We expect YY to deliver in-line 1Q20E results in late May, with revenue at RMB6.85bn (+43% YoY) and adj. net profit at RMB383mn (-41% YoY). 1Q20E overseas user metrics trend well. We keep positive on its overseas expansion, and expect YY Core to see positive growth in 2H20E. Bigo’s strong momentum and narrowing loss could help it re-rate, coupled with Likee’s initial monetization. We keep our core forecast unchanged but adjusted Huya’s deconsolidation. Maintain BUY with TP of US$74.
- Solid 1Q20E on track. We forecast its revenue/adj. net profit at RMB6.85bn/RMB383mn, suggesting +43%/-41% YoY in 1Q20E (at midpoint of guidance). International expansion would be key focus, and Huya would be deconsolidated from 2Q20E. We forecast its 2Q20E revenue at RMB5.0bn, with 20% YoY decline (excluding Huya’s revenue).
- Bigo’s strong momentum to continue. We view Bigo resilient to COVID-19. Its net adds & time spent trend well in 1Q20E, according to sensor tower. We forecast Bigo’s revenue to grow 73% YoY in 1Q20E (pro-forma), and 61% YoY in 2Q20E. Likee began monetization through ads and livestreaming, forecasting to contribute 10% of Bigo’s revenue in FY20E. We estimate Bigo’s non-GAAP OPM at -19% in 1Q20E, on track to achieve monthly breakeven in FY20E and overall breakeven in FY21E.
- YY Core to see positive growth in 2H20E. We expect YY Core revenue to decline 5% YoY in 1Q20E for weak seasonality and COVID-19 impact, and stay flat YoY in 2Q20E. With stabilization of domestic epidemic, we expect YY Core to see positive revenue growth from 3Q20E, and 3% YoY in FY20E. HAGO’s revenue would see 150% YoY growth, but still small part of YY Core. 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 TP of US$74 unchanged. The stock is now trading at 16x/11x FY20/21E P/E. Valuation is attractive. We think COVID-19 and regulation impact have been priced in. Healthy overseas user metrics trend and overseas expansion could be further catalysts, as investors gradually digest global TAM and competition landscape.
