After Strong Supervision, Welcome To "Breathing" Opportunities, Small And Medium Game Companies Accelerate IPO In Hong Kong

After the downturn, the gaming industry is accelerating to the capital market.

In December 12th, the heartbeat network will be listed officially after hearing through the HKEx. This is also a game company after the middle hand tour and the creation of a dream world. Prior to this, the heart network was listed on the new third board in 2015. The market value of the heartbeat network is 3 billion 106 million 300 thousand yuan, based on its final trading day (September 27, 2018) closing price before the delisting of the third board. The market value is expected to be HK $5 billion 700 million.

At present, the operation of heartbeat network includes "fairy tale M", "girl front", "sausage party" and other games, and owns the largest game community TapTap in China. Compared with the popularity of investors in consumer concept stocks, the game industry is obviously cold. As of 16 December 11th, the Chinese hand travel price was 2.90 yuan, approaching its listing price, with a total market value of only HK $6 billion 757 million. Behind the industry's valuation and poor performance is the strong regulatory risk faced by the industry.

From March 2018 to December, the State Administration of press, publication, and radio and television suspended the approval of the new version of the electronic game. The tightening of policy led to a sharp slowdown in the growth of China's game market. As the largest gaming company in the world, the market value of Tencent has shrunk by more than 40% from its high level in 2018. Since the approval of the game edition this year, there have been a number of small and medium game companies listed in the era of friends, fingertips, Seventh Avenue, dream world, Zen tour technology and home interaction. At present, there are nine mutual entertainment and technology companies in Hong Kong stock market.

"The new three board is not a good choice for securitisation, but much worse than the valuation of Hong Kong stocks. At present, it should be the best time for heartbeat network, the flow of water brought by exploding game, and the user stories brought about by the community effect. The game company will have to wait until the second explosion comes out again, it is also very difficult. Zheng Jintiao, co-founder of Gamer, said in an interview with the twenty-first Century economic report reporter that the listing of Hong Kong stocks is also faced with certain risks, that is, we must rely entirely on performance and figures, rather than domestic A shares, who are keen on speculation.

After the downturn, the gaming industry is accelerating to the capital market. - Song Wenhui diagram

Head grab share

According to the prospectus, the total revenue in 2016, 2017 and 2018 was about 766 million yuan, 1 billion 344 million yuan and 1 billion 887 million yuan respectively. The corresponding net profit was 25 million yuan, 121 million yuan and 353 million yuan respectively.

Explosive money game is still the backbone of revenue. In the first 5 months of 2019, the income from five major online games accounted for 81.6% of the total revenue. The top 5% players contributed most of the game. In 2018, the revenue of company game increased by 26%, accounting for 84.4% of total revenue and the total amount was about 1 billion 592 million yuan.

On the other hand, the income from the TapTap community increased by more than two times last year. IT orange reported that TapTap has completed three rounds of financing, the latest round of strategic investment financing up to 150 million yuan, investors include Jibit, heartbeat game and flying fish technology, heartbeat game also led the TAPTAP Angel wheel.

Therefore, this business is also highly anticipated, but the community is also facing enormous pressure from regulation. In February 28, 2018, the Ministry of public security, the Ministry of culture and the national "anti pornography office" announced 7 major online game crimes, including Chen Changyang's dissemination of pornographic articles in Zhengzhou, Henan. Among them, Yi Yi (Shanghai) Network Technology Co., Ltd., because its website "TapTap" and App are suspected of illegal publishing activities, and involves a large number of illegal publications, bad circumstances, according to the law, to suspend business for 3 months, a fine of 318 thousand and 600 yuan administrative penalty.

At present, the main source of profit for TapTap is still advertising. After the approval of the game number is restored, the industry is expected to return to a new normal. Public data show that from the beginning of this year to the end of November, the relevant departments issued 1353 edition numbers (including imported games), and since June 2019, according to the new reporting requirements, the number of games published in single month has been around 100. According to this estimate, it is estimated that the number of domestic games approved in 2019 will be around 1500, and the number of new titles will be about 1000 per year in the future. Compared with nearly 10 thousand games in 2017, the supply side will shrink significantly.

