Fund Manager of the Asia-Pacific region
Ying Zhuo Yun Chevin Lui

Core points:

1. Great success in overseas training
(2) develop P2E (Pay to Earn) and share economic benefits.
3. Use NFT to get through the small and micro studio supplies.

After our research post on August 28th last year, there was a series of corporate actions (corporate actions) in Huoyan:

In 2020, the annual net income of 1909.HK reached 521 million yuan, an increase of 71.3 percent over the same period last year. Gross profit was about 480 million yuan, an increase of about 68.9 percent. The gross profit margin reached 92.1 percent, a decline of 1.4 percent in the same period last year. If calculated according to the split (one split and four), the earnings per share of 1909.HK would reach RMB 0.35 per share. However, this industry has not yet reflected the benefits of business ethics. We estimate that Decheng's annual revenue in 2020 will be as high as 820 million yuan, and the total annual revenue will be about 250 million yuan. As a result, 1909.HK earned 1.341 billion yuan in 2020 after the balance sheet, with an annual profit of 580 million yuan.

The royal tycoon is a brand owned by 1909.HK in Thailand. 1909.HK 's marketing strategy in recent years has focused on the development of overseas markets, while the royal tycoon's share of revenue has soared from 4% to 11% in just one year, becoming a new force for the growth of 1909.HK, and a new high for both MPU and ARPPU.

1909.HK is making use of the advantages of its own technology, taking NFT technology as the starting point to build an E-bay-style platform for players to sell props to create and store digital wealth for players. In addition, it is also building a cross-regional platform for spare parts, integrating all kinds of products from small and medium-sized workshops, such as characters, animation, background music, etc., to create a platform for the sale of guaranteed intellectual property rights in small and micro manufacturing studios.

Recent business actions

After we issued a research report last year, 1909.HK closed its contract with Decheng International on November 18, 2020 and completed the contract for the upper and lower industry. After that, Mr. Yan Yong, one of the original executive and executive directors of Huoyan, was appointed to the non-executive director and technical chief executive, and Mr. Yi, who had a lot of wisdom and experience, injected new vitality into the board of directors. In addition, on March 1, it announced the establishment of a Shenzhen Angel Investment Fund with the Shenzhen Angel Investment guidance Fund and Shenzhen Qianhai Tongfu Stock right Investment Management Co., Ltd., in order to capture the investment opportunities of various strategic new banking companies. In addition, 1909.HK announced that it would carry out strategic cooperation with the Internet Technology Co., Ltd., to conduct related activities in the development area. It even announced on 28 March that it had forgotten the record of the consultation and cooperation framework for gyro consultation with the well-known pan-Asian media, hoping that through this cooperation, more small and medium-sized enterprises could be launched at an early stage. Finally, on March 30, 1909.HK announced that its shares were split into 4 shares, reducing the turnover of each share, thus attracting more investors.

It's short.

1909.HK is very bright.，The annual net income of the people will be 521 million yuan in 2020，A year-on-year increase of 71.3%，The gross profit is about 480 million yuan.，The increase is about 68.9%.，Gross profit margin is 92.1%，It fell by 1.4% in the same period last year. 1909.HK 's earnings per share (after the shares were split) reached RMB 0.35 per share.，Compared with $0.22 in 2019，Up 64.4%. 1909.HK even announced a dividend of 0.0438 yuan.，The dividend payout rate is about 1.23%.

However,，This policy has not yet reflected the value of business ethics in the past few years. According to the receipt announcement issued earlier，If according to the annual and the first seven months of the announcement，We estimate，Decheng's annual revenue in 2020 is as high as 820 million yuan.，The total income in the year is about 250 million yuan. therefore，The income of 1909.HK in 2020 is 1.341 billion yuan after the "schedule".，The profit for the year is 580 million yuan.，The historical price-to-earnings ratio is 16.2x.

