Event: on November 2, the general meeting of shareholders of the company decided to approve the subscription price of HK $1.89,0.71 and 64 million new common shares of the company at the subscription price of HK $1.85,0.71 and 64 million respectively, equivalent to HK $1.65,1.32 and 120 million. The company's share price rose 4.44% the next day.
Performance review: 1H17 revenue fell 34.5% from the same period last year, with a net loss of 68.42 million yuan. 1H17's first-half income was 270 million yuan, down 34.5% from the same period last year. Of this total, revenue from PC games was 122 million yuan, down 40.6 percent from the same period last year, while revenue from mobile games was 120 million yuan, down 27.9 percent from the same period last year. The net loss was 68.42 million yuan, compared with 76 million yuan in the same period last year. The sharp decline in performance is mainly due to: 1) the chess and card business has encountered fierce competition, and the online room card function has a certain impact on the entire chess and card industry; 2) adverse changes have taken place in the payment policies of the company's main mobile payment partners, which has a significant negative impact on the company's domestic PC and mobile chess and card business.
The management of the company subscribed for shares for the first time, demonstrating confidence in the future development of the company. Although the short-term performance of the company has dropped sharply, the management has taken active measures to retain high net worth users of the platform by significantly increasing the frequency of online / offline competitions and launching the latest WPT events. At the same time, the company adds Alipay, Wechat and other third-party payment methods to its products to reduce the adverse impact of changes in the payment policy of mobile operators. We believe that the change in the function of "room card" and the payment policy of mobile operators will lead to a decline in the company's performance in the short term, but it may accelerate the transformation of the company's business structure and payment structure in the long run. This share subscription demonstrates the confidence of senior executives and major shareholders of the company to get out of the current predicament, improve business structure and enhance business efficiency. The company's other businesses also continue to make progress and may bring new growth points to the company in the next few years. 1H17, Chess Weiye has made a profit. E-sports, the alliance, signed a cooperation agreement with MGM Group to open a global flagship e-stadium in The Vegas Hotel, which will provide a lot of marketing and other support.
The target price is lowered to HK $3.27 per share, maintaining the "buy" rating, taking into account the impact of the "room card" model and the adverse changes in the payment policy of mobile operators in the short term, as well as our expectations for the future development of the company, the company's revenue for 17-19 years was lowered to 6.57,8.76 and 964 million yuan respectively, an increase of-25%, 33% and 10% respectively over the same period last year. The net profit was reduced to-50 million RMB, 90 million RMB and 185 million RMB respectively. Based on the absolute valuation, we lowered the company's target price to HK $3.27 per share, but still have 40% room to rise from the current, maintaining the "buy" rating.
Risk hint: chess and card business improvement is not as expected.
