAerie as “a top SLG game studio whose gross billing in the SLG category has ranked among the top five globally over the past five years.”

Yalla said it rolled out an Android version of the SLG game in April, while it debuted an iPhone version in early May. The company said the game has received “encouraging early feedback,” and has done well in terms of downloads in both Android and Apple stores.

“This partnership harnesses our complementary respective strengths: the BlazeAerie team leads R&D, leveraging its proven game development expertise to craft a game rooted in MENA's heritage and visual tastes, while Yalla Group leads distribution, using its deep local know-how and accumulated gamer community to deliver the title across MENA,” Yalla founder and Chairman Yang Tao said on the earnings call.

The other title in the new initiative, a match-3 game called Turbo Match, is “progressing smoothly” and “also performed well in its early stage” following its launch in the third quarter of last year, company officials said. Unlike the SLG game with its MENA-oriented desert theme, company officials pointed out that “Turbo Match,” which Yalla developed in-house, is more designed for global users, and thus more suitable for other global markets like the U.S. and Europe.

“We continue to see significant growth potential for SLG and Match-3 games and will continue to invest in these two genres,” Yang said. “In addition, we continued to expand our games team over the past year and have been exploring additional gaming verticals, including the casual and hyper-casual sectors, across more overseas markets.”

As it builds up its in-house team for more game development, Yalla’s R&D spending rose 16.2% year-on-year in the first quarter to account for 11.5% of its revenue, up from 9.3% a year earlier. Yalla was able to offset some of the higher marketing and R&D expenses through savings in its cost of revenue from lower commission fees paid to third-party platforms. But its net margin still dropped year-on-year as it posted a $28.4 million profit in the latest quarter.

Reflecting its strong cash position, the company’s cash and short-term investments totaled $806.7 million at the end of March, up from $754.6 million three months earlier, even as it repurchased nearly $10 million worth of its stock during that time under a $150 million share buyback program.

Yalla is based in the Dubai, but is also setting up a second base in adjacent Saudi Arabia, in a nod to the latter’s importance in the region. On that front, it unveiled a partnership as a title sponsor with the Saudi Esports Federation earlier this year. In its latest report it announced it was named as presenting partner of Yalla Saudi eLeague Women 2026, one of the esports league’s four categories.

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Once known for its Texas Hold’em games, the company is repositioning itself as a Hong Kong-listed bitcoin play through its push into Web3 gaming

Key Takeaways:

• Boyaa Interactive said its first-quarter loss more than doubled year-on-year, mainly due to a decline in bitcoin prices
• Excluding changes in the value of its bitcoin holdings, the company said its core profit for the quarter rose between 85% and 90%

By Lee Shih Ta

Boyaa Interactive International Ltd. (0434.HK) has transformed over the last two years, increasingly seen as a “bitcoin concept stock” as it drifts from its original core gaming business. As its bitcoin holdings grow, the gaming veteran’s earnings have become closely tied to price swings for the notoriously volatile cryptocurrency. But the company may be pursuing ambitions beyond simply stockpiling bitcoin.

Boyaa rose to prominence through its Texas Hold’em games before being hit by a regulatory crackdown on card and board games in China. Over the last two years, the company has attracted growing investor attention for its move into bitcoin. A sharp rise for the cryptocurrency in 2024 brought Boyaa HK$948 million ($121 million) in gains that year, turbocharging its annual profit to HK$969 million. Investors even viewed Boyaa as a Hong Kong edition of bitcoin treasury company Strategy Inc. (MSTR.US) at one point, sending the Chinese company’s shares surging in tandem with Web3 and other bitcoin plays.

But as bitcoin prices retreated, Boyaa recorded HK$411 million in losses from changes in the value of its holdings last year, sending it into the red with a net loss of HK$239 million. The bleeding is continuing this year, with the company warning last week that its loss ballooned by 110% to 120% year-on-year in the first quarter, as weak bitcoin prices continued to wreak havoc on its balance sheet. That said, excluding the digital asset value changes, the company’s profit for the quarter actually rose by 85% to 90% year-on-year.

Boyaa held 4,092 bitcoins at the end of last year, which it acquired at a total cost of about $279 million, implying an average of roughly $68,000 per bitcoin. According to the company, these bitcoin holdings are not merely investments, but are gradually being parlayed for use in Web3 gaming projects.

In its 2025 annual report, Boyaa for the first time formally outlined a “three-in-one” strategy centered on “gaming applications, ecosystem development, and value storage.” Under the model, its card and board game business provides it with a relatively stable revenue flow, while bitcoin is positioned as a core strategic asset within its Web3 ecosystem.

The company disclosed that part of its bitcoin holdings has already been deployed directly into Web3 infrastructure. For example, its MTT Network game public chain has allocated 1,000 bitcoins as staking assets to support blockchain security. Meanwhile, its Web3 game wallet, YAAKO Wallet, has committed 500 bitcoins as liquidity reserves for cross-chain asset transfers. Its Web3 poker platform, MTT Sports, also uses bitcoin as rewards for player tournaments.

A Web3 ecosystem

The company appears to be building a Web3 gaming ecosystem underpinned by bitcoin. Web3 games generally refer to gaming models that integrate blockchain technology, nonfungible tokens (NFTs) and cryptocurrencies, allowing players to own, trade and even transfer in-game assets instead of leaving them fully controlled by game publishers.

Over the past several years, many companies tried to build new gaming economies around a “play-to-earn” model. But as the crypto market cooled, many of those projects quickly unraveled due to collapsing token prices and unsustainable financial structures. To date, Web3 gaming has yet to achieve mainstream adoption.

Boyaa’s online gaming revenue was relatively stable last year at approximately HK$443 million, down just 0.4% year-on-year. That said, its underlying user metrics continued to deteriorate, at least in terms of user numbers. Its monthly active users (MAUs) plunged 34.5% from 4.15 million to 2.72 million last year, while paying users fell by an even steeper 54.7% from 201,000 to just 91,000.

The falling user numbers mean Boyaa’s ability to maintain its revenue increasingly depends on higher-spending users, rather than user growth. For example, mobile average revenue per paying user (ARPPU) for its Texas Hold’em games jumped 67.2% year-on-year last year, while ARPPU for other mobile card and board games surged 175%. The figures suggest the company is shifting toward a model that targets higher-spending users in smaller numbers, rather than relying on mass-market player growth.

The company’s heavy move into cryptocurrency comes with growing risks. Boyaa held only about HK$62.12 million in cash at the end of last year, while the value of its digital assets had ballooned to HK$2.92 billion. In other words, Boyaa’s balance sheet has become heavily “cryptoized.” When bitcoin prices rise, the company’s earnings and net asset value can expand rapidly. But the reverse is also true: a prolonged downturn in crypto prices could place significant pressure on Boyaa’s profitability and valuation, which is what is happening now.

From being China’s first listed card-and-board game company to reinventing itself as a Web3 stock, Boyaa’s recent transformation mirrors the broader search among many Chinese internet companies looking for “second lives” as their older businesses mature and stagnate. So far, however, investors remain highly cautious about the company’s Web3-plus-bitcoin strategy.

Boyaa’s shares have fallen about 42% over the last 52 weeks, significantly worse than bitcoin’s roughly 21.8% decline over the same period. That seems to show Boyaa has not only become a proxy for crypto assets, but is even a magnifier for swings in the volatile market.

With its Web3 initiatives still in the investment phase and lacking a proven stable business model, investors are increasingly treating Boyaa as a highly volatile crypto play rather than a traditional gaming company with predictable cash flow. That serves the company well when bitcoin prices are strong, but isn’t very reassuring in the current climate of weak prices.

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The ticketing company benefited from soaring concert sales last year, almost doubling its profit, and is also pivoting towards pop-culture merchandise

Key Takeaways:

• Damai Entertainment has predicted its annual net profit for its fiscal year through this March will surge by more than 90%, driven by strong demand for live music performances
• The company is also moving beyond ticketing into IP merchandising and cute collectibles

By Lee Shih Ta

China’s concert sector has boomed over the past two years, driven by demand for live experiences and a government drive to boost leisure consumption.

As concerts have become big business in many cities, tours for big-name acts popular with a young crowd, such as Jay Chou, Mayday or Jason Zhang, are typically selling out. Which is good news for Damai Entertainment Holdings Ltd (1060.HK), one of China’s leading ticketing platforms.

In a May 8 statement, the company said its profits for the year to March were expected to jump 92% or more to at least 700 million yuan ($103 million) from around 364 million yuan a year earlier. The company cited what it called a more stable asset structure, lower risk exposure within its portfolio and reduced investment losses.

Originally operating as Alibaba Pictures, the business rebranded as Damai Entertainment last year and has been scaling back its film and TV projects, which can be volatile and weigh on profits. Instead the firm has been shifting towards live entertainment, ticketing and cute merchandise derived from copyrighted cartoon or film characters.

China’s large-scale concert box office revenue rose 13.7% in 2025 to 29.56 billion, according to figures from China’s performing arts association. Including related spending, the concert economy is estimated to have generated more than 220 billion yuan in overall consumption. As one of the industry leaders, Damai Entertainment has clearly benefited from this trend, as illustrated by its half-year revenues to the end of September, which rose 33%. Performance content and technology businesses were the biggest revenue source, with income rising 15% to 1.34 billion yuan.

A closer look at the revenue structure reveals that the fastest-growing segment is no longer ticketing, but rather merchandise based on intellectual property and other derivative businesses. This revenue stream doubled to 1.16 billion yuan in the half year, generating a 44% jump in profit to 235 million yuan. The growth reflects the rapid rise of China’s so-called “guzi economy”, in which younger consumers are keen to buy licensed merchandise featuring their favorite anime or game content, such as badges, figurines, cuddly toys and keychains. By monetizing IP, Damai Entertainment can go beyond one-off consumer purchases to develop longer-cycle revenue streams tied to merchandise and offline experiences.

AI-enabled design

Through the IP commercialization platform “Alifish”, Damai has partnered with well-known Japanese character brands and media franchises such as Sanrio, Chiikawa, Pokémon and Crayon Shin-chan. It has also launched co-branded collaborations with the Chinese retail brands Miniso and Pop Mart to expand its presence across the entertainment IP spectrum.

Beyond that, Damai has begun integrating AI into its design processes, working with Alibaba’s Tongyi large language model team on the AI-powered program “MiaoYa” as a tool to encourage more creators to participate in toy design and development.

Coming up with trendy toys used to rely on costly design professionals and long product development cycles, but AI promises to lower the creative barriers and accelerate the process. Damai could further expand its reach If these tools can eventually integrate with Alifish’s resources and distribution channels such as Taobao and Tmall or offline events.

Damai has also started to expand into mass-market ticketing, testing a discounted movie ticket platform called TixGenie. The small-scale pilot has limited coverage for now but signals an expansionist intent, as the company positions itself as a comprehensive platform spanning concerts, movies, IP businesses, designer toys and offline entertainment.

Still, the lifespan of popular IPs is often limited, and market trends can shift quickly. The availability of AI tools could intensify competition, generating increasingly similar design concepts that could erode an IP’s status and scarcity value.

Damai currently trades at a forward price-to-earnings ratio of around 30.5 times, enjoying a platform-style premium when compared with the 10.6 times for movie ticketing service Maoyan Entertainment (1896.HK).

Goldman Sachs recently estimated that Damai’s live entertainment and IP business could grow at a compound annual growth rate of around 25% over the next two years, judging it to be less vulnerable to AI disruption than purely online entertainment platforms.

But the investment bank also cut its target price for the company from HK$1.07 to HK$0.92, suggesting that growth hopes have already been priced in as the share rallied over recent years. Investors will be looking to see whether Damai can justify its high valuation with consistent returns from its evolving entertainment ecosystem.

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The big-screen cinema company’s China revenue tumbled in the first quarter, returning to normal levels after a year-ago boost from animated blockbuster ‘Ne Zha 2’

Key Takeaways:

• Imax’s Corp.’s Greater China revenue fell 49% in the first quarter due to a high year-ago comparison fueled by the blockbuster “Ne Zha 2”
• China’s overall Lunar New Year box office also plunged 39% this year absent the year-ago hit that went on to become the world’s best-grossing animated film

By Lee Shih Ta

When "Ne Zha 2" dominated the Lunar New Year box office last year, rewriting Chinese box office history, the tale of mythical devil child had a halo effect on Imax China Holding Inc. (1970.HK), whose trademark big-screen theaters were packed during the period. By the first quarter of 2026, however, Imax’s results cooled sharply as the market returned to reality.

The massive 2025 boost, and a subsequent crash as the box office returned to more normal conditions this year, were both center stage in the first-quarter results of Imax China’s parent, the Canadian firm Imax Corp. (IMAX.US). The results, contained in a filing this week by Imax China, showed Imax Corp.’s revenue fell about 6% in the first quarter to $81.37 million from $86.66 million a year earlier. The company’s net income also fell about 25% to $6.07 million from about $8.15 million.

A closer examination of Imax Corp.’s regional breakdown reveals that nearly all of the weakness came from China. The company’s revenue from Greater China plunged by nearly half to $20.57 million in the latest quarter from about $40.13 million a year earlier. The region’s contribution to total revenue also shrank from 46% to roughly 25% over that time, highlighting how rapidly the company’s single most important overseas market contracted.

As a Hong Kong-listed company, Imax China is only required to report its financial results twice a year. But the weak first-quarter showing by its U.S.-listed parent, which files quarterly, hints that Imax China’s midyear results won’t be pretty when they’re released in August.

According to data from China’s National Film Administration, China’s 2026 Lunar New Year box office was worth 5.75 billion yuan this year ($845 million), down 39% from 9.5 billion yuan in the same period of 2025. Total movie attendance this year also fell about 36% from approximately 187 million viewers to about 120 million. More importantly, there was no encore blockbuster to pick up where “Ne Zha 2” left off. The entire 2025 holiday season was effectively carried by the animated hit, which generated about 15.44 billion yuan at the box office, making it the fifth-highest grossing film in global box office history and the best grossing animated film of all time. By comparison, the top-grossing title during the 2026 holiday period, "Pegasus 3," earned only about 2.9 billion yuan — less than one-fifth of the bounty for “Ne Zha 2.”

Imax’s China business is heavily dependent on box office revenue-sharing and related services, making the company, in essence, a “box office amplifier.” Like film studios, the company relies on hit films to keep its cash register full. During its earnings call, Imax Corp. management said that due to the exceptionally high comparison base from last year, Imax’s Greater China box office revenue in the first quarter plunged about 62% year-on-year, significantly underperforming its global box office.

Rather than passively waiting for the next local blockbuster or a Hollywood hit, Imax is taking a more active role in content production in China to secure a more stable and larger share of box office revenue. Imax China’s annual results last year already showed a noticeable shift in its content mix. Chinese-language films accounted for more than 66% of its box office revenue, while eight of the country’s top 10 films nationwide that year were domestic productions — a clear sign of shifting tastes towards domestic films.

Betting on local content partnerships

Imax benefits from the trend toward Chinese-language films because such domestic productions typically generate a higher revenue-sharing ratio for the company. Compared with Hollywood studios, which generally wield strong bargaining power, local Chinese production companies allow greater commercial flexibility in their Imax partnerships. At the same time, Imax often becomes involved earlier in the remastering and marketing process for Chinese-language films, shifting its role from a pure exhibitor to a content partner, enabling it to secure a larger share of the box office.

Meanwhile, the company’s approach to network expansion in China has also changed. The number of Imax theaters in China was essentially flat last year, increasing only from 809 at the end of 2024 to 810 locations by the end of last year, with 19 underperforming theaters closed. This suggests the company’s focus has shifted from simply expanding its screen count to improving revenue per screen. As Imax gradually increases its reliance on revenue-sharing arrangements in China while reducing one-time equipment sales, the linkage between box office results and its revenue performance has become more closely linked.

In the first quarter of this year, the parent Imax Corp. still recorded notable box office growth in markets outside China. But the steep decline in China offset those gains, highlighting how heavily the company’s performance can be tied to a single market or hit film. It also means the company’s profitability has become increasingly linked to Imax China. Looking ahead, management remained optimistic about the rest of 2026, forecasting the company would bring in global box office revenue of $1.4 billion this year, with content supply expected to improve in the second half of the year.

From a stock performance perspective, Imax China looks relatively solid. The stock is up about 13.7% over the past 52 weeks, though it’s down about 10% this year, suggesting investors are gradually reassessing its earnings outlook after last year’s blockbuster-driven rally. That includes a 2.1% decline this week on the first trading day after the earnings release, reflecting investors’ immediate reaction to the company’s tepid near-term performance.

Imax China currently trades at a price-to-sales (P/S) ratio of 3.2 times, in between Ruyi Film Entertainment’s (002739.SZ) 1.9 times and Bona Film’s (001330.SZ) 11 times. Such variance suggests investors continue to assign higher valuations to companies with stronger control over content and greater blockbuster potential, while Imax China, as primarily an exhibition and revenue-sharing company, remains more dependent on external content supply, limiting its valuation upside.

As online streaming platforms continue to divert business from traditional movies, attracting audiences back into theaters has already become increasingly difficult. Imax is shifting from simply expanding scale to try to improve efficiency, from relying on equipment sales to box office revenue sharing, and from relying on Hollywood to betting on local content. Such strategies show the company isn’t just sitting and waiting for viewers to come to its theaters based on old formulas, but instead is trying to figure out where the market is headed.

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"Credibility is not just going to result from telling the world you're operating from a place outside China."

Key Takeaways:

• RedNote's separation of its domestic business from the rest of the world highlights growing credibility and data security hurdles Chinese apps face overseas
• Texas Chicken aims to open 600 stores in China, even as such second-tier fast-food brands often struggle against established giants like KFC

By Doug Young & Rene Vanguestaine

We're seeing a fascinating divergence in how businesses navigate the border between China and the rest of the world. As recently reported by Wired, the social media sensation RedNote — also known as Xiaohongshu in China — is taking steps to separate its China business from its global operations, repeating a strategy we've seen from other Chinese internet majors facing geopolitical pressure. On the other side, Texas Chicken, a second-tier fast-food brand previously known as Church's Fried Chicken, recently announced ambitious plans to enter China and quickly open hundreds of stores.

These two developments underscore the immense complexities of cross-border expansion, whether it's Chinese social media platforms trying to reach the world, or Western brands trying to capture a slice of China's 1.4 billion consumers.

RedNote's recent move to carve out its global operations is primarily driven by politics and data security concerns. We've increasingly seen this theme among China's internet companies. The biggest name in that regard is TikTok, the international arm of China's ByteDance, which sold off its U.S. operations to a group dominated by American investors after coming under pressure from Washington. Others are taking similar steps, like PDD (PDD.US) with its Temu international site, and Tencent (0700.HK), whose popular WeChat has different systems for domestic and global users.

