Accumulate BOYAA 434.HK

14 November 2014
BOYAA （434.HK）
）
3Q results: Quarterly growth slowing down
HONG KONG | SOFTWARE | COMPANY UPDATES
Accumulate
Rating:
Maintain as Accumulate
•
•
•
•
3Q14 revenue increased 40.8% yoy (+3% qoq) to RMB 243Mn. Net
profit surged 143% yoy (+0.9% qoq). Very different pictures from yearly
and quarterly point of views.
GPM, EBIT margin and NPM were down 3.9, 2.8 and 0.7 percentage
points respectively from the second quarter.
Mobile paying users rose. DAU, MAU and the ARPPU of Texas Holdem
and Fight the Landlord achieved stable growth.
Due to slower estimated revenue growth, we lower our valuation with
target price adjusted to HK$ 8.52, and maintain the rating as
“Accumulate”.
Financial Highlights
Boyaa announced 3Q results which revenue increased 40.8% yoy to RMB
243 mn. Both web games and mobile games obtained yearly growth in
revenue of 14.4% and 68% respectively. Gross profit grew 37.4% yoy with
GPM 59.8%. Net profit sharply surged 143% yoy to RMB 76 mn. The
diluted EPS amounted to RMB 10.37cents. Mobile paying users rose from
1.4 millions in 2Q to 1.8 millions. DAU, MAU and the ARPPU of Texas
Holdem and Fight the Landlord achieved stable growth, while the ARPPU
of other mobile games declined to RMB 6.3.
How we view this
It seemed everything alright. But when we looked from the quarterly view, it
just showed a different picture. 3Q revenue only grew 3% compared with
2Q while the operating income actually dropped 4.4% from last quarter. The
qoq revenue growth was declining while the qoq net profit growth dropped
even faster. The margins also decreased from the 2Q. GPM, EBIT margin
and NPM were down 3.9, 2.8 and 0.7 percentage points respectively. In all,
the company missed our estimates in August that was not able to keep the
growing momentum in 2Q, though net profit beat due to lower expenses
and other incomes.
N/A
Market Cap. (HKD bn)
5,593
52 week range (HKD)
5.55 - 15.16
Enterprise Value (HKD mn)
3,892
Closing Price in 52 week range
0.00
0%
50%
100%
16.00
70
14.00
60
12.00
50
10.00
8.00
40
30
6.00
4.00
20
2.00
10
0.00
0
Nov-14
434.HK Equit y (LHS)
Major Shareholders
1. Zhang Wei & Family
2. Sequoia Capital China Advisors Limited
3. The Core Trust Co., Ltd.
4. Dai Zhikang & Family
Valuation Method
PE
Sep-14
Volume, mn (RHS)
HSI (LHS)
Jul-14
FY16E
1,180
369
0.61
12.1
3.65
2.0
0.20
2.7%
Raw Beta (Past 2yrs weekly data)
May-14
FY15E
1,065
333
0.55
13.4
3.04
2.4
0.16
2.2%
Company Data
Mar-14
FY14E
950
292
0.48
15.4
2.49
3.0
0.14
1.9%
Boyaa Interactive is a leading online card & board games developer
and operator that operated the "Boyaa Texas Hold`em" and "Boyaa
Fight the Landlord" in Southeast Asia as well as in mainland market
with over 1.8 million paid users.
Jan-14
Key Financial Summary
FYE Dec
FY12
FY13
Revenue (RMB mn)
518
681
Net Profit (RMB mn)
143
136
EPS (HKD)
0.38
0.32
P/E (X)
19.4
23.1
BVPS (HKD)
1.75
4.88
P/B (X)
4.2
1.5
DPS (HKD)
0.00
0.00
Div. Yield (%)
0.0%
0.0%
Source: PSR est.
*All multiples & yields based on current market price
Company Description
Nov-13
Investment Action
We adjusted down the forecasted revenue but expected a slightly higher
net profit in 2014 and 2015 due to the increasing income and profit from
other businesses. However, we believe that the revenue from traditional
card game business is comparatively stable than other web/ mobile game
categories. The company was quite conservative in operation as we
mentioned before, coupled with slower estimated revenue growth, we again
lower our valuation to 15X PE. 2014 forecasted EPS, the business value is
HK$ 7.2. Together with the cash per share of HK$ 1.32, we maintain the
rating as “Accumulate” with target price cut to HK$ 8.52.
