China Internet Cafe Holdings Group Inc
China Internet Cafe — China Internet Caf? Holdings Group — Investor Presentation (February 2011)
24 slides from China Internet Cafe's investor presentation, Feb 23, 2011
Slide 1: Investor Presentation
January 2011 Investor Presentation China Unitech Group, Inc.(OTCBB:CUI G)
Slide 2: Safe Harbor
Safe Harbor This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Act”) and Section 21E of the Securities Act of 1934, as amended (the “Exchange Act”). In particular, the words "believes," "expects," "intends," "plans,
Slide 3: Executive Summary
Executive Summary China Unitech Group owns and operates 44 internet Key Financials cafés in Southern China Ticker CUIG Doing business as Shenzhen Junlong Culture Communication (Junlong) 2009 Annual Revenue (12/31/09) $14.04M Headquarters in Shenzhen, China 2009 Net Income (12/31/09) $4.34M Employees
Slide 4: Transaction Summary
Transaction Summary Issuer (Ticker): China Unitech Group, Inc. (OTCBB:CUIG) Headquarters: Shenzhen, Guangdong, China Industry: Specialty retail – Chinese internet cafés Type of Offering: PIPE Capital Raise: $10 million Unit Price: $13.50 Stock: 3 year warrants: 9 shares 5% Series A Preferred 2 Class
Slide 5: Investment Highlights
Investment Highlights Pre-money valuation 2010 P/E multiple: 4.66x 2011 P/E multiple: 2.7x 28.3% NI margin Make good provision 2011 net income target: $10M 1M shares in escrow Proven company execution Profitable business since inception 2 year NI CAGR 38.7% $6M YTD cash flow from operations (as of 9
Slide 6: Use of Proceeds
Use of Proceeds Items Cost Guizhou province JV - 51% interest $4M Build out new wholly-owned cafés in Shenzhen 4M Working capital 2M Total $10M Page 6 Private and Confidential
Slide 7: Business Description and Café Pricing
Business Description and Café Pricing Diversified entertainment and media access platforms Movies, surfing, voice over IP service, online chatting, online gaming, snacks and drinks Preloaded games and videos Target customers: migrant workers, college students and low income residents Customers purch
Slide 8: Core Competencies
Core Competencies Café locations Early mover advantage in Shenzhen Access to prime sites near new factories Highly populated and dense locations such as universities, industrial zones and business centers Connectivity Preferential rates on high bandwidth connections from telecom provider Proprietary
Slide 9: Strong Cafe Portfolio
Strong Cafe Portfolio Junlong granted internet chain license by Ministry of Culture (MoC) in 2005 Existing café portfolio 44 locations in Shenzhen manufacturing zone Limited entertainment options in this area Areas of operation: Longgang, Pingshan, Baoan, Yangtian High traffic areas near live/work c
Slide 10: Customer Base
Customer Base Junlong caters to gaming customers Demographics 57% of users Age 82.3% are 18-25 vs. 30% industry average Gender 78% are male Longer play times Salary $220-450/month Higher revenue configurations Ancillary revenue from game card sales 1M registered users in January 2011 Customer activi
Slide 11: Quality & Superior Service
Quality & Superior Service Junlong uses management oversight to create a favorable customer experience and comply with regulations Quality control – centralized and standardized operations management Routine corporate inspections At least bi-monthly at random Cleanliness and appearance, fire safety,
Slide 12: Technology Differentiation
Technology Differentiation Fast computers and reliable internet connections are important to Junlong’s customers according to 2010 internal 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% cap
Slide 13: Steady Growth of Internet Café Usage
Steady Growth of Internet Café Usage Chinese Internet Café Users (Millions) Internet café industry Approximately $13B in revenue in 2009 according to the MoC Poised for continued expansion and a wave of consolidation amongst the less established players Social benefits for low income population Safe
Slide 14: National Internet Café License
National Internet Café License 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 Nat
Slide 15: 2-Pronged Growth Plan
2-Pronged Growth Plan Focused Approach to Expansion 1. Existing cafe acquisitions Joint venture operations in new provinces Provide financial and operational support to less established regional operators Targeted regions include Guizhou, Yunnan, Sichuan and Chongqing Qualify for national internet c
Slide 16: Acquisition Strategy
Acquisition Strategy Minimize development risks by partnering with quality regional operators Location Timeframe Regional characteristics Densely populated locations such as colleges & universities, Guizhou 2Q11 entertainment areas and residential areas Internet cafe trend directed towards high end
Slide 17: Proposed Acquisition- Guizhou Province
Proposed Acquisition- Guizhou Province Target company under LOI: Langren Internet Technology Culture Development Co. 32 internet cafés with 5800 PCs Junlong brings in modernized management with strong assets Change name to Junlong Langren Rationale National license Market leader Strong synergies: qu
Slide 18: Organic Growth Strategy
Organic Growth Strategy Estimated Mid-Tier Café Expenditures 30 new cafés in 2011 250 Computers $160,000 12 large cafés with 300 or more computers focusing on movies, high-end games and entertainment Furnishings & Decoration 56,000 15 medium cafés with 150 to 300 computers and a Equipment 56,000 few
Slide 19: Key Financials
Key Financials Fiscal Year ended Dec 31 ($ in thousands) 2008A 2009A 2010E 2011E 2012E Revenue $10,107 $14,038 $20,460 $37,446 $59,952 Gross Profit 3,772 5,629 8,637 16,072 25,144 Gross Margin 37.3% 40.1% 42.21% 42.9% 41.9% Operating Income 3,665 5,463 7,573 13,436 20,886 Operating Margin 36.3% 38.9
Slide 20: Experienced Management
Experienced Management Guo Dishan: CEO Bachelors degree in Business Administration from Management Administration Institute in Guangdong Executive president of the Internet Industry Association in Long Gang District Shenzhen, Guangdong Member of the Guangdong Chamber of Commerce of High-tech Industr
Slide 21: Investment Summary
Investment Summary Strong demand Driven by the increasing internet café user base in China $13B industry revenue 37% Y/Y café user growth in 2010 Well defined growth strategy Balanced organic growth and expansion through acquisition Proven business model Sustainable and profitable business 28% NI ma
Slide 22: Contact Us
Contact Us 17 State Street, 20th Floor New York, New York 10004 Tel: (917) 512-0822 [email protected] Page 22 Private and Confidential
Slide 23: Appendix I
Appendix I Internet cafés are subject to numerous national, provincial and local regulations Regulation Restriction Regulator Provincial office of national authority Age restriction At least 18 years old Ministry of Culture Content control PRC approved content only Ministry of Culture Internet opera
Slide 24: Appendix II: Corporate Structure
Appendix II: Corporate Structure China Unitech Group, Inc. OTCBB:CUIG (Nevada) 100% Classic Bond Development Limited (BVI) 100% Shenzhen Zhonghefangda Network Technology Co., Ltd. (PRC) Contractual agreements* Shenzhen Junlong Culture Communication Co., Ltd. (PRC) *Contractual agreements consisting
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