Strategic acquisitions to consolidate wholly-owned controlling position
The company announced on June 27, 2024 that it has signed a share purchase agreement with BGFG, JJQJ and JZZT to acquire 77,832,740 shares of the target company NBT Social Networking at a cost of approximately HK$1,983 billion. After the issuance and allocation of the target company, the company held 61.08% of the target company's shares. After completion of the acquisition, the target company will become a wholly-owned subsidiary of the company, and all of the target company's financial performance will be incorporated into the company's consolidated financial statements, further consolidating the company's market leadership position in the field of social entertainment. At the same time, the company announced that it plans to issue 220 million compensation shares, each with an issue price of HK$4.5 million, with a total raised capital of HK$989 million.
Efficient integration of resources to help increase performance
The target company is the overseas counterpart of Beijing Mike after the restructuring. It focuses on providing online social entertainment services and is committed to meeting the diverse social needs of users around the world. It has launched various social entertainment products such as MICO and YoHo, providing services to nearly 100 million users in more than 150 countries and regions around the world.
With the company's further acquisitions, the company's various general social networking products, such as MICO, YoHo, TopTop, and SUGO, cover pan-group social networking in different scenarios, including open, voice, and games, and the product matrix has been improved. Based on rich overseas experience, the company continues to explore overseas markets with a localized operating model as the core. In 2023, the company became the leading social networking platform in emerging markets such as the Middle East, North Africa and Southeast Asia, and SUGO and Yo Ho once ranked 5th and 10th on the Goo gle Play social media list in the UAE region. We believe that wholly-owned holdings will help the Group achieve efficient integration of resources, deepen strategic synergy, help expand and grow the company's products, and further increase the company's performance growth.
Investment advice
Based on the company's diversified product matrix and excellent operational capabilities, the acquisition further strengthened the product lineup, consolidated its leading position in the field of social entertainment, and laid a solid foundation for the company's international expansion. We forecast that FY2024-FY2026's revenue will be RMB 41.2/48.1/5.53 billion, respectively; net profit to mother will be RMB 51/52/530 million yuan; if the acquisition is successfully completed, the net profit due to the 24-26 exam is expected to reach RMB 5.1/5.5/60 billion yuan. We gave the company 11 times PE in 2024, corresponding to a market capitalization of $5.61 billion and a target share price of HK$5.09, maintaining an “gain” rating.
Risk warning: 1. Overseas market regulatory policy risk 2. Exchange rate fluctuation risk 3. New business falls short of expectations 4. Market expansion falls short of expectations 5. Acquisition progress falls short of expectations