China's Bona Reports 35 Percent Rise in Q2 Net Income

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Bona CEO Yu Dong

The production and distribution company announces a $163.4 million film and TV fund with two leading US venture capital firms.

Nasdaq-listed Chinese film production and distribution company Bona has announced a 35 percent rise in net income in the second quarter and announced a $163.4 million fund with two leading US venture capital firms to finance film and TV projects.

"The second quarter was a period of significant strength for Bona," CEO and founder Yu Dong said in a conference call. "In the second quarter, we continued advancing our key strategic initiatives of expanding our theater network and driving solid overall box office performance through a diversified and balanced film slate."

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Bona is the only Chinese studio on the Nasdaq Stock Market, and Rupert Murdoch's 21st Century Fox owns a 19.9 percent stake in the company.

The group's net income was $4.1 million in the second quarter compared with $2.8 million in the same period last year, Yu said.

Net revenues from film investment and production were $7.5 million, mostly from its investments in films released in the second quarter of 2013, as well as sales of TV show Flying Swords of Dragon Gate.

The 40-episode show was a big driver of revenues during the quarter. Bona chief financial officer Amy Xu said during the conference call that Flying Swords of Dragon Gate contributed $5.7 million (35 million yuan) to revenue in the quarter.

Second quarter net revenues were $28.3 million, compared with $20.7 million in the second quarter of 2012.

Bona is setting up a $163.4 million (1 billion yuan) film fund in partnership with venture capitalists Sequoia Capital Management and Noah Holdings to finance the development and production of film and TV projects over the next two years.

The fund will provide financing for projects such as Tracks in the Snowy Forest, The Third Master's Sword and Moscow Mission, the first project under Bona's co-production agreement with Fox International Productions.

"With rapid growth in theaters nationwide as a result of the ongoing urbanization movement and increasing availability of disposable income associated with the rise of China's middle class, we believe that China is poised to build upon its recently attained status as the world's second largest film market in the coming years," said Yu.

Projects financed by the fund will include both Bona-produced films as well as films developed through co-production agreements such as those previously announced with Fox International Productions, Universal Pictures and Working Title Films.

"This new fund will help Bona further expand its competitive advantages in film investment and production as we continue to strengthen our capabilities in the areas of distribution and exhibition."

In the second half of the year, Bona will focus on expanding its network of theaters as well as building on its market dominance in film distribution in the second half of this year.

"I am particularly pleased with the performance of our theater business segment, which once again exceeded expectations in the second quarter, delivering year-over-year revenue and segment profit growth of 71 percent and 74 percent, respectively," he said.

"In addition to our aggressive theater development strategy and compelling second-half release slate, our international expansion initiatives remain on track and are expected to create additional revenue opportunities for the company," Yu said.

He expects non-GAAP net income of between $3 million and $3.5 million in the third quarter of 2013.

"We are confident that we can build upon what we have achieved in the first half and are encouraged by our outlook for the second half of 2013," he said.

Bona distributed and invested in a total of three films in the second quarter - Christmas Rose, Kuiba II and The Funeral Parlor. In the second quarter box office was 60 million yuan, and the group is hoping to make a comparable figure in box office takings in the full year to its record year in 2011.

On Aug. 16, the group released the action drama Unbeatable on August 16, 2013, directed by Dante Lam and starring Nick Cheung and Eddie Peng, which has already generated over $18 million (110 million yuan) in domestic ticket sales so far.

Among other highlights coming from Bona in the third quarter are the romantic comedy My Lucky Star, a prequel to the hit 2009 film Sophie's Revenge, starring Zhang Ziyi and Leehom Wang, which is scheduled for release on Sept. 17th, 2013.

Post is continuing on Oxide & Danny Pang's 3D disaster film Inferno 3D, which is scheduled for release on September 30, 2013.

Benny Chan's crime drama The White Storm is coming in the fourth quarter, while the action comedy Red 2, directed by Dean Parisot and starring Bruce Willis, Helen Mirren, John Malkovich and Anthony Hopkins, has been given the regulatory green light and is scheduled for release in the fourth quarter of 2013.