FriendTimes delivered in-line FY20 results, with topline/bottom line +29% /21% YoY. Paying out ratio at 43.7% surprised us. With existing games trend priced in, we suggest to look beyond FY20 earnings, and move into new titles in FY21E. There are three key titles in 2021 pipeline, including female Xianxia games. (e.g. TLJ <此生无白> to be launched on 28 Apr) and modern woman game (2H21E). We trimmed its earnings by 7%/3% in FY21/22E to reflect new games S&M efforts, but maintain our TP of HK$4.0 (12x FY21E P/E) by rolling over to FY21E multiple. Maintain BUY with attractive valuation and multiple catalysts to come.
- Solid FY20 with dividend surprise. FY20 revenue grew 29.2% YoY, in line with our estimates despite 4% below consensus. Adj. net profit came in at RMB503.5mn, up 21% YoY, in line with buyside expectation and consensus. We are impressed by its dividend at HK$0.12 per share, with paying out ratio at 43.7% (vs. our expectation of 30%).
- FoE grossing steps into stable stage. After grossing peak in Jul 2020, FoE <浮生> kept stable at Top 20-30 in grossing rank in early 2021. We estimate its monthly grossing at around RMB100mn in Jan & Feb, in which mainland China/South Korea/HK, M&T version at RMB70mn/RMB16mn/RMB10mn. FoE would launch its Japanese version and English version in Apr/May. We forecast FoE & other existing games to contribute RMB1bn & RMB700mn annual grossing in FY21E, in which FoE with higher margin. The existing games grossing trend has been well anticipated by the market, more upside would come from 2021E new games, in our view.
- Three new titles in 2021E to bring further upside. We suggest market to eye on new titles in 2021E, including female Xianxia games. (e.g. Ftae: The Loved Journey <此生无白>, Promise of Lingyun <凌云诺>) and modern woman game (A Story of Lala’s: Rising Star <杜拉拉升职记>). <TLJ > would launch on 28 Apr, and mgmt reiterated confidence on its performance based on testing data. We estimate its monthly peak grossing at RMB80mn, if executed well. We expect PoL and Lala to be launched in 2H21E, in which Lala is highly-anticipated by the market.
Maintain BUY. The stock is trading at 8.5x FY21E P/E, largely below industry average of 15x. We trimmed its earnings by 7%/3% in FY21/22E, but maintain our TP of HK$4.0 (12x FY21E P/E) by rolling over to FY21E multiple. We suggest to accumulate on dips, as more catalysts to come (e.g. <此生无白> launch, ToE Japanese & English version, and solid 1H21E result).
