The one set on fire by Lo Wing-ho$BE FRIENDS HLDG (01450.HK)$At last, it ushered in a gorgeous transformation.

On July 28, Make a Friend Holdings announced a performance forecast increase. According to the announcement, in the first half of 2023, the company expects to achieve net profit of not less than 40 million yuan. Excluding the impact of equity incentives, the adjusted net profit will not be less than 90 million yuan.

Regarding the growth in performance, Zijaiwa Holdings said that the remarkable results achieved by the Group's new media service business segment, which began in 2019, were the main reason for the net profit recorded in the mid-term period. The total amount of product transactions completed across the network during the reporting period exceeded RMB 5 billion.

This means that since making friends, Holdings will soon have its first “good start” report card in mid-August after making a “online market on a curve.”

What was unexpected, however, was that this announcement of a sharp increase in performance did not lead to a sharp increase in its stock price: at the start of trading on July 31, Make Friends Holdings strongly opened more than 9%, then continued to weaken. At the close of the session, its stock price fell 7.98% to HK$1.73, with a total market capitalization of HK$2,397 million.

Getting on the “car” of live e-commerce ushered in a turning point in reversing losses

According to information from the Zhitong Finance App, the former name of Make a Friend Holdings was originally “Century Ruike.” Founded in 2007 and listed on the Hong Kong Main Board in 2014, Century Ruike is a media solutions provider. Since 2019, Century Ruike has begun to transform into the new media field, trying to gain new growth points by laying out platform businesses such as Douyin, Station B, and WeChat Mini Program.

Make Friends Holdings was founded in June 2019 and quickly became popular through the IP effects of commercial influencer Lo Wing-ho. In April 2020, Lo Wing-ho officially entered Live Delivery, and made a friend as the operating team behind Live Delivery, and the two sides cooperated for a win-win situation. In May 2022, Lo Wing-ho announced his withdrawal from the management of Make Friends, but he will still participate in the live broadcast as an anchor. Meanwhile, Lo Wing-ho also said that he will invest more energy into starting a business in the AR field.

Shortly after Lo Wing-ho announced his withdrawal from the management of Make Friends, Century Ruike formally established a comprehensive cooperative relationship with Make Friends in August of the same year. Beginning in November 2022, Century Ruike began to fully operate and manage all Douyin accounts owned by Zijanjuke, and all of Zijanke's revenue was included in Century Ruike's financial reports.

In May 2023, Century Ruike completed the wholly-owned acquisition of a friend. On July 11 of the same year, Century Ruike officially changed its name to “Make a Friend Holdings”. At this point, I made a friend and used Century Ruike to complete the “Curve Online Market.”

It's worth mentioning that before making a friend and completing the Curve online market, they made a friend and had close contact with Century Ruike, that is, the two companies have a common shareholder behind them Li Jun.

On the one hand, Li Jun joined Century Ruike in July 2021 and became the majority shareholder of this company. On the other hand, according to public information, Li Jun also made a friend to hold 18.18% of the shares through Huang He's acting as agent. Furthermore, Li Jun and Lo Wing-ho also have a close relationship; that is, the two are also co-founders of Ono e-cigarette. Meanwhile, Lo Wing-ho has also stated in public many times that Li Jun provided critical assistance to Douyin during its live e-commerce exploration.

In fact, it is important to note that before completing this wholly-owned acquisition, Century Ruike's performance in previous years was not “good”: operating risks such as fluctuating revenue, constant losses, and tight cash flow.

Relevant financial data shows that from 2019 to 2021, the company achieved revenue of 191 million yuan, 153 million yuan, and 203 million yuan, with overall performance fluctuating. Also, during the same period, the company's net losses due to its owners were 889 million yuan, 98 million yuan, and 069 million yuan respectively, which has been in a state of loss all year round.

From 2019 to 2021, the company's cash and cash equivalents were $014 million, $013 million, and $60 million respectively, and there was a shortage of cash flow. At the same time, the company's debt repayment pressure was not small. During the period, the company's current liabilities were 310 million yuan, 377 million yuan, and 306 million yuan respectively, and current assets were 339 million yuan, 390 million yuan, and 345 million yuan respectively. Current assets can cover current responsibilities, and short-term debt repayment pressure should not be underestimated.

