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IGG(00799) FY17E outlook: doubling sales and fast rising net margin In 2016, Asia, North America and Europe each contributed to aroundone-third of revenue. In terms of revenue by title, 42% came from CastleClash, 39% from Lords Mobile (LM) and 19% from other titles. ForFY17E, management expects revenue could double to over US$600mn,thanks to larger contribution from LM, which could contribute 70-80% oftotal revenue in FY17E. Driven by operating leverage, net margin hasjumped from 21% in 1H16 to 24% in 2H16, and 34% in Dec 2016. Thecompany thus guided net margin to exceed 30% in FY17E. Lords Mobile to remain as the key cash cow in FY17E The gross billing of Lords Mobile (LM) reached US$29.4mn in Dec 2016and further grew to US$35mn in Mar 2017. Management expects growthmomentum of LM to continue, with monthly grossing reaching US$50mnby end of FY17, driven mainly by 1) China: launch of Android version in2H17; LM’s sales contribution from China is expected to rise from 20% inFY16 to 30% in FY17E, 2) Japan: increased marketing efforts, and 3)additional markets. It will try to keep overall China vs. non-China playersat a ratio of 1:3. The Android version in China will be operated throughIGG’s own website, which should generate a higher gross margin vs.existing iOS version. For the legendary title Castle Clash, the companyexpects roughly flattish YoY performance. Trading at 11x FY17E P/E, still below historical average Dividend payout ratio was 43% in FY16 vs. 90% in FY15 due to sharebuyback. The company will keep repurchase its shares and allocate 90%of its FY17E net profit on dividend and share repurchase. It is trading at11x FY17E consensus P/E, still below its historical average of 12x. Risks:1) higher-than-expected marketing expenses and opex, 2) slow-down inLM’s grossing expansion, and 3) poor performance in non-LM games.[招商證券(香港)] [點(diǎn)擊查看PDF原文] |
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