8.52
0.14
7.39
17.2%
Target Price (HKD)
Forecast Dividend (HKD)
Closing Price (HKD)
Potential Upside
33.91%
16.36%
14.26%
5.36%
Analyst
Kay Ng
[email protected]
+852 2277 6751
Page | 1
BOYAA (434.HK)
14 November 2014
Revenue and profit growth declined
Fig 1 Revenue and profit growth
2013Q2 2013Q3 2013Q4 2014Q1 2014Q2
Revenue growth
YoY
QoQ
Net profit growth
YoY
QoQ
6.8%
-24.6%
8.4%
3.9%
2014Q3
15.4%
48.3%
11.1%
48.1%
6.6%
40.8%
3.0%
8.5%
55.6%
83.1%
150.7%
21.5%
143.2%
0.9%
Source: Company reports
Margin dropped from the peak in 2Q
Fig 2 Margins summary
2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2
Gross profit margin
63.1%
60.8% 61.3% 59.6%
60.1%
63.7%
EBIT margin
34.2%
24.8% 27.5% 19.1%
32.3%
38.6%
Net profit margin
26.8%
18.9% 18.1% 17.0%
28.1%
32.0%
2014Q3
59.8%
35.8%
31.3%
Source: Company reports
Potential Risks
Sharply drop on web game players and ARPPU;
The revenue growth continues decline or at a faster rate;
Margins continue dropping.
Page | 2
BOYAA (434.HK)
14 November 2014
Financial Estimates
RMB '000
Revenue
Web Games
Mobile Games
Cost of Sales
Gross Profit
Selling & Distribution
Admin
Other incomes
Other expenses
Operating income
Finance income
Finance cost
Profit/ Loss from associates
2012
517,745
430,331
87,414
2013
681,262
406,197
275,065
2014Q2 2014Q3
236,324 243,462
106,784 100,147
129,540 143,315
2014Q4E
248,918
94,138
154,780
2014E
2015E
2016E
950,331 1,064,534 1,179,765
411,267
390,704
371,169
539,064
673,830
808,596
(203,916) (265,053) (88,390) (85,710) (97,776)
313,829 416,209 133,237 150,614 145,686
(99,567) (371,443)
149,351 578,888
(425,814)
638,720
(471,906)
707,859
(81,714) (147,685) (42,702) (45,215) (45,352)
(46,918) (111,415) (26,645) (28,201) (27,717)
11,347
19,082
7,754 14,121
14,641
(46,797) (180,066)
(28,128) (110,691)
14,935
51,451
(191,616)
(117,099)
60,000
(212,358)
(129,774)
65,000
(117,285) (240,018) (61,593) (59,295) (58,428)
(59,989) (239,305)
(248,715)
(277,132)
390,006
430,727
196,544
510
(8,232)
(1,341)
(9,063)
176,191
71,644
91,319
2,018
(13,656)
177
(11,461)
6,033
(3,222)
341
3,152
611
(3,164)
2,460
(93)
74,796
91,226
EBT
187,481
164,730
Taxation
Net Profit
(44,690)
142,791
Outstanding shares
Diluted shares
Fair value adjustment
215,560
489,577
8,229
EPS, basic
EPS, diluted
2014Q1
221,627
110,198
111,429
66.242
30.847
87,258
591
(215)
2,659
3,035
600
(300)
2,500
2,800
339,583
7,835
(6,901)
7,960
8,894
2,500
(5,000)
10,000
7,500
3,000
(5,000)
12,000
10,000
92,162
348,477
397,506
440,727
(29,223) (12,559) (15,627) (14,043)
135,507 62,237 75,599
76,250
(14,746)
77,416
(56,975)
291,502
(64,793)
332,712
(71,839)
368,889
311,226 630,822 651,631
598,451 734,347 732,869
16,922
683,789
735,153
683,789
756,795
683,789
756,795
683,789
756,795
683,789
756,795
11.151
10.372
11.322
10.229
42.630
38.518
48.657
43.963
53.948
48.744
43.540
25.471
9.866
8.475
11.602
10.315
90,293
89,362
Gross profit margin
EBIT margin
Net profit margin
60.6%
38.0%
27.6%
61.1%
25.9%
19.9%
60.1%
32.3%
28.1%
63.7%
38.6%
32.0%
59.8%
35.8%
31.3%
60.0%
35.9%
31.1%
60.9%
35.7%
30.7%
60.0%
36.6%
31.3%
