Bank of America Merrill Lynch gives a buy rating for betta: target price of $13
Recently, Bank of America Merrill Lynch released its Betta investment research report. In view of its optimistic long-term value, Bank of America Merrill Lynch based on a price-earnings ratio of 17 times 2021 E/E per share, gave a purchase rating of $13 for the target price of betta, and predicted that the platform had 36% upstream potential.
On the same day, the betta also released its latest quarterly earnings. In the second quarter of 2019, the net revenue of Betta Fish reached 1.87 billion yuan, an increase of 13.2% over the same period last year. Gross profit increased from 32.6 million yuan in the same period in 2018 to 301.1 billion yuan, with an increase of 82.3% in gross profit. The adjusted net profit is 52.6 million yuan, an increase of 274.5 million yuan over the same period in 2018, and the adjusted net profit rate is 2.8%. Overall revenue and profit increased significantly year-on-year, showing a strong upward growth trend of Betta fish.
Traffic advantage is prominent, and the number of users continues to grow
According to Bank of America Merrill Lynch, by the end of 2018, the number of users of the game accounted for 45% and 30% of the total number of live and online game players in China, respectively. According to the Q2 financial report of the betta fish, the platform MAU reached a new high in the second quarter. As of June 2019, the average MAU of the platform has reached 162 million, and mobile MAU has reached 50.6 million.
With the rapid development and integration of the industry, the head platform effect is aggravated, and Betta Fish has the ability to attract more high-quality anchors to join, and to differentiate the management of anchors. At present, fighting fish has become the industry’s most anchored game live broadcasting platform. There is no doubt that excellent anchors will play a role in promoting the growth of MAU, which will further consolidate the leading position of the Chinese game live broadcasting platform in the industry, ultimately scale to promote efficiency and enhance liquidity.
Bank of America Merrill Lynch research forecasts that Betta PC and mobile terminals will continue to grow at a high speed in the future. In 2018-2021, the annual growth rate of Betta will reach 14%, the total platform MAU will reach 203 million, the mobile penetration rate will reach 41%, and the mobile MAU will reach 83 million.
Increase profitability, future liquidity can be expected.
In the second quarter, the overall revenue of Betta was excellent. Bank of America Merrill Lynch pointed out that the main reasons for the improvement of Betta profitability are lower content costs, higher user fee rates and higher payroll numbers, which are driven by the Betta Fish to create a benign content ecosystem. According to Bank of America Merrill Lynch statistics, the content cost of Betta Fish has declined year by year with the benign regulation and control of anchor cost sharing. By 2018, the proportion of platform content cost has dropped to 27%. Analysts believe that the cost of content will also be reduced in the future, and the proportion of content cost is expected to drop to 13% by 2021.
Due to the increased participation of Betta users. With the increasing of high-quality content of the platform, its operational capacity is also significantly enhanced. According to public data, the number of users paying for Betta reached 6.7 million in the second quarter of 2008, an increase of 123.3% compared with 3 million in the second quarter of 2018; the average ARPPU reached 256 yuan, an increase of 14.3% over the same period of last year, of which the revenue of the game sector increased by 180% and the payment rate reached 4.1%, an increase of 1.7 percentage points over the same period of last year.
According to the comprehensive calculation of Bank of America Merrill Lynch financial data, the annual compound growth rate of Betta income in 2018-2021 is about 52%, which will reach 12.9 billion yuan. By 2021, the real-time live broadcasting revenue of Betta will contribute more than 90% of the revenue. It is estimated that by 2021, the payment conversion rate of Betta users will increase to about 5.2%. User payment conversion rate will be greatly improved, which will be conducive to the future profitability of Betta fish.
Net profit is expected to reach 1.9 billion yuan by 2020.
Merrill Lynch of Bank of America believes that the core advantages of Betta are richer games, e-sports content, exclusive anchor strategy, and the huge liquidity potential brought by the growing user base, which will push the price-earnings ratio of Betta back from 13 times to 17 times the average price-earnings ratio of the same industry. 。 Based on a 17-fold P/E estimate, there is about 36% room for Betta to rise.
According to the study, the game-centric content management model, which is based on a large user base, can support the ultimate profitability of the game and improve the profitability of the game. As a result, Betta has a high growth potential in the future and a shorter profit cycle than similar platforms.
Bank of America Merrill Lynch predicts that Betta will achieve profit-loss balance in 2020, net profit will reach 1.9 billion yuan and earnings per share will reach 5.2 yuan, which means that the earnings per share of Betta is expected to increase by more than 80% year on year by 2021.