These social media platforms have accumulated millions of users in the West, raising the issue of where all the information about individuals — especially in the U.S. — ends up being stored. The fundamental question is whether a Chinese entity or the government could force these platforms to provide data. To go overseas, addressing cybersecurity issues and registering a legal entity outside China is just the first step. But there is a second side to this story besides information security, namely, credibility. A decade ago, when Tencent tried to launch WeChat in the U.S., people simply didn't want to give their information to a Chinese company. While younger people who live on social media might be oblivious to data risks, foreign governments and regulators aren't. They're going to create issues if the fundamental risks aren't addressed.

We believe credibility isn't going to magically result from telling the world you're operating from Singapore or elsewhere outside China. Given the recent Manus fiasco where a company outside China was told by the Chinese government to undo an M&A deal, simply operating abroad doesn't create much comfort. For RedNote to truly expand in the U.S., it would have to do something similar to TikTok, ensuring U.S. citizen data doesn't end up outside the country.

The longer-term implication of this strategy is clear: we're heading towards a reality where China ends up as an island for user-generated content. Platforms like Facebook (META.US) and other U.S. apps aren't available in China at all. While Beijing would likely be happy if Western influences couldn't get in but Chinese content could invade the world, foreign countries don't want a flood of Chinese content when they aren't even sure if it's coming from real people, bots, or is propaganda.

A second-tier chicken chain's big Chinese gamble

On a slightly lighter note, Texas Chicken announced in April that it signed a deal with a local partner to bring its brand to China — the land where rival KFC has found huge success. The company boasts big plans, aiming to open its first store in Shanghai this summer and eventually reach 600 stores in the market.

We think this sounds highly ambitious. Second-tier fast-food brands typically have a hard time in markets like China, which are quite different from what they're used to in the U.S. Take Popeyes, for example. The Louisiana fried chicken chain has been trying to make it in China for almost 25 years. They got in during the early 2000s, pulled out, and are trying again now with a few shops in Shanghai. But they don't seem to be achieving any major penetration. Meanwhile, KFC is historically way ahead of everyone else and is managed very well by Yum China (YUMC.US; 9987.HK), which also operates Pizza Hut.

However, companies keep throwing out big numbers because of China's 1.4 billion consumers and the relatively strong growth of the franchise model. The franchising wave in China is pretty new, really dating back only the last five or six years. If a foreign brand finds a good partner who knows how the system works, finding franchisees isn't that difficult. Many Chinese people are entrepreneurs in their guts, perfectly willing to take a risk and work very hard in the hope of becoming financially successful quickly.

Chinese homegrown chains like Mixue (2097.HK) and Luckin (LKNCY.US) are famous for massive, rapid expansion through aggressive franchising. In the West, chains franchise much more cautiously. But there's a big difference between a coffee shop and a fried chicken restaurant. You don't go to a Luckin shop to sit down and enjoy coffee as you do at Starbucks (SBUX.US). You buy your coffee online, pick it up, and you're on your way. For a chicken business competing with KFC, you need an actual restaurant. The financial implications for investment, upkeep, and reinvestment are much more serious.

When it comes to food and beverage, discretionary spending goes through boom periods until something new comes to town and customers migrate. We believe we're eventually going to see a correction to these massive franchise openings. It's easy for people to think they can make money easily when everything is going well, but franchising requires continuous investment to keep facilities attractive and up to date. If a franchisee isn't in an optimum location, life will become difficult. We've already seen this correction in the hospitality sector, where hotel chains like GreenTree (GHG.US) went the franchise route and eventually threw out a number of franchisees who fell behind, failed to upgrade, and weren't getting enough revenue. At some point, we're going to see a number of these food and beverage franchisees dropping out too. Given these structural challenges, we remain highly skeptical that many of these rapidly expanding franchisers will be able to keep their scale. When it comes to Texas Chicken, we'll be very surprised if they reach that 600-store milestone.

The company’s latest valuation suggests it is being priced like a sprawling platform built on Douyin’s domestic cash flow, TikTok’s global reach and an aggressive AI push

Key Takeaways

• ByteDance’s latest super-sized valuation looks increasingly like a sum-of-the-parts story, centered on Douyin domestically, TikTok globally, and a growing AI story through Doubao
• The company doesn’t urgently need cash from an IPO, but could start by listing some of its smaller businesses first if the situation is right

By Hu Minghe

Potentially worth more than $600 billion in a recent proposed transaction, ByteDance is no longer being valued like the owner of a single hit app. That’s how much the parent of the Douyin and TikTok short video apps could be worth after a current investor looking to sell its stake at an initial $550 billion valuation raised its price after finding strong buyer interest, the South China Morning Post reported last week.

That super-sized valuation speaks volumes about what investors think ByteDance has become, namely China’s second most valuable internet company, slightly behind Tencent’s (0700.HK) $650 billion and twice as big as Alibaba’s (BABA.US; 9988.HK) $300 billion.

That headline figure raises the question of which businesses are doing the heavy lifting for a company whose portfolio includes the Douyin and TikTok short video apps at its core, along with a host of smaller but influential others like Toutiao, CapCut, Lark and Feishu. The hierarchy is relatively clear: Douyin and TikTok are kings, while AI through the company’s Doubao app is the fast-rising star supporting the latest premium.

The center of gravity starts in China. While TikTok is known to the world, Douyin is a household word in China, where it has become the platform of choice for advertisers and product sellers alike over e-commerce stalwarts like Alibaba, JD.com (JD.US; 9618.HK) and PDD (PDD.US), and where it increasingly also competes with Meituan (3690.HK) in online-to-offline local services.

Douyin: The domestic anchor

To understand why ByteDance can command this kind of valuation, the first place to look is Douyin. While it started as a short video app, Douyin has evolved to include its cash-spinning Douyin E-commerce, which generated about 3.5 trillion yuan in gross merchandise value (GMV) in 2024, up roughly 30% from a year earlier, according to market estimates. Official platform data released this year said shelf-based e-commerce GMV rose 49% over the prior 12 months, while the number of merchants rose 45%. Douyin also said more than 80,000 new merchants crossed 1 million yuan ($146,000) in livestream transaction value.

Those numbers point to a change in how shopping happens on Douyin. Put simply, Douyin is increasingly looking like a place where people go to shop, rather than simply to watch videos and make occasional purchases when something catches their eye.

That helps explain the battlefield Douyin is now fighting on. It is no longer just a platform where brands buy ads or influencers peddle products. Instead, it has become a more direct rival with Alibaba, JD.com and PDD’s Pinduoduo. The battle doesn’t stop at shopping. Through its local-services push, Douyin is also trying to turn short-video traffic into restaurant deals, hotel bookings and other offline spending, which compete with Meituan’s offerings. Estimates put Douyin Life Services’ 2025 payment GMV at more than 850 billion yuan, up 59% year on year.

That’s why Douyin is such an important piece in ByteDance’s current valuation: it’s the clearest example of how the company is turning content into a broader commercial ecosystem offering not only entertainment, but product sales and services.

TikTok: essential but harder to value

If Douyin is ByteDance’s domestic cash anchor, TikTok is its global growth engine. ByteDance’s international sales rose 63% to about 280 billion yuan in 2024, contributing roughly a quarter of total revenue, with much of that coming from TikTok, according to a Bloomberg report.

But TikTok is also harder to value than Douyin due to geopolitics. Following U.S. government pressure, TikTok’s U.S. business that was its largest asset has been restructured into a venture that’s 80.1% owned by American and global investors, with ByteDance holding the remaining 19.9%. At the same time, some commercial activities, including e-commerce, advertising and marketing, remain under ByteDance’s existing U.S. entities. In other words, TikTok is still central to ByteDance’s global story, but has become a more complicated asset.

Oracle has valued its 15% stake in the U.S. venture at about 13.3 billion yuan, implying ByteDance’s 19.9% is worth about 19 billion yuan and the joint venture itself is worth roughly 95.4 billion yuan. But the joint venture is only part of TikTok’s U.S. operation, and ByteDance also still wholly owns TikTok’s operations in other lucrative global markets like Europe, Southeast Asia and Latin America.

AI is the premium

If Douyin is ByteDance’s crown jewel with TikTok in a more supporting role, AI looks like the company’s rising star that’s still a diamond in the rough. Of ByteDance’s plans to reportedly spend about 160 billion yuan on capital expenditure this year, roughly 85 billion yuan – or more than half – is set aside for AI chips and related computing infrastructure. That suggests AI is no longer a side bet, but one of the company’s top priorities.

The consumer side of that push is Doubao, ByteDance’s AI chatbot. The company said this month that daily calls to the Doubao model had surpassed 120 trillion tokens by late March, doubling in three months and rising roughly 1,000-fold since its launch. It also said the number of enterprise customers whose cumulative usage topped 1 trillion tokens had risen to 140, up from 100 at the end of last year.

ByteDance is also trying to push Doubao into interfaces users touch every day. It has already rolled out a Doubao-powered assistant on ZTE’s Nubia M153 prototype phone, and is reportedly in talks with other handset makers. At the same time, ByteDance is extending its AI reach outside China through Cici, its overseas AI app. Its new Seedance 2.0 AI video model has also captured recent headlines for its ability to transform text into realistic, high-quality videos.

IPO in sight?

Despite its huge size, ByteDance has shown few signals lately of rushing toward an IPO. Its shares regularly trade through private market transactions, and its private status helps it avoid the disclosure burden and extra scrutiny that come with a public float. What’s more, the company is reportedly quite profitable and doesn’t really need the billions of dollars an IPO would provide.

If any listings occur, they might start with one or more of ByteDance’s smaller, autonomous units rather than the crown jewels. One such candidate could be Dongchedi, also known as DCar, which is ByteDance’s automotive information and trading platform. At the same time, ByteDance could also simply sell off other non-core parts, like it reportedly did with its Moonton gaming division last month in a deal that valued the unit at $6 billion.

ByteDance is ultimately a puzzle with many moving parts, but also one that appears to be trying to sharpen its focus. Investors are no longer valuing it like the owner of one blockbuster app, but more like a platform that is one of China’s first truly global internet stories. Douyin is its domestic base, while TikTok supplies its global reach with a big political risk asterisk. And Doubao offers the possibility of another major growth engine.

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The company hopes to charm the market with its profitable dating business built around Yidui, a live video app where hosts get paid to help awkward users break the ice

Key Takeaways

• Milian has filed for an IPO, building its business by turning traditional matchmaking into a scalable online role using live three-way video chats
• Its rise comes as rival Hello Group deals with tax trouble and declining users, while socializing app Soulgate eyes its own IPO with an AI-heavy emotional-economy pitch

By Hu Minghe

In a room on the Yidui dating service, romance doesn’t begin with a swipe, but rather with an unlikely third-wheel to grease the often-awkward process of meeting someone new. The Chinese dating and social app is built around live, three-way video chats, where a host sits above two users on the screen and helps to keep the conversation moving. Part ice-breaker, part emcee, part digital-age matchmaker, the online ringmaster steps in when things get awkward, fills the silences, and tries to coax two strangers into something resembling chemistry.

That unusual approach lies at the center of Milian Technology Inc.’s IPO story for investors: the company didn’t try to reinvent dating from scratch. Instead, it simply reimagined a new rendition of one of China’s oldest professions for an age of livestreaming and mobile payments.

That old-meets-new formula has become serious business for Milian, which refiled for a Hong Kong IPO last week after an earlier application lapsed. The company is pitching investors on something very different from the usual routine of picking out potential mates from a lineup, then engaging in getting-to-know-you chats. Its unusual “third wheel” formula for finding love appears to be rapidly gaining traction. Last year its revenue rose 74% year-on-year to 4.12 billion yuan ($570 million), while its profit more than tripled to 519.1 million yuan, most of that from Yidui. By then, the flagship app accounted for 81.7% of total revenue.

Milian is arriving on a Chinese dating scene that badly needs a fresh story. China’s relationship-oriented online social market reached 22.6 billion yuan ($3.1 billion) in 2024 and counted about 280 million users by mid-2025, making it large but hardly easy for companies trying to tap into the market, according to third-party market data in Milian’s prospectus.

But that market isn’t always necessarily a friendly place for business operators. Hello Group (MOMO.US), one of the older names in the space, recently disclosed a 547.9 million yuan ($76.5 million) in potential liability in an ongoing dispute with China’s tax authority. Meanwhile, Soulgate Inc., operator of the socializing-oriented Soul app, is trying to list in Hong Kong after an earlier attempt in the U.S. failed, aiming to woo investors with an AI-heavy emotional-economy pitch.

What makes Milian stand out is that it’s not really a dating app in the Tinder sense at all. The company says its core is a host-led three-party interaction model aimed at users who lack the confidence or social skills to start and maintain conversations online. In other words, it doesn’t simply offer instructions to shy people on how to flirt and then leave them to fend for themselves. Rather, it built a paid layer of online matchmakers to grease the dating process and do much of the hardest work. By the end of 2025, Yidui had accumulated more than 193,000 hosts, turning the old Chinese matchmaker into a commission-driven internet role.

The model’s cleverness lies in how it monetizes the process. Traditional dating apps tend to make money at the door, through subscriptions or premiums to make yourself more visible. Yidui makes money in the room. In 2025, 98.8% of the company’s revenue came from virtual items and interactive functions, while membership services contributed just 1.2%. The company is not really selling access and visibility. It’s selling momentum — the small nudges, gifts, and paid interactions that keep a promising romance moving forward.

Monetizing users

That also helps explain why Milian doesn’t need Soul- or Hello Group-sized traffic to post eye-catching financials. In 2025, the company averaged 10.3 million monthly active users (MAUs) and 1.2 million monthly paying users, with a paying-user conversion rate of 11.6%. Yidui on its own averaged 4.8 million monthly active users, with a seven-day retention rate of 71.9% and a paying-user conversion rate of 16.4%. That compares with Soulgate’s 28 million monthly active users in the first eight months of 2025, and 6.5% paying ratio.

And while Hello Group remains much bigger in terms of its brand recognition, its latest results show a shrinking payer base, with paying users of its core Momo app plunging to 3.9 million in the fourth quarter of 2025 from 5.7 million a year earlier. Yidui may not be the biggest party in town, but it has become unusually good at turning awkwardness, attention, and hope into a growing business.

That formula has been compelling enough to draw in heavyweight backers, including names linked to Xiaomi, Shunwei and Lanchi. Such big names show that serious investors saw more than a quirky social app. They saw a product that found a very specific, very Chinese way to make money by addressing a basic dating problem: too many users want to meet someone, but don’t know how to get the conversation started.

Milian does have an AI angle, but it’s not the company’s main event. Unlike Soulgate, which pitches itself as an AI+ immersive social platform and considers itself more a socializing app, Milian uses AI more as a support layer — to improve matching, prompts, moderation, and newer overseas products, including apps with AI-powered voice interaction. That makes AI more a practical tool than the central figure in its story. Its core product is still human-facilitated interaction, not AI companionship.

That’s also where the story can get messy. The same system that helps awkward users talk more freely can also encourage them to keep spending. Outside the IPO filing, complaint platforms and media reports point to the same tension: some users say they spent heavily on gifts, chats, and other in-app interactions without getting the desired results. More broadly, Chinese court records show that romance scams remain a recurring risk in online dating. Milian acknowledges the same problem, admitting it may not be able to identify every instance of inappropriate content or illegal or fraudulent activity on its service.

But many might argue that’s simply the risk anyone takes when dating, be it online or through more traditional offline means like meeting someone at a social event or a bar.

For now, at least, Milian has something many of its peers must envy: a business model that feels culturally intuitive, financially proven, and still unusual enough to stand out. It did not win by building the slickest dating app. It won by recognizing that millions of users don’t want to be left alone with a blank chat box and a stranger. They want help, a little theater, a little encouragement, and, above all, someone to help get things started and guide them through the awkward moments of meeting someone new.

Milian turned that need into a company. The real test now is whether public investors will become just as enamored with Milian’s story as many of its users who keep coming back for more.

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A cultural tourism company operating boat trips on a celebrated Yangzhou lake is making a second attempt to list its shares on the Hong Kong stock market

Key Takeaways:

• Slender West Lake Culture and Tourism turned overmore than $20 million in revenue last year, most of it from sightseeing boat trips
• Helmed by a tour guide turned entrepreneur, the firm operates a fleet of more than 200 boats, but could struggle to expand beyond its home base

By Lau Chi Hang

Embarking from a scenic lake and ancient canal network in eastern China, a boat trip business is inviting investors on board for a journey to the Hong Kong stock market.

Famed for its picturesque weeping willows, the winding waterway in Yangzhou is a popular destination for cultural tourism, framed by bridges, temples and pavilions built by wealthy merchants during the 18^th century.

The name of the tourist spot - Slender West Lake - is also on the masthead of the waterborne leisure company that now wants to list on the Hong Kong Stock Exchange, seeking funds to expand its fleet and services.

At the helm of Jiangsu Slender West Lake Culture and Tourism Co. Ltd. is an entrepreneur, Xu Sunmei, who started out as a tourist guide in the area before building her company into a business consistently turning over more than 100 million yuan a year ($15 million). 

In that time she made a splash by forming a female crew who rowed across the waters in traditional Yuloh boats, using body-propelled sculling oars. Her current challenge is to steer the company safely to the Hong Kong market.

This is not the firm’s first attempt to dock in the equity market. It first listed on Beijing’s National Equities Exchange and Quotations (NEEQ) in 2017, and filed an unsuccessful Hong Kong application last September, before making its second attempt this year.

Starting out as a junior tour guide, Xu worked her way up to general manager in 2011 and was later promoted to the role of chairman, presiding over a fleet of more than 200 vessels.

The location of the business features in a famous poem written by Li Bai in the Tang Dynasty, which describes a poignant parting with a friend, sailing away towards Yangzhou. Today, boat tours on Slender West Lake are a popular choice for visitors as China heavily promotes its domestic tourism and cultural heritage, as part of a bid to boost domestic consumption.

Woman power

The area’s waterborne tourism services were historically fragmented, but from 2006 operations began to be consolidated and developed. Tours focusing on imperial sites were introduced, along with a nighttime canal trip, and the famous female-crewed boats proved to be a big draw.

The company trained a bevy of young boatwomen in 2009 to manually propel double-oared Yulohs around the lake for tourists, while providing commentary and singing local folk songs along the way.

Slender West Lake C&T’s fleet now numbers 221 vessels, including 36 Yuloh boats, 121 self-drive boats and 64 themed boats. During peak tourism periods, the fleet can carry up to 35,000 passengers a day, according to company data. Based on boat ticket sales, the company ranked second in Jiangsu Province for waterborne tourism services in 2024.

