XD Inc (2400 HK) Notable Economic Moat, a Foundation for Future Growth August 21, 2020 136

PSR Recommendation: NEUTRAL Status: Initiation
Target Price: HKDHKD41.20

Investment Summary
A diversified gaming company
The company develops and operates quality games in China and overseas. According to Frost & Sullivan, among PRC game operators who earned a majority of game operating revenue overseas in 2018, the company ranked fifth in terms of revenue from mobile games in 2018. The company has a diverse portfolio of games across different genres. As of December 31, 2019, its game portfolio consisted of 38 online games and 11 premium games. The company also operates TapTap, a leading game community and platform in China. According to the Frost & Sullivan, TapTap was the largest game community and platform in China in terms of average MAUs in 2018.
The company’s abundant game reserve
The company has an abundant game reserve and is expected to launch multiple online games in 2020, including 3 self-developed games, Fantasy World (創想世界), Torchlight: Infinity (火炬之光:無限) and Project A (tentative name). Project A, the largest game project invested by the company since Ragnarok M, has been prepared for more than a year and is a Japanese girl-style MMORPG. Its liquidity is expected to reach Ragnarok M’s relative high level. In terms of premium games, the company will launch multiple premium games in 2020 including Human: Fall flat (人類:一敗塗地) , which is a game with a huge fan base around the globe and has already achieved incredible results in the Client game sector. The company’s abundant game serve has laid a solid foundation for the company’s future growth.

About the author

Kevin Chiu
Analyst
Research

Kevin Chiu received Bachelor`s Degree from University of Bristol and obtained Master`s Degree with distinction in Accounting and Finance from Warwick Business School. Kevin once worked as an analyst in the Equity Capital Market department of China Securities International, and he is familiar with the operation of Hong Kong`s capital market. Kevin is currently a licensed research analyst at Phillip Securities and covers TMT / Education sectors.

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