Pan-entertainment strategy has been further implemented, and rich IP resources have contributed to the new success of Langang.
The launch speed of mobile games is expected to accelerate in the second half of the year, and 2016 is expected to be the harvest time for the company.
Due to the decline in 1H15 profits compared with the same period last year, the game schedule is uncertain in the second half of the year, the neutral rating is temporarily maintained, and the target price is lowered to HK$6.3.
Rich IP resources and pan-entertainment strategy will open up a new growth space for Blue Port.
We believe that Blueport Interactive can grow into a leader in the industry with its rich IP reserves and excellent game development and operation capabilities. The success of "A Thousand bones of Flower" provides a classic example for the hairstyle promotion of popular IP mobile games, and provides valuable experience for Langang to tap the value of IP more effectively in the future. The company's current IP resources include "100, 000 Cold jokes", "Young Bee", "Shushan War" and "Legend of Miyue" and other strong IP resources with the same influence as "Flower Thousand bones", from which it is expected to give birth to heavyweight boutique mobile games. At the same time, we believe that the pan-entertainment strategy will promote the expansion of the company's business into commercial systems such as animation, movies and online dramas, and become an integrated entertainment group. At the same time, the original famous mobile games in Langang also have the opportunity to be displayed in other art forms.
Strategic opportunities and product risks coexist, waiting for the game schedule and business model to become clear
Although we are optimistic about the pan-entertainment strategic direction of Langang, the success of its strategy requires a high degree of coordination and high-quality social marketing of multiple stakeholders such as IP owners, channels, star artists, film and television media and Internet companies. We note that the success of "A Thousand bones of Flower" is also achieved by many participants, including game manufacturers, through careful and unified operation, and the success of the TV series "Thousand bones of Flower" is also an important reason why its mobile games are favored by players. Therefore, we believe that the strategic success of Langang will depend on 1) the schedule and quality of film and television plays; 2) star effect and communication effect; 3) the type and player preference of mobile games; and 4) the mode of cooperation between Blueport and stakeholders. In addition, we also note that operational factors such as game schedule, continuity of running water and promotion costs have a great impact on Langang's financial performance in 2015-16, and we will make a new evaluation of the company after more details are gradually implemented.
Valuation and rating
Due to the decline in the company's earnings in the first half compared with the same period last year, the game schedule in the second half of the year is still not clear enough, so we still use the 2015 industry average forecast price-to-earnings ratio for valuation. Based on the average 2015e Pmax E 14.8x of overseas-listed Chinese game companies, we conclude that the company's new target price is HK$6.3 and maintains a neutral rating. The current share price of Langang corresponds to 14.6x 2015e P Band E, which is in line with the industry average. We are still optimistic about the revenue and earnings growth of Blueport in 2016, and re-adjust our earnings forecasts and ratings after the company's game schedule becomes clearer and its pan-entertainment business model becomes clearer.