Revenues have exceeded 100 million yuan for the last three years, amounting to 109 million yuan in 2023, 111 million yuan the following year, and rising to 141 million yuan in 2025. Over the same timeframe, profits came in at 46.43 million yuan, 42.88 million yuan and 51.99 million yuan.

Business limitations

It is certainly a business with high returns. Last year, the gross profit margin for waterborne boat tours was 57%, while the margin for sightseeing vehicles reached 76.6%. The overall gross profit margin stood at 58.2%.

However,Slender West Lake C&T has limited scope to expand beyond its geographic base on the Yangzhou waterway, and the boat tourism market there is already highly developed, making it hard to boost revenues further.

The firm relies heavily on waterborne tourism for the bulk of its income. Sightseeing boat services account for 80% of revenue, with bus tours adding another 10%, while management services contribute less than 5%. Once listed, the company will face a critical challenge to find ways to generate additional income streams.

According to research by Frost & Sullivan, revenue from China’s water-based tourism services is projected to grow from 10.2 billion yuan in 2024 to 18.8 billion yuan by 2029, representing a steady but not particularly rapid compound annual growth rate (CAGR) of around 13%.  

Overlooked by foreign tourists

Moreover, competition in the sector is fierce. Slender West Lake C&T ranked only 10^th in China’s water tourism market in 2024, holding a mere 1% share.

If it targets other mainland cities, the firm’s competitive strength is hard to evaluate. This uncertainty stems from the fact that Slender West Lake C&T is ultimately owned by a subsidiary of the Yangzhou municipal authorities, giving it an exclusive right to operate sightseeing tours on its namesake lake. Whether it can scale up beyond its home base in Yangzhou remains an open question.

In fact, the scenery of Yangzhou is not widely recognized outside of China, falling far short of the fame enjoyed by Hangzhou’s West Lake, which would be the first choice for international tourists seeking to explore a celebrated waterscape. The Slender West Lake boat trip business has acknowledged that most of its customers come from within China.

Among listed companies primarily focused on cultural tourism, Impression Dahongpao (2695.HK), which listed last year, offers a relevant comparison, being similarly reliant on a single attraction and a distinct type of tourism. Since its IPO last year, the company’s share price has halved, leaving its price-to-earnings (P/E) ratio currently below 6 times.

Using this as a reference, Slender West Lake C&T’s potential market value would be around 700 million yuan. Given this modest scale and the business outlook, the appeal of the boat trip business to investors may be moderate.

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The strong full-year financials for China’s leading hotelier underscore improving domestic and overseas markets, as well as its strategic shift to a business model that improves profitability

Key Takeaways:

• H World Group’s adjusted EBITDA rose 24.2% last year as it placed greater focus on an asset-light model, echoing the playbooks of global hospitality players
• The company’s blend of domestic scale, margin improvement and disciplined global expansion is driving its growth as it seeks to become a world-class hotelier

By Doug Young

Chinese hotel giant H World Group Ltd.’s (HTHT.US; 1179.HK) latest financial results, released last week, show the company posted strong gains for most of its major metrics, fueled by several key strategic shifts. Once known for no-frills stays, the operator is reinventing itself to capture a fast-evolving domestic travel market eager for quality and reliability, in addition to affordable prices. With stronger margins, rising franchise income and a strong balance sheet, H World is trying to show that China’s vast lodging market can also produce a scaled, asset-light hospitality company with growing international credibility.

Asset-light shift

H World continued to expand its footprint at a steady clip last year, opening 2,444 new hotels and extending its reach across China’s smaller cities, bringing its total to 12,858 at the end of the year. It said it plans to open another 2,200 to 2,300 hotels this year. Many of its new properties are managed on behalf other property owners, or “manchised.”

With a strong focus toward such managed, as well as franchised, properties, away from directly leasing its own properties, the company reported its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) last year rose 24.2% year-on-year, driven by growing fee-based income under the asset-light model.

This model is already widely used outside China by big names like Marriott (MAR.US) and Hilton (HLT.US), and typically brings higher margins and far lower capital spending requirements than the older model of hotel companies that own and operate their properties.

H World’s revenue for all 2025 increased 5.9% year-on-year to 25.3 billion yuan ($3.6 billion), while revenue from its asset-light operations increased by a faster 23% to 11.7 billion yuan. More importantly, that part of its business accounted for 69% of its gross operating profit last year, up from 64% in 2024.

Member-driven demand was another key growth engine for the company. Room nights booked through H World’s loyalty program jumped 21% in 2025, reflecting both customer stickiness and the increasing integration of the company’s digital platforms. The company’s strong cash position and cash flow also allowed it to return $759 million to shareholders as part of a multi-year capital return plan — a show of discipline and confidence in China’s post-pandemic travel recovery.

“This year’s results show our ability to combine scale with quality,” said CEO Jin Hui in a statement. “Our asset-light strategy not only enhances profitability but also allows us to stay agile as we expand our global footprint.”

Structural upside in China hotel market

H World’s roots remain in China, a market that still holds big potential for big chain operators due to strong structural demand and a high degree of fragmentation. Over the past two decades, the company and its peers have thrived alongside China’s growing middle class, which is fueling demand for both business and leisure travel. Celebrating its 20th anniversary last year, H World is among the country’s leading hotel operators, competing with local brands like Atour (ATAT.US) and BTG Hotels (600258.SH). Yet such branded chains still represent only about 30% to 40% of China’s hotel market, well below the U.S. level of about 70%, leaving significant room for growth.

Half of H World’s expansion pipeline is targeted at China’s lower-tier cities, where national operators have historically been underrepresented. These areas are now attracting more travelers thanks to improved transportation networks, including high-speed rail links, and rising local business activity.

At a broader level, growth in China’s travel market is underpinned by a cultural shift: travel in the country is increasingly seen as an important lifestyle choice for a growing middle class. Domestic tourism reached record highs in 2025, driven by retirees, young weekend travelers, and multi-generational families. “We’re seeing steady gains in leisure travel and a recovery in business travel,” noted CEO Jin Hui, underscoring the industry’s continued upward momentum.

Responding to those evolving trends, H World recently launched Hanting Inn, a new family-friendly economy brand with multi-room layouts and flexibility for group travelers. At the same time, the company continues to build its presence in the upper- and mid-scale segments through brands like Intercity, which bills itself as combining comfort and functionality at affordable prices.

International business turnaround

Beyond China, H World’s international division has also shown a marked turnaround in its core European business. The segment, built around the company’s 2020 acquisition of Deutsche Hospitality, reported adjusted EBITDA of 499 million yuan in 2025, reversing a 154 million yuan loss from the previous year. 

The company credited the improvement to sharper cost control, unified brand management, and technology enhancements adapted from its China model. Internationally, H World said it continues to pursue profitability ahead of scale, maintaining a selective presence across Europe, Asia, and the Middle East and North Africa (MENA). It has 13 hotels open or under development in Asia, reflecting a measured approach to serving outbound Chinese travel.

Looking forward, H World said it plans to continue leaning on its asset-light model for expansion in China, where it sees a multi-year window to consolidate its market position around its various brands. Its longer-term ambitions include expanding its network to 20,000 hotels and controlling 15% of China’s hotel market by 2030, a target that would place it among the top global hospitality players in the country.

The company’s domestic dominance remains its strategic anchor, providing both funds and a template for its global ambitions. Its positioning around “quality for the many” keeps it focused on the economy and midscale categories, where H World sees the clearest long-term demand opportunity in China and, increasingly, in selected overseas markets.

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The company is starting to monetize its gaming ecosystem through game publishing, selling in-game items and providing other related services

Key Takeaways:

• Huya’s latest results show its long-promised shift beyond livestreaming is starting to show up in its financials
• For investors, the real bet is not on one breakout title, but on whether Huya can repeatedly monetize games using its streamers, tournaments, publisher ties and content ecosystem

By Hu Minghe

After three years of falling revenue, livestream gaming leader Huya Inc. (HUYA.US) may finally have found a new growth formula in China’s constantly evolving game landscape.

The company’slatest quarterly resultssuggest it may have found a better way to grow, not by reviving its old livestreaming playbook, but by making more money around games themselves. Its fourth-quarter revenue rose 16.2% to 1.74 billion yuan ($252 million), the highest level in 10 quarters. That brought Huya’s total revenue for 2025 to 6.5 billion yuan, up 7% from 2024 – marking its first annual revenue growth since 2021.

The momentum came despite just a 1.9% rise for the company’s livestreaming revenue in the fourth quarter. Instead, Huya’s big growth driver for the quarter was game-related services, advertising and other revenue, which jumped 59.4% to 592.5 million yuan. Its gross profit rose 43.6%, lifting its gross margin to 14.1% from 11.4% a year earlier. The takeaway isn’t that livestreaming is back, but rather that Huya’s newer businesses are finally large enough to become a major revenue contributor. 

That matters because the market has changed for specialist game-streaming platforms like Huya. China’s e-sports industry still generated 29.33 billion yuan in revenue in 2025 and had more than 495 million users, showing the market remains large. But Huya is no longer competing only with longtime rival DouYu (DOYU.US) and other livestream gaming specialists.

Short-video giants such as Douyin and Kuaishou (1024.HK) are also pushing deeper into livestreaming, leveraging their much larger user bases, stronger recommendation engines, and broader monetization tools. Douyin, in particular, has lured top gaming creators and e-sports talent away from traditional platforms.

On the company’s earnings call, acting co-CEO Huang Junhong said Huya is “no longer just a game livestreaming platform,” and has evolved into a “content-driven integrated game services provider.” For Huya, the shift is reflected in titles like “Goose Goose Duck Mobile,” the Chinese version of a social-deduction game originally developed by Gaggle Studios, which was previously popularized in China via Steam. Huya obtained rights to the mobile version of the game and launched its version in January.

“Goose Goose Duck’s” history also explains why the momentum for Huya’s newfound growth is less certain than the headline numbers suggest. Huya didn’t create the original “Goose Goose Duck” craze, and such viral party games can cool quickly. What Huya is trying to prove is that it can localize, market, and monetize such titles more effectively than it did in the past. Huang said the game attracted more than 5 million new users in its first 24 hours and surpassed 10 million within six days.

Monetization, however, is intentionally limited for now, with management expecting stronger revenue only after later content updates. That makes “Goose Goose Duck” more important as a potential future source of game-related sales under Huya’s new business model rather than as a standalone hit.

Emerging alternative model

The latest quarter caps a year when an alternative model has become clearly visible. Huya is no longer just trying to turn viewers into tippers. It’s trying to use streamers, tournaments, short-video reach, and community distribution to help game companies market and monetize titles, then capture more of that value itself. That’s a stronger story than simply “livestreaming stabilized,” and it’s a story investors can map more easily.

The more interesting question is whether Huya is building something broader than one or two successful launches. Management said in-game item sales grew by more than 200% year-over- year in the fourth quarter, and highlighted exclusive presale rights for an “Honor of Kings” FMVP skin, describing game publishing as the company’s most important growth driver.

Company officials also pointed to the Demacia Cup, which Huya hosted in December in what they described as the first time the official League of Legends organizer had handed the event to a third-party livestreaming platform. Taken together, those examples suggest Huya’s publisher relationships, content operations and event capabilities are beginning to translate into revenue beyond simply putting viewers in front of streamers.   

Huya is also trying to build supporting growth legs around that ecosystem. On the earnings call, Huang said AI-powered channels were gaining traction, while the company was expanding AI tools such as the Delta Force Map Tool and experimenting with ways to apply AI features to titles including “Goose Goose Duck.” He also said Huya’s overseas efforts were showing some traction, with steady growth in overseas advertising and in-game item sales and more emphasis on scaling overseas publishing opportunities. None of that is large enough to convince investors to give the company a second look just yet.

Huya’s stock jumped nearly 10% the day it released its latest report last week, suggesting its transformation was capturing investor attention, though it later gave back all the gains. The stock is down about 4% over the last 52 weeks, missing the broader rally for Chinese stocks over that time, showing investors are still waiting to see if the recent return to revenue growth can be sustained.   

Huya is doing its best to create excitement about the potential of “Goose Goose Duck.” Huang said the game has major content updates planned for later this year, that management expects another jump in daily active users in the summer, and that Huya plans to launch a WeChat mini-game version and a UGC editor to extend the game’s life cycle.

The next few quarters will be pivotal, showing whether Huya can repeat the “Goose Goose Duck” formula with other titles and make publishing a durable part of its revenue mix.

Regulation was not a major topic on Huya’s earnings call, but it remains an ongoing risk. Investor concern in that regard eased after late-2023 draft measures aimed at curbing in-game spending incentives and reward mechanics were later removed from the regulator’s website. Still, the reality is that gaming and livestreaming remain closely supervised.

Huya’s progress also looks notable beside rival DouYu, whose latest disclosures still show a company struggling to stabilize a shrinking livestreaming business, even as it leans on cost cuts and side businesses to steady its ship. That contrast helps explain why Huya’s quarter matters. It isn’t proof that its turnaround is complete. But at least it shows investors what the next version of Huya might look like. That’s a better story, though it will still require more time to show it’s sustainable.

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The company with strong ties to the Taiwanese Mandopop king swung into the red last year, blaming slower content launches and impaired trade receivables

Key Takeaways:

• Star Plus Legend said it lost up to 52 million yuan last year, reversing a profit of 50.2 million yuan in 2024
• The company, closely tied to pop star Jay Chou, reported declining revenues for its IP business in the first half of last year, but has been aggressively diversifying since then

By Edith Terry

Taiwanese singer and songwriter Jay Chou has sold more than 30 million records and is regularly likened to an Asian edition of Taylor Swift, with 16 spiders and an asteroid named after him and his songs. He was the first Asian singer to top the global album charts with his 15th studio album, Greatest Works of Art, in 2022. But at 47, the “King of Mandopop” isn’t getting any younger.

That may be a problem for Star Plus Legend Holdings Ltd. (6683.HK), which is closely tied to the superstar, and last week warned that it lost up to 52 million yuan ($7.5 million) last year, marking a sharp reversal from its 50.2 million profit in 2024.

Star Plus blamed the reversal of fortune on restructuring as well as a slower pace of content launches and impairment provisions on trade receivables – showing some of its clients aren’t paying their bills in China’s slowing economy. “The group is currently at a critical stage of upgrading its business structure and strategy,” it said.

Perhaps many of the company’s investors are Jay Chou fans, which might explain why they shrugged off the news and rewarded the stock with a 13% rise over the week after the announcement, taking it to a four-month high.

Star Plus makes money from a coffee brand endorsed by Chou and licensing rights to his cartoon alter ego, Chou Chou. A social media influencer, Liu Genghong, notorious for wearing a tight-fitting Aquaman costume on his livestreaming fitness program, is another Star Plus frontman, but Chou is by far the company’s superstar when it comes to its revenue makeup.

In the business world, Chou’s fans include the Shanghai Museum, which staged an exhibition last October on Chinese culture aimed at attracting young people with Chou’s avatar as its main attraction. Another fan is Pop Mart (9992.HK), the company behind the Labubu sensation, which sells Chou Chou figurines in its trademark blind boxes. Both organizations go through Star Plus, which said it had exclusive rights for 10 years to all Chou-related IP at the time of its IPO.

Even so, Star Plus Legend’s results from the first half of last year show the Jay Chou brand may be aging. The company’s revenue rose 33% year-on-year to 354.5 million yuan, largely thanks to its new retail business, whose revenue nearly doubled to 210.7 million yuan from 110 million yuan a year earlier. But revenue from its IP segment sagged by 8.2% to 144 million yuan.

The IP slowdown was a reversal from a much stronger 2024, when revenue from IP and content creation grew by 65.1%, raising questions about the company’s overwhelming reliance on the shaggy-haired Chou.

Chou set up Star Plus in 2017 with Yang Chun-Jang, his manager, Yeh Hui-mei, his mother, and Chen Zhong, one of his artistic managers. Although Chou has no direct shareholding in the company, he made it an investor and production agent for his own company, JVR Music, which is also owned 5% by his mother. Chou owns 40% of JVR and Yang owns 45%.  

New initiatives

New retail, one of Star Plus’ two main business lines, mainly consists of a low-carbohydrate coffee business under the company’s Modong brand, but also includes skincare products and a separate line of matcha powder. Its IP business includes event management and content creation, which both rely heavily on Chou’s star power.

At the time of its 2023 Hong Kong IPO, the company’s prospectus noted the risk of over-dependence on Chou’s popularity. In 2019, his “promotional effect” accounted for 83% of the company’s new retail segment revenue, gradually declining to 45.2% by 2022. Revenue from content creation centered on Chou grew from 5.7% to 13.3% of the total over that time.

Analysts seem to think the company is taking necessary steps to address its Jay Chou overreliance through the reorganization mentioned in last week’s announcement, which may explain the post-announcement stock gains. Last December Huayuan Securities wrote: “We believe the company has successfully infused the emotional value of its IP into diverse touchpoints, ranging from offline physical stores to online interactions, and from cultural experiences to technological products.”

Huayuan projected the company’s revenue would grow 36.2% last year to 795 million yuan, and forecast even faster growth through 2027. “The company is transforming from a traditional ‘IP creator and operator’ to a ‘communicator of happiness’ through a series of strategic deployments,” it said, rating the stock as “overweight.”

Star Plus has been busy over the last nine months trying to expand its scope. It has invested in Galaxy Corp., a 1 trillion won ($676.2 million) South Korean unicorn that positions itself as an AI-plus-robotics-plus-entertainment content firm. Like Star Plus Legend, Galaxy banks on a single artist, G-Dragon, sometimes called the “King of K-Pop” and the trade name for rapper Kwon Ji-yong, for most of its brand value. In January this year, the pair expanded their agreement into a partnership, with Galaxy announcing plans to work with Star Plus to increase its presence in China.

More recently, Star Plus has signed deals with other high-profile Korean artists, including Kim Joong-kook and Song Kangpho. It is also considering a U.S. IPO on the Nasdaq according to Korean media reports.

Last September the company also purchased 1.17% of the shares in Beijing’s Bird Nest National Stadium, becoming the only private shareholder in the central venue for the Beijing 2008 Olympics. And it is partnering with robotic sensation Unitree, a creator of the crowd-pleasing robots from China’s last two “Spring Festival Gala” TV programs, in a joint venture to develop character-based robots, starting with a robot dog.

