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Underestimated User Value, Initiate with 股 票 研 [Table_Title] Jason Zhou 周桓葳 Company Report: Zengame (02660 HK) 究 (852) 2509 5347 Equity Research 公司报告： 禅游科技 (02660 HK) [email protected] 7 October 2020 Underestimated[Table_Summary] User Value, Initiate with "Buy" 被低估的用户价值，首予“买入”评级 According to a Frost & Sullivan ("F&S") report, compared with other 公 Rating:[Table_Rank] Buy mobile games such as hardcore games, card and board mobile games Initial 司 usually have 1) longer life cycles, 2) more stable MAU, 3) lower ARPPU, and 4) comparatively shorter but fixed single play time duration. 报 评级： 买入 (首次覆盖) 告 Zengame Technology (02660 HK, the "Company") is an established mobile games developer and operator in the PRC with special focus on Company Report 6[Table_Price]-18m TP 目标价 : HK$2.25 card and board and other casual mobile games. The Company's signature game Tiantian Fight the Landlord - Live-action Version mini program ranked No.3 in the games category on Alading’s (a third-party data Share price 股价： HK$1.050 company) index in August. Driven by its high player base and cooperation with well-known advertising platforms such as Tencent and ByteDance, the 告 Company's in-game information service surged 187.6% yoy to RMB292.0 Stock performance 证 million in 1H20 and we believe that in-game information service is the main 股价表现 报 driver of the Company's revenue growth. The Company's total revenue is [Table_QuotePic] 120.0 % of return 券 expected to grow at a CAGR of 26.1% during 2019 to 2022. 究 100.0 研 研 We forecast the Company's shareholders' net profit to be RMB285.0 80.0 究 million, RMB324.1 million and RMB361.8 million in 2020-2022, 60.0 券 respectively. We believe that 1) the Company’s in-game information service 报 will be the main revenue driver and have further growth momentum given 40.0 告 证 expected broad player base and 2) revenue from virtual items is expected to 20.0 Equity Research Report keep steady growth due to the relative stable amount of paying players. 0.0 (20.0) We initiate our coverage on Zengame with a TP of HK$2.25 and an investment rating of "Buy". Our TP corresponds to 7.1x, 6.5x and 6.1x (40.0) Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 [Tab 2020-2022 P/E, respectively. HSI Index le_I ZENGAME TECHNOLO 根据弗若斯特沙利文的报告，与其他手机游戏例如硬核游戏相比，棋牌类手机游戏通常具 nfo1 有：1）更长的生命周期；2）更加稳定的月活跃用户；3）较低的平均每用户收益；以及 4）相对较短但固定的单机游戏时长。 [Table_PriceChange] ] Change in Share Price 1 M 3 M 1 Y 互 禅游科技（02660 HK，“公司”）是中国知名的手机游戏开发商和运营商，专注棋牌和其 股价变动 1 个月 3 个月 1 年 联 他休闲手机游戏。公司主打游戏《天天斗地主-真人版》小程序在 8 月份阿拉丁（第三方 Abs. % (11.0) (4.5) 41.9 绝对变动 % 网 数据公司）指数游戏类别中排名第三。得益于其庞大的玩家基础以及与腾讯和字节跳动等 Rel. % to HS Index (8.1) 4.4 49.0 行 知名广告平台的合作，公司游戏内信息服务在 2020 年上半年同比增长 187.6%至人民币 相对恒指变动 % 亿元，且我们认为游戏内信息服务将成为公司收入增长的主要驱动力。在 年 Avg. share price（HK$） 业 2.920 2019 1.1 1.2 0.9 Internet Sector 平均股价（港元） 至 2022 年期间，公司的总收入预计将以 26.1%的复合年增长率增长。 Source: Bloomberg, Guotai Junan International. 我们预测公司 2020 年至 2022 年股东净利分别为人民币 285.0 百万元、人民币 324.1 百 万元和人民币 361.8 百万元。我们认为：1）公司游戏内信息服务将成为主要的收入来源 并且在预计扩展的玩家基数下有进一步增长动力； 2）由于付费玩家的数量相对稳定，虚 拟物品的收入预计将保持稳定增长。 我们首次覆盖禅游并给予 2.25 港元的目标价以及“买入”的投资评级。目标价分别对应 7.1 [Tab 倍、6.5 倍和 6.1 倍 2020-2022 年市盈率。 le_I Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结Profit] 收入 股东净利 每股净利 每股净利变动 市盈率 每股净资产 市净率 每股股息 股息率 净资产收益率 nfo2 12/31 (RMB m) (RMB m) (RMB) (△%) (x) (RMB) (x) (RMB) (%) (%) ] 2018A 555 109 0.133 63.9 6.9 0.308 3.0 0.031 3.4 43.1 禅 2019A 662 161 0.167 25.6 5.6 0.619 1.5 0.047 5.0 27.0 2020F 1,001 285 0.280 67.7 3.3 0.835 1.1 0.030 3.2 33.5 游 2021F 1,155 324 0.303 8.2 3.1 1.067 0.9 0.031 3.4 28.4 科 2022F 1,329 362 0.322 6.3 2.9 1.306 0.7 0.032 3.5 24.7 技 [Table_BaseData]Shares in issue (m) 总股数 (m) 1,018.3 Major shareholder 大股东 The Core Trust Co.Ltd 64.3% Market cap. (HK$ m) 市值 (HK$ m) 1,069.2 Free float (%) 自由流通比率 (%) 35.7 Zengame (02660 HK) 3 month average vol. 3 个月平均成交股数 (‘000) 3,763.0 FY20 Net gearing (%) FY20 净负债/股东资金 (%) (39.9) 52 Weeks high/low (HK$) 52 周高/低 (HK$) 1.480 / 0.580 FY20 Est. NAV (HK$) FY20 每股估值（港元） 5.2 Source: the Company, Guotai Junan International. See the last page for disclaimer Page 1 of 13 [Table_PageHeader] Zengame (02660 HK) Industry Analysis ] 1 r a M t h g i R _ e l b a T [ Mobile Games Market in the People’s Republic of China Thanks to the increasing penetration rate of smartphones and mobile internet in the People’s Republic of China (PRC), mobile games have become a key online games activity. Generally, mobile games refer to games that can be installed on mobile phones and tablets, which can be classified into different types based on game genre. According to China Internet Network Information Center (CNNIC), China mobile netizens reached 932.4 million in 1H20, accounting to 99.2% of China’s overall internet 7 October 2020 users. In addition, the amount of mobile game players in China reached 535.9 million in 1H20, up 14.5% yoy. However, we believe that growth rate of game players may decline over the next following years as the internet demographic dividend in China has been dwindling. Figure-1: China mobile netizen scale Figure-2: Total amount of mobile game players in China China mobile netizen scale yoy Total amount of mobile game players in China yoy (million) (million) 1,000 14.0% 600 30.0% 932.4 27.5% 12.6% 535.9 900 846.8 12.0% 787.7 500 25.0% 800 10.6% 458.3 467.6 723.6 10.1% ] 2 r a M t h g i R _ e l b a T [ 700 656.4 10.0% 10.2% 8.9% 400 385.5 18.9% 20.0% 593.6 600 7.5% 8.0% 302.4 14.6% 500 300 267.0 15.0% 6.0% 400 13.3% 200 10.0% 300 4.0% 6.0% 200 100 5.0% 2.0% 100 2.0% 0 0.0% 0 0.0% 1H15 1H16 1H17 1H18 1H19 1H20 1H15 1H16 1H17 1H18 1H19 1H20 Source: CNNIC, Guotai Junan International. Source: CNNIC, Guotai Junan International. China’s mobile games market surged in 1H20, driven by increasing online user time spent in 1Q20 during the quarantine period. According to QuestMobile, a third-party data company, average daily time spent on mobile internet devices peaked at 7.3 (02660 HK) hours in March and returned to normal levels, which is 6.1 hours, in June. In addition, according to CNG, a third party data company, China’s mobile games market scale increased 35.8% yoy in 1H20, reaching RMB104.7 billion. During the post-COVID-19 period, China’s mobile games market scale maintained its growth momentum with 4.2% mom increase in August. 禅游科技 We believe that the market growth was mainly due to 1) expanding player base during the summer holiday period and 2) momentum from strong titles such as Hok and Peacekeeper Elite. Looking ahead, we believe that the new supply of game titles Zengame will be the main driver of mobile games industry growth in our forecasted period. The total amount of new licensed games approved by the National Press and Publication Administration (NPPA) was boosted in September, with 188 domestic games licenses granted. In addition, 55 imported games have been approved for game licenses, granted by NPPA in August. Figure-3: China Mobile Games Market Scale Figure-4: Average Daily Time Spent on Mobile Internet Devices China Mobile Games Market Scale yoy Average daily time spent on mobile internet devices (hours) (billion) 8.0 120 90.0% 7.3 79.1% 104.7 80.0% 7.0 100 67.2% 6.0 6.1 70.0% 6.0 5.8 5.9 80 77.1 60.0% 5.0 49.8% 63.4 50.0% 60 56.1 4.0 35.8% 40.0% 3.0 40 37.5 30.0% Report 21.5% 2.0 20.0% 20.9 12.9% 20 10.0% 1.0 Company 0 0.0% 0.0 1H15 1H16 1H17 1H18 1H19 1H20 Jun.2019 Sep.2019 Dec.2019 Mar.2020 Jun.2020 Source: CNG, Guotai Junan International. Source: QuestMobile, Guotai Junan International. See the last page for disclaimer Page 2 of 13 [Table_PageHeader] Zengame (02660 HK) Figure-5: China Mobile Games Market Scale During Figure-6: Amount of Licensed Games Approved by NPPA Post-COVID-19 Period ] 1 r a M t h g i R _ e l b a T [ China Mobile Game Market Scale mom (billion) Approved Domestic Games in 2020 Approved Imported Games in 2020 18.00 9.0% 200 188 7.9% 8.0% 180 17.80 17.8 169 160 7.0% 17.60 140 6.0% 7 October 2020 120 17.40 110 109 5.0% 106 103 100 4.2% 100 4.0% 17.20 80 17.1 3.0% 55 57 55 17.00 60 2.0% 40 27 16.80 1.0% 20 16.60 0.0% 0 Jul.2020 Aug.2020 Jan.20 Feb.20 Mar.20 Apr.20 May.20 Jun.20 Jul.20 Aug.20 Sep.20 Source: CNG, Guotai Junan International.
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