V1 Group (0082.HK) extends its footprint in Hainan and targets at sports quiz, with favourable factors arising from reorganization

V1 Group (0082.HK) extends its footprint in Hainan and targets at sports quiz, with favourable factors arising from reorganization

HONG KONG, Jan. 20, 2021 /PRNewswire/ -- Another round of reshuffling of fortune is happening under the changing urban pattern. In 2020, popular terms such as "internal circulation", "Hainan Free Trade Port" and "supply-side reform" emerged, reflecting the key strategic deployment direction of the state. Hence, market and capital enthusiasm has been ignited. In particular, the construction of Hainan Free Trade Port speeds up significantly, which attracted huge capital injection. Crazy Sports is regarded as one of the capital representatives in sports industry.

I. Crazy Sports Extends its Footprint in Hainan, Ushering Historic Opportunity

1) Crazy Sports Extends its Footprint in Hainan, the Construction of Hainan Free Trade Port Speeds Up Significantly

On 13 August 2020, Crazy Sports, on behalf of V1 Group, was invited to participate the Centralized Signing Ceremony for Key Projects of Hainan Free Trade Port held in Haikou.

Founded in 2015, Crazy Sports was completely acquired by V1 Group Limited (0082.HK), a Hong Kong listed company, in 2018. At present, Crazy Sports has developed itself into the largest sports lottery and entertainment platform provider in China.

It is reported that Crazy Sports and its subsidiaries have obtained approval from relevant authorities of Hainan Provincial Government to establish a block chain-based sports tournament platform and reward points system in Hainan. For V1 Group, it is also the first time that it has extended its footprint in Hainan, thus facilitating the development of its online sports business.

Since June, Hainan Free Trade Port has been a hot economic topic in the market. On 1 June, the central government officially announced the Master Plan for the Construction of Hainan Free Trade Port (the "Plan"), which aims to develop, with Hong Kong as benchmark, Hainan into the largest special economic zone in China covering trade, investment, finance, talents and other fields.

As interpreted by Hainan Provincial Party Committee, the Plan can be simply summarized as "6+1+4", i.e. "six freedoms", "one modern industrial system" and "four system construction". Among them, the "six free aspects" represent the bonus policy and the final opening-up scale in Hainan Free Trade Port: namely free investment, free trade, free cross-border capital, free personal entry and exit, free goods transportation and order data flow. The "six freedoms" is expected to fully implement by 2035. In addition, many aspects in the specific policies to be implemented in short run or before customs closure by 2025 deserve the attention of domestic and foreign companies.

So far, the policy specifications seem to be extremely high, with unprecedented intensity of reform and opening-up and out-of-expectation policy support. This also means that Hainan will become a test field for the "highest level of opening-up policy" in mainland China. Since the announcement of the Plan six months ago, the policy has been intensively implemented, attracting a large number of signed projects. The pace of construction has accelerated significantly, indicating that Hainan is ushering in a historic opportunity for prosperity. Hence, it is easy to understand the phenomena of domestic capital rush into Hainan, a train bringing investors to global fortune.

2) With New Opportunities in Sports and Tourism in Hainan, Crazy Sports Targets at Sports Lottery

The sports industry in Hainan has also enjoyed strong policy support for a long time. In April 2020, with the implementation of policy on the national sports tourism showcase region, the sports industry in Hainan is facing a new wave of development opportunities.

On 7 August 2015, the Implementation Opinions of the People's Government of Hainan Province on Accelerating the Development of the Sports Industry and Promoting Sports Consumption (the "Opinions") was issued, which proposed the exploration and development of the distinctive sports entertainment industry for the first time, and putting together the Trial Measures for the Development of Characteristic Cultural, Sports and Entertainment Projects in Hainan and the overall implementation plan; and is developing a prize-winning reward points system and monitoring platform. It also focused on introducing and developing a number of popular sports quiz projects, developing IQ quizes, competitive sports and other prize-winning quizzes, and adopting the method of "winning reward points" to redeem prizes or services to enhance the entertainment, attractiveness and interest of distinctive sports, thereby stimulating tourism consumption.

On 30 June 2017, the government issued the 13th Five-Year Plan for the Culture and Sports Industry of Hainan Province, which clearly pointed out that by 2020, the cultural and sports industry will be developed into a pillar industry of Hainan economy. It focuses on developing four major industrial sectors, namely film and television, animation and games, tourism and performing arts and sports events, as well as promoting the integrated development of the cultural and sports industry and the Internet.

On 7 April 2020, the Development Plan of the Hainan Provincial National Sports Tourism Showcase Region (2020-2025) (the "Development Plan") pointed out that it will focus on the development of fitness and leisure sports tourism with characteristics of Hainan, promote the construction of nationwide sports tourism, strive to organise 6 to 7 world class sports events, establish 5 duty-free sports goods stores, encourage the development of sports tourism equipment manufacturing and service industries, and promote the marketization and international development of the sports industry in Hainan.