The initial announcement of the tie-up with Unitree parent Yushu Technology last July caused Star Plus Legend’s stock to surge, as investors got excited about the potential for a major new revenue source. The two sides formalized their relationship in November with announcement of a 50-50 joint venture. That same month, Star Plus announced one distribution agreement with Adata Technology involving 1,000 quadruped robots and 20 million yuan, and another with Cloud Factory Technology involving 5,000 quadruped robots and 100 million yuan.

How is it paying for its new series of deals? Last November, the company announced two new stock issues involving about 130 million new shares, raising a combined HK$760 million ($97 million). Those followed another sale in August when the company raised HK$324 million through the sale of 37.5 million shares.

All this shows that Star Plus is thinking about the next steps as Jay Chou’s star inevitably fades, and has built up its war chest to pay for its new ventures. Now, investors will be waiting to see if some of those new initiatives can bring back some of the star power to Star Plus’ business.

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The Middle Eastern social media and gaming firm announced the move as it said it expects to start generating revenue from its new gaming initiative in the second half of this year

Key Takeaways:

• Yalla announced a new partnership with the Saudi Esports Federation, as part of a new buildup of its presence in the key Middle Eastern market
• The company’s profit rose 6.2% in the fourth quarter, as it focused on cost controls and efficiency improvements using its self-developed Themis multimodal AI model

By Doug Young

“Two” was the big number for Yalla Group Ltd. (YALA.US) in its latest financial report released on Monday. The Dubai-based social media and gaming company revealed it expects to start generating significant revenue from its recent mid- to hardcore gaming initiative in the second half of this year. It also unveiled a second major base taking shape in its core Middle East and North Africa (MENA) region with a ramp-up of its presence in Saudi Arabia. And it provided some detailed discussion of an evolving “two pronged” strategy for the future of its gaming operation that could power it back to strong revenue growth in the future.

At the same time, the company also briefly touched on the current unrest in the Middle East. All that, as Yalla continued to report stable results for its two current businesses consisting of a voice-based chat service and a casual gaming service.

The company ended the year on another two-pronged note as well, as its profit rose in the fourth quarter, reflecting its fiscal discipline. And in one final double-play, it unveiled a second major share repurchase program as it winds down a current one of similar size, which combined could see it buy back up to $300 million worth of shares using its large cash pile.

All eyes have been focused lately on Yalla’s mid- to hardcore gaming initiative, which will complement its older casual games business and could return it to the double-digit growth it recorded in earlier years. It launched its first game in that initiative, “Turbo Match,” in last year’s third quarter, and plans to start official promotions in this year’s second quarter as it prepares to serve gamers at a “potentially significantly larger scale,” said Chairman and CEO Yang Tao.

The company is also developing a desert-themed simulation game (SLG) in collaboration with an established game studio. That game, which Yalla says features “rich Arabian aesthetics and strategic gameplay,” is currently in the final stages of product optimization and set to start official promotion in the second quarter.

“From a medium- to long-term perspective, our gaming strategy is built on the dual approach of consolidating our core portfolio while also expanding into new growth segments. On the core side, we will continue to strengthen our casual gaming foundation,” said COO Jeff Xu on the company’s earnings call. “On the expansion side, we remain committed to investing in mid-core and hardcore games under a clearly defined two-pronged roadmap, utilizing in-house development for mid-core titles, and partnership-based publishing for hardcore games.”

Xu added that the new games will remain focused on the company’s core Middle Eastern market initially, but could eventually be expanded to other markets including North America and Europe. The company expects the new mid- to hardcore gaming initiative to start generating revenue in the second half of this year.

Yalla’s stock is up more than 60% over the last 52 weeks, bringing it near its IPO price from its 2020 New York listing. But investors may also be growing impatient to see some results from the new gaming initiative, which was reflected in pressure on the stock after the latest announcement. “We appreciate your patience with our team,” Yang said on the earnings call.

Growing Saudi presence

Yalla is based in the United Arab Emirates (UAE), but recognizes that an equally important regional market is adjacent Saudi Arabia, whose capital, Riyadh, was host to one of several live tournaments the company held last year. In a nod to the country’s importance, Yalla announced it has set up a regional office in Riyadh and entered a strategic partnership with the Saudi Esports Federation to better align with the country’s Vision 2030 plan and its National Gaming and Esports Strategy.

“Serving as the official event partner of the Saudi eLeague 2026 will meaningfully enhance our brand visibility in Saudi Arabia, one of our most important growth markets,” Yang Tao said. “We believe this will enable us to cultivate deeper connections with users in the Saudi market and strengthen our regional influence,” he added, pointing out the partnership wasn’t limited to a single tournament.

The company also discussed its use of AI to operate more efficiently, centered on Themis, its in-house developed multimodal model. It said it’s using the model to analyze text and images and identify inappropriate content, and is also using AI to find ways to encourage more engagement and interactions within its online community.

While the company was generally upbeat on its new gaming and AI initiatives, it said unrest in the Middle East prompted it to arrange for employees in affected countries to work from home.

Yalla provided the outlook, as well as the brief on its current situation, as it reported revenue of $83.9 million during the fourth quarter, compared with $90.8 million a year earlier. That gave it full-year revenue of $341.9 million for 2025, up slightly from 2024.

The company’s cost of revenue fell 15.1% in the fourth quarter, more than double the rate of its revenue, helping to boost its net margin to 41.2%, up 5.4 percentage points from a year earlier. As a result, its fourth-quarter net income rose 6.2% to $34.5 million from $32.5 million a year earlier. The company’s strong cash flow helped to raise its cash position to $755 million at the end of last year from $656 million at the end of 2024.

To put that cash to work, Yalla unveiled a new $150 million share repurchase, which will follow an earlier $150 million buyback that saw the company repurchase $56.6 million worth of its shares last year. The earlier buyback plan still has $44 million worth of unused quota, which Yalla will use first before dipping into the new $150 million plan, executives said.

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The company booked a paper profit by offloading its money-losing soccer club, but its cash-burning new energy commercial vehicle business is in an equally difficult league

Key Takeaways:

• ZO Future was profitable in the first half of its fiscal year to December, but only thanks to gains from offloading its debt-laden Birmingham City Football Club
• The company's ambitious pivot to new energy vehicles also faces a steep uphill climb given its recent arrival to the field

By Warren Yang

ZO Future Group (2309.HK), formerly owner of the Birmingham City Football Club, is following a classic playbook by Chinese companies making foreign acquisitions: take over a high-profile dud asset, rack up years of losses and then pivot to the next big thing. In ZO’s case, the foreign asset was a prominent British soccer club, and the next big thing is green vehicles. But as some sports fans may say, you can't just change the game and expect to win the league.

Last Friday, ZO Future, previously known as Birmingham Sports Holdings, released midyear results that featured a headline-grabbing return to profitability that suggested a major turnaround after years of losses. For the six months to last December, the first half of ZO Future’s fiscal year, the company scored a net profit of HK$179.8 million ($23 million), reversing a loss of HK$117 million for the same period a year earlier.

But a closer look quickly casts doubt on the turnaround story. ZO Future’s profit for its fiscal first half was entirely due to the disposal of its perennially loss-making Birmingham City Football Club last November. The company pocketed gross proceeds of just 5 million pounds ($6.7 million) in cash from the sale of its 52% stake in the team. When ZO Future bought a majority stake of the club in 2016, the team, then under receivership, was worth 12.3 million pounds. So, the team has lost value since then, which isn’t surprising given its financial troubles.

In addition to acquiring ZO Future’s equity in the Birmingham City club, the buyer, a subsidiary of an investment firm founded by hedge fund manager Wagner in New York in 2008, will also settle 19.2 pounds million of debt owed by the team to ZO Future. The new owner of the Birmingham City Football Club, Shelby Cos. Ltd., already bought part of ZO Future’s stake in 2023. 

After eliminating losses and debt related to the club, ZO Future booked a HK$229.1 million net profit from the discontinuation of the business. ZO Future’s continuing operations, now almost entirely comprised of a fledgling new energy vehicle (NEV) business, made a net loss of HK$49.3 million in the first half of its current fiscal year, more than double the HK$20.4 million it lost a year earlier.

Revenue from the company’s continuing operations during the six-month period did double to HK$56.6 million. But even that was only a tad larger than its administrative and selling expenses totaling HK$52 million. What’s more, the company booked a HK$16.1 million loss from an equity-accounted investment.

ZO Future’s transformation into an NEV brand marks a certain denouement of an exuberant chapter in outbound investment by Chinese firms. As recently as a decade ago, flush with cash and cheered on by the government, Chinese companies went on a shopping spree for overseas soccer clubs, spending an estimated $2.3 billion on teams from Birmingham City Football Club to Inter Milan to Aston Villa Football Club. The logic behind the purchases was often murky — a mix of soft power projection, personal passion, and occasionally, a convenient conduit for moving money out of China.

The results, however, were predictable. Most of these assets proved to be money pits that required constant new funding, with operating costs far outstripping the modest revenue they generated. ZO Future's journey with Birmingham City was typical of this story, resulting in annual losses and the need for frequent capital injections.

Big bet on NEVs

ZO Future is now betting big on NEVs — specifically, commercial trucks under the ZO Motors brand – which at least takes it out of the higher-profile but extremely overheated sector for passenger vehicles. That said, the company’s NEV sales aren’t anything to get too excited about, amounting to a little over HK$30 million in its fiscal first half. The company’s NEV strategy is twofold. In China, it’s looking to go asset-light. To that end, it inked an exclusive manufacturing partnership in 2024 with Weichai New Energy, which eliminates the need for ZO Future to spend the big money necessary to build its own factory.  

But the company has its own manufacturing bases overseas, with plants in California and Cambodia. The U.S. facility, in the city of Fontana, serves as a local assembly hub designed to signal its long-term commitment, while also catering to "buy American" sentiment and pre-emptively helping it to navigate local regulations. Its Cambodia factory can help it gain a first-mover advantage in that emerging market, while allow it to avoid import tariffs on finished vehicles and build a local ecosystem, including charging infrastructure.

On paper, ZO Future’s NEV ambition looks laudable. The commercial NEV segment is poised for growth as logistics companies and local governments seek to decarbonize their fleets. And seeking a niche in that space avoids a passenger electric vehicle market that has become brutally competitive, both in and outside China, crowded with both traditional automakers like BYD (1211.HK; 002594.SZ) and well-funded startups like Nio (NIO.US; 9866.HK).

ZO Future’s NEV business will need to make significant investment to gain traction. But its balance sheet is fragile, with only HK$43.7 in cash at the end of December, as it continues to grapple with negative cash flows. In fact, in its midyear report, the company admitted that its solvency may be in danger after it was hit by a net cash outflow of about HK$200 million from operations in the first half of its fiscal year.

“This condition indicates the existence of a material uncertainty which may cast significant doubt on the group’s ability to continue as a going concern,” ZO Future said.

At the moment, financial support from the company’s major shareholders is enough to supply it with sufficient working capital. That shareholder group is led by a man named Vong Pech, a former Chinese national previously named Wang Dong, who is now a naturalized Cambodian and owns about 30% of the company. But there’s no guarantee that this lifeline will always be there. 

ZO Future shares have slipped about 2% through Tuesday since the release of its midyear report, which suggests that the headline net profit didn’t really fool investors. They trade at a price-to-sales ratio of 4.2, higher than 1.3 for BYD, even though ZO Future’s revenue base is tiny compared to the NEV titan.

At this point, whether ZO Future will be any better off as an NEV maker than as a soccer club owner is doubtful. The company may end up looking for another business in the latest hot area if it fails to score a big win in the NEV game – a relatively common approach in a landscape of similar publicly traded Chinese “chameleon companies.” But that would only erode investor confidence in its ability to chart a path to sustainable growth.  

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The film producer and movie ticketing company staged a comeback in the second half of last year after suffering a profit slump in the first half

Key Takeaways:

• Maoyan Entertainment said it expects to report its profit rose around 200% last year, citing strong performances for its films and cost controls
• The movie ticketing and production company’s revenue rose between 12.7% to 15% in 2025, far slower than its profit gain

By Lau Chi Hang

The blockbuster “Ne Zha 2” shattered Chinese box office records early last year, grossing a staggering 15.46 billion yuan ($2.25 billion) in ticket sales to become the world’s highest-earning animated film of all time. But even as the movie’s producers and cinema operators boomed, online ticketing platform Maoyan Entertainment (1896.HK) failed to profit from the hit, reporting a 37% profit slump in the first half of last year.

But the Chinese film market’s boom also proved to be short-lived, with the box office flagging in the second quarter of last year as “Ne Zha” inevitably lost momentum. That didn’t bode well for Maoyan and its peers, leading investors to worry the group would suffer in the second half of the year as well. Against that backdrop, Maoyan’s upside profit surprise for all of 2025, contained in an announcement last week, defied the earlier skeptics.

The company said it expects to report 2025 revenue between 4.6 billion yuan and 4.7 billion yuan, up 12.7% to 15.1% year-on-year. While that increase was modest, the company said it expects to report its profit surged by a much larger 196.9% to 224.4% year-on-year to between 540 million yuan and 590 million yuan.

Three key profit drivers

Maoyan attributed the big profit leap to strong performances for some of its key metrics, led by films it promoted, produced and distributed. Several titles delivered especially strong results. Those included its self-distributed and produced “Detective Chinatown 1900,” which grossed over 3.6 billion yuan, making it China’s third-highest grossing film of 2025. Another hit, “Nobody,” generated 1.7 billion yuan, while “The Lychee Road” raked in 600 million yuan.

The company also benefited from a strong live performance market in China, with box office revenue from such shows rising 6.4% year-on-year to 61.7 billion yuan last year. Benefiting from that boom, Maoyan’s live entertainment segment achieved record gross merchandise value (GMV) last year, growing significantly faster than its peers.

Lastly, the company also credited cost controls as an important factor behind the big profit gains. That included a strategic focus on high-quality content development and investment, which it said helped to mitigate risks associated with content development. It also made aggressive efforts to rein in outstanding accounts receivable, accelerating the collection of long-overdue payments and recovering some past-due amounts.

Despite the big profit gain, Maoyan’s stock rose less than 2% to close at HK$6.41 the day after the upside profit announcement. Still, the uptick marked a reversal of a selloff that saw the stock drop 21% over the seven previous trading days.

Sputtering box office

Investor concerns about Maoyan’s outlook aren't without merit. China's box office initially surged post pandemic, hitting 54.9 billion yuan in 2023 as people celebrated the end of several years of tough pandemic restrictions. But that rebound quickly sputtered, causing the box office to tumble to 42.5 billion yuan in 2024, before rebounding to 51.8 billion yuan last year. But even last year’s rebound was misleading, since “Ne Zha 2” accounted for nearly one-third of ticket sales that year.

British consultancy Gower Street Analytics forecast late last year that China’s box office would generate 51 billion yuan this year, marking a 4% dip from 2025. But things could be even worse, following a critical Lunar New Year period that delivered just 5.75 billion yuan over seven days last month — the worst showing since the pandemic. Such a weak start has raised doubts over whether the annual box office will even reach 50 billion yuan. Most industry watchers see little to no likelihood of a return to the 2019 peak of 64.1 billion yuan anytime soon.

Such a stagnating, or even contracting, market will make sustainable profit growth difficult for anyone. In such an environment, breakout hits become all the more important, as evidenced by Maoyan’s 2025 surge that was fueled by success of several key films.

More than simple luck?

The problem is, producing consistent box office hits involves significant serendipity. There’s no guaranteed formula for success, even with substantial investment, A-list actors and renowned directors and screenwriters. “Ne Zha 2’s” phenomenal triumph was a generational event unlikely to play again anytime soon. Banking on Maoyan to deliver consistent hits seems speculative at best. Such unpredictability inevitably causes investors to value companies like Maoyan at a discount in the capital markets.

Acknowledging constraints of its sector, Maoyan is trying to build a stable base by pivoting towards the less fickle market for merchandise and other products based on movie-based intellectual property (IP). It established its Menggu Culture division last fall to manage its animation business, and launched an MmmGoods brand to leverage its IP in the retail sector. The overall strategy leverages Maoyan’s movie IP as a springboard into a diverse array of entertainment scenarios and merchandise categories – an area where many Western film companies like Disney have found big success.

While such a strategy sounds prudent, Maoyan’s midyear report showed that revenue from “advertising services and others,” which includes IP development, totaled just 83.3 million yuan in the first half of last year, and even that was down 17% year-on-year. That shows the business remains nascent, and will require big investment to produce meaningful returns, a process likely to take years.

Rival Damai Entertainment (1060.HK), backed by e-commerce giant Alibaba, reported a profit of 520 million yuan in the first half of last year and commands a market cap near HK$25 billion ($3.2 billion). It significantly outpaces Maoyan in terms of profitability, financial backing, and scale, thanks in no small part to its membership in the Alibaba family. Given the current challenging market, Maoyan’s prospects of matching last year's profit, let alone exceeding it, appear slim, providing limited appeal for investors despite last year’s big profit gains.

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The first of iQiyi’s three immersive experience-based theme parks in the city of Yangzhou will feature content from its streaming platform

Key Takeaways:

• After seven quarters of declining revenue and the departure of its CFO, iQiyi has launched a series of small-scale theme parks to further monetize its intellectual property
• Pop Mart, Miniso and Netflix are also experimenting with high-tech immersive theme parks, hoping to better leverage their content to boost sales

By Edith Terry

China is known as the land of copycats, including its renown for pirated movies and TV shows as recently as the early 2000s. Still, it’s probably mostly coincidence that leading video site iQiyi Inc. (IQ.US) opened the first of three theme parks planned for Yangzhou, Beijing and Kaifeng just months after U.S. rival Netflix (NFLX.US) also opened its first two immersive experience-based “Netflix Houses” in Dallas and Philadelphia.

Tickets were sold out for the first day at iQiyi Land in Yangzhou, a major city in Eastern China’s Jiangsu province, according to Chinese media reports, That capped nearly a decade of development by an iQiyi team charged with creating content for offline immersive, interactive experience spaces, with nearly 60 offline immersive theaters in 30 Chinese cities already operating.

The new theme parks take the immersive experience a step beyond sit-down theaters, though the spaces are still relatively small. The Yangzhou park is a leased, 10,000-square-meter building, about 1/400th the size of traditional outdoor theme parks. And it cost a fraction of the price for Shanghai Disney Resort and Universal Studios Beijing, whose estimated costs both topped 30 billion yuan ($4.3 billion).

The new iQiyi Land parks will mostly be between 10,000 square meters and 20,000 square meters in indoor spaces that allow for year-round operation and rapid IP refresh cycles, according to Zhang Heng, general manager of R&D. They will include virtual reality, motion systems, scent, wind, sound and live actors, as well as ready-made social media locations, to animate story worlds based on popular films and TV series.

