02660.HK Zen Game Tech Has More Cash Than Market Cap. So Why Trade at a Discount?
Mahjong, cash flows, RMB 2.25B of net assets, 18% yield… and the governance catch.
Zen Game Technology does appear to be one of the simplest Hong Kong value situations to wrap your head around at first glance.
Based on audited FY2025 financials, the company possesses around RMB 2.25 billion in net financial assets, which equates to roughly HK$2.47 billion. With shares priced at approximately HK$2.20 (based on the underlying research), its entire market capitalization amounted to only around HK$2.3 billion.
Translation: The market was essentially pricing the entire operating business at nearly zero, perhaps even imputing negative enterprise value.
Of course, Zen Game Technology isn’t exactly a cash shell. Far from it. It has an actual gaming business on its hands that still produces hundreds of millions in renminbi profits per year, requires minimal capital expenditures, and generates cash from profits.
If there’s one question to be asked about Zen Game going forward, it’s no longer:
“What are these assets worth?”
Rather, it’s:
“How much of that value will ultimately trickle down to ordinary shareholders?”
Zen’s Aging Mahjong Machine Still Prints Cash
Zen Game’s most valuable asset is neither its tech nor a particularly complex gaming franchise. Zen Game’s most valuable asset is the commercial machine that Fingertip Sichuan Mahjong has built over the years.
Revenue from the card- and board-game business alone totaled roughly RMB 1.305 billion in FY2025, and still accounts for the vast majority of the company’s total revenues. There were around 460,000 paying users on the core platform as of last year, spending an average of about RMB 272 each per month.
That’s an extremely odd freemium business.
Most players never spend money. Their function within the economy is simply to populate the matching pool to the size necessary that paying players can always find someone to play against. The revenue side of the equation consists of the small fraction of players who are willing to spend real money buying virtual currency in order to preserve their game “rank”, skill level, and sense of identity within the community.
Mahjong also enjoys another huge advantage over your typical mobile game: it doesn’t need to constantly develop new maps, characters, storylines, or blockbuster-quality cutscenes.
Because the rules of mahjong provide hours of entertainment value on their own. Maintenance is low. Game updates are primarily limited to rule variants, tournament infrastructure, anti-cheat measures, live operations, and standard tech support.
No wonder why Zen Game is able to convert such a high proportion of profits into cash.
Of course, the machine isn’t nearly as explosive as it once was.
In fact, the company is moving past peak user growth rate. Over the last two years, we’ve seen both Monthly Paying Users come down, as well as ARPPU recede from its highs. The original flywheel – Douyin streamers, inflated virtual currency units, frenzied livestream fueled customer acquisition – is no longer working as well as it used to.
Operate mahjong tournaments. Release new game variants. Maintain streamer relationships. Just to decelerate user decline.
The spending necessary to do the above is starting to resemble digital CapEx. The company isn’t necessarily spending money to grow the top line. It’s spending money just to keep revenues from dropping at an even more rapid rate.
As such, investors should not be modeling Fingertip Sichuan Mahjong as a perpetually growing asset, nor should it be given the same multiple you’d typically assign to a stable gaming business.
Think of it more as a cash-flow-positive toll road that’s slowly but surely losing traffic.
Fishing Is Not a Second Mahjong—At Least Not Yet
Zen Game’s proposed second growth engine is Fishing Master.
Revenue from fishing and “other casual games” hit roughly RMB 241 million in FY2025, more than doubling YoY. On a revenue line only, this allows you to tell yourself a very attractive growth story.
But there is one key way fishing games are different from mahjong.
Mahjong is primarily a player-versus-player system. Virtual chips flow from one player to another while Zen Game provides the platform, rules, and services.
Fishing games skew more player-versus-system. Their economics revolve around paid user acquisition, advertising spend, payout ratios, and lifetime value.
Translation: You can’t judge the value of the fishing business by looking at revenue alone. Instead, you want to know how much of that revenue sticks after the company cuts back on or eliminates advertising.
Until customer acquisition spending flattens or declines—or at least no longer rises almost as quickly as game revenue—fishing is not yet a cash generative machine. It remains a growth project whose unit economics have yet to be proven.
Option value, not a big revenue multiple, is therefore the appropriate treatment.
Could be great. Could also be how the company spends the mahjong cash looking for growth.
The Cash Is Real—But It Needs an Exit Route
Zen Game’s net financial assets—around market cap or higher—is the biggest, flashiest thing on the balance sheet.
These funds are predominantly held in bank deposits, money-market products, structured deposits, and relatively conservative wealth-management products. The company has negligible interest-bearing debt and hasn’t repeatedly raised capital, conducted heavily dilutive rights issues, or made large unrelated acquisitions.
If we’re talking about asset authenticity and historical capital discipline, Zen Game’s history looks a lot better than your average HK micro-cap.
The problem is that as minority shareholders we can’t walk up to the banking apps and demand our cut.
Zen Game is incorporated offshore but conducts the majority of its business and holds its cash onshore in China. Founders hold majority voting power. The company has not relied on outside capital markets.
Shareholders cannot force liquidation, compel a special dividend, or otherwise mandate management to give back capital.
Cash on the company’s balance sheet is not automatically a dollar of cash in shareholder hands. It needs to be distributed via dividend, share buyback, privatization, or another credible method of exit.
This is why we care about the 2022 dividend incident.
The board originally included a proposal for a final dividend. The resolution was overwhelmingly voted down at the AGM. The stock dropped precipitously soon after. While Zen has reinstated and even increased its dividend payouts since then, the incident served to highlight:
Shareholders are not automatically entitled to dividends. Dividends are a policy decision that can be changed by controlling shareholders.