60.0%
36.5%
31.3%
Revenue growth
YoY
QoQ
62.9%
31.6%
48.3%
11.1%
48.1%
6.6%
40.8%
3.0%
24.8%
2.2%
39.5%
12.0%
10.8%
Net profit growth
YoY
QoQ
62.2%
-5.1%
55.6%
83.1%
150.7%
21.5%
143.2%
0.9%
127.7%
1.5%
115.1%
14.1%
10.9%
Source: PSR, Company reports
Page | 3
BOYAA (434.HK)
14 November 2014
Total Return
>+20%
+5% to +20%
-5% to +5%
-5% to -20%
<-20%
PHILLIP RESEARCH STOCK SELECTION SYSTEMS
Recommendation
Buy
Accumulate
Neutral
Reduce
Sell
Rating
1
2
3
4
5
Remarks
>20% upside from the current price
+5% to +20%upside from the current price
Trade within ± 5% from the current price
-5% to -20% downside from the current price
>20%downside from the current price
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited
to) a stock's risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and
speculative undertones surrounding the stock, before making our final recommendation
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2014 Phillip Securities (Hong Kong) Limited
Page | 4
BOYAA (434.HK)
14 November 2014
Contact Information (Regional Member Companies)
SINGAPORE
Phillip Securities Pte Ltd
Raffles City Tower
250, North Bridge Road #06-00
Singapore 179101
Tel : (65) 6533 6001
Fax : (65) 6535 6631
Website: www.poems.com.sg
MALAYSIA
Phillip Capital Management Sdn Bhd
B-3-6 Block B Level 3 Megan Avenue II,
No. 12, Jalan Yap Kwan Seng, 50450
Kuala Lumpur
Tel (603) 21628841
Fax (603) 21665099
Website: www.poems.com.my
HONG KONG
Phillip Securities (HK) Ltd
Exchange Participant of the Stock Exchange of Hong Kong
11/F United Centre 95 Queensway
Hong Kong
Tel (852) 22776600
Fax (852) 28685307
Websites: www.phillip.com.hk
JAPAN
PhillipCapital Japan K.K.
Nagata-cho Bldg.,
8F, 2-4-3 Nagata-cho,
Chiyoda-ku, Tokyo 100-0014
Tel (81-3) 35953631
Fax (81-3) 35953630
Website:www.phillip.co.jp
INDONESIA
PT Phillip Securities Indonesia
ANZ Tower Level 23B,
Jl Jend Sudirman Kav 33A
Jakarta 10220 – Indonesia
Tel (62-21) 57900800
Fax (62-21) 57900809
Website: www.phillip.co.id
CHINA
Phillip Financial Advisory (Shanghai) Co. Ltd
No 436 Hengfeng Road,
Greentech Unit 604,
Postal code 200070
Tel (86-21) 51699400
Fax (86-21) 63532643
Website: www.phillip.com.cn
THAILAND
Phillip Securities (Thailand) Public Co. Ltd
15th Floor, Vorawat Building,
849 Silom Road, Silom, Bangrak,
Bangkok 10500 Thailand
Tel (66-2) 6351700 / 22680999
Fax (66-2) 22680921
Website www.phillip.co.th
FRANCE
King & Shaxson Capital Limited
3rd Floor, 35 Rue de la Bienfaisance 75008
Paris France
Tel (33-1) 45633100
Fax (33-1) 45636017
Website: www.kingandshaxson.com
UNITED KINGDOM
King & Shaxson Capital Limited
6th Floor, Candlewick House,
120 Cannon Street,
London, EC4N 6AS
Tel (44-20) 7426 5950
Fax (44-20) 7626 1757
Website: www.kingandshaxson.com
UNITED STATES
Phillip Futures Inc
141 W Jackson Blvd Ste 3050
The Chicago Board of Trade Building
Chicago, IL 60604 USA
Tel +1.312.356.9000
Fax +1.312.356.9005
AUSTRALIA
PhillipCapital Australia
Level 12, 15 William Street,
Melbourne, Victoria 3000, Australia
Tel (613) 96188238
Fax (613) 92002272
Website: www.phillipcapital.com.au
Page | 5