The original Yangzhou iQiyi Land is aimed at females between the ages of 16 and 35. It has seven zones, with immersive theaters, light-and-shadow spaces, stage performances, interaction with non-player characters (NPCs), social games, retail and dining. The company envisions about 300,000 customer visits annually – a small fraction of the 14.7 million who visited the Shanghai Disney Resort in 2024.

“Experience comes first,” said Zhang. “We don’t want the experience to be affected just for the sake of having more visitors.”

The next two parks in Kaifeng, of Central China’s Henan province, and Beijing are currently under construction and due to open by year-end. The Beijing location is in a shopping mall in the city’s central business district, while the Kaifeng park will be twice the size of Yangzhou, targeting families and male viewers.

iQiyi is badly in need of a new revenue stream. Since the fourth quarter of 2023, when its revenue rose just 1% year-over-year to 7.7 billion yuan, the company’s revenue has been falling steadily. The declines continued in last year’s third quarter, with revenue down 8% year-on-year to 6.68 billion yuan. And the company slipped into the red in the second quarter of 2025, and reported another loss of 249 million yuan in the third quarter.

Most of iQiyi revenue comes from membership services, which accounted for 4.21 billion yuan, or 63% of the total, in the third quarter of last year. Online advertising services accounted for 1.24 billion yuan in the quarter, or 18.5% of revenue, and content distribution revenue accounted for 644.5 million, or nearly 10%.

‘Interactive and scalable experiences’

“By integrating technologies like AI and XR (extended reality) with our content IP, iQiyi Lands will provide interactive and scalable experiences that are faster to iterate and more efficient than traditional them parks,” founder and CEO Gong Yu said last November on the company’s earnings call after announcing its latest results. “This approach reduces space and capital requirements, with revenue expected to come mainly from ticket sales and other on-site spending.”

As it tries to return to revenue growth and profitability, iQiyi’s CFO Wang Jun also resigned from the company in January, without a new permanent person named for the role. The company’s shares rose nearly 9% in the two days after the announcement, but have given back all that and more since then and are now down about 10% this year.

iQiyi’s shares have lost 90% of their value since the company listed on the Nasdaq in 2018. Its subscriber base has been shrinking, last reported at 102 million in 2023. It competes with market leader Tencent Video, with 110 million subscribers, and Youku, owned by Alibaba, with 92 million subscribers as of 2024. But some of the biggest recent competition for the group is coming from a new generation of short-video specialists led by Kuaishou (1024.HK) and Douyin, the Chinese version of TikTok.

Only time will tell if iQiyi’s leap into theme parks can reverse its sliding revenue. But it’s certainly not the first intellectual property (IP) owner to try out this direction. Consumer spending in China may be depressed by the nation’s economic slowdown, but experiential consumption is a rare exception to that malaise.

The industry leader in the relatively new niche of miniature or compact theme parks driven by IP is undoubtedly Pop Mart International (9992.HK), owner of last year’s breakout Labubu collectible toys. The company’s 40,000-square-meter Pop Land in Beijing’s Chaoyang Park launched in 2023, and was the capital city’s most popular attraction by 2024, according to rankings from lifestyle app Dianping.

Featuring the furry Labubu and its older Molly character, among other IPs, Pop Land was a main contributor to the company’s 748.2 million yuan in its “wholesale and others” revenue segment in 2024, up 50.7% year-on-year. The segment’s gain slowed to just 9.4% year-over-year in the first half of 2025, as the figure reached 261.3 million yuan. But the company hopes to jumpstart the segment with the launch of its first overseas Pop Land in a Singapore shopping mall in October.

Pop Mart’s co-COO Si De told Reuters last year the company spent years studying Disney’s success. “We have learned from Disney for a long time,” he said. “In fact, Disney’s great value lies in its ability to operate IP over the long term, even up to 100 years.”

Retailer Miniso (MNSO.US, 9896.HK) has taken a similar tack with the opening of a 2,000-square-meter Miniso Land store on Shanghai’s iconic Nanjing East Road in 2024. The store generated $1.65 million in revenue in its first month and $14 million in its first nine months, with customer traffic eclipsing 10,000 visits daily. The company has quickly expanded the concept overseas, with stores in Bangkok and Sydney.

iQiyi’s new theme park gamble is still very much a work in progress, but should certainly be able to contribute new revenue. Visitors who encounter its various IP for the first time are potential candidates for iQiyi’s membership programs and core video services, and vice versa. But if the initiative does well, its video rivals are almost sure to follow.

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The online literature company lost up to 850 million yuan last year, largely due to a massive charge related to its New Classics Media video acquisition

Key Takeaways:

• China Literature warned it expects to report a net loss of up to 850 million yuan for last year
• Much of the loss owes to a 1.8 billion yuan goodwill impairment charge related to New Classics Media, which China Literature bought for 15.5 billion yuan in 2018

By Lau Chi Hang

Its name may sound relaxing, but recent stock volatility has left shareholders of online reading platform China Literature Ltd. (0772.HK) hardly feeling any of the calm that typically comes from the calming type of good read implied by the company’s name.

After peaking at HK$45.50 late last October, China Literature’s stock suddenly went into a tailspin that wiped out 20% of its value within two months at the end of last year. It began to rebound early this year, only to suddenly shift gears again and tumble after an “incident” on Jan. 24 involving an uprising of its authors that we’ll describe in more detail shortly. Then, investors suddenly piled back in after management unveiled its 2026 strategy, fueling a 27% surge in the stock over two days.

But just as the bulls were returning, the company wrote yet another new chapter for its stock by issuing a profit warning last week saying it expected to report a net loss of between 750 million yuan ($108 million) and 850 million yuan for last year. That was enough to unleash the bears again, as the shares plunged 8% the next day.

The filing disclosed that recoverable goodwill for the company’s New Classics Media unit fell below the division’s carrying value, necessitating an estimated goodwill impairment charge of 1.8 billion yuan. Excluding that, the company would have reported a non-IFRS net profit of 800 million yuan to 900 million yuan last year, down between 21% and 30% from the 1.14 billion yuan it earned in 2024.

Headwinds gradually easing

Despite a steady flow of losses, the string of negative news around China Literature appears to be largely priced into its stock by now. The Jan. 24 incident mentioned earlier stemmed from the company’s July 2025 replacement of its decade-old “Four-Round Recommendation PK System” for pushing content to readers with a “Traffic Package Intelligent Distribution Model.” On Jan. 24, authors who form the core of the company’s writer base suddenly took to forums alleging unfair traffic allocation and low data transparency under the new system, with mid-tier authors seeing their incomes halved. The controversy simmered until early this month, when China Literature announced modifications, drawing a line under the turbulent chapter.

Then there’s the source of China Literature’s most recent selloff. It acquired New Classics Media for 15.5 billion yuan in 2018, aiming to use the company’s film and TV production capabilities to bring some characters and stories from its huge literary library to the video world. But New Classics Media’s contributions were subsequently underwhelming. A recent boom for short-form dramas has been especially ill-timed, since New Classics Media focuses on long-form series and movies. The result has been repeated goodwill impairments that have significantly dragged down China Literature’s profits over the last few years.

But the situation is finally improving, and New Classics Media’s goodwill impairments have been fully written off. While China Literature’s investment didn’t provide much of a boost to its business, the recurring impairment drag on its profits is at least in the past. Freed from that weight, the company can move forward unencumbered by the need for future write-downs related to the subsidiary.

Stagnating core operations

With legacy issues now subsiding, China Literature’s future performance will hinge on its core literature business. That business looks lackluster right now, even showing signs of decline. The company’s revenue plunged 24% to 3.19 billion yuan in the first half of 2025 from 4.19 billion yuan a year earlier, while its gross profit fell by a similar 22.6% to 1.61 billion yuan.

Despite that, its net profit jumped 68.5% to 850 million yuan during the six-month period. But the rise wasn’t due to anything operational, and instead was driven partly by other gains of 583 million yuan, primarily from the disposal of investments in other companies. The company also benefited from a 20.4% drop in selling and marketing expenses and an 11% reduction in administrative costs, showing its midyear profit stemmed entirely from cost-cutting and non-recurring gains, both unrelated to its core operations.

In his earlier 2026 strategy comments that got investors so excited, CEO Hou Xiaonan outlined three core strategic pillars for this year in an internal communication, namely, Evergreen Content, Intellectual Property + AI, and Globalization.

Evergreen Content focuses on supporting core authors and key genres, elevating short dramas and comics into premium offerings, and deepening IP integration into users’ lives using merchandise and collectibles to cultivate long-lasting IP. IP + AI leverages artificial intelligence to enhance efficiency and value in content incubation, premium production, IP development, and global industry expansion. And Globalization aims to build a global engine for multi-language market expansion.

Strategies under scrutiny

Despite the initial investor enthusiasm, Hou Xiaonan’s new strategy appears somewhat superficial by simply outlining broad principles rather than providing concrete, detailed action plans. It’s hard for investors to see how the company can succeed in the future based solely on such broad statements.

At the same time, China Literature seems to be falling steadily behind in the battle for viewers due to growing popularity of short dramas. Despite acknowledging it needs to make more effort in that direction, its eighth-place ranking on brand research organization CNPP’s 2026 list of the top 10 production brands suggests that catching up won’t be easy.

As to globalization, the current reliance on AI for translating works into other languages to enter new markets has limitations, since such works often fail to capture nuanced cultural context and local linguistic styles effectively. The bottom line is that investors are waiting to see what chapter China Literature will turn to next to revive its stalling growth story.

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The Macao gaming operator’s shares plunged after being saddled with a major increase for rights to use the name of its parent, MGM Resorts

Key Takeaways:

• MGM China said its licensing fee rate for rights the MGM Resorts name doubled to 3.5% of its monthly revenue starting this year
• The Macao casino operator’s market value plunged by over $1.3 billion in a single day after the announcement

By Lau Chi Hang

Its business is dealing in money at its many casinos worldwide. But MGM Resorts International (MGM.US) was behaving more like a Scrooge around the holidays late last month, as it became a poster child for the adage “penny wise and pound foolish.”

After the Hong Kong market closed on Christmas Eve, the company’s Hong Kong-listed unit, MGM China Holdings Ltd. (2282.HK), abruptly gave its shareholders some early Christmas coal. The Macao casino operator informed them that a branding agreement with its Las Vegas-based parent was expiring at year-end, and a new long term deal would take effect on Jan. 1.

While such contract renewals are routine matters, the devil was in the details this time. Simply put, the licensing fee MGM charges its Asian offspring in the new contract doubled from 1.75% of consolidated net monthly revenue to 3.5%, effective for up to 20 years. MGM China said its own board resolved to cap this year's license fee at $188.3 million.

Morgan Stanley forecast that MGM China will pay HK$1.2 billion ($154 million) in licensing fees this year, double the HK$600 million it paid in 2025. That substantial increase could drag down the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) by about 5% year-on-year, it added. As a result, it downgraded its rating on MGM China to “equal-weight” from “overweight,” and reduced its target price from HK$19 to HK$16.50.

Gaming license renewal beneficiary

Before the Christmas surprise, MGM China had become an investor darling after the Macao government issued new gambling licenses that dealt the company a strong hand over its rivals.

The new licenses in 2022 included a major reshuffle of gaming table allocations for the city’s various operators, with many receiving major reductions. The top loser was SJM (0880.HK), whose count was slashed by 29% to 1,250 tables. Melco Resorts (MLCO.US), a subsidiary of Melco International (0200.HK), saw its total cut by 17.8% to 750 tables, while Wynn Macau (1128.HK) also experienced a 10.7% cut to 570 tables. Sands China (1928.HK) and Galaxy Entertainment (0027.HK) came up neutral and were spared any reductions. Only MGM China emerged as a winner, as the government raised its count by 36%, from 552 to 750 tables.

At the same time the new gaming regulations have shifted the focus for casinos away from VIP rooms that were their traditional big money spinners, and towards the mass gaming floor to drive revenue growth. Since the mass market segment operates on a volume-based model, operators holding the most gaming table licenses automatically have a distinct competitive advantage. Accordingly, MGM China became the primary beneficiary of the shifting focus due to its substantial increase in gaming tables.

Those advantages sent investors diving in MGM China’s stock. Before a steep decline the next trading day after the Christmas Eve announcement, MGM China’s stock had risen up to 90% from its low for the last year. By comparison, stock gains for the remaining five license holders ranged between 25% and 89%.

An improving gaming environment in Macao has also lifted the entire group. After year-on-year growth rates for monthly gross gaming revenue (GGR) slowed significantly in the first half of last year, the trend began to reverse in June. As a result, monthly growth rates rose into double-digit territory in the second half, with the monthly total topping 20 billion patacas ($2.5 billion) in six separate months.

Stock plunges on fee hike

MGM China reported a profit of HK$2.39 billion in the first half of last year, equating to about HK$4.8 billion on an annualized basis. Accordingly, an increase of HK$600 million in money for licensing fees – equal to one-eighth of the profit – will have a major impact on the company's profitability.

While MGM China will undoubtedly survive the blow with relatively limited impact, the abrupt nature of the increase left a bad taste in investors’ mouths.

When the Hong Kong market opened on Dec. 29, the first trading day after the announcement, MGM China's stock plunged sharply to close down 17% at HK$12.91 for the day, on trading volume that was eight to nine times the daily average. That shaved about HK$10.2 billion from its market value, which fell to HK$49 billion.

MGM Resorts’ decision to increase its offspring’s licensing fee looks a bit like a misstep. While the U.S. company stands to gain nearly $100 million in additional revenue annually, the immediate consequence was a much greater hit to MGM China's market value in a single day. Based on MGM Resorts' 55.95% stake in MGM China, this translates to a one-day loss of HK$5.69 billion for the parent, far more than it will gain from the increased fee income over the first few years.

Dented investor confidence

The biggest negative fallout from the fee hike is damage to investor confidence. Morgan Stanley points out that under the new structure, licensing costs represent about 15.2% of MGM China's projected 2026 EBITDA. This compares to around 14.1% for Wynn Macau, approximately 5% for Sands China, and zero for Galaxy Entertainment. Consequently, MGM China is bearing the highest relative burden for that metric among its peers.

Investors have previously expressed reservations over the licensing fee. The fundamental question arises: since the gaming concession itself was secured by MGM Resorts, why impose an additional licensing fee? Furthermore, the parent already holds a majority stake in MGM China, making a license fee exceeding HK$1 billion annually seem excessive.

Investors in MGM China clearly don’t like this approach, believing the parent is prioritizing its own interests without adequately considering minority shareholders.

Following the selloff, MGM China currently trades at a trailing price-to-earnings (P/E) ratio of 11.4 times, below the 17 times for Galaxy Entertainment and Wynn Macao, and just half the 22.4 times for Sands China. SJM and Melco International are both losing money.

Comparatively speaking, MGM China's current valuation looks the most attractive among its peers, implying potential upside as Macao's gaming industry continues to improve. But the sudden fee hike shows the lower valuation may not be completely unfounded. The reason is straightforward: when a controlling shareholder prioritizes its own interests over minority investors, the company's valuation will inevitably suffer.

Such a shifting perception could make a near-term recovery for MGM China’s share price challenging, as investors continue to smart from this unexpected piece of Christmas coal.

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The toymaker will end its exclusive 37-year agreement to make products based on Teenage Mutant Ninja Turtles at the end of 2026

Key Takeaways:

• Playmates will soon lose its exclusive rights to Teenage Ninja Turtles toys, part of its licensed toy business that accounted for 36% of its revenue in the first half of last year
• The toymaker’s revenue plunged 58% in the first half of this year to HK$186 million, dropping the company into the red

By Lee Shih Ta

They represent childhood memories for many who grew up playing with the four famous fighting figurines. But for Playmates Toys Ltd. (0869.HK), the Teenage Mutant Ninja Turtles were equally valuable, if not more so, as one of its key money-spinners. The company has produced Ninja Turtle toys since 1988, establishing it as an industry titan during Hong Kong's manufacturing golden age. That distinction also propelled Playmates to global prominence, gaining its Hong Kong base a reputation as the “world's toy factory” by manufacturing products across Chinese border in adjacent Guangdong province. Yet all good things usually end.

That’s certainly the case for Playmates, which last week announced its longtime Ninja Turtles licensing agreement won’t be renewed when it expires Dec. 31, 2026, ending a 37-year relationship. After that happens, Playmates said it will seek new licensing opportunities while continuing to develop some of its other existing franchises, including Power Rangers, MonsterVerse and Winx.

Father of Ninja Turtle toys

Playmates’ history dates back to 1966 when Hong Kong entrepreneur Sam Chan Tai-ho, originally from Shantou in Guangdong province, founded Playmates in Hong Kong's industrial Tuen Mun district. The company shot to fame with its Cabbage Patch Kids dolls, which became a major cultural phenomenon in the U.S. in the 1980s. Not long afterwards, Playmates secured global master toy rights for Teenage Mutant Ninja Turtles in 1987.

Two years later, the “Teenage Mutant Ninja Turtles” live-action film, made locally by Hong Kong’s Golden Harvest Pictures, boosted not only the franchise’s popularity, but also Playmates' fortunes, lifting the company’s profits over tenfold to HK$1.21 billion ($156 million) the next year. Chan became known as “Father of the Ninja Turtles,” while Forbes named Playmates as the world's most profitable toy company as it became the first in its class to record more than $100 million in annual profit.

The 2014 Hollywood take on the “Teenage Mutant Ninja Turtles” drove Playmates' toy sales higher still to a record HK$2.16 billion, with Ninja products accounting for 95% of that.

The Turtles' importance to the company quickly swam to the surface when Playmates' shares sank 14.7% to HK$0.435 on the first trading day after the announcement, extending their year-to-date decline to 30%. Revenue from such licensed products climbed from just 8% of the company’s total in 2021 to 77% two years later, before falling back to 36% in the first half of 2025.

Playmates’ overall revenue tumbled 58% year-on-year in the first half of 2025 to HK$186 million, dropping the company into the red with a HK$25.61 million loss, reversing a HK$91.46 million profit a year earlier. It blamed the tumble on an absence of major new entertainment content during the period for its core licensed brands, particularly the Ninja Turtles, which saw no new live-action or animated films released. U.S. tariffs, rising mold and development costs, and discontinued product clearances also pressured the company’s margins.

The sudden reversal of fortune reflects a major weakness in Playmates' licensing model, whose sales depend heavily on external catalysts, most often promotional efforts by owners of the intellectual property (IP) it licenses.

Early warnings?

