JOYY delivered solid 4Q19 results, with revenue/adj. EPADS +64%/-48.6% YoY, 2%/3% higher than consensus. We keep positive on its overseas expansion, forecasting Bigo to see 60% YoY revenue growth and monthly breakeven in FY20E. We think market concern on COVID-19 and regulation impact has been partly eased by this result. Maintain BUY with unchanged TP of US$74.
- 4Q19 beat. 4Q19 revenue grew 64% YoY, 1%/2% higher than our estimates/ consensus. Adj. EPS declined 48.6% YoY (for Bigo’s consolidation), 0%/3% above our estimate/ consensus. Mgmt. guided 1Q20E revenue at RMB6.75bn-6.85bn (midpoint +42% YoY), in line with consensus. We view this result as positive, on both solid financials and user metrics.
- Overseas expansion to step up. As stated in our preview report, we keep confident on Bigo’s overseas expansion, and mgmt. guided 60% YoY revenue growth in FY20E. Bigo performed well in developed countries (e.g. USA, Japan, Europe), with 31% revenue mix from these regions in 4Q19 (vs. 26% in 3Q19). Its paying users in developed countries surged 50% in Dec (vs. Jun). Likee would begin monetization in 2020 through livestreaming and ads, forecasting to contribute 10% of Bigo’s revenue. We view Bigo resilient to the epidemic, and kept its net loss forecast of US$150mn in FY20E unchanged. We expect Bigo to achieve monthly breakeven in FY20E, and overall breakeven in FY21E.
- Stable YY Live with limited impact from epidemic and regulation. Given epidemic impact and regulation headwinds, mgmt. guided low single-digit growth for YY Core’s revenue in FY20E. We view this guidance in line with our expectation, and we forecast YY Core’s revenue to grow at 3% YoY in FY20E and decline 5% YoY in 1Q20E, as stated in our preview report. We estimate its non-GAAP OPM at 20% in FY20E and 18% in 1Q20E, mainly on innovative features and initiatives investment.
- Maintain BUY. We maintain our forecast and TP of US$74 unchanged. The stock is now trading at 10x/7x FY20/21E P/E. Valuation is attractive. We think COVID-19 and regulation impact have been priced in. Healthy user metrics trend and overseas expansion could be further catalysts, as investors gradually digested global TAM and competition landscape.
