Dji Holdings Share Discussion Threads

[sjc] 22/1/2015 17:13

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[sjc] 22/1/2015 17:11

Pos resistance here
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[sjc] 22/1/2015 17:07

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[sjc] 20/1/2015 23:30

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[sjc] 20/1/2015 23:14

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[toyin] 19/1/2015 20:41

It will be next week not this week. I to believe it will show great progress, but I don't believe in making predictions, but do hope you are right.

[sjc] 19/1/2015 16:38

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[sjc] 18/1/2015 23:04

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[sjc] 18/1/2015 22:50

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[ayesha4] 16/1/2015 10:12

Results next week possibly.

Look for an amazing upturn.

My guess is for a 20-30p rise if as I expect.

[ayesha4] 16/1/2015 10:11

150p by end of month imo

[sjc] 15/1/2015 17:26

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[sjc] 15/1/2015 17:06

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[sjc] 14/1/2015 23:29

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[sjc] 14/1/2015 23:12

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[sjc] 14/1/2015 23:11

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[monts12] 14/1/2015 19:23

Mike Walters has given permission for his original article to be shared:



It's A Lottery - (DJI)
29/12/2014 (119264)

It's a Lottery

High risk investments ought to attract high rewards. So grit your teeth, shrug your shoulders, and read on if you fancy a gamble on the explosive growth of legal gambling in China, courtesy of a loss-making British company which slipped almost unnoticed onto the speculative AIM market this summer. For good measure, the shares soared from 100p to 160p, then slumped to a current 92.5p. Sounds wild? Bear with me. The boys love it.

The company is called DJI Holdings (DJI). It effectively supplies the systems which enable lottery ticket sales - the only legalised form of gambling - to companies and consumers in China. It takes a commission on every sale, ranging from around 1% to maybe 13%, and assumes no gambling risk. Once you get into the detail, it quickly gets confusing. So let's start with a simple outline of why DJI could be a very good gamble. Forgive me if I miss some parts or get a touch muddled. If you wish, you can check the 140 page admission document at

The Chinese are legendary gamblers, but the only legal outlet is through two lotteries, the Welfare Lottery and the Sports Lottery, both promoted as important sources of revenue for the provincial and central governments. Sales were worth some $42bn in 2012, and are predicted to hit $72bn in 2015. Illegal gambling is reckoned to be worth between three and ten times as much.

The State is seeking to cut illegal gambling, partly by encouraging official lotteries. They are being helped by innovative ways of playing, and - most significantly - by the growth of the internet and the spread of mobile phones.

Online sales of lotteries have exploded , but have been suspended several times in recent years amid a profusion of scams and fake sites. The number of operators has been cut sharply, so the official, licenced, providers are generating much faster growth. Research shows that 75% of Chinese players would play online if they could, with 40% opting for mobile phones. State-backed China Mobile is fast building a 4G national network, opening the way for millions of extra players.

DJI got into China after working on software solutions with an American company whose plans went wrong, and seized the opportunity in 2009 to acquire Beijing New Net Science & Technology, which brought in the official website of the Beijing Welfare Lottery and a licence to sell lottery tickets in Beijing. It then began acquiring additional licences and outlets, and establishing relationships with the lottery authorities and the Ministry of Finance, which decides which companies can provide lottery services.

Raising finance privately through the years, DJI gradually shifted from low margin to online and mobile business. In 2013, it made three major acquisitions which brought in more provincial licences, a stronger technology platform, and a higher quality site to reach consumers. Now it has licences to offer its own consumer online lottery service and provide services which businesses can offer as their own lottery services.

Online lottery sales have been driven partly by the Chinese internet giants. Rather than build their own lottery sites, these majors see lottery as a small but useful add-on for generating traffic and revenues, so prefer to sign up existing lottery operators. The lottery providers also prefer not to go with a single online operator. As a result, DJI has signed distribution deals with part of Alibaba, and with Tencent and 360 in the past year. This helps use third party sites to drive traffic to DJI's own sites. There is also an opportunity for DJI to provide sites for banks and insurers.

Online and mobile sales will be the main source of growth for DJI as it moves away from lower margin areas like scratch cards. It has lottery licences in major provinces, including Beijing, Shanghai, Chongqing and Guangxi.

