InvestIdeas

<Research Report>DBS Vickers: CHINA LIT 2019E PE Ratio Below Peers; Recommends to Subscribe

DBS Vickers, in its report, said it recommended investors to subscribe to CHINA LIT (00772.HK), the spun-off from TENCENT (00700.HK), as the offer price of CHINA LIT was 32x-36x 2019 P/E (estimate), lower than peers (44x-51x), making its valuation attractive.

The broker estimated CHINA LIT's 2017-19 revenue CAGR at 44% and 2017-19 net profit CAGR at 245%.

The broker said China Literature is the largest online literature platform in China, being a leader among peers in terms of readers, authors and amount of literary works.

Its full-year revenue last year was RMB2.557 billion, with 170 million monthly active users (MAU), 5 million authors and 8 million literary works.

Source: AAStocks Financial News

not vested

China Literature profit tumbles, online revenue shrinks

China Literature (0772) said today net profit for the first half fell by 22 percent to 392.7 million yuan from 505.8 million yuan for the six months ended June 30, 2018.

Revenue fell by 30.1 percent on-year to 2.97 billion yuan.

The company said its library features 7.8 million writers and 11.7 million works of literature, including 11.1 million original literary works by writers on its platform, 380,000 works sourced from third-party platforms, and 230,000 e-books.

Revenues from online business fell by 11.5 percent to 1.66 billion for the six months ended June 30, on a year-over-year basis, accounting for 56 percent of total revenues.

Revenues from online business on self-owned platform products dropped by 10.1 percent year-over-year to 985.3 yuan, mainly due to a decline in paying users for the self-owned platform products as the company strengthened the review of paid content during the first half.

Revenues from online business on self-operated channels on Tencent products fell by 13.7 percent year-over-year to 431.4 million yuan mainly due to the continued decline in paid reading revenues from self-operated channels on certain Tencent products, partially offset by the contribution of online advertising revenues generated from the free-to-read model introduced in the first half on these Tencent products.

Revenues from online business on third-party platforms fell by 13.2 percent to 245.8 million yuan. This was due to the suspension of cooperation with certain third party platforms during the first half.

General and administrative expenses increased by 41.8 percent year-over-year to 473.4 million yuan due to an increase in employee benefit expenses resulting from increased headcount and salaries, an increase in outsourcing expenses for developing online games, and the consolidation of NCM’s business since October 2018.

Source: The Standard

http://www.thestandard.com.hk/breaking- ... 0812&sid=2

not vested

China Literature profit tumbles, online revenue shrinks

China Literature (0772) said today net profit for the first half fell by 22 percent to 392.7 million yuan from 505.8 million yuan for the six months ended June 30, 2018.

Revenue fell by 30.1 percent on-year to 2.97 billion yuan.

The company said its library features 7.8 million writers and 11.7 million works of literature, including 11.1 million original literary works by writers on its platform, 380,000 works sourced from third-party platforms, and 230,000 e-books.

Revenues from online business fell by 11.5 percent to 1.66 billion for the six months ended June 30, on a year-over-year basis, accounting for 56 percent of total revenues.

Revenues from online business on self-owned platform products dropped by 10.1 percent year-over-year to 985.3 yuan, mainly due to a decline in paying users for the self-owned platform products as the company strengthened the review of paid content during the first half.

Revenues from online business on self-operated channels on Tencent products fell by 13.7 percent year-over-year to 431.4 million yuan mainly due to the continued decline in paid reading revenues from self-operated channels on certain Tencent products, partially offset by the contribution of online advertising revenues generated from the free-to-read model introduced in the first half on these Tencent products.

Revenues from online business on third-party platforms fell by 13.2 percent to 245.8 million yuan. This was due to the suspension of cooperation with certain third party platforms during the first half.

General and administrative expenses increased by 41.8 percent year-over-year to 473.4 million yuan due to an increase in employee benefit expenses resulting from increased headcount and salaries, an increase in outsourcing expenses for developing online games, and the consolidation of NCM’s business since October 2018.

Source: The Standard

http://www.thestandard.com.hk/breaking- ... 0812&sid=2

not vested

CHINA LIT (00772.HK) Dives Nearly 8% on Private Equity Fund's Further Shr Dumping

2020/01/14

Snapping days of winning streak, CHINA LIT (00772.HK) plummeted 7.9% to $38.05 after a pre-market non-auto-matched block trade on board, involving 40.11 million shares at $38 each.


Carlyle Group plans to place over 41.14 million shares in the online literature platform at $37.8-39 each to cash in up to $1.6 billion, making it its second share unloading in the latest six months, according to the sales document.

