FriendTimes announced investments in two game developers, which is positive to its category expansion and development cooperation. Tale of Empress (<浮生为卿歌>) performed stable at Top 10-15 in iOS grossing rank in Jun and Jul. We estimate its monthly grossing at around RMB120-150mn in Jul (Mainland version), coupled with over RMB10mn for South Korea version. Wait for more titles to be launched in 2H20E and FY21E. We keep our forecast unchanged, with TP at HK$4.0. Valuation at 9.0x FY20E P/E is attractive.
- Investments for category expansion. FT announced investments in Aoshen Interactive (澳深互动)、Baolong Network(暴龙网络) on 28 Jul. We expect this investment could enrich FT’s game category, and expand its pipeline (e.g. Project BGS, Project CSC) with upcoming cooperation. With flagships of Luan shi tian xia <乱世天下>, Aoshen specialized in SLG games, complementary for FT to expand male users. Baolong focused on RPG games, with key titles of Darkness and Light <暗黑之光>. We estimate the investment valuation far below 10x FY20E P/E, which is not demanding for FT.
- ToE stable at Top 10-15 iOS grossing rank. ToE kept stable at Top 10-15 in grossing rank in Jul (vs. Top 30-50 in Jan, Top 20-25 in Feb, Top 12-20 in Mar, Top 9-15 in Apr, Top 5-15 in May & Jun), with daily grossing at RMB4.0-5.0mn (vs. RMB0.6-1mn in Jan, RMB2mn in Feb, RMB2.5-3.5mn in Mar, RMB3.5-5.5mn in Apr, May, Jun). We estimate its monthly grossing at around RMB120-150mn in Jun and Jul, (vs. RMB40mn/60mn/80mn/100mn+/120mn in Jan/ Feb/ Mar/ Apr/ May). Moreover, we expect ToE South Korea version to contribute RMB15mn monthly grossing, after launch in Jun. We suggest market to eye on further new titles in 2H20E, including modern woman, casual elimination and female Xianxia games. (e.g. Fate: The Loved Journey <此生无白>). FT would release its 1H20E results in Aug. 1H20E growth might be below full-year, for deferred revenue, lower ToE contribution in 1Q and Android performance, but we keep confident on its full-year result, and maintain our forecast unchanged.
- Maintain BUY. The stock is trading at 9x FY20E P/E, largely below industry average of 15x. We suggest to look beyond 1H20E results, and eyes on new titles in 2H20E and FY21E. With forecast unchanged, we maintain our TP of HK$4.0 (implying 13.5x FY20E P/E).