IP holders like the owner of Ninja Turtles are always tweaking their strategies to squeeze the most money from their characters. Simply being able to manufacture products is no longer enough. In addition, such IP owners now demand wide-ranging distribution, digital marketing and cross-category integration capabilities from their licensees — putting pressure on long-term partners who may lack in those areas. High costs and tariff pressures may also narrow room for negotiation, as license-dependent toymakers navigate a fine line between profits and losses. Playmates' gross margin fell from 56% to 43% in the first half of this year, giving the company less room to negotiate mutually agreeable terms with its IP partners.

Playmates also faces a new generation of competition from Mainland China, with new rivals catering as much to a rapidly expanding home Chinese market as to other countries. One of those is Bloks (0325.HK), which makes Lego-style block-building toys using IPs with frequent updates. Another is Miniso's (9896.HK; MNSO.US) Top Toy unit, which leverages the company’s vast retail network of novelty stores. And the king of the toy box is Pop Mart (9992.HK), which took the world by storm in 2025 with its Labubu franchise.

Its newer rivals depend on a mix of self-developed and licensed IPs, while Playmates remains dependent on partners for its traditional licensed toys, putting it a disadvantage. While the Ninja Turtles loss will prove painful after 2026, that pain could become even more acute if the IP owner licenses the rights to one of Playmates’ Chinese competitors.

Whatever the future may hold, Playmates post-Ninja Turtles future will hinge less on finding a single replacement, and instead on diversifying its business to reduce reliance on a single license. With its strong history and capabilities in manufacturing, mold-making and distribution, the company certainly has a strong base to work from. Now, it just needs to find some good content to put into that machine during this critical period of transition.

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The company says it plans to list in Hong Kong, basking in the limelight of strong demand from American viewers for its over-the-top Chinese-style soap operas

Key Takeaways:

• COL Group, a Shenzhen-listed producer of online literature and dramas, is preparing to apply for a second listing in Hong Kong
• The company’s short dramas, following a formula from popular Chinese online literature, briefly lifted its affiliated ReelShort video platform to fame in the U.S.

By Lee Shih Ta

Tired of the “Mary Sue” in your favorite online soap? Then just swap her out for the latest popular new character. It may sound hokey, but such whimsy takes place regularly in popular Chinese online literature, whose video equivalents became a recent sensation in the U.S. on the ReelShort short video platform.

Now, the Chinese source behind that cultural phenomenon, COL Group Co. Ltd. (300364.SZ), is preparing to take its own show to global investors as it prepares to list in Hong Kong. The company detailed the plan in a filing this month to the Shenzhen Stock Exchange, where its shares are already traded. COL’s move follows a recent trend by companies listed on China’s domestic A-share markets to make second listings on the more globally focused Hong Kong Stock Exchange to boost their international profiles.

Founded in 2000 as a university-industry collaboration originating in the prestigious Tsinghua University, China’s equivalent of MIT, the company stands out as one of China’s earliest online literature and digital publishing enterprises. Its current operations cover short dramas, online literature and intellectual property (IP) licensing.

Pre-packaged cinematic fare

The core appeal of Chinese short dramas lies in their ability to deliver intense emotional experiences in extremely brief segments lasting just 30 to 90 seconds. They do that by employing highly recognizable melodramatic themes such as “marriage before love” and “class reversal” to create highly addictive viewing. Such content is becoming increasingly popular among female viewers in North America. A case in point is ReelShort’s hit short drama “The Double Life of My Billionaire Husband” which surpassed 470 million cumulative views and has even been compared to Netflix’s popular “Squid Game” series.

The operator of ReelShort is U.S.-based Crazy Maple Studio, a venture that COL Group has meticulously cultivated in overseas markets over an extended period, and in which it still holds a large, though minority, stake.

Crazy Maple founder Jia Yi previously spearheaded overseas operations within COL. Taking advantage of interactive fiction platforms like Chapters and Kiss, he utilized data to repeatedly validate plot structures and emotional cadences, progressively developing expertise in content targeting female audiences in Europe and America. Crazy Maple eventually emerged as an independent operator built upon this capability, evolving from interactive fiction to short dramas and ultimately shaping the current iteration of ReelShort.

ReelShort employs a “pay-to-unlock” business model. The initial episodes of most short dramas are free. But once the narrative reaches a core conflict or pivotal plot twist, users encounter an “unlock threshold.” At this point, they can choose to watch an advertisement first, or pay directly to unlock later episodes. For users wishing to view an entire series, the cumulative expenditure typically ranges between $15 and $25, higher than the monthly subscription fee for Netflix.

According to media reports, ReelShort generated in-app purchase revenue of $130 million in the first quarter of 2025, capturing 24% of the short-drama market. Data from NetMarvel indicates that in May this year, the ReelShort app achieved 14.49 million monthly downloads, surpassing traditional streaming giants like Netflix and HBO for two consecutive months.

As a result of such rapid growth, Crazy Maple’s scale has significantly overtaken COL Group’s. In the first half of 2024, Crazy Maple reported revenue of about 1.09 billion yuan ($154 million), more than double COL Group’s 460 million yuan over the same period. Crazy Maple’s revenue surged 150% year-on-year to 2.76 billion yuan in the first half of this year, while COL Group’s grew by a more modest 20% to 556 million yuan.

Crazy Maple has been less reliable on the bottom line, shifting from a profit of 22.93 million yuan last year to a loss of 46.51 million yuan in the first half of this year, primarily due to increased marketing costs and intensifying competition. That loss, combined with a decline in investment income, resulted in a 50.8% year-on-year widening of COL Group’s own loss to 226 million yuan during the same period.

U.S. entity status

It’s noteworthy that COL Group ceased consolidating Crazy Maple’s financials into its own statements starting in May 2023. COL maintains a 49% stake in the company, while its voting rights have dropped from 50.9% to 47.81%. That led COL to reclassify its Crazy Maple stake as a simple equity investment, giving Crazy Maple de facto operational independence.

The company said the move aims to encourage Crazy Maple’s independent development and facilitate the company’s own market-driven financing. In practice, the structure also mitigates the types of geopolitical and content censorship risks that became problematic for ByteDance with its TikTok ownership. ReelShort’s status as a U.S. entity also enhances its ability to expand within the American app store ecosystem, payment systems, and local production networks.

Beyond the nominally independent ReelShort, COL also operates another short-drama platform, FlareFlow, which has achieved rapid user growth since its launch in April. As of October, FlareFlow had accumulated over 19 million downloads and hosted more than 3,000 titles. FlareFlow is also deeply integrated with COL’s proprietary “XiaoYao” large AI model, leveraging AI-generated content to enhance efficiency and create a synergistic effect encompassing “AI content generation – short-drama adaptation – IP derivation.”

The rapid growth of ReelShort and FlareFlow in the U.S. has bolstered COL Group’s optimism on its overseas expansion prospects and further validated its decision to pursue a Hong Kong listing. For the company, listing in Hong Kong could help to redefine its strategic positioning, transitioning from a traditional online literature and copyright entity into a global digital content platform. This shift positions FlareFlow, its AI content ecosystem and international IP incubation capabilities as the core pillars of its valuation thesis.

COL’s shares haven’t moved too much this year, down about 3.9% since January, significantly underperforming the broader market. That may owe to the company’s yet unproven profitability, with its overseas operations still in a high-investment phase leading to widening losses, prompting investor caution. While Chinese short dramas are experiencing explosive popularity, associated production costs are substantial, and skepticism persists regarding whether rapidly produced, formulaic narratives can evolve into valuable long-term IP.

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The former adult education company has transformed to a pop toy maker, reporting its revenue from that business rose sharply in its latest quarter

Key Takeaways:

• Here Group’s revenue nearly doubled sequentially in its latest reporting quarter through September, as it ramps up its recently acquired pop toy business
• The company’s stock currently trades at a P/S ratio of just 2.5 using projected sales for this year, less than a quarter of the 10.3 for collectible toy sensation Pop Mart

By Doug Young

Watch out, Labubu. Wakuku is coming for your business.

That’s the challenge coming from Here Group Ltd. (HERE.US), a recently reborn company rising from the ashes of former adult educator QuantaSing. The warning could be a bit premature, since Here Group’s pop toy business, which we’ll describe in more detail shortly, is a tiny fraction of that for global sensation Pop Mart (9992.HK), owner of the Labubu franchise.

Here Group only entered the pop toy business this year through its acquisition of Shenzhen Yiqi Culture Ltd., also called Letsvan, owner of the Wakuku franchise launched a year ago. The company has wasted little time diving into this newer business with a campaign of aggressive promotions and plans to open a network of offline stores.

It announced plans to sell its older adult education business in September, and its latest quarterly report, released last week, is the first to include only its pop toy business. In keeping with its big shift, the company also ditched its older QuantaSing name and ticker symbol and began trading under the new Here Group name on Nov. 11.

The shift looks relatively prudent, since education has become an increasingly problematic area in China due to the potential for regulatory crackdowns. The company’s focus on adult education made it less prone to such regulatory changes, unlike the more sensitive primary education area that was subject of a major crackdown four years ago, wiping out an entire industry of after-school tutoring companies.

Pop toys are less sensitive, though they’re also quite fickle. Hit toys often fall as quickly as they rise, which appears to be happening now to Labubu, which sparked a worldwide craze this summer. That means companies in the space must be constantly finding and popularizing new characters, often called intellectual property (IP), to keep their sales alive.

Unlike other pop toy makers, Here Group is taking a gamble by betting almost exclusively on self-developed and exclusively licensed IPs. By comparison, rivals like Bloks (0325.HK), Miniso’s (MNSO.US; 9896.HK) Top Toy, and even Pop Mart, rely on a mix of exclusively developed IPs and non-exclusive licensing of popular characters from third parties like Disney (DIS.US) and Japan’s Sanrio (8136.T), owner of the Hello Kitty franchise.

On its first earnings call as a pure pop toy company last week, Here Group officials disclosed that nearly all of its 127 million yuan ($18 million) in revenue for the quarter through September – or 97% to be exact – came from three of its proprietary IPs, led by 71% from the Wakuku franchise, followed by 16% from another older IP called Ziyuli.

The use of exclusively owned IPs carries a big advantage of higher margins, since owners don’t have to pay expensive licensing fees and share revenue from product sales. But it also puts the big responsibility of popularizing IPs on the owners, unlike licensed characters like Hello Kitty that already enjoy high popularity and thus require far less spending on marketing.

Rapid revenue growth

Next, we’ll take a deeper dive into Here Group’s financials that reveal its pop toy business is showing some strong initial growth as the company aggressively markets its products. The 127 million yuan in revenue for the three months through September, the first quarter of Here Group’s fiscal year, is nearly double the 65.8 million yuan it earned from that business in the previous quarter through June.

The company said it expects revenue to keep growing to between 150 million yuan and 160 million yuan in the current quarter through December, implying continued growth but at a slower quarter-on-year rate of about 22%. But that slowdown is probably due to seasonal factors, and the company said it expects to earn revenue of 750 million yuan to 800 million yuan for its current fiscal year that runs through next September. That implies revenue of about 500 million yuan in the second half of its current fiscal year, which would be nearly double the roughly 280 million yuan it expects to earn in the first half.

Here Group’s stock seems to be moving roughly in sync with Pop Mart’s since announcing its move into pop toys early this year. The shares initially exploded, rising as much as sixfold from where they started the year to a peak in mid-June. They’ve fallen more than 60% since then, though they’re still more than double where they started the year. Similarly, Pop Mart’s shares more than tripled this year to a peak in mid-August, but have fallen more than 40% since then. Still, at current levels they are more than double where they started the year.

From a valuation perspective, Here Group’s stock certainly appears to still have plenty of upside potential if it can deliver on its promised growth. The shares currently trade at a price-to-sales (P/S) ratio of about 2.5, based on the annual revenue projection for its first year as a pop toy company. That’s just a quarter of the 10.3 for Pop Mart, and is also less than half the 6.11 for Bloks.

Here Group Chairman and founder Li Peng detailed many of the things the company is doing to market its products on the earnings call. Those included its launch of a themed street in Shanghai, and a partnership with the state-run Beijing TV and radio station operator, which it said could become a template for future partnerships around China. It also detailed the opening of its first offline stores in Beijing and Chongqing, and indicated more such stores will be coming next year. Its business remains mostly confined to China right now, but it also pointed out it has laid the foundation for a future global expansion by establishing operations in 20 other markets.

Here Group said the gross margin for its toy business improved to 41.2% in the latest quarter from 34.7% in the previous quarter, though both figures are still significantly behind Pop Mart’s 66.8% for all of 2024. Investors will probably be watching closely to see if that figure improves as Here Group’s pop toy business gains momentum. They’ll also be watching to see if the company can quickly return to profitability. It reported an adjusted net loss from operations of 17.1 million yuan for the latest quarter, marking a slight improvement from a 19.3 million yuan loss in the previous period.

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The social platform plans to entice investors with the combination of its self-developed AI model, immersive social scenarios, and strong profitability

Key Takeaways:

• Tencent-backed Soulgate, operator of the Soul App, is seeking a premium valuation in its Hong Kong IPO based on its early adoption of AI technology into its platform
• The company says high user engagement is fueling improvements to its AI model, enhancing user experience and driving new monetization opportunities

By Doug Young

ChatGPT may have the answers to all your questions on everyday matters, but Soulgate Inc., which runs the Soul App social platform in China, thinks it has the right stuff to nurture human souls that are at the heart of its name. Seizing on the AI momentum sparked by ChatGPT in 2023, the company rolled out Soul X, its proprietary native emotional intelligence large model in December of the same year.

That head start has inspired Soul, backed by internet giant Tencent, to figure out how to better monetize its business, which centers on connecting people based on common interests. In Soul’s universe, all users interact with avatars, shedding the baggage of real-world identity to connect based on who they are, rather than what they are.

Soul’s Soul X is trained on the company’s vast pool of user data sourced from the platform's dynamic public scenes, such as the Soul Square. Soul says the model, which only uses compliantly gathered data, “possesses multi-modal perception and real-time interactive capabilities, focusing on breakthroughs in emotional perception and empathetic companionship.”

The company has monetized the business mostly through a growing stable of emotional value goods and services, including virtual items and membership privileges, that it sells to its users. Its growing skill in that regard has lifted Soul to profitability – a feat that very few AI-centric companies have achieved due to the huge costs of developing new models and keeping them updated.

AI is the ticket

Soul is at the forefront of a recent movement among user-generated content (UGC) platforms to better leverage AI, and for AI model operators to leverage the huge pools of user data that such platforms possess. Snapchat (SNAP.US) recently entered that race as well, securing a $400 million payment agreement from Perplexity in November for AI search integration. The move underscores that in the current AI era, a massive, engaged audience like Snapchat's can be a more immediate and monetizable asset.

Soul’s AI headstart could make it a hot ticket as it resubmitted its Hong Kong IPO application on Nov. 27. According to its filing with the Hong Kong Stock Exchange, its focus is squarely on Gen Z, who made up more than 78.7% of its users. The company has been profitable since 2023, reporting adjusted profits of 337.3 million yuan ($47.7 million) in 2024 and 286.4 million yuan in the first eight months of 2025. Its gross margins came in at healthy levels of 83.7% and 81.5% for those periods, respectively. Meanwhile, its revenue climbed 19.7% from 1.85 billion yuan in 2023 to 2.21 billion yuan in 2024, and was up another 17.8% year-on-year in the first eight months of 2025 at 1.68 billion yuan.

The company previously filed to list in the U.S. in 2021, but about a year later withdrew that application. It moved its sights to Hong Kong with a new listing application in June 2022, but that application expired.

A new listing would come into one of the hottest Hong Kong IPO markets in years, where nearly every new application boasts of how companies are using AI to make their businesses more efficient. While some of those claims look dubious, aimed more at creating hype than doing anything truly unique, Soul can legitimately say it began using generative AI well before the current craze.

In its 2022 Hong Kong IPO application, published a full half year before ChatGPT launched its first product, Soul discussed how its AI algorithm enables users to find like-minded people.

"When AI is fully integrated into our social networks, this new AI-driven productivity will transform everyday life – from socializing to digital living and consumption. It will create new markets, like 'emotional value-to-price consumption,' and lead to entirely new products and business models for the social industry," said Chief Technology Officer Tao Ming in a previous company announcement.

The rising monetization of AI is also evident in the latest third-quarter results of other tech firms. Kuaishou’s (1024.HK) AI-driven marketing and video model helped to boost the company’s revenue, while Tencent (0700.HK) saw a 21% surge in marketing services income from improved AI targeting.

Growing stable of models

Soul App started out as a platform focused on person-to-person connections, helping its pool of users meet others with similar interests and world views. Since 2017, the app has used the company’s self-developed AI-powered recommendation algorithm, which can perceive users’ cognitive and behavioral patterns with high precision, to drive user recommendation and social connections.

The company says it has been "systematically exploring the deep integration of AI and social scenarios" since 2020. This long-term investment culminated in the 2023 launch of its proprietary Soul X large language model, marking a significant milestone in its AI journey.

Soul X leverages multi-modal perception to understand user preferences at a granular level, recommending like-minded friends and relevant communities, including content feeds, interest groups, and audio party rooms. With long-term memory and contextual awareness, the "Chat Spark" powered by Soul X offers potential conversation starters and replies during one-on-one dialogues, while the "AI Inspiration" tool helps refine and format posts. By enhancing social connectivity and engagement, Soul is positioning its AI-driven communities as key spaces for emotional consumption.

According to its application, Soul App had around 11 million daily active users (DAU) in the first eight months of 2025. AI-powered emotional value services accounted for more than 90% of the company’s revenue. Such items include virtual products that can be purchased using the company’s social currency called Soul Coins – such as avatars, virtual gifts and props and recommendation privileges.

Soul says high user engagement is driving improvements to its AI models and algorithms, enabling smarter applications and expanding its digital community. It adds that these advances enhance user experience and open up new commercialization opportunities in areas like advertising and IP, and create a self-reinforcing "user-AI-platform" cycle.

At the end of the day, Soul’s AI pedigree and profitability may help it to score a valuation premium following its IPO. Its proprietary AI models look well positioned to attract a growing audience of Gen Z users increasingly looking for more satisfying emotional connections and immersive interactive experiences.

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The online knowledge community operator briefly achieved profitability in the first half of this year, but that momentum didn’t carry into the third quarter

Key Takeaways:

• Zhihu reported its revenue fell 22% year-on-year in the third quarter, as it slipped back into the red after finding profits earlier this year
• The operator of a knowledge-sharing community, often called the “Quora of China,” said its paid membership revenue for the quarter dropped 16% year-on-year

Lee Shih Ta

Generative AI is reshaping the global content industry at an astonishing pace. For short-video platforms, the technology is rapidly eliminating content-creation barriers, paving the way for explosive growth as just about anyone can create compelling content. For search engines and text-and-image social platforms, AI is also making information retrieval faster and more interactive, significantly amplifying their user attractiveness.

