At age 35, Michael Yufeng Chi is a veteran entrepreneur in China. His latest deal involves Perfect World
Perfect World has built a sophisticated online gaming system, known as Angelica 3-D, that provides realistic graphics and sounds. Angelica's modular game-design platform means there's no need for designers to learn a complex programming language. As a result, it takes only about six months to develop a game, making it easier for titles that use Angelica to reflect the latest fashions and cultural trends.
So far, Perfect World's four game titles have been spot-on with consumers. In the first quarter of 2007, the games boasted about 237,000 average concurrent users.
The company has also been flexible with its business model. It makes money partly by charging for play time and the purchase of in-game items (such as new clothes or other enhancements). It's also succeeded in licensing games to neighboring countries such as Japan and Taiwan.
Perfect World's growth has been scorching hot. Last year, the company posted revenue of $12.9 million, and it's already generated $11.3 million in the first quarter of 2007 -- $5.2 million of which made its way to the bottom line.
Still, Perfect World faces stiff competition from players like Shanda
If Perfect World maintains its current run rate from Q1, and generates roughly $21 million in net income, or $0.64 in earnings per share, the P/E ratio works out to about 43. For a hypergrowth company, that's fair valuation. Yet Foolish investors should remain cautious and see how things play out, especially with the next earnings report. After all, in the topsy-turvy gaming world, things aren't always as perfect as they seem.