China Internet Cafe Holdings Group Inc. (fka CICC)

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7 junlong final (china rising) - Presentation Transcript

1. May 2010
2. Safe Harbor Statement
* This presentation may contain forward-looking statements and management may make additional forward-looking statements in response to your questions. Such written and oral disclosures are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.
* All statements other than statements of historical fact in this presentation are forward-looking statements, including but not limited to, the Company’s ability to raise additional capital to finance the Company’s activities’ the effectiveness, profitability, and the marketability of its products; the Company’s ability for which its current liquidity will enable the Company to fund its operations, general economic and business conditions; the volatility of the Company’s operating results and financial condition and other risks. Although we believe our expectations expressed in such forward looking statements are reasonable, we cannot assure you that they will be realized. Investors are cautioned that such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the anticipated results.
* The forward-looking statements contained in this presentation are made only for this date, and Junlong Communications is under no obligation to revise or updated these forward-looking statements.
3. Corporate Overview
* Operating Company Shenzhen Junlong Culture Communication Co., Ltd. Established in 2003
* One of five Internet Cafe Chain operator and the Largest Internet Cafe Chain in Shenzhen with 28 company-owned stores
* The first public company in the industry
Online entertainment is very popular within internet cafes
4. Investment Highlights Seasoned Management Team – Extensive experience with the internet cafe business Well Defined Growth Strategy – Balanced organic growth and expansion through franchising Leading R&D Capability – Proprietary and unique Saflash software that boosts stable connection Very Strong Demand – Driven by the increasing internet cafe users in China High Barriers to Entry – Junlong is one of the few chain internet cafe operators with license in Shenzhen – High registered capital requirement: RMB 10 million for regional chain license and RMB 50 million for national chain license. Proven Business Model – Rapidly growing, sustainable and profitable business – Rev / NI was $14M / $4.4M in FY09, and estimated to be $29.2M / $8.3M in FY10 5 1 3 4 6 2
5. Corporate Milestones Opened 5 internet cafes Approximately 312 employees with a total of 28 internet cafes Dec 2003 Jan 2005 2005 March 2006 2006 2008 2009 Junlong Saflash 2006 version was launched Opened 7 internet cafes Junlong Teng was opened and became the best internet cafe in Long Gang District, Shenzhen* Granted Internet Chain License by the Ministry of Culture Shenzhen Junlong Culture Communication Co. Ltd was established * Junlong Teng was rated the best internet cafe due to its environment and high speed computer configuration Opened 5 internet cafes Opened 11 internet cafes 2007 2 3 4 5 6 7 8 1
6. Dragon Surf Stores Junlong’s internet cafes are operated and managed under the Dragon Surf brand. Its robust system offers diversified and one stop entertaining media platforms, including Voice over IP service, online chatting, online game, snacks and drinks Junlong’s Internet Cafes Average size 875m² Number of computers 245 Average occupancy 11.3 hrs/day Revenue per square meter/year 4,137RMB Revenue contribution/year/internet cafe 3.6 million RMB Performance measurement Measured by daily computer usage Demographics of Junlong’s customers Age 18-28 Disposable income 1,500-3,000 RMB/month Customer group Migrant workers and matured students
7. Marketing Strategy
* Identical internet cafe layout ensures uniformed branding and consistent customer service
* Cooperate with online game developers by launching newly developed games through Junlong Internet cafes
* Comprehensive training program to ensure safety enforcement and customized technical support
* Monitor customer demand changes on a regular basis
* To diversify its customer base, Junlong also aims to target high end customers by locating its internet cafes in busy and well attended locations. New cafes will include various sizes of private movie rooms with popular movies and advanced sound effect to offer an ideal place to make new friends
8.
* Through Junlong Internet Cafes, leading online game developers, including Tencent and Perfect World, actively offer game products and other information service to online game players
* Junlong cooperates closely with Tencent to promote safe online game and has been awarded the Golden Medal Cooperative Community by Tencent.