Yet the very same AI wave is also creating major headaches for some traditional content platforms. One of those is Zhihu Inc. (ZH.US; 2390.HK), often called the “Quora of China,” which is renowned for its high-quality knowledge-sharing community. Paradoxically, the even more omniscient power of AI is undermining the company’s existing business model, forcing it to search for a new strategic footing.

According to its latest financial report, released last week, Zhihu’s revenue tumbled 22% year-on-year to 660 million yuan ($120 million) in the third quarter from 850 million yuan a year earlier. All three of the company’s main revenue streams declined. Advertising and marketing services revenue dropped 26% to 189 million yuan; paid membership slid 16% to 385 million yuan; and “other revenue,” including its once-promising vocational training services, fell over 30% to 83.92 million yuan from 129 million yuan.

The weak showing continued a losing streak from the first half of the year, when Zhihu’s revenue dropped 23.7%. Its revenue for all last year also decreased by 14.3%.

Despite those troubles, Zhihu had finally found a formula for profitability after reporting years of losses. But it slipped back into the red in the third quarter, ending a winning streak of three consecutive quarters in the black. It reported a net loss of 46.65 million yuan for the latest period, more than quadrupling from a 10.49 million yuan loss a year earlier. Its gross margin during the latest period also fell 2.6 percentage points to 61.3%.

The weak third quarter brought Zhihu’s revenue for the first nine months of this year to 2.11 billion yuan, down 23% year-on-year. It recorded a net profit of 15.7 million yuan, compared to a net loss of 260 million yuan in the same period last year.

Hemorrhaging users

The latest earnings report offered no specific reason for the wide-ranging revenue declines, which in some ways is fueling concerns about the stability of its business.

Zhihu’s most touted assets – its “high-quality answers” and “in-depth knowledge sharing” – are coming under siege from AI large language models (LLM). Users traditionally visited Zhihu to search for curated knowledge and experiences, seeking quality responses from experts and people with real-world experience. But AI models can deliver similarly high-quality, structured answers within seconds that incorporate vast amounts of content and offer diverse perspectives, making Zhihu look increasingly replaceable.

As users grow accustomed to querying AI directly, Zhihu’s crucial entry-point traffic is being siphoned off, reflected by its user metrics. By the end of the third quarter, Zhihu’s average monthly subscribing members totaled 14.3 million, down 13.3% from 16.5 million a year earlier. In 2024, its average monthly active users (MAU) also declined 21.2% year-on-year. The company ceased reporting MAU figures starting this year.

AI + social as a breakout strategy?

Founder Zhou Yuan hasn’t downplayed AI’s impact on content platforms, giving his views in multiple interviews. He contends that as knowledge becomes easier to access, “trust, expert networks and genuine engagement” will grow scarcer in the AI era. As that happens, he envisions Zhihu evolving into a dual-pronged medium for “information + trust,” leveraging its community for diverse perspectives to become the “trusted information infrastructure” of the AI age.

While the concept isn’t inherently flawed, it could struggle to reverse the existing business model’s weakness in the near term. Payment incentives on Zhihu lean toward the functional rather than being linked to boosting social value or identity. Its advertising context is less defined than short-video platforms, and embedding commercial content within knowledge-centric text faces inherent limitations. Unless the new social dimension Zhou envisions can translate clearly into measurable income, the strategy is unlikely to stem the company’s near-term revenue slide.

In the latter half of last year, Zhihu launched Zhihu Zhida, an AI-powered feature generating answers to user queries by synthesizing its own content and web data, offering both concise and in-depth responses. At the same time, it also introduced a knowledge base subscription product emphasizing traceable content sources to boost credibility. But such features can only offer limited differentiation from the rapidly evolving capabilities of general AI models, failing to provide a compelling reason for why people should use Zhihu instead. Consequently, those initiatives haven’t yielded significant or sustained growth in traffic or paid users since their launches.

Zhihu’s Hong Kong-listed shares fell over 8% on the day after the release of the latest earnings report. The stock has shed roughly 7% over the last six months, even as many other China tech stocks have rallied, reflecting pessimism about the company’s near-term outlook. Valuation-wise, Zhihu’s Hong Kong-listed shares trade at a price-to-sales (P/S) ratio of less than 1, lagging Kuaishou’s (1024.HK) 2.1 and Baidu’s (BIDU.US; 9998.HK) 2.2. That signals the market does not see it as an AI beneficiary, but rather as a content company losing momentum during the AI revolution.

Zhihu’s true challenge lies not in finding new technological breakthroughs, but in pinpointing and conveying its unique positioning to build value that isn’t easily replicated in the AI era. Its ability to reignite growth hinges on moving beyond its original “knowledge supply” framework and building a new type of trust that can position it in an irreplaceable niche at the intersection of AI and human capabilities. Only then can it try to translate that new proposition into sustainable commercial value.

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The hotel operator expects to report 35% revenue growth for all of 2025, up from a 25% forecast at the start of the year, thanks to strong performance for its retail business

Key Takeaways:

• Atour reported 38.4% revenue growth in the third quarter, and raised its full-year guidance to 35% from a previous forecast of 25% growth
• The hotel operator’s revpar continued to decline in the third quarter, but it said the situation should improve after a strong performance during the weeklong Oct. 1 holiday

By Doug Young

The year 2025 could well go down as the “Year of the Pillow” for Atour Lifestyle Holdings Ltd. (ATAT.US).

In its third-quarter financial results, announced last week, the upscale hotel operator said it expects to report 35% revenue growth this year, marking a strong upgrade from the 25% rise it forecast at the start of the year. The main engine behind that growth is the company’s retail business, which allows customers to buy products they see in their rooms through Atour’s online store. That business has done especially well, led by strong performance for its bedding products, including pillows.

Investors were broadly encouraged by the company’s latest report, sending Atour’s stock up 8.5% in the five trading days last week after the announcement. Analysts also quite like the company, with all 19 who follow the stock rating it either a “buy” or “strong buy” – a relative rarity these days due to uncertainty surrounding China’s economic slowdown.

Atour wasn’t immune to that slowdown, recording another quarter of declines for revenue per available room, or revpar, the most widely watched industry metric that combines room prices with occupancy rates. Atour and most of its peers saw their revpar start contracting last year, after recording strong gains in 2023 fueled by a wave of post-pandemic “revenge travel.”

In a slightly encouraging sign, Atour’s rate of revpar declines has been moderating through the year, and fell by a relatively small 2.4% year-on-year in the third quarter to 371 yuan, as the company lowered room prices to attract guests. Not surprisingly, a bright spot for the company was its Atour Light brand, which attracted budget-conscious travelers due to its positioning at the lower end of Atour’s mid- to upper-end range of offerings. One other encouraging sign came from a rise in revpar for the company’s hotels during China’s weeklong National Day Holiday starting Oct. 1, which will be reflected in its fourth-quarter report.

“For the hotel sector, the overall market has shown a moderate recovery since the third quarter,” said Atour founder the Chairman Wang Haijun on the company’s earnings call. “While travel and leisure demand continues to be robust, the industry is also characterized by rapidly shifting hotspots and uneven recovery across regions,” he added, without giving specifics.

Like many consumer-facing industries in China, the country’s leisure and travel sector experienced a strong rebound in 2023 after taking a drubbing during the pandemic. But it began to sag again last year under the weight of China’s slowing economy. Against that backdrop, Atour and some of its peers have helped to keep their growth stories alive partly by aggressively opening new hotels.

Atour opened 152 new hotels during the quarter, raising its total to 1,948 by the end of September. That number was roughly equal to the total number of hotels it opened in the first half of the year, showing it is accelerating its rate of new openings. That acceleration looks set to continue into the fourth quarter, as the company said on the earnings call it had “full confidence” of meeting its goal announced early this year of operating 2,119 hotels by the end of 2025. That means it will need to add 171 during the quarter to meet that target.

Million-yuan pillow

Atour’s revenue grew 38.4% year-on-year in the third quarter to 2.63 billion yuan ($372 million), picking up from the previous two quarters on its accelerated new hotel openings. That brought its revenue growth for the first nine months of the year to 35.5%, which is why the company felt confident raising its full-year revenue forecast to 35% growth from the previous 25%.

The retail business has been the company’s “secret sauce” behind the strong revenue growth, with revenue from that part of the business rising 76.4% to 846.3 million yuan during the quarter from 479.7 million yuan a year earlier. By comparison, revenue from its core hotel business rose by a much slower 25.5% to 1.72 billion yuan from 1.37 billion yuan a year earlier. In that process, Atour’s retail business has grown to account for nearly a third of its revenue compared with about a quarter a year earlier.

The company has found particular success in selling bedding products. It noted one of the retail business’ recent best sellers was its Deep Sleep Memory Foam Pillow, which recorded 100 million yuan in gross merchandise value (GMV) in the first 25 days after its launch, with 8 million of the pillows sold since the product went on sale.

Revenue from the retail business is now up 75% in the first nine months of the year, giving the company confidence to forecast the figure will rise “at least 65%” for the full year. Here, however, we should note the figure was up by a much larger 126% in 2024, which shows the growth rate is likely to keep slowing rapidly as the business matures.

The retail business is a unique feature to Atour, and probably one of the reasons analysts like the company so much, as it carries far higher margins than the hotel business. Atour said its gross margin for the retail business stood at 52.7% in the third quarter, unchanged from a year earlier, while the figure for its hotel business rose 1.3 percentage points year-on-year to a much lower 37.3%.

On its bottom line, Atour reported its profit rose 24.6% year-on-year to 474 million yuan. The slower rise compared with revenue growth was mostly due to non-operational factors including higher tax expense. The company also announced its payment of a second dividend for the year, which will bring its total dividend distributions for the year to a little over $100 million.

While analysts are bullish on the company, investors seem to have more mixed feelings. Even after a 45% increase for its stock this year, Atour’s shares trade at a forward price-to-earnings (P/E) ratio of just 20. That’s well behind the 35 for rival H World Group (HTHT.US; 1179.HK), whose core China business is also suffering, with revpar down 4.7% in the third quarter. But H World also owns a large overseas hotel portfolio, which was suffering for years but has begun to show signs of improvement, including a 6.1% revpar increase in the third quarter.

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The gaming company is shedding most of its satellite casinos and focusing on core assets in a restructuring that has taken a chunk out of quarterly earnings  

Key Takeaways:

• Bucking a positive trend in the sector, SJM posted lower gaming revenues and profits as it reshapes its business to comply with new Macao regulations
• Gaming revenue and adjusted property EBITDA also fell at its flagship Grand Lisboa venue

Lee Shih Ta

Macao’s gambling industry has regained its luster, but one casino operator is shining less brightly than the rest.

SJM Holdings Ltd. (0880.HK), a veteran of the Macao casino scene, is in the throes of a sweeping restructuring that has wiped the sheen off its earnings results.

In October, Macao’s overall gaming revenue surged nearly 16% from the same month a year earlier to a post-pandemic record of 24.09 billion patacas ($3.01 billion). Robust tourist flows, high hotel occupancy and bustling casino floors were all signs that the gambling capital had roared back to life.

But for SJM it was a different story. The company posted relatively gloomy earnings for the third quarter. Gaming revenue fell 4.7% to HK$7.14 billion ($919 million) from a year earlier and 1.8% from the prior quarter. Adjusted EBITDA declined 15% year on year to HK$881 million, although it rose 28% compared with the second quarter. SJM was the only one of Macao’s six concessionary operators to report a fall in takings from the gaming business.

The SJM bottom line was even more alarming. Net profit plunged 91% to a mere HK$9 million from the HK$101 million profit recorded a year earlier. For the first nine months, the company made a loss of HK$173 million. By contrast, the other five operators all enjoyed rising profits in the third quarter.

The root cause of SJM’s pain is a restructuring of its casino network prompted by Macao’s revised gaming rules. A law that fully takes effect at the end of this year requires operators to take any satellite casinos under direct management or otherwise break off existing profit-sharing arrangements with third parties.

SJM has been hard hit in the current earnings cycle, with a network of satellite casinos dotting the Macao peninsula that will cease operations by year-end. Four satellite venues have already closed this year, with three more set to be shuttered by December, stripping SJM of vital market access points. Only two will be bought out and pass into SJM’s direct control.

The company’s revenue from satellite casinos dropped 14.6% in the third quarter, although EBITDA jumped more than 50% to HK$53 million from HK$35 million in the same period a year earlier. SJM is softening the blow by reducing subsidies and intermediary costs, but the loss of floor space and custom has taken a toll.  SJM’s market share for gaming revenue fell to 11.8% in the quarter from 13.9% in the year-earlier period and 12.9% in the previous three months, which the company blamed on the restructuring upheaval.

Chairman Daisy Ho Chiu Fung said the transition was disruptive, but stressed the company was actively reallocating its personnel and gaming resources to strengthen its core business.

Grand Lisboa under pressure

Short-term pain from the forced changes may be unavoidable, but the flagship Grand Lisboa property is also a cause for concern.

A Macao landmark, Grand Lisboa has long been SJM’s most reliable profit engine, yet its third-quarter performance notably faltered. The venue’s gaming revenue dipped to HK$1.91 billion from HK$1.94 billion in the third quarter of last year, while adjusted property EBITDA slid 13.6% to HK$471 million. 

The company’s newer luxury resort, Grand Lisboa Palace, posted an 11% rise in gaming revenue but its adjusted property EBITDA plunged 32.7% to HK$111 million, and hotel occupancy dropped to 94.9% from 98.9% in the third quarter of last year.

Furthermore, SJM held only HK$3.4 billion in cash against HK$27.3 billion in debt at the end of September, making it the most financially leveraged of Macao’s six casino operators. The debt load leaves the company with limited means, compared with its rivals, to rebuild its business through marketing campaigns and upgrades of its entertainment offerings. Crucially, only Grand Lisboa Palace has the required scale for a modern resort, while the other peninsula-based properties lack the space for expansion.

SJM shares tumbled 8.05% to HK$2.74 on the first trading day after the results. Its year-to-date gain of just 1.86% lags way behind the sector average of 31.3%. Morgan Stanley warned that SJM’s debt could rise further after the company acquires the two satellite properties, assigning an “underweight” rating and a target price of HK$2.80.

The casino operator has outlined a strategy to restore its fortunes, with a focus on revitalizing its core properties on the Macao peninsula. It will redeploy gaming tables and machines from its satellite casinos to another SJM flagship venue, Hotel Lisboa, using extra space that was acquired from its parent Sociedade de Turismo e Diversões de Macau.

However, competitors are rapidly diversifying their businesses beyond gaming. Melco Resorts & Entertainment (MLCO.US) has scored a first by opening a private hospital within a resort, while Wynn Macau(1128.HK) plans a large-scale event center. Having to give up its network of satellite casinos, SJM is already several steps behind. Investor patience may be wearing thin in the face of a lackluster earnings performance and excessive leverage.

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The company’s dominance in live entertainment ticketing and IP franchises has turbocharged its revenue, despite persistent consumer complaints and monopolistic behavior

Key Takeaways:

• Damai’s profit rose around 50% in the six months through September on the back of strong gains for its event ticketing and IP businesses
• The company’s booming live event ticketing business faces potential risks from slowing youth discretionary spending, as well as user backlash over technical glitches and scalping

By Xia Fei

In the post pandemic era, Chinese consumers appear to be skimping on virtually everything, from smartphones to dining out. But even as that happens, their willingness to splurge on live entertainment like concerts, comedy shows and soccer matches is hitting new highs.

Damai Entertainment Holdings Ltd. (1060.HK) has reaped a big bounty from that collective pursuit of offline leisure activities, even in the face of China’s economic slowdown and difficult job market. The company gave a hint of just how well things are going in an upside profit alert last week, revealing a strong double-digit increase in its profit during the first half of its fiscal year through September.

Damai started out as an online movie ticket seller in 2004 and was acquired in 2017 by e-commerce giant Alibaba, which folded the company into its separately listed film unit, Alibaba Pictures. That listed entity changed its name to Damai Entertainment in July this year, reflecting the rising prominence of the Damai live ticketing service in Alibaba’s entertainment business mix.

The listed company’s stock has been on a tear lately as it helped to stage events for top-tier artists from Ed Sheeran to Jay Chou. Its share price has more than doubled since January, far outstripping the 30% gain in Hong Kong’s benchmark Hang Seng Index, and easily beating out archrival Maoyan (1896.HK), whose shares are down about 8%.

Much of the gains reflect a second act for the Damai ticketing service, which is finally bouncing back dramatically after years of uninspired performance. The service’s revenue more than tripled to 2.06 billion yuan ($290 million) in its latest fiscal year through March, compared to 613 million yuan a year earlier. That made the Damai service the listed company’s most lucrative unit, contributing nearly one-third of overall revenue for Alibaba’s entertainment arm.

The stunning run for Damai, which is fast emerging as the listed company’s crown jewel, may be far from over. The company alerted shareholders last week that its net profit for the six months through September will exceed 500 million yuan ($70 million), up 48% or more from a year earlier. It attributed the strong performance to its Alifish intellectual property (IP) business as well as reduced investment losses.

Not just movies

The Damai and Alifish services are clearly what’s driving the broader company’s growth right now. The Damai service’s skyrocketing revenue owes to its strategic shift away from its original business of selling movie tickets, which suffered from pandemic shocks and anemic demand more recently amid a broader economic slowdown.

In 2024, China’s box office receipts fell 22.6% to 42.5 billion yuan ($5.8 billion) from a year earlier, official data show. While China’s box office has regained some strength this year, the film industry’s overall sluggishness led to a 37% plunge in the profit for Maoyan, which still relies mostly on movie ticketing and production, in the first half of the year.

By contrast, Damai’s signature service has morphed into China’s go-to online ticket seller for live activities like concerts, talk shows, and visiting museums and exhibitions. According to the China Association of Performing Arts, commercial performances grew nearly 11% last year to 488,400, with shows drawing more than 5,000 attendees grossing 29.6 billion yuan ($4.2 billion). At Alibaba Picture’s rebranding event in May, Damai President Li Jie hinted that he envisioned people will turn to Damai for just about any kind of tickets in the future except for transportation.

Beyond its ticketing business, the listed company’s other big growth engine, the Alifish service, is notching big growth among Gen Z consumers through its heavy investment in IP merchandising, including popular Japanese franchises Sanrio, Pokemon and Chiikawa. The unit’s revenue grew 73% to 1.43 billion yuan in the company’s latest fiscal year. The rapid growth of the IP business looks aimed at trying to copy the success of Pop Mart (9992.HK), the mastermind behind the global sensation Labubu dolls.

