(Yicai Global) April 9 -- G-bits Network Technology's stock price plunged by the exchange-imposed limit on concern about a surge in costs at the Chinese online gaming company and the long-term prospects for its main gaming asset.

Xiamen-based G-bits [SHA:603444] fell as much as 10 percent today before closing 6 percent lower at CNY397.50 (USD56.33).

A 12 percent gain in net profit to CNY809 million (USD114.6 million) last year on a 31 percent jump in revenue to CNY2.17 billion (USD307.4 million), according to G-bits' earnings report published yesterday, failed to impress investors worried by a 68 percent surge in sales expenses. Overall operating costs rose almost 60 percent to CNY205 million.

The jump in expenses was largely put down to the rising cost of acquiring new users. The number of gamers in China grew just 3.2 percent last year, according to industry data. That has led to fierce competition and much higher promotional costs.

G-bit relies heavily on its most popular game AskTao Mobile, first launched in April 2016, for income. But despite having 40 million registered users at the end of last year, the game has been declining in popularity since last April, dropping from sixth on the App Store's bestseller list to 40th in the third quarter.

G-bits' games do not have an entry fee, but generate most of their income by charging for virtual props needed to advance to higher levels. This is a profit model common among domestically developed online games.

Like many other industry leaders, the firm's revenue from its long-term operations and multiple intellectual property gaming rights is key to its continued performance.

Editors: Tang Shihua, Kim Taylor