The positive takeaway is that behavior has materially changed since then.
Total dividends declared for FY2025 equaled HK$0.40 per share. At a recent price of ~HK$2.20, that’s an annual dividend yield of ~18%. It also exceeded annual net profit.
Raising the dividend while profits fall is practically speaking more meaningful than any management presentation slide or verbal assurance.
Also consider that the two founders collectively own >50% of the company. Dividends aren’t some gift to outside shareholders. Frankly, it’s the largest (and most scalable) way for the founders to take cash out of the company.
Issuing dividends lets minority shareholders benefit indirectly because the two founders chose to build a withdrawal channel we can also use.
Zen Game Technology: Management Is Neither a Classic Fraudster nor Costless Steward
Zen Game’s (02660.HK) valuation paradox is rooted in the complexity of its governance. Investor sentiment alternates between thinking management is either fundamentally good or fundamentally evil. Neither mindset paints an entirely accurate picture.
One argument holds that Zen Game has cash on its balance sheet, pays meaningful dividends, and hasn’t conducted a rights issue. Ergo, management must be shareholder-friendly since it has not repeatedly stuck investors with expensive capital raises.
The opposing argument holds that executive pay is too high and equity incentives are growing. Ergo, management will inevitably milk the cash balance and use it for things that don’t benefit minority shareholders.
Reality falls somewhere in between these extremes.
The good news is that there is some positive evidence. Zen Game hasn’t raised money repeatedly since listing. The founders haven’t sold a lot of shares. There’s no blatant evidence of related-party cash draining. Financial investments have been mostly plain-vanilla. Dividends have been paid with actual cash.
But bad news should also count.
The founders’ aggregate annual pay hasn’t come down much. More significantly, the share-option and award program has materially increased.
Note the proposed incentive package consists of newly issued options, newly issued share awards, and shares that are bought in the market with company money and transferred to insiders.
Taken individually, these are not as pernicious as a highly discounted rights issue. Still, they extract a continuing governance toll.
Stock options can be extremely asymmetric at a depressed share price. If the company keeps going south, management can just let the options lapse. If the stock gets repriced higher, insiders reap the benefits and existing shareholders get diluted.
Zen Game shouldn’t be considered a net-cash stock that carries no governance penalty.
Rather, think of it as owning tangible financial assets and a cash-generating business that perpetually extracts from minority shareholders via executive compensation, dilution, and uncertainty regarding how fast distributions will continue.
Changing the Question
Trying to value Zen Game from “What is the company worth?” to “What will minority shareholders ultimately receive?” helps focus attention on these hidden costs.
Sum-of-the-parts valuing of the core mahjong business, fishing option, the small plays, and net financial assets can get you to a value around HK$5/share.
Of course, that is theory-land.
It assumes you can monetise the cash promptly, management doesn’t take too many tolls, and minority shareholders get their fair share of the value.
The real world is messy and several deductions must be made.
Here are four of them:
Above-market compensation paid to management
Dilution from current and future stock option plans
Risk that dividends will be cut, cash is trapped, or the company goes private at less than intrinsic value
Speed of liquidity
Getting RMB 2.25 billion in cash tomorrow is worth far more than receiving those funds spread out over 10+ years. The company may earn ~2% on its financial investments, but the investor’s opportunity cost is much greater than that. The longer the timeframe for distribution, the less valuable those cash balances are to common shareholders.
That’s why “cash > market cap” doesn’t always lead to a risk-free trade.
Adjusting for governance, timing, and regulatory risk, I arrive at a valuation range for Zen Game’s minority interest of HK$3.00 to HK$3.70 per share. The lower bound of that range assumes heavier discounts for distribution speed and regulatory tail risk. The upside assumes the cash on hand is genuine, that historical dividends should be weighted more heavily, and that controlling shareholders have incentives aligned with keeping that channel open.
HK$3.00 to HK$3.70 is well below the ~HK$5 “gross asset value.”
But it’s still above the ~HK$2.20 share price used in this analysis.
Conclusion
Zen Game Technology does trade at a “cheap” valuation… but not for the reasons investors think.
The real bargain isn’t RMB 2.3 billion in cash and a mahjong money-press. The really cheap part of the deal is the market pricing in risk of distribution policy, management incentives, and regulatory intervention.
Long 02660.HK isn’t buying a mattress of cash they can rip open tomorrow. They’re betting on whether dividends will be maintained and whether the value created by the company can flow through its governance structure quickly enough to reach minority shareholders.
I don’t think 02660.HK is a net-cash arbitrage. I think it’s better viewed as a governance-risk trade with a very large asset cushion. And at ~HK$2.20, it looks like a good price to me… but again, only as a small odds-squeeze play. Not as a high-conviction core position that relies on certainty.
I don’t think the key unknown is whether mahjong can resume growth.
Instead, I think the key issue is whether Zen Game will continue to distribute the cash from the mature business to shareholders, and how much damage the company will do along the way with equity incentives and new business investments.
Cautionary Note: This article should not be relied upon as investment advice, nor should it be considered a recommendation, purchase offer, sell offer, or an indication of future performance. Some numbers contained herein were compiled from public sources. The article may also contain user-submitted research material and estimates. These numbers may be inaccurate, incomplete, or subject to different accounting treatment. All forward-looking statements, including but not limited to statements about future operations, expectations about future dividends, regulation and future value are subjective. Actual results may vary. Please do your own research before making any investment decisions. Investment decisions should be made based on your individual financial situation, goals, and risk profile. You should consult with your financial advisor.