Events:
On June 14, the company issued the announcement of Giant Network Group Co., Ltd. on donated equity assets and related party transactions, which showed that Giant, the company's controlling shareholder, intends to give its 1.1% stake in Giant Network to Giant Network for free. After the completion of this transaction, Juyi Network will change from a shareholding subsidiary of the company to a holding subsidiary.
Comments:
After receiving the gift, it controls the giant bank network and represents the high-quality core asset Playtika. After the completion of this transaction, Giant Investment holds 49.9% equity, the company holds 49.91% equity, Judao Network, a wholly-owned subsidiary, holds 0.19% equity, and the company and Judao Network together hold 50.1% of Judao Network. Judao Network will change from a shareholding subsidiary to a holding subsidiary. Giant Network's core asset is the Israeli board game company Playtika, which was listed on the NASDAQ Stock Exchange in January this year.
Playtika is good at merger and acquisition integration and artificial intelligence technology, business model for the acquisition of game assets for transformation, through big data, artificial intelligence and other technical means of continuous analysis, understanding and learning of users, and then output the game's fine operation transformation plan to achieve growth. At present, Playtika's main game product matrix includes 15 games, including "Slotomania", "Bingo Blitz", "House ofFun" and "World Series of Poker", nine of which are on the US best-seller list Top100 (a combination of iOS App Store and Google Play Store), seven of which are acquired by post-acquisition transformation. According to the prospectus, the quarterly revenue of "Bingo Blitz", "Solitaire GrandHarvest" and "June's Journey" acquired by Playtika increased by 410%, 146% and 148%, respectively. Playtika2020 realized full-year revenue of $2.37 billion, compared with $1.89 billion in the same period last year, and net profit of $92.1 million, compared with an adjusted EBITDA of $940 million. Playtika 1Q21's revenue was $640 million, up 19.6% from $530 million last year, and its net profit was $35.7 million, which was roughly the same as last year's $35.8 million. Looking ahead, Playtika expects to achieve revenue of $2.6 billion in 2021, compared with an adjusted EBITDA of $1 billion.
Playtika has advanced technical strength and global distribution capacity, this gift will help the company: 1) accumulate artificial intelligence, big data and other advanced technology, further enrich the company's product line; 2) obtain global distribution capability, help international development strategy; 3) and show that Playtika can effectively enhance the company's profitability and development potential, and effectively improve the company's asset quality.
In addition, Giant Investment is not only the donor of this gift, but also the enterprise controlled by the actual controller of the company, and the Giant Network is a strategic linkage platform jointly created by Giant Investment and the company. Through this gift, the company brings all the game industry business of the actual controller into the corporate governance system, eliminates potential inter-industry competition and avoids related party transactions, and effectively protects the interests of the company and minority shareholders.
Investment suggestion: Playtika has the world's leading technical strength and issuing capacity, and has established a deep moat in the leisure chess and card track. After receiving the holding Playtika, the company will quickly accumulate advanced technologies such as artificial intelligence and big data, further enrich the product line and build a global distribution network, thus comprehensively enhancing the company's ability of the game industry chain from research and development, distribution to operation. We estimate that the net profit of the company from 2021 to 2023 is 1.16 billion yuan, 1.49 billion yuan and 1.67 billion yuan respectively, and the corresponding EPS is 0.58,0.74 yuan and 0.82 yuan respectively. Considering that the company, as a representative manufacturer in the PC game era, on the one hand, seize the key track to invest core resources in the current stock competition era, on the other hand, comprehensively expand the overseas blue ocean market, and be optimistic about its way back to the top manufacturers. We give it 30 times PE in 2021, corresponding to the 6-month target price of 17.4 yuan, and give it a "overweight-A" rating.
Risk hint: the progress of new product research and development is not as expected, the effect of overseas market promotion is not as expected, and the industry regulatory policy changes.