Great success in overseas training

Data sources: fire rock annals and mountain data collation

From the previous year, we can see that the production of 1909.HK is gradually decreasing according to the snack bar and the catch. instead, the Royal Costume has formed the third largest harvest pillar. It is worth noting that the Royal Grand Holiday is an independent brand of 1909.HK in Thailand. In recent years, 1909.HK 's marketing strategy has been devoted to the development of overseas markets, while Royal Holdings has increased its share of revenue from 4% to 11% in just one year, which has become a new force supporting the high growth of 1909.HK. This clear experience is sufficient to confirm the proficiency and performance of 1909.HK 's market strategy.

Data sources: fire rock annals and mountain data collation

In terms of market division, most of 1909.HK 's income comes from the Chinese market, but the overseas investment strategy has achieved results. The Asia-Pacific region's income (mainly Thailand) has increased from 5% to 13%, while 1909.HK will launch more sales in overseas markets in the coming year. Overseas share is expected to further increase, diversified revenue sources, low according to the price of a single market.

Volume rise

Data sources: fire rock annals and mountain data collation

From 2016 to 2019, the income of 1909.HK has doubled in recent years due to the popular styles of snacks and catchers. However, as we can see from the past, 1909.HK is in the dilemma of small profits, and the average monthly payment (MPU) has increased significantly, but the average income of consumer goods (ARPPU) has not increased. It means that if the number of people in the popular style of 1909.HK slows down, 1909.HK will stop.

However, since 2019, 1909.HK has actively opened up the Thai market, successfully turning the tide and showing a positive trend of rising volume. The average income of payment users increased nearly 11.6 times to $1437, greatly enhancing the health of their income.

Continue to strengthen the development and development of the city river

According to the latest yearbook, 1909.HK has released a total of 23 titles and plans to release 9 new titles this year, of which 5 are recreational, 2 are H5 and 1 is MMORPRG and card category.

Data sources: fire rock annals and mountain data collation

1909.HK has always been committed to the development of revenue collection channels. On the other hand, in 2019, it had 102 people in financial research and development, but by 2020, the number has soared to 140, an increase of 37%. 1909.HK continues to increase its investment in financial development, which we believe will make its economic development more stable in the future. It is understood that 1909.HK hopes to increase production in the coming year. If it can be implemented, the faster the harvest will rise, and in the visible future, I believe that the average annual growth of 60% of 1909.HK will be maintained.

The economic model of economic development + economic development
The dilemma of the former mobile phone industry is that the sales volume in the inland market has become white, the cost of sales volume remains high, and the capacity is increasing day by day. With the rapid disappearance of the population, the size of the Chinese mobile phone industry has increased and expanded. In order to attract players, mobile phone companies have become a new norm in the mobile phone industry. Brushing the flow rate to speed up the volume has become a general method of play. However, recently, the volume cost of 002555.SZ has risen sharply in the third quarter, which has caused an increase in the income of Panax notoginseng without an increase in profits, setting off a warning for the entire mobile phone industry. the volume model at the beginning of the market has come to an end, and the most important result is that the line of 002555.SZ also collapsed in October last year. This proves that for mobile phone developers, the relationship with channel providers is more important than single-market traffic.

1909.HK can strengthen its control over distribution channels after it has been established in Germany, so that it can avoid the follow-up of 002555.SZ and tell merchants to eat most of the profits.

Data sources: fire rock year, middle-hand year, mountain data collation

As mentioned above, 1909.HK 's revenue in 2020 exceeded 1 billion yuan after the balance sheet, while profit is expected to be close to 600 million yuan. It is worth noting that since 1909.HK had a good and long-term cooperative relationship with Decheng before closing, it can be seen from the above table that the market marketing expenditure of 1909.HK is much lower than that of ordinary mobile phone companies, saving a lot of marketing expenses to merchants.

The economic model of 1909.HK is telling the market that it is better to operate and control domestic and foreign distribution channels than to continue to develop good distribution channels. We believe that after the integration of the 1909.HK industry, with its rich market development experience, market management will be more rapid and effective, and the market market strategy will enjoy higher market activity, which will further reflect its own strong market development capacity in the coming year.

