China Literature's earnings potential may be understated due to unusual items deduction. With these expenses often not repeated, improved results and higher profit are expected next year.

The cooperation was in relation to placing advertisements which are solicited by the Retained Tencent Group on the Platforms of the Group, and in relation to the distribution of the authorized works (including literature works, audio works and mini drama works) of the Group through the Retained Tencent Group Channels.
The proposed annual caps for the aggregate commissions payable by the Retained Tencent Group...

China Literature's share price drop is due to its consistent revenue decline. Despite profitability in the last five years, the lack of revenue growth worries shareholders. Recent insider buying is a positive, but the company's stock performance remains disappointing.

The declining ROCE trend at China Literature is worrisome, indicating potential loss of competitive edge or market share. Unless metrics show a positive shift, consider other investment opportunities.

China’s ‘Amazon’ gets more animated with purchase from Tencent
December 21, 2023
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With a quarter of China’s online readers as customers, e-book giant China Literature announced it is buying its parent’s comics and animation unit
Key Takeaways:
China Literature’s acquisition of Tencent’s comics and animation unit brings all of the latter’s long-form print and filmed entertainment assets under one roof
Tenc...

Citi analysts keep a positive outlook on China Literature's acquisition strategy and project expansion, maintaining a Buy rating with a HK$40 target price. Jefferies analysts also hold a Buy rating, expecting the newly acquired assets to profit in 2024.