For Century Ruike, 2022 is a “turning point” in performance — in its 2022 annual report, Century Ruike stated that the company will unswervingly strengthen its new media business. And the growth effects brought about by the new media business are also obvious.

According to financial data, in 2022, Century Ruike's revenue increased 109.9% year on year to 426 million yuan, mainly due to a significant increase in revenue from new media services on platforms such as Douyin and Taobao. In the reporting period, the revenue of the new media service business segment was 303 million yuan, an increase of about 1275% over the previous year. The operating results of the Make a Friend Live e-commerce business exceeded 7 billion yuan in GMV for the whole of 2022, and both revenue and gross profit achieved 3-digit growth.

It's easy to see that by making a friend and getting on the “car” of live e-commerce, Century Ruike can be described as having achieved a “transformation” in many ways.

After Lo Wing-ho's “merciful retirement,” how did he go about making friends?

It can be said that the rise in fame of Make a Friend Group is inseparable from the IP effect of Lo Wing-ho.

But when Lo Wing-ho “retreats as a hero,” what impact will it have on Yuanzhiwa Holdings, and where should the company go?

Looking at the entire live e-commerce industry, almost all leading MCN agencies have removed their personal IPs in the past two years. On this point, Mr. Huang He, founder and CEO of A Friend, also stated bluntly in a public interview that the company's logic is to “be a number rather than be a person,” because there will be a lot of uncertainty and not stable enough. He also pointed out, “The initial position of making friends was an e-commerce company, not an influencer studio. A healthy company doesn't focus on one person's performance.”

Having said that, after Lo Wing-ho gradually faded out of the live broadcast room of a friend, the butterfly effect was quite obvious.

First, it has contributed to a decline in the company's investment appeal. According to reports, following the demise of this soul figure, Lo Wing-ho, on June 20 of the same year, Fengrui Capital and Asashi Venture Capital withdrew from the ranks of the original shareholders of the parent company to make friends.

Second, traffic data growth is gradually approaching the ceiling. According to Xindou data, in the three months after Lo Wing-ho left the Internet, “Make a Friend Live” did not enter the top 5 of Douyin's monthly delivery list, but in almost a year since Lo Wing-ho left the Internet, the number of fans on the Make a Friend live broadcast has grown by less than 2 million. Expanding new traffic has become an urgent problem to solve in making friends.

In view of this, Make Friends Holdings has also begun to embark on the path of diversified layout, thus seeking a new growth curve.

On the one hand, follow the changes in Douyin traffic distribution to create a live broadcast matrix number. Up to now, Make a Friend has also moved from IP to matrixization, forming matrix accounts covering the fields of alcohol, food, beauty and skin care, outdoor sports, etc., such as “make a friend live broadcast room,” “make a friend, exercise outdoors,” and “make a friend, live a home,” etc.

On the other hand, from content-driven to product-driven, personal IP is moving towards channel IP. In the early days, Lo Wing-ho was a resident anchor, using his personal IP influence and interesting live broadcast content to attract viewers to the live broadcast room to spend; based on longer-term development, he made friends hoping to focus more on the live broadcast room account itself, attracting consumers with the rich and cost-effective products of the live broadcast room, that is, from content-driven to product-driven, thus moving towards channel IP. In 2022, Lo Wing-ho's live broadcast time accounted for 3%, and GMV accounted for 5%. It can be seen that the company has moved from an early “Lo Wing-ho Live Room” personal IP to a “Make a Friend Live Room” channel IP.

In addition to this, the successful expansion of Make Friends Holdings through the Taobao platform at the channel expansion level also encourages the company to continue to make new achievements in the direction of platform diversification; in terms of business development, the company has its own supply chain management advantages and has already begun to lay out its own business. I believe that in the future, it can draw on the Oriental selection model to consolidate profit growth through self-operated business; in addition, it is expected to expand the company's online growth space in the future by helping Chinese brands go overseas.

As can be seen, a great deal of effort has been made in seeking a new growth path by making friends. However, the reality is often “stubborn,” which also means that it also needs to be wary of development risks such as the company's cross-platform live streaming, overseas business is still in the early stages of development, and new business development may not be as fast as expected. However, the fact that its stock price did not maintain its “victory fruit” performance even after opening higher after its results also meant that it still needed stronger “muscles” to prove itself.