Zhitong Financial APP learned that Xi Niu Securities issued a research report saying that it first gave hometown Interactive (03798) a "buy" rating, valued the group through the discounted cash flow valuation model and took the P / E valuation model as a reference, with a target price of HK $2.48, which is equivalent to the 2021-23 5.4x/4.7x/4.2x forecast P / E ratio.
The main points of Xi Niu Securities are as follows:
Hometown Interactive is a localized mobile board game developer and operator in China, focusing on the development of localized mahjong and poker games. By the end of June 2021, the Group had more than 300 million cumulative registered users and about 8 million daily active users, and launched 634 mobile game products in 28 provinces and municipalities directly under the Central Government in China. Of these, 556 are localized mahjong games, 71 are poker games and 7 are casual games.
The potential for strong horizontal expansion
Hometown interaction has basically entered most of the provinces and regions of China, of which only a few are the main sources of income of the group, and the rest have not been deeply ploughed or promoted. By ploughing new areas, the Group has the potential to expand its existing business horizontally, and the Group has successfully expanded its business from the Northeast to new provinces in the past few years.
The bank is confident that hometown interaction will be able to open up and dig new fields again.1)Past experience (including waybill platform strategy, localized marketing strategy, etc.),2)Abundant capital and cash cow business have laid the foundation for the success of the group's expansion.
As of the end of June 2021, the group had about 960 million yuan in cash, equivalent to about 68% of total assets, and the cash cow business supported potential marketing expenses with sustained cash inflows, while buffering the adverse impact of failed business expansion on the group.
More and more cash patterns
By adding selective advertising fields to WeChat Mini Programs's game, Home interaction can cash out non-paying users without affecting the user experience. Generally speaking, users can get virtual props or virtual items as a reward after watching the advertisement, and the user can also choose to watch or skip the advertisement directly.
In addition, hometown Interactive added two major functions: live broadcast and social interaction with strangers in WeChat Mini Programs, and the live broadcast usually revolves around mahjong and poker games. Both users and officials can broadcast live through the platform, and both the live broadcast host and the viewer have the opportunity to receive rewards. Viewers can give gifts to the live broadcast host. In view of the huge promotion potential of the live broadcast, the group now tends to make a profit and give all the proceeds to the live broadcast master. Even though live streaming and stranger social functions are unlikely to contribute to the group in the short term, the bank believes that social attributes are beneficial1)Build communities and increase loyalty,2)Through the word-of-mouth promotion platform,3)Bring the possibility of realization to the group in the long run.