22-Feb-2021 ︱Research Department HengTen Networks (00136.HK) SBI China Capital Research Department T: +852 2533 3700 Initiation: China’s Netflix backed by Evergrande and Tencent E:
[email protected] ◼ Transforming into a leading online long-video platform with similar Address: 4/F, Henley Building, No.5 Queen's DNA to Netflix. Road Central, Hong Kong ◼ As indicated by name, HengTen (HengDa and Tencent) (136.HK) will leverage the resources of its two significant shareholders in making Ticker (00136.HK) Pumpkin Film the most profitable market leader Recommendation BUY ◼ New team has proven track record in original content production Target price (HKD) 24.0 with an extensive pipeline. Current price (HKD) 13.8 ◼ Initiate BUY with TP HK$24.0 based on 1.0x PEG, representing 74% Last 12 mth price range 0.62 – 17.80 upside potential. Market cap. (HKD, bn) 127.8 Source: Bloomberg, SBI CHINA CAPITAL Transforming into a leading online long-video platform with similar DNA to Netflix. HengTen Networks (“HT”) (136.HK) announced to acquire an 100% stake in Virtual Cinema Entertainment Limited. The company has two main business lines: “Shanghai Ruyi” engages in film and TV show production while “Pumpkin Film”operates an online video platform. Currently one of the only two profitable online video platforms, we expect the company to enjoy similar success as Netflix given their common genes such as: a) a highly successful and proven content development team b) focus on big data analytics which improves ROI visibility and c) enjoyable user experience with an ads-free subscription model As indicated by name, HengTen (HengDa and Tencent) (136.HK) will leverage the resources of its two significant shareholders in making Pumpkin Film the most profitable market leader.