Dream World launched the self-developed "Little Animal Star" on May 13, 2021, which ranked second in AppStore's list of free games on that day. So far, it has attracted more than 2 million registered users, and the customer retention rate is about 50-60%. After the launch of the game, the company further promotes and increases the operation of the game. For example, the company invited four game anchors on Douyu's platform to broadcast the game of Little Animal Star in June. The company also uses short video platforms to advertise to attract new users. After the first major update of the version, Animal Star returned to No. 6 on the App Store free game list, demonstrating its strength in game development and operation. Currently, Little Animal Star has a score of 8.7 on the TapTap platform, and we expect more promotions and version updates in the second half of 21 to further enhance DAU.

Although the launch of Little Animal Star has been a success, we expect the revenue contribution of the new games to be limited in FY21.

According to our communication with the company, the game is currently focused on user growth, while the commercialization plan will be carried out in 2022. We expect the company's total revenue growth in fiscal year 22 to slow to 13% and 10%, the contribution of new games is limited, and about 20 old games will be eliminated.

Investment points We maintain the forecast of FY21/22 revenue of 3.6244 billion yuan / 3.9694 billion yuan and raise its fair value to HK $5.50 based on 14 times the forecast price-to-earnings ratio for fiscal year 21 to reflect the better prospects of self-developed games.