FriendTimes launched ToF2 o2 Ja2024, followed by aoverseas versioo10 Jan. By 10 Jan, ToF2 ranked top 53 iterms of iOS grossing. We estimate ToF2's grossing for the first month could exceed that of TOF1, and anticipate aupward trend over the next 4-5 months. We see high visibility for ToF2 to contribute annual grossing of RMB1.2band profit of RMB200miFY24E, supported by 1) a larger user base from channel diversificatioacross iOS, Android and proprietary channels, 2) differentiated marketing campaigns, and 3) the release of monthly expansiopacks. We suggest investors keep aeye othe company's FY24E momentum, giveits 1) rising ToF2, 2) further upside from new launches and overseas expansioand 3) decent shareholder return.
We maintaiour estimates unchanged and TP at HK$2.0 (implying 15x FY24 P/E).
A solid start for ToF2; eyes oupcoming ramp-up with enriched marketing and versioupdates. After the launch o2 Ja2024, Twist of the Fate (ToF2, 浮生忆玲珑) ranked top 53 iterms of iOS grossing by 10 Jan. The overseas versiowas released o10 Jan. We estimate ToF2's grossing for the first month to slightly surpass that of ToF1, and anticipate aupward trend over the next 4-5 months. Leo Luo (罗云熙) has beeinvited to serve as the ambassador for NPC engagement and offline activities. Additionally, a series of promotioinitiatives have beeplanned for ToF2: 1) the theme song (performed by Sara Liu (刘惜君)) to be released ilate Jan; 2) offline activities (e.g. Suzhou-style afternootea) during CNY; and 3) collaboratiowith a highly anticipated show.
More titles to come, with overseas expansion. Code: WX (a martial arts game with license approval) may be launched i2H24E after two rounds of paying tests. Reigof Destiny (Europearoyalty type) is expected to undergo two rounds of tests ithe overseas market i1H24E and be released i2H24E/FY25E. Moreover, FT plans to convert multiple key titles to mini-games, unlocking grossing potential.
Decent shareholder return. Since Aug 2023, FT mgmt. has continued to repurchase shares, which have exceeded 2.5% of total share capital. Based oour calculation, FT has repurchased approximately 0.204% of total shares at aaverage cost of HK$1.22 since 27 Nov 2023. Iaddition, mgmt. proposed decent dividends each year, implying 6% 12-month yield oaverage.
MaintaiBUY. We suggest looking beyond the soft FY23E with a net loss position. Our FY23-25E estimates remaiunchanged, with TP at HK$2.0.