Fortune Securities analyst He Ying believes that the supply side contraction brought by the total volume control has limited impact on the growth of the market size, mainly based on two reasons: first, the trend of head games of game products is obvious; the game of Top50 has contributed 70% of revenue, while most of the head games are excellent products, and the probability of passing trial is large and the content risk is relatively small. In addition, the control of the number of articles is mainly aimed at chess games and a lot of low-quality games that are changing the skin and rubbing IP. This part of the game has little impact on the scale of the industry's income.

Force overseas market

Once the game company earned a full bowl of scenes, it has no longer been reproduced. Gamma data showed that the domestic game market in the first half of 2019 was 116 billion 310 million yuan, up 10.8% over the same period last year, and the growth rate was 5.2% during the same period last year. Among them, the scale of mobile gaming market reached 75 billion 310 million yuan, an increase of 18.8% over the same period last year, compared with 12.9% last year.

It also revealed that the game industry in the first half of this year is getting warmer. However, this does not mean that the game industry can quickly return to the expected growth rate, after all, the dividends of users have become bottlenecks. "Now the whole industry is very difficult, on the one hand, the game can not get the approval of the edition, on the other hand, the user's requirements and aesthetic standards are also getting higher and higher, and the industry's R & D and operation have put forward higher requirements." A senior game company executive told the economic news reporters in twenty-first Century that the time spent by a user on the Internet is constant. This means that electricity providers, games, live broadcasting and short videos are robbing him. At this level, the game is also facing huge competition.

Take the technology of flying fish listed in Hongkong as an example, its revenue in the first half of 2016-2019 years was 188 million, 131 million, 83 million and 42 million respectively, and its loss has been 669 million yuan since 2016. In 2016, it lost 151 million yuan, lost 377 million in 2017, lost 108 million in 2018, and lost 33 million 420 thousand in the first half of 2019. Its share price also dropped from HK $4 to HK $0.171.

For games and entertainment industry, it is almost impossible to continue building explosive funds. Because of this, investment also has huge fluctuation risk. Like most game companies, the heartbeat network is facing some problems of high game dependence and unbalanced income structure. Prospectus shows that in the first five months of 2016, 2017, 2018 and 2019, the five online games contributed 90.9%, 83.1%, 75.6% and 81.6% of the total operating revenue of the same period, respectively, contributing 89.6%, 77.5%, 63.7% and 67.4% of total revenue.

How to find new bursts beyond the legend of fairyland M remains a challenge for the company. A clear trend is that after tight domestic regulation, game makers aim at overseas markets. It depends on the overseas development of fairyland legend M. In 2016, 2017, 2018 and 2019 five, the proportion of game revenue from overseas market to total game revenue was 2.1%, 31.7%, 61.5% and 67.8% respectively, and the importance of overseas market was rising.

But compared to the game leading companies, there is still a huge gap. App Annie released the list of China's publishers' revenue in November 2019, ranking the 27 highest in offshore gaming revenues, down 11 from last month. In the whole year of 2019, the heartbeat network ranking is basically outside the 20 place. NetEase, Tencent, and the happy gathering era still occupy the forefront of the list.

Under the background of "28" differentiation, is there any chance for small and medium-sized game companies to go to sea? Shen Nuo group COO Xu Mohan told reporters in twenty-first Century economic report that each country's national conditions are different, for example, India, Southeast Asia and other countries can be divided into several gradients. Not every game can be completely covered. The more complex areas, the more opportunities. "Sometimes in China we see a game popular 4 years ago. It may be very suitable for Burma now. The infrastructure there is very much like China three years ago. On the contrary, competition will be bigger in the US and Europe.

In his view, small game companies also need to accumulate experience and money to grow up slowly. This is also a necessary process for development.