24 Feb 2020 CMB International Securities | Equity Research | Company Initiation CMGE Technology (302 HK) BUY (Initiation) IP -oriented game publisher pioneer Target Price HK$4.39 Up/Downside +30.3% Current Price HK$3.37 As a leading game publisher in China, CMGE exceled itself with abundant valuable IP reserve and rich pipeline. We expect its revenue/ adj. net profit to grow at 48%/46% CAGR in FY18-21E, driven by strong momentum of key titles China Internet Sector and rollout of new names. Initiate with BUY with TP HK$4.39 (30.3% upside). Sophie Huang (852) 3900 0889 China’s Top 1 independent mobile game publisher. Backed by popular
[email protected] and high-quality IP-oriented game portfolio, CMGE is ranked Top 1 in terms of cumulative revenue generated from publishing games developed based on IPs, with market share of ~13.7%, from 1 Jan 2015 to 30 Jun 2019, according Stock Data to Analysys. With its abundant IP reserve, diversified publishing network and Mkt Cap (HK$ mn) 7,853 strategic investment, we expect CMGE to deliver 48%/46% revenue/net profit Avg 3 mths t/o (HK$ mn) 45.69 52w High/Low (HK$) 4.49/2.43 CAGR during FY18-21E, thanks to its rich game pipeline. Total Issued Shares (mn) 2,330 Source: Bloomberg Valuable IP reserve to build high entry barriers. Supported by deep cooperation with IP owners and IP investment, CMGE holds the largest Shareholding Structure reserve of 99 IPs (31 licensed IPs & 68 proprietary IPs) in China. We expect Fairview Ridge Investment 29.8% CMGE to leverage its existing well-known IPs to derive abundant adapted Pegasus Network 12.6% Hotel Zhike 12.5% games, and attract loyal game players with longer life cycle (e.g.