Solid Partnerships with Leading Brands
9. Strong R&D and Exclusive Technology 2006 Saflash 2007 Saflash 2008 Saflash Ongoing R&D
* Junlong’s exclusive Saflash software increases the stability of its connections and continually upgrades Saflash software through R&D efforts
* Junlong’s self developed Saflash only for internal usage
* Developed on a Microsoft Windows platform, Saflash offers automatic flow control which prevents disruptions in internet connections
* R&D team members have signed a strict confidentiality agreements in order to ensure its intellectual property
$000 Junlong’s Continuous R&D Commitment
10.
* China has become the largest market of internet users in the world
* Highly fragmented market and strong government controls provide opportunities to expand and gain market share
* Junlong is one of five companies granted a license to operate internet cafe chains in Shenzhen (total internet cafes in Shenzhen = 984)
* Junlong is applying for a national chain license, expected to be approved by the end of 2010
Rapid Growth of Internet Cafes in China Source: iResearch (Estimates) Users (million) Internet users growth & percentage of Chinese population Number of Internet Cafes in China 2000 40,000 2001 60,000 2002 110,000 2003 110,000 2004 100,000 2005 113,000 2006 130,000 2007 135,000 2008 147,000 2009 168,000
11.
* Internet Cafe is still underdeveloped in rural and suburban areas
* Internet cafe has become the second largest platform for internet users in China
* Internet cafe is a key outlet of thriving Internet Game market in China
Strong Market Potential Total internet users by location in Jun 2009 Source: China Internet Network Information (CNNIC) Users in millions Interactive Game Market Size in China Source: Pearl Research Revenue $ Billions 0.5 1.0 1.5 2.0 2.5 3.0 3.5
12. Government Policy: Safety Through Consolidation The goal of the government: to promote safety through consolidation into large chains rather than supporting independent operators Currently ten national licenses have been issued. Only five national internet cafes are operating on a small scale
* Requirements for a national chain license:
* RMB 50 million registered capital and
* A minimum of 30 internet cafes located in three provinces
Junlong will meet the requirements for a national license after expanding into Chongquing, Yunnan and Sichuan provinces The Chinese government announced in 2009 that it encourages internet cafe franchising in order to combat illegal operators
13.
* 2010 – 2011: using Shenzhen as a base, set up 50 additional "Dragon Surf" self-run cafes
* 2011-2012: set up 100 chain internet cafes in central and western provinces in China
* 2012-2015: open up to 500 chain internet cafes
* By 2015: expect to have a total of 500 Internet cafes: 35% self run 65% franchised
Growth Strategy Beijing Shanxi Nanjing Shanghai Shenzhen Guangzhou Projected red dots: chain internet cafes Dark side: sparsely populated areas Brightside: concentrated population areas Yunnan ?? Sichuan ?? Chongqing ??
14. Well Planned Regional Expansion Strategic expansion location Total number of internet cafes in existing markets Total number of internet cafes to be introduced in 2010 by Junlong Regional distribution characteristics Estimated monthly contribution $ 000 Chengdu 2,300 10-15
* Most are located adjacent to universities and train stations
* Average occupancy rate is 65%
63-137 Kunming 1,000 10-15
* Focused on populated and dense locations such as -- colleges & universities, entertainment areas and residential areas
* Internet cafe trend directed towards high end environment
* Transition from single internet cafes to chains
70-156 Chongqing 1,890 10
* Distribution is concentrated in Jiangbei, Yuzhong, Jiulongpo and Shapingba districts
* Mostly focused on lively streets, downtown areas and small districts
47-103
* Management has carried out in-depth market research and feasibility studies on the above regions.
* Customized expansion strategies will be implemented based on the distribution of regional internet cafes.
* Targeted markets offer attractive returns in regions where they are not well developed: Average hourly bill rate in undeveloped regions is RMB 6 compared to RMB 5 in Shenzhen.
