We covered it for the first time and gave the company a “buy” rating. The target price was HK$3.54, which is equivalent to 5.4 times, 4.6 times, and 4.1 times the 2022-2024 non-IFRS price-earnings ratio. We expect the company's 2022 revenue and net profit for non-IFRS shareholders to increase 26.0% and 13.4%, respectively.

On the supply side, we don't think the scarcity of online game versions is necessarily a negative factor for popular card games. 1) A decrease in the supply of games or an increase in the concentration of the card game market. 2) Competitive card games tend to have a long life cycle. 3) Channel advantages can increase visibility and help expand the user base.

On the demand side, we think 2022 may be an opportunity for low-ARPU games, mainly due to declining consumption levels. 1) Older players and rural players have lower internet penetration rates, or opportunities for structured user growth. 2) Due to the impact of the COVID-19 pandemic, the decline in consumer expectations and willingness to pay may bring opportunities for low-ARPU games.

Catalyst: “Sichuan Mahjong at Your Fingertips” has topped the weekly iOS bestseller list for desktop mobile games in China since mid-June 2022. We expect the company's revenue to increase year-on-year and month-on-month in the second half of 2022.

Risk: Threats from major competitors lead to a decline in market share; negative changes in dividend policies.