As a leading female-oriented game company in China, FriendTimes is posied to surf on the emerging industry growth with a strong product pipeline. We expect its revenue/ adj. net profit to grow at 23%/26% CAGR in FY18-21E, driven by rollout of new titles. With major concerns priced in, we think FT’s valuation is attractive. Initiate with BUY with TP HK$1.41 (44% upside).
- A leading female-oriented mobile game company in China. FriendTimes is 3rd largest female-oriented mobile game company in China, according to F&S, in terms of revenue from female-oriented mobile games in 2018. Backed by steady game pipeline, revenue/net profit rocketed at 60%/103% CAGR in FY16-18. We expect the solid momentum to continue, driven by rollout of new titles and further penetration in overseas markets. In our forecast, revenue/net profit will grow at a 23%/26% CAGR in FY18-21E.
- Well-positioned to seize opportunities in female-oriented games. We see high visibility that the growth of female-oriented game market will continue to outpace that of overall mobile game market, thanks to female player expansion. Sequential launch of female-oriented hit titles (such as Legend of Empress(《熹妃传》), Royal Chaos(《熹妃Q传》) and Rise of Queendom (《宫廷计手游》)) brought FriendTimes onto the emerging track in FY16-18, as well as equipping it with know-how and insights to fortify its first-mover advantage in the foreseeable future, in our view.
- Rich game portfolio with great monetization potential. Considering FriendTimes’ meticulous operation and active in-game interaction among players, we expect existing game portfolio to perform steadily. In addition, there are five new games in pipeline. We expect two highly-anticipated titles will release in FY19/20E, namely Tale of Empress(《浮生为卿歌》) and Yokai Kitchen(《精灵食肆》), and will bring further upside. Overall, we estimate that the enriched game portfolio will lift up MAU/monthly ARPPU at an 11%/2% CAGR in FY18-21E.
- Initiate with BUY. We set our TP at HK$1.4 (implying 5x FY20E P/E), largely lower than industry average of 16x P/E, mainly due to high revenue concentration and uncertainty in new games performance. Waiting for more catalysts from: 1) launch of Tale of Empress; and 2) potential dividends.
