China Internet Cafe Holdings Group Inc
China Internet Cafe — Investor Presentation (September 2011)
25 slides from China Internet Cafe's investor presentation, Sep 15, 2011
Slide 1: Investor Presentation
Investor Presentation China Internet Café Holdings Group, Inc. (OTCQB:CICC) September 2011
Slide 2: Notice of Disclosure
Notice of Disclosure This information is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy any security or related financial instrument. This presentation may include “forward - looking statements” within the meaning of Section 27A of the Sec
Slide 3: Executive Summary
Executive Summary Capitalization Shares % Insiders 19,450,000 92 Public 1,750,507 8 Total 21,200,507 100% China Internet Café owns and operates 57 internet cafés in Southern China • Branded under Shenzhen Junlong Culture Communication ( Junlong ) • Headquarters in Shenzhen, China • Employees: 700 •
Slide 4: Investment Highlights
Investment Highlights Valuation • 2010 PE multiple: 2.6x (Actual) • 2011 PE multiple: 1.5x (Based on make good) • 2011 NI Margin > 25.0% Make Good • 2011 net income: $10M • 0.65M shares in escrow Proven Company Execution • Profitable business since inception • 3 year NI CAGR 24% • $5.8M in cash flow
Slide 5: Steady Growth of Internet Café Usage
Steady Growth of Internet Café Usage Internet café industry • Approximately $13B in revenue in 2009 according to the Ministry of Culture • Poised for continued growth • Regulators drive consolidation Affordable entertainment for low to middle income consumers • Safe & easy access to information • Af
Slide 6: Locations
Locations • Select locations throughout Shenzhen ( Longgang, Pingshan, Baoan, Yantian) • Dedicated team sources prime locations within walking distance to factories • Located in highly populated and dense locations such as universities, industrial zones and business centers
Slide 7: Customer Demographics
Customer Demographics Demographics Age 82.3% are 18 - 25 Gender 78% are male Disposable income $ 280 - 560 /month Target Customers: • Factory workers • College students • Local residents
Slide 8: Café Pricing Configuration
Café Pricing Configuration Member Non - member Off Peak Peak Video chatting $0.15 $0.30 $0.45 LCD screens 0.23 0.38 0.53 World of Warcraft 0.30 0.45 0.61 High end g aming 0.45 0.53 0.68 Private booth 0.45 0.61 0.76 *Exchange rate:6.69 • Customers purchase reloadable integrated circuit (IC) cards – I
Slide 9: Inside the Cafe
Inside the Cafe Movies, surfing, VOIP service, instant messaging, online gaming, snacks and drinks, preloaded games and videos Over 1 Million Active Customers in Q2 2011 • Customer activity: – 80% active within last year – 65% within 1 month – 50% within 1 week • Average number of visits/month: 1.5
Slide 10: Café Usage
Café Usage 57% 21% 15% 7% Café Usage Preference Gaming Chat Surfing Movies/Other Junlong caters to gaming customers • Premium high speed internet performance • 57% of users vs 30% industry average • Longer play times • Higher revenue per hour • Proprietary Saflash software for stability • Average le
Slide 11: Strong Cafe Portfolio
Strong Cafe Portfolio Junlong granted internet chain license by Ministry of Culture (MoC) in 2005 Strict government oversight • Mandatory license • MOC actively fining and shutting down illegal operations in 2009 • Safety and size thresholds • Frequent internal inspections Café Portfolio Factsheet A
Slide 12: Quality Management Protocols
Quality Management Protocols Quality control – centralized and standardized operations management Routine corporate inspections • At least 2/month at random • Cleanliness and cafe appearance, fire safety, game and software content updates, uniforms, staff training Incentivize café employees for reve
Slide 13: Technology Differentiation
Technology Differentiation According to 2010 survey: • 53.2% attend for service and equipment quality • 26.5% attend for internet speed and stability of connection Junlong cafés are designed to run at 100% capacity Innovation improves customer experience Saflash proprietary network control software
Slide 14: Growth Plan
Growth Plan Focused Approach to Expansion 1. Existing cafe acquisitions • Joint venture operations in new provinces • Provide financial and operational support to smaller regional operators • Targeted regions include Guizhou , Yunnan, Sichuan and Chongqing • Qualify for national internet café chain
Slide 15: Increased MoC Regulation of Internet Café Market
Increased MoC Regulation of Internet Café Market Policy: Safety through Consolidation In 2009, the MoC cracked down on illegal operators • Underage users • Internet addiction • Unsafe conditions • Banned content Encourage larger, better regulated nationally licensed chains Junlong will meet national
Slide 16: Acquisition Strategy
Acquisition Strategy Minimize development risks by partnering with quality regional operators Location Timeframe Regional characteristics Hunan 4Q11 • Densely populated locations such as colleges town, entertainment areas and residential areas • Focused on capital city, Changsha Hubei 1Q12 • Develop
Slide 17: Organic Growth Strategy
Organic Growth Strategy 57 cafés as of August, 2011 • L arge cafés with 300 or more computers focusing on movies, high - end games and entertainment • Medium cafés with 150 to 300 computers and a few movie suites focusing on high - end games • Small café with 100 to 150 computers Implement high end
Slide 18: Key Financials
Key Financials $ in millions Fiscal Year ended Dec 31 ($ in thousands) 2008A 2009A 2010A 1H 2011 Revenue $10,107 $14,038 $20,460 $15,115 Gross Profit 3,772 5,629 8,637 $6,047 Gross Margin 37.3% 40.1% 42.2% 39.9 % Operating Income 3,665 5,463 8,002 4,716 Operating Margin 36.3% 38.9% 39.1% 31.1% Net I
Slide 19: Experienced Management
Experienced Management Guo Dishan : CEO • Bachelors degree in Business Administration from Management Administration Institute in Guangdong Province (1996) • Executive president of the Internet Industry Association in Long Gang District Shenzhen, Guangdong • Member of the Guangdong Chamber of Commer
Slide 20: Investment Summary
Investment Summary Strong demand • Driven by increasing internet cafe user base in China – $13B industry revenue – 185 million users in 2010, ▲ 38% Y/Y Well defined growth strategy • Balanced organic growth complemented by acquisitions Proven business model • Sustainable and profitable business with
Slide 21: Contact Us
Contact Us Investor Relations Ted Haberfield Executive Vice President MZ - HCI Direct: 760 - 755 - 2716 Cell: 858 - 204 - 5055 Email: thaberfield@hcinternational.net Website: www.mz - hci.com www.chinainternetcafe.com Company Mr. Jingwei Li Vice President of Corporate Finance Phone: +86 - 755 - 3366
Slide 22: Appendix I: Regulation
Appendix I Regulation Restriction Regulator Provincial office of national authority Age restriction At least 18 years old Ministry of Culture Content control Internet o perations license PRC approved content only Unmonitored internet communication Monitoring software required Ministry of Culture Loc
Slide 23: Appendix II: Major licenses
Appendix II • Major licenses from government bureaus
Slide 24: Appendix III: Awards
Appendix III • Awards
Slide 25: Appendix III: Corporate Structure
Appendix III: Corporate Structure China Internet Café Holdings Group, Inc. OTCQB:CICC (Nevada) Classic Bond Development Limited (BVI) Shenzhen Zhonghefangda Network Technology Co., Ltd. (PRC) Shenzhen Junlong Culture Communication Co., Ltd. (PRC) 100% 100% Contractual agreements* *Contractual agreem
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