CMGE delivered in-line FY20 results, with topline/bottom line +25.8%/32.1% YoY. We suggest investors to move into its 2021E strong pipeline, backed by three highly-anticipated titles cooperating with Tencent & Toutiao. We forecast its revenue/ adj. net profit to grow 36%/19% YoY in FY21E, with over 20 new titles in pipeline. Looking ahead, we expect CMGE to deliver solid growth in the long run, backed by valuable IP reserve and rich pipeline. We keep our forecast and TP of HK$4.39 unchanged.
- FY20 in line. FY20 revenue/ adj. net profit grew 25.8%/32.1% YoY, largely in line with our estimates. FY20 growth was primarily from contribution of existing games and new game Xuan Yuan Sword <轩辕剑>, The New Legend Of The Condor Heroes <新射鵰群侠传之铁血丹心>, and Monster List: Past and Present Lives <妖怪名单之前世今生> with benefit from COVID-19. CMGE announced a final dividend of HK$0.093 per share, suggesting 3% yield. Looking ahead, we expect CMGE to perform well in 2021E and long run, and forecast its revenue/ adj. net profit to grow 36%/19% YoY in FY21E.
- Eyes on three key titles in pipeline. There are over 20 new titles to be launched in 2021E. We expect The King of Fighters <全明星激斗>, The Voyage <航海王热血航线> to deliver meaningful contribution in FY21E, with Toutiao’s guarantee annual grossing of RMB600mn/RMB1bn. These two games are available for pre-order, and are expected to be launched in 2Q21E. Dynasty Warriors <真•三国无双>, another game cooperating with Tencent, was pre-ordered by over 4mn players on Tencent Gaming platform and will be launched in 3Q21E. Mgmt prioritized its IP-driven strategy in a bid to deliver consistent and stable growth.
- Maintain BUY. We barely changed our forecasts, and keep our DCF-based TP of HK$4.39 unchanged (implying 9x FY21E P/E), still below industry average of 15x P/E. We believe CMGE’s positive price drivers and catalysts originate from: 1) upcoming The Voyage and Soul Land <斗罗大陆> in Apr; and 2) potential M&A on IP/game companies.
