Shanda Interactive Entertainment Ltd reported better-than-expected third-quarter net profit of 66 percent from a year ago, thanks to more users paying for its games, China's No. 1 game firm said yesterday.

Net profit totaled 238.9 million yuan (US$32.28 million) in the period, five percent above the high end of guidance and analysts' forecast. Revenue climbed 50 percent to 656.3 million yuan, Nasdaq-listed Shanda said yesterday in a statement.

The number of active paying accounts for Shanda's online role-playing games jumped to 3.08 million from 2.14 million a year earlier. Average monthly revenue per user, a key measure in the industry, rose 12 percent to 57.90 yuan from 51.60 yuan.

The company's gross margin widened to 69.8 percent in the third quarter from 56.2 percent a year earlier.

"Shanda surpassed most of its Internet peers in average customer spending acceleration over the past six quarters by lifting its ARPU for MMORPGs (massively multiple online role playing game) by 96 percent, compared with mid-90 percent for Baidu, high-50 percent for Sina, low-20 percent for Focus Media and single digit growth for NetEase," Morgan Stanley said in a note yesterday.

Shanda's pipeline of new games, including 10 new MMORPGs and seven new casual games in 2008, may offer stability by reducing revenue contribution from one or two "blockbusters" (such as The9 company, whose more than 90 percent revenue comes from the World of WarCraft), Morgan Stanley said.

The US-based investment bank set Shanda's price target at US$40.20 compared with US$34.50 on Tuesday.

Total revenue for China's online game market rose nine percent to 2.9 billion yuan in the third quarter from the previous quarter.

(Shanghai Daily November 29, 2007)