Continuous integration of China's handset industry

In the past, China's manual employment was equated with profiteering. However, after the Chinese government began to regulate the number of output and consumer spending, they were tired of too much consumption.

The "half-year" of China's mobile phone industry has entered a cold winter. According to the new report of CCTV on January 13, 2020, a total of 18710 enterprises closed down in 2019 (9705 in 2018), an increase of 92.79 percent over the same period last year. The main reason for the demise of a large number of small and medium-sized enterprises lies in the number of license plates issued and the nuclear speed. The mobile phone industry has entered the era of consolidation. On the other hand, significant integration has begun to take place in the mobile phone world, and the multi-year market or opportunity, led by 700.HK and 9999.HK, will be broken.

The following is an excerpt from the article "how 1909.HK Holdings has become an 'open player' in the video clip. I think it is correct to describe the difficulties of mobile phone developers:"

"there are only three purchasing companies in China.，Send a message，The Internet is easy and others. This is a photo of the activities of the Chinese market in the past. In the market where the giant has become the protagonist，Whether it is Mikhail, Xinxing or 1909.HK holding its success.，What has been shown in practice is also a sign that small and medium-sized enterprises are actively opening up the road under the huge financial crisis. "

Sources: Sanqi Mutual Annual report, Yi Qianfan, AppAnnie, Seven data, Leopard second-level Market Research report，Collation of mountain data

According to the report of Lianbao Secondary Market Research, 700.HK and 9999.HK account for 67.67% of the domestic market share, while the third place, Panax Notoginseng Mutual (002555.SZ), has a market share of 10.44%, but this is caused by "subscription flow", and the situation is so severe that "income does not increase profit". This certifies that there are unshakeable messages in 700.HK and web e-commerce (9999. HK) of the identity sharing platform.

According to the statistics, mobile merchants will post traffic on platforms such as Douyin and Kuaishou Technology. However, the fast-growing 2400.HK in recent years, the popular social platform TapTap, is creating traffic portals led by the local community, and has become a new channel distribution channel.

In view of this, IGG (799.HK), a well-known global operator, recently announced a strategic cooperation with Tap Tap, and its hands will be distributed on the Tap Tap platform first.

Bilibili Inc. (9626.HK), who has the largest number of Z-generation subscribers, even announced on April 1 this year that he would buy a stake in 2400.HK for about HK $960 million and acquire about 4.72% of the shares. The special TapTap community model can help Bilibili Inc. to do business in terms of channel, research and development, and management ecology.

On the other hand, starting from 2019, the word jump of the largest traffic platform has started with the developer 302.HK, announcing the launch of the IP masterpiece "HNA Wang Jian Blood Line" and the all-Star thrill based on SNK.

With regard to the above-mentioned integration campaigns, various new communication provocators are seeking breakthroughs in the oligopoly market.

As for 1909.HK, we will start with the new encryption technology of editing NFT, develop the game, reshape the relationship between merchants and players, and create a new circle of symbiosis between merchants and players. As the shared economic model of "trading" will seriously harm the great interests of the existing mobile phone industry, it can be expected that it will inevitably be vigorously attacked by major developers, so closing down dealers is an important first step in the implementation of ensuring profits and benefits.

Change in itself-from F2P (Free to Pay) to P2E (Pay to Earn) shared economy

After the completion of 1909.HK, the company immediately announced that it had established a special relationship with Hu Yifeng, a member of the GameFarmer audience.

According to the circular, "the establishment of 1909.HK (Shanghai) will enable 1909.HK to make full use of the resources and professional knowledge of Mr. Hu and Mr. Li in the development and development of tourism in the region, enrich the marketing and usage of 1909.HK, and increase the company's visibility in overseas markets." Promote the coverage rate of 1909.HK and further improve the coverage rate of the city.

