Photographer: Kiyoshi Ota/Bloomberg

GungHo Jumps on Puzzle & Dragons China Version Reservations

  • Chinese smartphone gaming market seen worth $8.25 billion
  • Plans to release game in China were announced in 2014

GungHo Online Entertainment Inc., the developer of Puzzle & Dragons, started taking reservations for the Chinese version of the mobile game, triggering the biggest jump in the company’s shares in more than a decade.

The Tokyo-based gaming company is teaming up with Chinese mobile-Internet company Tencent Holdings Ltd. to develop the game, it said in a statement Friday. While the companies first unveiled their alliance in December 2014, along with plans to introduce a version for China, the game failed to reach smartphones in 2015. Sales fell 11 percent that year, and the company’s share price declined 25 percent.

Early reservations for the world’s former highest-grossing smartphone title have already started via Tencent’s WeChat and QQ platforms, GungHo said, without saying when the game would become available.

“The sheer size of the Chinese market and the partnership with Tencent holds a promise of new subscribers and renewed growth for GungHo,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “Puzzle & Dragons hasn’t had much success outside of Japan, but there are expectations that it may do better in China because of cultural affinity.”

Shares of GungHo climbed 30 percent to 338 yen as the close in Tokyo, their biggest jump since 2005, the year of the game maker’s initial public offering. The stock rallied to its daily limit, and Friday’s trading volume was 34 times the daily average of the past three months. 

GungHo spent a decade in relative obscurity as an operator of online computer games before the 2012 release of the puzzle-cum-strategy game Puzzle & Dragons, which turned it into one of the world’s top developers. The company had 154.3 billion yen ($1.4 billion) in sales last year, with 89 percent of that coming from its flagship game. While there’s intense competition in China’s smartphone gaming market, the market is very attractive with a total estimated worth of 54.1 billion yuan ($8.25 billion), GungHo said.

“It is within this environment that GungHo is aiming to get as many gamers to enjoy our games as possible,” GungHo said in the statement. “This is the key to stable, long-term profitability, and that is why we have been developing games.”

Puzzle & Dragons, which combines puzzles with role playing, is already available in North America, South Korea, Taiwan and Hong Kong. GungHo’s market value stood at about $3.3 billion on Friday.

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