Investment Summary
Obvious drop in online ticketing subsidies
In order to compete for market shares, we have seen the market leaders in online ticketing sector, such as Maoyan and Ali Picture, spending significant amount of online ticket subsidies in recent years. Nonetheless, due to the stable market leading position of Maoyan in online movie ticketing sector, we do not think that it is necessary for Maoyan to keep spending a significant amount on subsidies in the future. In fact, the company’s marketing and promotion cost (which mainly includes subsidy expenses) as a percentage of online ticketing revenue has been dropping in recent years. The decrease of online ticketing subsidy expense in 2019 was also the major reason for the company’s first ever-yearly positive earnings recorded in 2019. We expect that the company can continue the decreasing trend of subsidy expense as percentage of online ticketing revenue in the future.
Strategic support from the strong shareholder’s background
The company has received significant strategic support from its shareholders which includes Tencent, Meituan and Enlight. Their support facilitated the huge expansion and enhanced the users experience of the company. The company obtains free entry portals from Wechat and Meituan App, which allow the company to benefit from the huge user traffic of Tencent and Meituan. In August 2019, the number of users of Maoyan’s Wechat mini program has reached 250 million, which is nearly 30% of the total internet users in China. In July 2019, the company has launched the “TenMao” Alliance along with Tencent. Maoyan and Tencent will take advantage of their rich resources across various entertainment sectors to deepen the cooperation and create a superior entertainment experience for Chinese consumers.