The notice only points out the possibility of exploring NFT technology in the market, but Mr. Hu is a well-known "dark god" in the country. the following is the propaganda sea of the god of Diablo, with five major features listed in it:

The list includes the above 5 points: each time you complete any business, you will get a subscription, and as soon as the number of subscribers has been uploaded, the subscriber cannot change it. And these generations have a real value, and can be used to buy ethernet. If a player gets any props in the gallery, he can sell it to other players, and the players who buy the props can also buy etheria. In a nutshell, it is the realization of the concept of playability.

The following is an excerpt from Mr. Hu's memo, which clearly explains the impact of the existing F2P model and how to realize the player's grand ambition.

We used this business model in our fake King of Glory. In the first half of the year, King Yaoyao collected more than 6 billion to 8 billion yuan. If we spend $3 billion and turn it into a scarce resource within the budget, it will be a big change for players to win in every game and share the 30 cents to all players.

Of course, the king of glory will not do this, because it is clear that it has already reached 8 billion, so why should it be given away? Therefore, this new business model is bound to be born in the regional economy, which will be sent back to the system until the end of the revolution. This is a major difference in the business model, which is based on a shared economy. On the other hand, the sharing economy is bound to develop better and better in the regional economic field, because regional economic development is fundamentally a technology of equality. Therefore, the idea of sharing and co-building has always been a great idea. It must also play a role in regional application. And regional training is the best application, but also the easiest to achieve.

We believe that 1909.HK is the platform that will be launched, and it is possible to use NFT to turn stone into gold, so as to realize that players can "play games" and use the props in the store to store property with a real value. The most important thing for 1909.HK is to realize a cross-regional and cross-border props transfer platform.

Or simply, we can understand it as the E-bay (EBAY.US) of the world, where players can transfer digital assets on the platform.

Use NFT to get through the supply of small and micro workshops.

By the same token, since the players on the C side can actually practice and produce each other, the B side can do the same, but this time the image has been turned into a studio.

Source of data: CCTV's new news

In fact, as traffic is blocked, small and micro desktop studios are becoming more and more likely to survive in the industry. Because of the lack of resources, they are unable to make full coverage, it can only be used for a certain part of the game, such as background sound, video action, scenery and so on. However, in the lack of sales channels, they failed to get the desired revenue. And 1909.HK can precisely provide them with a platform for the purchase of spare parts through NFT technology.

Or simply, we can understand it as the BABA platform (9988.HK) in the world, where authors can transfer digital property rights.

To build these two NFT platforms, 1909.HK can not only access the trading usage of the platform, but also get important player data, short self-purchase time and pre-market research. More importantly, we should create a fairer world of financial and financial resources and break the excessively lucrative wealth and oligarchy.

1909.HK even cooperates with the well-known mass media Gyro, and its feature is that it focuses on the "pan-industrial" industry and serves the customers. However, it will make use of this industry information platform to join its wealthy family.

Valuation

1909.HK has changed to the business model of market development + market development since it took over the franchise, and it is no longer the original "Foxconn". Of course, it is more than that. Making use of its own strong technology, it began to use NFT technology to build an E-bay platform for selling props, on the one hand, to create and store digital wealth for players. On the other hand, using NFT technology, we can help all kinds of manufacturers to produce products, build cross-regional platforms for manufacturing parts, integrate all kinds of products from small and medium-sized manufacturing studios, such as characters, animations, and background sounds, and create a platform for manufacturing parts of small and medium-sized studios to help them sell guaranteed intellectual property.

However, as NFT and financing are new concepts, the stock market has little information about the valuation of related assets. Of course, there is a valuation of US $7.5 billion in the private equity market, such as Dapper Labs, a famous NFT financing development company. However, due to the lack of public information, we have decided not to include relevant assets in the valuation model. However, in order to reflect the positive impact of related assets on 1909.HK performance, we believe that 1909.HK can still maintain a median price-to-earnings ratio of 20 times the industry's earnings in the last two years.

Cymbals

The Chinese government accepts policies related to the industry.

The Development of NFT encounters Technical bottleneck

Overseas service development is not as expected.