It is reported that the project on sports tournament platform and reward points system to be launched by Crazy Sports have secured an approval. Aiming at the good opportunity for the development of sports and entertainment industry with Hainan's characteristics, Crazy Sports initially developed the field of digital sports and entertainment which it has been expert in, thus further expand its existing sports and entertainment business territory and promote the development of Hainan cultural, sports and tourism industry with characteristics of its own.

It is conceivable that Crazy Sports, thanks to its entertainment offerings such as sports event information, live broadcast and match prediction, can become a new and unique attraction for Hainan's tourism industry, thereby effectively driving the growth of tourism consumption and meeting people's entertainment needs, and promoting the development of social welfare undertakings.

In the future, Crazy Sports plans to focus on its "competitive event platform" and introduce the MAX CHAMPIONSHIP ultimate boxing championship, China Football Association Premier League e-sports, the "Belt and Road" World Equestrian Grand Prix and other international events to facilitate integration of sports event management, entertainment media, club training, big data analyses and user communities into a comprehensive sports tournament and e-sports service platform, thereby building a full industrial chain of sports, culture and tourism integrating industry, culture, tourism and investment in Hainan.

II. With Favourable Factors Arising from Reorganization, V1 Group is Expecting Stronger Future Growth

Soon after the implementation of Hainan project, V1 Group reported another favourable factor arising from reorganization. There will be qualitative changes from brand, team establishment to business structure. After the completion of the reorganization, Crazy Sports will become a new brand and the future business focus of the Group.

Due to the leading position of Crazy Sports in the domestic sports lottery and entertainment market, benefited from the promotion of large-scale events and the rapid growth of sports lottery market, performance of Crazy Sports has grown strongly in recent years. Large-scale international sports events will be concentrated in the coming 2-3 years. With the application of vaccines, the pandemic restrictions will be withdrawn. It is expected that the industry will maintain a high level of prosperity. Crazy Sports is expected to develop rapidly and generate substantial profits in the future.

As the largest sports lottery and entertainment content provider in China, Crazy Sports has formed an O2O online and offline business ecosystem, including sports-oriented media platforms (Lottery 365 and China Football Lottery), sports lottery content platforms (Crazy Red Insights APP), sports theme mobile leisure game platform (Crazy Sports APP) and a convenient national sports lottery sales network (exclusive + joint operation).

In terms of user resources, according to the report of Analysys International, in 2019, Crazy Sports provided contents for more than 70% of internet sports users in China. In terms of revenue scale, according to the China Insights Consultancy, the paid sports lottery information service of Crazy Sports ranked first in China in terms of revenue in 2019. In terms of sales network, Crazy Sports currently cooperates with 18 large-scale chain stores, including Vanguard, Bianlifeng, Guangdong 7-Eleven, Good Neighbors, Jiajiayue etc., and plans to install sports lottery terminals at no less than 20,000 sales points nationwide.

In terms of operating results, considering the leading position of Crazy Sports in the industry, the expected sales growth driven by major sports events, as well as the divestiture of loss-making business units and the corresponding elimination of capital investment and significant impairment charges, it is estimated that the Group will likely return to record profits from the 2021 fiscal year. In addition, amid the accelerated construction of Hainan Free Trade Port, Hainan economy is undoubtedly ushering in the "second spring". Crazy Sports, leveraging on advantage of the development of sports tourism industry policy opportunity layout, is expected to further expand the business layout and strengthen the certainty of its future growth. At the same time, the signal of accelerating expansion has released.

Conclusion

V1 Group is one of the few Hong Kong listed companies in the domestic sports lottery and entertainment field. With its dominant position established in the O2O sports lottery entertainment field as an entry point, V1 Group will expand its footprint into other fields in the huge sports industry.

The "14th Five-Year Plan" has set up the goal of striving market value of RMB5 trillion in 2025, and the "13th Five-Year Plan" has confirmed that sports lottery will be the key development area. According to statistics from China Industry Information Network, from 2012 to 2019, the seven-year compound annual growth rate of the output value of China's sports industry and market reached 11.7% and 25.1%, respectively. It is predicted that by 2020, the output value of Chinese sports industry and market will increase by 13.2% and 28.7% year-on-year, reaching RMB301.1 billion and RMB1.5 trillion, respectively.

Under the huge sports industry, the Group takes root in the fast-growing sports lottery retail O2O sector, and seizes the dual development opportunities of the Hainan Free Trade Port and the distinctive sports industry. With the different policy support, there will be two positive expectations in the future:

On the one hand, with the vigorous development of sports lottery and entertainment business, its operating performance will experience rapid growth. Profitability can be improved by divestiture of loss-making businesses. On the other hand, after the reorganization, V1 Group will be transformed into a pure internet sports concept stock, with significant changes in business structure, opportunities for revaluation and scarcity in the capital market. The fulfilment of performance goal is likely to become an opportunity to promote revaluation.

It is worth mentioning that the 2020 pandemic has severely hit many industries and hindered the economy, with domestic lottery market under pressure as well. However, it is undeniable that the pandemic has also greatly promoted public healthcare awareness and stimulated healthcare consumption, which will become the catalyst for the development of domestic sports industry.

SOURCE V1 Group Limited