To leverage high growth opportunities from the growing mobile game market in China, we expect the company to focus more on its Mobile Game business, which accounts for 10.1% of total revenues. Kong expects the revenue contribution from the Mobile game segment to increase exponentially in the range of 20-25% in FY 2009 supported by its new partnerships and recently launched 3G services in China, boosting the number of mobile Internet users. An important factor that could possibly increase penetration of mobile games in China is the 66% reduction of accession fees charged by China Mobile, the largest cellular operator with the highest subscriber-base in China, since 01 January 2009 and a corresponding increase in bandwidth. The partnership with NGP will allow Kong to access Nokia’s diversified network in China. Meanwhile the company’s plan to decrease spending on Kong.net branding and its increased focus on Mobile game platform will drive margin growth. However despite these positive factors we remain cautious for FY 2009 due to the effect of the global economic crisis and job losses in the Chinese mobile market. Moreover, going forward, the Chinese economy is expected to witness a rebound in the second half of FY 2010 while the popularity of 3G enabled smartphones is expected to see an increase. However we do not expect a significant upside on Kong’s revenue growth. Hence, at current price levels we keep a cautious outlook on the company.

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