According to Frost & Sullivan's report, compared to other mobile games such as hardcore games, board games usually have: 1) a longer life cycle; 2) more stable monthly active users; 3) lower average earnings per user; and 4) a relatively short but fixed amount of time spent on stand-alone games.

Zenyou Technology (02660 HK, the “Company”) is a well-known mobile game developer and operator in China, focusing on board and other casual mobile games. The company's main game “Tiantian Dou Lords - Live Action Edition” applet ranked third in the Aladdin (third-party data company) index game category in August. Thanks to its huge player base and partnerships with well-known advertising platforms such as Tencent and ByteDance, the company's in-game information services increased 187.6% year-on-year to RMB 292 million in the first half of 2020, and we believe that in-game information services will be the main driver of the company's revenue growth. The company's total revenue is expected to grow at a CAGR of 26.1% from 2019 to 2022.

We forecast the company's net shareholders' profit from 2020 to 2022 to RMB 285.0 million, RMB 324.1 million, and RMB 361.8 million, respectively. We believe that: 1) the company's in-game information service will be the main source of revenue and will have further growth momentum under the anticipated expansion of the player base; 2) As the number of paying players is relatively stable, revenue from virtual items is expected to continue to grow steadily.

For the first time, we covered the Zen Tour and gave it a target price of HK$2.25 and an investment rating of “buy”. The target price corresponds to 7.1 times, 6.5 times, and 6.1 times the price-earnings ratio of 2020-2022, respectively.