Source: AAStocks Financial News

not vested

UBS Initiates CHINA LIT (00772.HK) at Sell with $21 TP

2019/12/13

UBS initiated CHINA LIT (00772.HK) at Sell, with a target of $21 which implied a 31% potential downside.

Positive on the firm's long-term outlook, UBS noted CHINA LIT's leading position as well as traffic resources from TENCENT (00700.HK).

However, its reading business would be hugely affected by the free reading model.

The broker estimated CHINA LIT's reading revenue CAGR at 8.7% for 2018-21E, with S&M expense ratio holding steady at 30%.

Source: AAStocks Financial News

not vested

China Literature profit climbs 20pc to $1.2b

by Stella Zhai

Mainland online literature platform China Literature (0772) announced its net profit last year grew 20.4 percent from a year ago to 1.1 billion yuan (HK$1.22 billion), while also saying the coronavirus outbreak has driven up online consumption.

Basic earnings per share were 1.10 yuan last year and no final dividend has been declared.

Revenue surged by 66 percent to 8.35 billion yuan, with revenue from online business sliding 3.1 percent to 3.71 billion yuan.

Revenue from intellectual property operations and other business surged by 3.41 times to 4.64 billion yuan, driven by the acquisition of New Classics Media and the increase in revenues from IP-related self-operated online games and co-invested drama series.

Gross profit margin slid 6.6 percentage points to 44.2 percent.

Co-chief executive officer and director Liang Xiaodong expects the virus outbreak will provide opportunities to attract more readers. He said the epidemic may impact the film and television industry and has dragged the company's TV series' shooting.

Source: The Standard

https://www.thestandard.com.hk/section- ... c-to-$1.2b

not vested

China Literature: Better NCM momentum

China Literature (CL; 772 HK) turned in a good set of results.

FY19 revenue rose 65.7% to RMB 8.3b; non-GAAP earnings rose 33% to RMB 1.2b, (+23.6% against consensus), on the back of strong performance at New Class Media (NCM) and tax gains registered in 2H19.

In 2019, NCM saw earnings growth of >60% with its 4 TV drama series booked (including the blockbuster Qing Yu Nian) during the year.

On NCM, management indicated that 8-10 dramas are in the pipeline.

MAU has increased while MPU has dropped, as CL launched its own free-reading platform, Feidu, in 2Q19.

Still, on the latter, we are encouraged that management plans to focus on both user retention and profitability at this stage.

On a DCF basis (3% terminal growth and ~11% WACC), we derive a FV of HK$27.6.

Upgrade from Sell to HOLD.

Source: OCBC

not vested

China Literature (772 HK) - Mixed bag of results

China Literature (CL; 772 HK) 1H20 results were mixed.

Revenue grew 9.7% YoY to RMB 3.3b; growth in online business was driven primarily by the increase in monthly ARPU (+52% YoY) to RMB 34.1 on the back of expanded content distribution channels during 1H20.

Adjusted net profit came in at RMB 22m, falling 94.4% YoY.

We understand that CL has focused on distributing its paid reading content through WeChat public accounts in 1H20 at a premium pricing over other paid reading platforms – these are high ARPU in nature but margins are thin.

In terms of free reading, we believe management will focus more aggressively on market share.

CL plans to leverage Tencent channels to operate its free reading content, except for Weixin Reading (paid reading channel).

We understand that CL is still in discussions with Tencent around potential changes in the revenue-sharing arrangement at this juncture.

Given management changes, we are expecting CL to deepen their cooperation with Tencent and 3rd party production houses across adaption formats.

Management is focused on the quality of adapted work and to our understanding has built a dedicated team to expand the lifecycle of its IP to maximise content value.

While we believe the above are moves in the right direction, time will be still be needed for improvements to materialise.

Incorporating more constructive long-term prospects, we take our FV estimate up from HK$27.60 to HK$43.60. HOLD.

Source: OCBCC

not vested

CHINA LIT(772)

Analysis：

China Literature Limited (772) is principally engaged in the provision of reading services, copyright commercialization, writer cultivation and brokerage, operation of text work reading and related open platform, which are all based on text work, and the realization of these activities through technology methods and digital media in China.

The company has recently announced a brand new strategy during its annual conference.

The company will take online literature as the cornerstone, and continuously improve its writer ecology, IP operation, and visual development.

We are optimistic about the company`s IP development and operation system and believe that the IPs of the company will continuously generate value for the company.

Strategy：
Buy-in Price: $88.00, Target Price: $96.00, Cut Loss Price: $83.00

Source: Phillips