Friendtimes (6820 HK) FoE has set highest monthly revenue record, the company has a strong pipeline in the upcoming years April 26, 2021 37

PSR Recommendation: BUY Status: Maintained
Target Price: HKD HKD3.53

Investment Summary
The company’s 2020 result is in line with expectation
The company’s 2020 result meets our previous expectation. The revenue for 2020 was RMB
2.18 billion (+29.2% YoY). The YoY rise was mainly driven by the strong performance of The
Fate of the Empress (浮生為卿歌). In terms of the geographical breakdown, the revenue
generated from China region and overseas region were RMB 1.71 billion (+53.0% YoY)/RMB
0.47 billion (-17.7% YoY), respectively. As at 31 December 2020, the company has released
and is operating 34 mobile games in different languages worldwide, and the accumulated
total number of registered users reached 130.8 million (+21.2% YoY). Further, the company
has strengthened its monetization ability in 2020, the monthly average revenue per paying
user (ARPPU) in 2020 was RMB 715.5 (+34.6% YoY).
The company’s 2020 GP was 1.47 billion (+33.2% YoY), with a GPM of 67.3% (+2.0ppts YoY).
The 2020 S&M expense was RMB 0.61 billion (+55.7% YoY), with expense ratio of 28.1%
(+4.8ppts YoY). The increase in both S&M expense and expense ratio in 2020 was mainly
attributable to the fact that the 1) the company had no new title launched in 2019, hence the
2019 S&M expense was at a low cardinal number 2) the company has invested a lot on the
promotion of The Fate of the Empress (浮生為卿歌) in 1H20. The 2020 R&D expense was
RMB 0.26 billion (+18.4% YoY), with respective expense ratio at 12.1% (-1.1ppts YoY). The
2020 admin expense was RMB 46.33 million (-25.4% YoY), with respective expense ratio at
2.1% (-1.6ppts YoY), The drop in both admin expense and admin expense ratio YoY were
because the admin expense in 2019 included some one off items such as listing expenses. The
company recorded a NP of RMB 0.50 billion (+21.2% YoY), which is in line with our forecast of
RMB 0.52 billion.

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