* The payback period is between 10 – 14 months
15. Unique Franchise Model Traditional internet cafe franchising model
* Licensor issues a license in
* exchange for an annual fee
Junlong’s unique franchising model starting in 2011
* 100% Internet Cafe ownership
* Construction and set-up fee is
* funded by licensees
* Licensees get 40% of annual profit
* from Junlong
* Junlong is responsible for staff
* training and location selection
* based on its own feasibility studies
* Implement management decisions
* quickly and efficiently
16. Expansion Milestones for 2010
* July to Setember 2010
* Expand into Sichuan Province
* Introduce 10-15 internet cafes
* Each with 100-150 computers
* Ranging in area from 400 to 600 square meters
* October to December 2010
* Expand to Chongqing
* Introduce 10 internet cafes
* Each with a total of about 150 computers
* Each ranging in area from 400 to 600 square meters
* May – June 2010
* Expand into Yunnan,
* Introduce 5 internet cafes, each with 100 to 200 computers, ranging in area from 300 to 500 square meters
During 2010, 20 new internet cafes will be added with 4000 computers in total.
17. Income Statement
* Assumption:
* The company will open 20 new cafés in 2010, 102 in 2011, and 150 in 2012.
* Scenario assumes achieving National Chain License by end of 2010.
($MM) 2009A 2010E 2011E 2012E Revenue 14,039 24,139 80,113 167,326 Gross Profit 5,629 9,765 32,552 68,117 Operating Income 5,463 9,476 26,632 53,584 Net Income 4,389 7,483 20,368 40,360 Number of stores 28 48 150 300
18. Strong Balance Sheet ($MM) December 31, 2009 December 31, 2008 Cash and Cash Equivalents 3.1 1.1 Total Current Assets 5.1 1.3 Total Assets 8.7 4.9 Total Current Liabilities 1.7 2.3 Total Liabilities 1.7 2.3 Shareholders’ Equity 7.0 2.7
19. Experienced Management
* Guo Dishan: CEO and Managing Director
o - Bachelors degree in Business Administration from Management Administration Institute in Guangdong Province (1996)
o - Executive president of the Internet Industry Association in Long Gang District Shenzhen, Guangdong
o - Member of the Guangdong Chamber of Commerce of high-tech industries
* Li Jingwei: VP of Corporate Finance
* - Master of Professional Accounting from Monash University, CPA
* - Served as a senior accountant at Bentleys MRI, Melbourne, Australia
* Li Zhenfan: Engineering Manager
o - Bachelor of Public Administration; Hunan Teacher-training University
o - Responsible for Junlong SAFLASH system software R&D.
o - Served in Shenzhen Altai Technology Co. Ltd. as the Chief Technology Officer CTO / Chief Information Officer CIO
* Guo Zhenquan: Sales Manager
o - Five years experience as Sales Manager in internet cafes
o - Strong strategic planning capacity and management decision-making ability
* Huo Kai: Marketing Manager
o - Masters degree in Computer Management from Grafton College Dublin Ireland
o - Five years marketing experience
20. Cap Table Shareholder Shares % Dishan Guo 16,535,700 85.5% Jinzhou Chen 1,377,975 7.1% Xiaofen Wang 459,325 2.4% Shell 967,000 5.0% Total 19,340,000 100%
21. Investment Highlights Seasoned Management Team – Extensive experience with the internet cafe business Well Defined Growth Strategy – Balanced organic growth and expansion through franchising Leading R&D Capability – Proprietary and unique Saflash software that boosts stable connection Very Strong Demand – Driven by the increasing internet cafe users in China High Barriers to Entry – Junlong is one of the few chain internet cafe operators with license in Shenzhen – High registered capital requirement: RMB 10 million for regional chain license and RMB 50 million for national chain license. Proven Business Model – Rapidly growing, sustainable and profitable business – Rev / NI was $14M / $4.4M in FY09, and estimated to be $29.2M / $8.3M in FY10 5 1 3 4 6 2
22. Contact Details Junlong Culture Communications Co., Ltd Mr. Guo Dishan Chief Executive Director Phone: [phone] Mr. Li Jingwei, VP of Corporate Finance Phone: [phone] Email: [email_address] Legal Pillsbury Winthrop Shaw Pittman LLP Louis A. Bevilacqua, Partner [email_address] Investor Relations Firm: CCG Investor Relations Inc. Mr. Crocker Coulson, President [phone] [email_address] Mr. Pierre Maccagno Phone: [phone] (New York) [email_address] Auditing Firm EFT Rotenberg Nicholas R. Bottini, Partner + 1-585-295-0580 [email_address]
23. Thank You


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