Author: Yuan Xi

Source: China Fund News

The US stock market, which has no limit on the rise or fall rate, has brought about another shocking increase. After the release of the first quarterly report for FY2020 on May 26, China Securities 36 Krypton closed up 51% on May 27. This is rare among media internet companies.

China Securities shares of 36 krypton surged 51% in one day

On May 27, US stocks rose across the board, with mixed ups and downs in the US listing. Among them, 36 krypton led the way. By the close, 36 krypton had risen 51.11% to 6.80 US dollars/share. Once on April 28, the intraday stock price of 36 Krypton dropped to 3.31 US dollars/share. Now, assisted by yesterday's increase, 36 Krypton's stock price has doubled within 1 month.

According to the Tianyan survey, 36 Krypton is a vertical media that reports on entrepreneurial projects in the TMT industry at home and abroad. The website will post all kinds of content about startups in real time, and is committed to providing users with high-quality and realistic content reports on startups; the affiliated company is Beijing Dokrypton Information Technology Co., Ltd., which went public on November 8, 2019. As a media-based listed company, 36Krypton's main business is mainly in the three areas of online advertising services, enterprise value-added services, and subscription services.

Stock price increases always have an intrinsic logic. The day before this surge, 36Krypton released its quarterly report for FY2020. On May 26, 36 Krypton released its FY2020 quarterly report. Financial reports show that in the first quarter of FY2020, 36 krypton's total revenue was RMB 65.2 million (about US$9.2 million), while the total revenue for the same period last year was RMB 83.8 million. For the first quarterly report since its launch, 36Krypton has summarized the three highlights.

First, traffic performance continued to grow strongly. As of the end of March 2020, 36 Krypton had an average of 474 million monthly visits across the network over the past 12 months, an increase of 110.2% over the previous year.

Second, revenue from value-added services for enterprises has bucked the trend. Value-added service revenue for enterprises in one of the three main businesses was 42.8 million yuan, up 3.4% year on year, compared to 41.4 million yuan in the same period last year.

Third, net losses are narrowing. The net loss for the first quarter of 2020 was RMB 95.4 million (approximately US$13.5 million), compared with a net loss of RMB 130 million for the same period in 2019.

By business, the revenue of online advertising services was 21 million yuan, down 39.5% from the previous year, compared to 34.8 million yuan in the same period last year. The company's revenue from value-added services was 42.8 million yuan, an increase of 3.4% over the previous year. Subscription service revenue was 1.3 million yuan, down 82.3% year-on-year from 7.6 million yuan in the same period last year. As for the decline in revenue from online advertising services and subscription services, 36 krypton was attributed to the COVID-19 outbreak in the first quarter of this year in the first quarter of this year.

In terms of profit performance, the adjusted non-US GAAP net loss of 36 krypton in the first quarter of FY2020 was RMB 82.9 million (approximately RMB 11.7 million).

Value-added services for enterprises have become a new driving force for 36 krypton

Many people are familiar with the aspect of 36Krypton because it continues to provide high-quality media content as an Internet media platform. In fact, prior to its listing, 36Krypton had positioned itself as a diversified service provider for businesses in the new economy. According to a research report by the Southwest Securities media team, in addition to media information, 36Krypton is dedicated to serving China's new economic participants as an outstanding brand and development platform. It targets the six major new economic communities of startups, TMT giants, traditional enterprises, institutional investors, local governments, and individual users to provide new economic content, attract traffic through high-quality content, and develop a range of business services, including online advertising services, enterprise value-added services, and subscription services.

As we all know, media revenue depends on advertising, but 36 Krypton defines itself as a diversified service provider for enterprises in the new economy, gradually reducing its dependence on advertising revenue, and the share of revenue contributed by enterprises from value-added services is increasing.

As a traditional media commercialization channel, while maintaining continuous growth, the share of online advertising in 36 krypton's total revenue is gradually declining. In 2017, online advertising accounted for 61.4% of total revenue of 36 krypton. In 2018, online advertising revenue accounted for 58.1% of revenue, fell to 43.2% in 2019, and retreated to second place. Online advertising was greatly affected by the pandemic in the first quarter of 2020, falling to 32.3% of revenue.

According to the Southwest Securities media team's research report, in 2019, 36 Krypton's enterprise value-added services surpassed advertising revenue for the first time and became the main source of revenue. Judging from the impact of individual businesses on revenue growth, in 2018, the contribution rate of enterprise services to revenue growth was 32.31%. In 2019, the contribution rate of enterprise services to growth reached 61.57%. The effects of enterprise value-added services as core business are beginning to show, accounting for 65.64% of total revenue in the first quarter of 2020.

However, the stock price of 36 Krypton has been low since its listing, and has been on a downward trend since listing. The stock price after the sharp rise on May 27 has dropped 53% from the high of 14.5 US dollars/share at the time of listing.

Not long ago, on May 7, 36 Krypton announced a stock repurchase plan to repurchase no more than 1 million American Depositary Receipts (ADS), each representing 25 shares of the company's common stock. The market also responded positively to this. After announcing the repurchase plan, 36 Krypton's stock price increased by more than 17% on 2 out of 10 trading days (May 8 and May 22, respectively). With the easing of the epidemic, the revenue contribution of 36Krypton's enterprise value-added services is still expected to grow, which may also be the engine for 36Krypton's stock price to rise.