According to the report released by Tianfeng Securities on the Zhītōng Cáijīng APP, it maintains the "shareholding" rating on Newborntown Technology (09911) and predicts that the company's revenue for FY2024-FY2026 will be RMB 4.12/4.81/5.53 billion respectively; the net income attributable to the parent company will be RMB 510/520/530 million. If the acquisition is completed successfully, the net income attributable to the parent company is expected to reach RMB 510/550/600 million in 2024-2026. The target price is HKD 5.09. Based on the company's diversified product matrix and outstanding operational capabilities, the acquisition will further enhance the product lineup and consolidate the leading position in social entertainment, laying a solid foundation for the company's international expansion.

The main points of the report are as follows:

Strategic acquisition to consolidate full ownership 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 NBTSocialNetworking, the target company, for approximately HKD 1.983 billion. After the issuance and distribution of the target company, the company will hold 61.08% of the shares of the target company. After completion of the acquisition, the company will be in a wholly-owned controlling position of 100%. After completion of the acquisition, the target company will become a wholly-owned subsidiary of the company and its financial performance will be fully included in the company's consolidated financial statements, further consolidating the company's market leadership in social entertainment. At the same time, the company announced that it plans to issue 220 million shares of shares at a price of HKD 4.5 per share and raise a total of HKD 989 million.

Efficient integration of resources to help increase performance.

The target company is the overseas correspondents reorganized by Beijing Mikozukuri, focusing on providing online social entertainment services, and is committed to meeting the diverse social needs of users around the world. It has launched multiple social entertainment products such as MICO and YoHo, serving nearly 100 million users in over 150 countries and regions worldwide. With the company's further acquisition, the company's multiple pan-population social products such as MICO, YoHo, TopTop, and SUGO cover different scenarios such as open, voice, and games, improving the product matrix. Based on its rich experience in going global and localized operation mode, the company continuously explores overseas markets. In 2023, the company has become a leading social platform in emerging markets such as the Middle East, North Africa, and Southeast Asia. SUGO and YoHo have even ranked fifth and tenth on the Google Play social media charts in the UAE region. The bank believes that full control will help the Group realize efficient integration of resources, deepen strategic synergy effects, and help the expansion and growth of the company's products, further increasing the company's performance growth.