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INVESTMENT: HUYA. Profit in the second quarter of 2019
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Profit in the second quarter of 2019
By Morgan Brady

BT 201908 INVESTMENT 02Huya Inc. chairman Xueling Li (centre L) and CEO Rongjie Dong (centre R) ring the bell ahead of the company's IPO at the New York Stock Exchange (NYSE) in New York, U.S., May 10, 2018.

E-sports is a flourishing market, and only a few companies could leverage that market as HUYA did. Huya is a social media company with focus on live-streaming video games and interactions between the host and the audience. The company currently has a strong position in the market, despite the competition.

电子竞技是一个蓬勃发展的市场,只有少数公司可以像虎牙直播那样利用这个市场。 虎牙直播是一家社交媒体公司,专注于直播视频游戏以及主持人和观众之间的互动。尽管竞争激烈,该公司目前在市场上仍占据强势地位。

Huya's governing structure

Huya is controlled by YY, which is a subsidiary of Tencent Holdings Limited. YY focuses on live-streaming content through its social media platform. The content is user-generated, which gives it a cost-advantage. Given this advantage, Huya has the most appealing model among competitors. Its revenue is generated from the sale of virtual content, whereas competitors have a different model. Bilibili, which is the Chinese equivalent of YouTube or similar to it, derives its revenues from the sales of mobile games. The fact that it is ad-free caused a gap between operational costs and revenues. iQIYI, which is similar to Netflix, purchases premium content from producers, and it makes money from selling memberships and from the advertisements. Among the three, Huya has the best cost structure and is the most engaging, and thus it attracts longer watch time, and it can represent a valid investment opportunity from a fundamental angle.

BT 201908 INVESTMENT 03虎牙直播的公司结构



Huya presents its services through its streaming platform, Nimo TV. Following its success in China, the platform was launched in Brazil, which is the tenth country the platform expands to after mainland China. This took place after launching in Indonesia, Vietnam, Thailand, India, Mexico, Argentina, the Philippines, Turkey, and Egypt. As of December, 2018, Nimo TV had more than 11.5 million overseas monthly active users and 20 million Android mobile downloads globally.

To successfully launch in the Latin American country, Huya teamed up with leading figures in the gaming world, such as Bruno “playhard” Bittencourt in an exclusive partnership, and influencers, including Piuzinho, Elgato and Crusher.

Nimo TV had signed an earlier strategic cooperation agreement with Tencent games. According to the agreement, both parties would promote deep cooperation in overseas game and live streaming. They aimed to provide overseas game lovers with high-quality games and live streaming.

NIMO TV TENCENT GAMES Sign Strategic Cooperation AgreementNIMO TV, TENCENT GAMES Sign Strategic Cooperation Agreement


虎牙通过其流媒体平台Nimo TV提供服务。继在中国取得成功后,该平台在巴西推出,是该平台扩展至中国大陆之后的第十个国家。

Nimo TV与腾讯游戏签署了早期战略合作协议。根据协议,双方将促进海外游戏和直播的深度合作。他们的目标是为海外游戏爱好者提供高质量的游戏和直播。

YY Inc

The YY livestreaming site was first established in 2012, with a focus on games in China. This proved to be successful to the extent that it became an independent entity listed on the New York Stock Exchange (NYSE). Today, YY services cover online dating, finance, variety show and talk show, outdoor sports, and social games.

BT 201908 INVESTMENT 04YY 直播


The e-sports and gaming market

China boasts the world's largest gamer base in e-sports with about 266 million gamers in 2018. The market globally is also booming. Users typically engage for 51 minutes daily, and as such, video gaming is now more engaging than any social media outlet, such as Facebook, Snapchat, and Instagram. The total prize money offered in games in 2016 reached $93 million, up from $61 million in 2015 and much higher than $5 million in 2010.

BT 201908 INVESTMENT 06电子竞技和游戏市场


Stock performance

HUYA went Public on the New York stock exchange last year. The stock was initially traded at around USD16.06 in May, 2018. It spiked up to above USD46 afterwards. Currently, the stock is trading at around USD24, which is still above its IPO price. The market capitalization is currently USD5.25 billion. Although the price of the stock is tempting, it carries a certain element of risk as the company still was at a loss in 2018. Revenues in 2018 exceeded USD4.5 billion. However, the company still stood at a loss of USD (1.5) billion. Despite this, the company managed to turn a profit in the second quarter of 2019. It generated $10.8 million of profit on $134.5 million revenue. The parent company YY generated RMB 568 million of operating income on RMB 2.4 billion of revenue in the first quarter of 2019, with an operating margin of 23.6%. Given YY’s maturity, a similar level of operating margin can be expected for Huya in the long run.

BT 201908 INVESTMENT 08股票表现



Screenshots of game live streaming platform HuyaScreenshots of game live-streaming platform Huya

HUYA has managed to ride a rising wave and attract large and impactful investors that helped it succeed. Even though not many expect that people will pay to watch other people play video games, they actually do. Some analysts predict that the global e-sports market will exceed $1 billion in size in 2019. Huya is positioned to leverage that large market and achieve exponential growth. It can use its sound business model, competitive advantage, and its geographic presence. All of those points can be used as a launching pad into other areas, and perhaps expand vertically by launching new products and horizontally into the supply chain by making agreements with suppliers, or through mergers and acquisitions. Either way, the opportunities are plenty considering that the market is still in the early growth phase. The stock price is still low, which is an attractive buying opportunity, and it stands to make gains in the future given the current trend.



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