In a key move, late in September DJI signed an exclusive joint venture agreement with Xinhua, the dominant State-owned media company, to provide a technology platform and Sports and Welfare lottery games and lottery services. This brings great prestige and national reach and status. DJI has 49% of a venture aiming to become the leading provider and distributor of lottery products in China.

Xinhua operates China's main online news sites, and has over 20 newspapers, dozens of magazines, and is into various other media ventures. The online division is to be floated in Shanghai to raise capital for growth. All round the Xinhua deal gives DJI a massive step up in status (to help gain extra licences), revenue potential and national presence.

As the internet and official online gaming takes off in China, growth will be speeded by the introduction of new ways of playing. Single match betting on football and basketball is getting started, and will be boosted in the New Year. DJI is well placed to establish greater links with the Premiership. Revenues were boosted in the first half of 2014 from the online Sports Lottery during the World Cup. Once hooked, it seems, the punters have stayed on to play in the months which follow, and are looking at European matches. Earlier this month there was a deal which brings a trial of a high frequency horse racing lottery.

DJI came to AIM in July, raising £9m by issuing shares at 100p, plus £6m in convertible loan notes. It is growing at a scorching pace. In the first half of 2014, gross revenues leapt from £5.7m to £134m, with second quarter revenues at £113m, against £21.8m in the first quarter. Broker NSBO Beijing notes that the company has become profitable on a monthly basis for the first time, and expects growth to continue. The broker forecasts that net revenue will rise from £12.62m in 2014 to £22.88m in 2015, with earnings per share up from 1.58p to 7.48p, and cash flow turning £8m positive for 2015.

These numbers look extremely conservative given the pace of ongoing growth, deals which have been done, and the probability of further deals. The broker note was written in September when the shares were 140p, and there was a price target of 167p. That was arrived at by comparison with the peer group of companies listed in Hong Kong and the US.

The price is much lower now, probably brought down by at least one sizeable distressed seller on a thin market. At the beginning of December, the company announced that it would be seeking an additional share listing, either in Hong Kong or the US. Though the move into profits and the strong cash flow suggest that there is no urgent need for extra capital, it is safe to assume that any adviser bringing DJI to a new market would want to profit by managing a share placing.

It is likely that the company will want to wait, however, until the shares are significantly higher before such a move. There must also be a chance that some predator might make a move for the company before that happens.

DJI offers a unique way in to China, and must look inviting to any number of bigger players in and around the gaming industry. It is effectively controlled by the management and by long-standing institutional investors and others who came in ahead of the flotation. Through the years, JDI raised some £35m to £40m ahead of the flotation.

The main board is British, and looks solid enough. Former stockbroker Darren Mercer is chief executive, and spends 20 days a month in China. Virtually all of the staff are Chinese, and well established in the gaming industry.

Chinese companies which have floated in the UK have a well-deserved bad reputation, but DJI is British based, and is extremely careful about building a solid reputation in China, based on the local staff. The Chinese wish to encourage outside investment, and ought to be ready to stand by formal agreements. If you worry that DJI will be summarily locked out or thrown out, or placed at a disadvantage to local rivals, this is not one for you. No amount of reassurance can be sufficient.

DJI has been operating in China since 2008, and has plainly built respect. It has succeeded in winning new licences and establishing new partners of real standing. The joint venture with Xinhua is a massive step forward in gaining and enhancing respect, and it operates carefully within the legal lottery business, where the government is encouraging established operators to expand.

The shares could respond quickly to good news, and there are certainly deals to come and a move to another market. As more investors come to know DJI and appreciate the opportunity there could be quite a sharp re-rating. At present, the £123m market capitalisation at 92.5p (the spread is 90p to 95p but you should be able to deal inside it) looks demanding.

Given the pace of growth, however, we could be looking at a prospective single figure pe for 2015. As a way into a market where growth is exploding, that looks way too cheap. Don't bet the house, but a small punt ought to be fun.

Ends

[sjc] 14/1/2015 17:56

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[sjc] 14/1/2015 17:55

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[sjc] 14/1/2015 14:22

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[sjc] 14/1/2015 13:30

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[ayesha4] 14/1/2015 09:20

This will re-rate hopefully as a consequence.

[sjc] 13/1/2015 16:55

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[ayesha4] 13/1/2015 13:08

results are going to be bumper according to Walters

[toyin] 13/1/2015 12:19

Thanks whiteknight. RNS wouldn't have gone amiss!