We expect FriendTimes (“FT”) to see a strong quarter in 1Q20E, benefiting from: 1) more MAU and time spent shift to online leisure for the epidemic outbreak; and 2) eye-catching performance of newly-launched Tale of Empress (<浮生为卿歌>)。Given recent sector valuation rebound and FT’s strong grossing of new titles, we lifted FT’s TP from HK$1.4 to HK$2.0 (implying 10x/7x FY19/20E P/E), with earnings forecast unchanged. Valuation is still attractive. Maintain BUY.
Mobile games to benefit from epidemic. We expect game comps to benefit from the epidemic outbreak, with more time spent shift to online leisure & MAU in the CNY. Mobile games could directly benefit, while PC games not (less operation of internet café)。 Game sector saw price rebound in recent weeks, with valuation up to over 20x FY20E P/E.
Strong
Potential new titles rollout ahead. Apart from
Maintain BUY. Given recent game sector valuation rebound and eye-catching performance of key titles, we lifted our TP from HK$1.4 to HK$2.0 (implying 10x/7x FY19/20E P/E), still largely lower than industry average. More catalysts to come: 1) solid FY19E results; 2) rising Tale of Empress and launch of new titles; and 3) potential dividends.