Monopolistic behavior

While its stock has performed strongly this year, Damai’s deteriorating relationship with consumers is a potential red flag showing that good times can quickly change. Boasting a vast base of 170 million users, the Damai ticketing service has run afoul of fans frustrated by tech glitches as well as the platform’s lax measures to deter scalpers.

In June, angry fans of Chinese singer Lu Han flooded Damai’s official ticketing page on the popular Weibo platform after it failed to allow some users to purchase tickets on time, causing the service to cancel all tickets and eventually postpone the concert. In some cases, scalpers have swarmed the platform to buy up tickets, and then jacked up prices on the secondary market. The company has also been fined twice this year for failing to fulfill obligations. During some concerts, fans chanted “go bankrupt” when singers thanked Damai near the end of their shows.

Yet public outcry has done little to undermine Damai’s near monopoly in China’s live performance industry. According to Questmobile, monthly active users of Damai surpassed 24.4 million in February this year, nearly six times its main rival Moretickets. Its market dominance has emboldened Damai to dictate its terms to concert fans.

Already trading at a meteoric 12-month trailing price-to-earnings (P/E) ratio of more than 100, Damai gets strong reviews from the analyst community, including three “strong buys” and nine “buy” recommendations from 12 analysts polled by Yahoo Finance, who are especially impressed by its booming IP franchising business.

In many ways, Damai’s business is less comparable to Tencent-backed Maoyan and closer to Live Nation Entertainment (LYV.US), the U.S.-based live event company that also currently trades at a lofty P/E ratio of 101.

But investors should remember all euphoria has limits. A softer job market could quickly curb Gen Z willingness to splurge on live events. The cooling of Labubu sales shows how fast youth‑led demand can slip into reverse. Regulatory risk also looms for companies that dominate their industries like Damai. Live Nation is already battling a lawsuit with the U.S. market regulator over alleged scalper‑related profits. If frustration with fees, queues, or resale abuse lingers, China’s antitrust watchdog may also eventually come knocking on Damai’s door.

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After a year of preparations, the Middle Eastern social media company launched its first self-developed midcore game during the third quarter

Key Takeaways:

• Yalla kept its revenue growth streak alive in the third quarter, and suggested its new gaming initiative could start contributing to its top line in the first half of 2026
• The company said its recently launched self-developed midcore game has been well received in its core Middle East market, as well as in North America and Europe

By Doug Young

Gentlemen, start your engines.

That was the sound coming from Yalla Group Ltd. (YALA.US) in the third quarter, as the leading Middle East and North Africa (MENA) social networking and gaming company launched a highly anticipated midcore game that it hopes will jumpstart its growth. The company said that title, a car-themed midcore game called “Turbo Match,” is off to a relatively strong start, not only in its Middle Eastern base but also in other markets.

It also held out the possibility that the new title, plus two others set for launch by the end of the year, could start making noticeable contributions to its revenue as early as the first half of next year.

“For those expecting a notable revenue impact from these new games, we see the second quarter of 2026 as a key inflection point,” said Yalla COO Jeff Xu, speaking on the company’s earnings call following the release of its results on Monday after markets closed.

Xu made his remarks as Yalla released its latest quarterly results that showed it managed to post another quarter of revenue growth, even after previously forecasting the figure could fall, keeping alive its streak of gains for that key metric in every quarter since its public listing on the New York Stock Exchange in 2020. The company recently attended a fifth anniversary bell-ringing ceremony to commemorate the event.

While the company's revenue growth has recently slowed, it is not resting on its past glory days. Instead, Yalla is trying to get investors excited about the future as it leverages its large base of casual gamers to carve out a place in the more lucrative midcore and hardcore gaming spaces.

Yalla isn’t feeling any financial pressures as it makes that move, as it’s already quite cash rich thanks to its generally conservative approach. It had $739.5 million in cash at the end of September, up substantially from $656.3 million at the end of last year, and remains quite profitable with enviable margins. What’s more, it’s also using its abundant cash to repurchase its shares.

Instead, the company is feeling pressure from its own slowing growth, and is trying to get investors excited about its potential to reignite that growth with its entry to midcore and hardcore games. Its efforts in that direction have had a clear effect, with Yalla’s stock up about 75% this year as the company kept investors updated on its new gaming initiative.

Yala’s stock currently trades at a price-to-earnings (P/E) ratio of 8.7, which is firmly in between the 7.6 for Weibo (WB.US; 9898.HK), one of China’s leading social media platforms, and a 9.6 for the similar-sized U.S.-based Pinterest (PINS.US). But it’s still well behind the 19 for NetEase (NTES.US: 9899.HK), one of China’s leading online game companies, showing there could be big potential upside for Yalla’s stock if its gaming initiative bears fruit.

Third-quarter launch

COO Xu said “Turbo Match” had its soft launch in the third quarter. The emphasis on the game by both Xu and Yalla founder and Chairman Yang Tao showed the company is particularly optimistic about the title, which Xu described as a “unique blend of car modification and simulation operations gameplay.”

Xu added that based on initial feedback, the company is adding new levels and diversifying side gameplay options to “Turbo Match,” “setting the stage for the next wave of large‑scale user acquisition.” Chairman Yang added that Turbo Match” has gotten good reception not only in the Middle East, but also in North America and Europe.

“Given this positive user feedback, we certainly plan to increase marketing budget for markets where performance is strong,” Yang said.

In addition to the launched game, Yalla also expects to debut a self-developed roguelike game called “Boom Survivor” and a strategy game (SLG) under a Middle East licensing agreement with a “leading game studio” by the end of this year.

Yalla began as a social media company with a focus on voice-based chat services, and still counts such services as its largest revenue source. It also developed a concurrent business for casual gamers, which lately has been growing faster than its original chat services, and is serving as the foundation for its latest gaming initiatives.

Those two services combined generated $89.6 million in revenue during the third quarter, well ahead of the $78 million to $85 million from the company’s guidance three months earlier, which was up 0.8% from the $88.9 million it reported a year earlier. Within that overall figure, chatting services accounted for about 62% of the total, while gaming accounted for the rest.

The company’s average monthly active users rose 8.1% year-on-year to 43.4 million, while paying users declined slightly compared to the same period last year.

Yalla is quite fiscally disciplined, giving it margins that would make most other companies envious. Its cost of revenue fell 10.7% year-on-year in the latest quarter, even as its actual revenue grew, with the result that its cost of revenue fell to 31.7% of revenue from 35.8% a year earlier. It credited the improvement to lower commission fees to third-party payment platforms.

Its total costs and expenses also fell 1%, which helped to boost its net margin by 1.3 percentage points to 45.4%, as its net income rose 3.9% to $40.7 million from $39.2 million a year earlier. The company said it had bought back $51.9 million worth of its stock this year through Nov. 7, outpacing its earlier target of $50 million for the whole year, leaving another $48.6 million it can spend for more buybacks under a $150 million plan first announced in 2021.

Such buybacks can help to support a company’s stock, and are almost certainly a factor behind Yalla’s rally this year. But to really get investors excited about its prospects, the company will need to start showing some results from its new gaming initiatives, which, if things go according to plan, could come in the first half of next year.

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The travel and tourism company will spin off its tourist property segment and significantly reduce its capital in a major restructuring

Key Takeaways:

• China Travel International will spin off its property arm, giving shareholders the option of receiving a cash payment of HK$0.336 per share as part of the divestment
• The move comes as the company shifts its focus towards developing scenic tourist attractions and related businesses

By Lau Chi Hang

When China’s real estate market was still hot several years ago, China Travel International Investment Hong Kong Ltd. (0308.HK) touted its tourist property unit as a major growth engine. Fast forward to the present, when real estate has gone from hot property to albatross asset in just a few years. Seeking to shed that heavy burden, the company has announced an abrupt about-face with a major overhaul taking it back to its core travel roots.

The revamp will see China Travel International divest its tourist real estate business, which will be moved into a private company. Holders of the company’s stock can choose to get shares of the new private company, or to receive HK$0.336 in cash for each share of China Travel International they currently hold. The company’s closing price of HK$1.53 before the announcement means the cash option equates to about a 22% return on each share.

Disclosure documents peg the net asset value of China Travel International’s property assets at HK$4.9 billion ($629 million). Thus, the company’s current share base of 5.537 billion shares would translate to HK$0.886 per share – significantly higher than the actual cash payout.

Concurrently, China Travel International is proposing a dramatic capital reduction that would shrink its issued share capital to HK$720 million from HK$9.22 billion. The eliminated HK$8.5 billion will be credited directly to the company’s retained profits.

Weighed down by property losses

The tourism real estate business involves developing property on land near tourist sites like theme parks or scenic areas. China Travel International has five such projects: a resort hotel and residential complex development at the Ocean Spring Resort in Zhuhai; a resort hotel and hot spring at the Ocean Spring Resort in Xianyang; a resort hotel and residences in Anji, a city in East China’s Zhejiang province; a commercial complex in Shenzhen; and the Jintang project in Chengdu, capital of Southwest China’s Sichuan province.

China Travel International's planned reorganization reflects the grim state of its tourism real estate business. That operation’s revenues fell from HK$629 million in 2023 to HK$459 million last year. It lost HK$461 million in 2023 and another HK$239 million last year. The unit's condition continued to slide this year, generating just HK$147 million in revenue and a HK$192 million loss in the first six months of 2025.

Persistent write-downs have added to the pain. Those include fair value losses on investment properties totaling HK$90.72 million in 2022 and HK$19.13 million in 2023, while the figure ballooned to HK$222 million in 2024. Impairment losses in the first half of this year continued to grow, jumping 24% year-on-year to HK$123 million.

Dragged down by its property exposure, China Travel International’s net profit tumbled 56% to HK$106 million last year. The company fell into the red in the first half of this year, registering a HK$86.85 million loss, versus a profit of HK$63.23 million in the year-ago period.

Return to travel focus

This restructuring looks like a shrewd move for China Travel International. With the Chinese property market still depressed and no clear recovery in sight, selling tourism-adjacent properties is difficult. At the same time, such property development requires substantial investment, straining the company’s cash flow. By spinning off the property unit, the listed company can reduce the drag from that segment and avoid the steady flow of impairment charges.

What’s more, losing its property development and maintenance business will allow China Travel International to focus on its core travel business, which has remained relatively strong even in the face of China’s slowing economy. That means the company can return to its tourism and travel roots that still have some growth potential, rather than waste its resources on a sinking property sector with no bottom in sight.

Just half a month before its restructuring announcement, China Travel International acquired the ski area, hotels, apartments and commercial street at the Songhua Lake Ski Resort in Jilin province from Vanke, along with the ski resort’s management company, for 300 million yuan. The deal also included China Travel International’s assumption of the project's 755 million yuan in bank loans, showing the company is returning its focus to tourism, with an eye to further expanding its urban and leisure projects.

Better market positioning

Property projects are prone to losses in the current sector downturn, while tourism attractions carry much higher profit margins. By spinning off the property segment, investors can more easily calculate the company's prospects. Moreover, the offloading of its property business could help to lift China Tourism International’s valuation.

Tourism-related stocks have been a relative favorite among investors lately, as the sector bounced back strongly post-pandemic, boosting shares of companies like Trip.com (TCOM.US; 9961.HK) and Tongcheng Travel (0780.HK). While China Travel International is smaller, the property spinoff will turn it into a purer tourism and travel play, making it easier for investors to understand its positioning. That could work to its advantage if it can be similarly valued to Trip.com and Tongcheng, which both trade at price-to-earnings (P/E) ratios of about 19, once it returns to profitability.

China Travel International’s restructuring announcement wasn’t especially well timed, coming just before the benchmark Hang Seng Index fell more than 400 points. Despite that, the company's stock rose the day after the announcement, surging as much as 15% as investors applauded the property divestment. While it later gave back some of the gains, it still managed to close up 8.5% for the day.

That said, the property market will have to bottom out at some point, which could happen sooner rather than later following several years of destocking and government policy support. If and when that happens, China Travel International will miss out on the turnaround.

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The property developer is betting heavily on its acquisition of a casino in Manila, as the Philippines privatizes its portfolio of government-owned properties

Key Takeaways:

• International Entertainment Corp. issued its fifth profit warning in two years last week, saying its loss widened by 60% in its latest fiscal year
• The company’s $1.2 billion integrated casino and hotel development in downtown Manila will reopen soon, as the Philippines sells off its 43 state-owned casinos

By Edith Terry

Its bottom line is still shaky, but investors seem to be betting things could be looking up soon for International Entertainment Corp. (1009.HK) (IEC).

The aspiring casino operator issued a profit warning last week, predicting a loss before taxes of HK$260 million ($33.4 million) or more for its latest fiscal year through June, much larger than its HK$162.2 million loss the previous year. But investors didn’t seem too surprised or worried and mostly took the news in stride as the stock barely budged over the next few days.

Perhaps investors were used to this kind of news. After all, this was the company’s fourth negative profit warning since February 2023. Its revenue comes from its New Coast Hotel and equipment leasing to the property’s associated casino, which is owned by Philippine Amusement and Gaming Corp. (Pagcor), the country’s state-owned gambling authority.

The expected loss for the 2025 fiscal year was due to a mix of factors, including higher expenses for general and administrative spending, and marketing campaigns for the casino, as well as a write-off related to an ongoing renovation at the casino. The company’s final annual results, due out on Sept. 26, are unlikely to hold any big new surprises.

Despite the losses, IEC could well be worth a second look, following its May 2024 agreement to purchase and subsequently manage the Pagcor casino attached to its New Coast Hotel property. And in fact, much of those losses are directly related to that transition, which includes a major renovation of the property. That could explain why investors are willing to tolerate higher losses for now, in hopes that things could soon change for the better.

The takeover will make IEC a first-mover as Pagcor puts its large casino portfolio on the block in a campaign to put the properties into private hands. As part of the deal, IEC agreed to spend between $1 billion and $1.2 billion on renovations, developing the property as an integrated resort hotel with family entertainment in addition to gambling. Pagcor ultimately plans to sell all of its 43 casinos, aiming to generate at least 50 billion ($870 million) pesos in proceeds from the sales.

Despite its widening losses and regular profit warnings, IEC’s top line revenue has been remarkably healthy lately. For the six months through December 2024, its revenue more than doubled to HK$267.6 million from HK$105.1 million a year earlier. While its loss for the period nearly tripled, rising from HK$36.1 million to HK$95 million, its bank balances and cash rose from HK$617 million in June 2024 to HK$855 million at the end of December 2024.

That strong growth represented a sharp acceleration from the previous fiscal year through June 2024, when revenue increased by a far smaller 11% from HK$207 million to HK$230 million. That said, the company’s losses are steadily widening as it takes over the Philippine casino. It swung from a small profit of HK$18.3 million in its 2023 fiscal year to a loss of HK$132 million in fiscal 2024.

New investment

The company’s investment in rejuvenating the 26-year-old New Coast Hotel property, originally the Hyatt Regency Hotel & Casino, is a major reason for the red ink. Its general and administrative costs in fiscal 2024 doubled to HK$204.6 million, while its finance costs for that year nearly tripled to HK$70 million.

IEC’s property is in Malate, an older part of downtown Manila away from the concentration of more upscale casino resorts in Entertainment City, also called Pagcor City, and the nearby Ninoy Aquino International Airport. IEC’s involvement in the Philippines goes back to 2007, when it bought a casino hotel in Manila and a 7,128-square-meter plot of land at Novos Aterros do Porto Exterior, which became the site of L’Arc Macau two years later.

IEC’s first incarnation was as an internet content creator called HKcyber.com, part of Hong Kong’s New World group, which was listed on the Hong Kong Stock Exchange’s Growth Emerging Markets (GEM) board in 2000. Four years later, it took over operation of an independent film production company, M8, and changed its name to International Entertainment Corp., which moved to the Hong Kong Stock Exchange’s main board.

Its shares mostly languished after that until Stanley Choi, a renowned poker player and co-founder of Jack Ma’s Yunfeng investment arm, began buying shares in 2017 and ultimately took control of the company. Under Choi, IEC negotiated rights to gaming events organizer PokerStars LIVE in Macao, Japan, South Korea, Vietnam, Singapore, Malaysia and Cambodia.

Choi resigned as chairman in 2022 and was replaced by CEO Ho Wong Meng, a former chairman of Frontier Capital Group, which owns the Stotsenberg Hotel and FortuneGate Casino, both in the Philippines.

IEC will have its work cut out to operate its new property profitably, as it competes against other private companies that have invested in the Philippines casino industry. Operators in Manila’s Entertainment City cluster include City of Dreams, owned by Melco Resorts & Entertainment (0200.HK, MLCO.US); Solaire Resort, owned by Bloomberry Resorts (BLBRF.US); Newport World Resorts, owned by Travellers International Hotel Group; and Okada Manila, owned by Universal Entertainment Corp. (6425.T).

A fifth integrated resort is scheduled to open in the Entertainment City complex before the end of 2025, by another Hong Kong-listed company, LET Group (1283.HK). The Philippines has two other major casino clusters in Clark and Cebu, with Hann Resorts and Casino Plus in the former and Nustar Resort and Casino in the latter.

Compared to Macau, with 2024 gaming revenues of 226.8 billion patacas ($28.35 billion) and the State of Nevada, with $15.6 billion in gaming revenues that year, the Philippines is still a small player. In 2024, Pagcor generated record revenues of 112 billion pesos, or about $1.9 billion, up 41% over 2023, with most of that coming from gaming operations. Its net income in 2024 was 16.8 billion pesos, up 146%, showing the industry can be quite lucrative.

The entire gaming industry in the Philippines, including Pagcor, generated 410 billion pesos in gross gaming revenue in 2024, up 25% from 2023. The figure for the first half of 2025 reached 214.75 billion pesos, another record for that six-month period.

Melco’s market cap of HK$12.31 billion and price to sales (P/S) ratio of 0.29, offer benchmarks for IEC, whose market cap is a much smaller HK$1.69 billion but trades at a far higher P/S ratio of 4.33. Both companies are minnows compared to leading Macao casino operator Sands China (1928.HK), with a market cap of HK$172.5 billion and P/S ratio of 3.12, or SJM Holdings (0880.HK), with a market cap of HK$22.6 billion and P/S ratio of 1.28. Given its smaller size and losses, IEC’s high P/S ratio means the stock could be slightly overvalued at current levels.

Despite its small size relative to Macao and Nevada, the Philippine gaming market clearly has strong regional potential compared to others where gambling is legal, including Singapore, South Korea and Japan. That could bode well for IEC, as the company seeks to enter the gambling big leagues with its move to casino ownership.

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