Newborn Town Inc. (Stock Code: 9911.HK) - October 2020
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Newborn Town Inc. (Stock Code: 9911.HK) October 2020
Disclaimer This presentation contains forward-looking statements. The use of words such as "anticipates," "estimates," "expects," "plans" and "believes," among others, generally identify forward-looking statements. Similarly, statements herein that describe Newborn Town Inc.’s future financial performance, prospects, strategy, outlook, objectives, plans, intentions or goals, or anticipated trends and other similar matters are also forward-looking statements. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, among others: competition, our ability to maintain user rates on our higher monetizing dating/gaming products, our ability to attract users to our dating/gaming products through cost-effective marketing and related efforts, foreign currency exchange rate fluctuations, our ability to distribute our dating/gaming products through third parties and offset related fees, the integrity and scalability of our systems and infrastructure (and those of third parties) and our ability to adapt ours to changes in a timely and cost-effective manner, our ability to protect our systems from cyberattacks and to protect personal and confidential user information, risks relating to certain of our international operations and acquisitions and certain risks relating to our relationship with IAC/InterActiveCorp, among other risks. Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, these forward-looking statements may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of Newborn Town Inc. management as of the date of this presentation. Newborn Town Inc. does not undertake to update these forward-looking statements. This presentation includes certain non-GAAP financial measures in addition to financials presented in accordance with U.S. GAAP. These non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP. This presentation contains statistical data that we obtained from third party publications, surveys and reports. Although we have not independently verified the accuracy or completeness of the data contained in these industry publications, surveys and reports, we believe the publications, surveys and reports are generally reliable, although such information is inherently subject to uncertainties and inaccuracies.
01 CORPORATE OVERVIEW
“Traffic+” Strategy
ABOUT US Proven Track Record of Accomplishments Since Establishment
Powered by AI technology, Newborn Town Inc. is a fast-growing high-tech enterprise positioned in a global industrial landscape. We develop high-quality and premium mobile
applications and are committed to operating as a global super traffic ecosystem. Listed on the HKEX on December 31, 2019, we began to proceed with the “Traffic+” Strategy
from 2020, strived to penetrate into the game and social networking segments by utilizing the large-scale traffic ecosystem and accumulated abundant data to further releasing
the value of traffic, expanding business scale and achieving sustainable growth. As at June 30, 2020, the Group's products and services have covered users in more than 200
countries and regions around the world, with the cumulative number of users amounted 1.13 billion.
1.1bn+ 200+ Google Oversubscribed FTSE Russell
Users Countries/Regions Top Developer 1441 Times Microcap Index
“Traffic+” Strategy
KEY PERFORMANCE OVERVIEW Outstanding Achievements in Both Game and Social Networking Businesses
Massive Product Type Supports Explosive Growth in Game Business Business Scale Expansion Promotes Sustained Growth in Social Networking Business
Balls Merge Mico
• Top 5 in Google Play Casual Game downloads in 4 countries/regions • #1 in App Store overall downloads in 48 countries/regions
• #1 in App Store Social downloads in 71 countries/regions
Beetles.io • Top 10 in App Store Social grossing in 83 countries/regions
(1) (1)
Users • Top 5 in Google Play overall downloads in 10 countries/regions Users
• #1 in Google Play overall downloads in 5 countries/regions
• Top 10 in Google Play Social downloads in 84 countries/regions
•
•
Top 5 in Google Play overall downloads in 10 countries/regions
Top 10 in Google Play Arcade downloads in 35 countries/regions 123mn • Top 10 in Google Play Social grossing in 85 countries/regions 152mn
Tank Heroes Yiyo
(1) (1)
MAU • Top 10 in Google Play Social grossing in 9 countries/regions MAU
• Top 10 in Google Play Arcade grossing in 5 countries/regions
•
•
Top 10 in Google Play overall downloads in 7 countries/regions
Top 10 in Google Play Arcade downloads in 32 countries/regions
10.2mn • Top 10 in Google Play Social downloads in 10 countries/regions
9.1mn
Kitty Live
Archery Go • #1 in Google Play Entertainment grossing in 10 countries/regions
• #1 in App Store overall downloads in 6 countries/regions • Top 5 in Google Play Social grossing in 49 countries/regions
• Top 10 in Google Play overall grossing in 5 countries/regions
• #1 in App Store Action downloads in 34 countries/regions
• Top 10 in Google Play overall downloads in 7 countries/regions
• #1 in App Store Sport downloads in 52 countries/regions
(1): Data as at September 30, 2020, MAU indicates the average monthly active users from 2020Q1-Q3
(Data as at June 30, 2020, the cumulative number of game users amounted to 89.1 million, MAU was 8.2 million; The cumulative number of social networking users amounted to 127 million, MAU was 8.93 million)
(2) All ranking data is obtained from App Annie, as at October 26, 2020
02 BUSINESS MODEL
“Traffic+” Strategy
“TRAFFIC+” Further Releasing the Value of Traffic to Form a Closed Commercial Loop
Multiple Monetisation 流量变现(⼴告)
Advertising In-App Purchase More Methods
Methods
Game Social Networking More Business Lines:
Various Content E-Commerce, Finance,
Platforms Education, etc
By cultivating various content
platforms, an abundant amount
ü Identify, understand and study user needs of high quality and affluent traffic
Underlying Architecture Data Collection ü Improve monetization efficiency through is transmitted into the global
Powerful AI Engine targeted advertising strategies
traffic ecosystem. The database
Model Training Intelligent Distribution ü Optimize existing products and develop
new products and tag library are further
expanded, forming an infinite
loop of traffic and a closed
commercial loop is developed.
Diverse Product Type
Large-scale Traffic Base
“Traffic+” Strategy
DIVERSIFIED MONETISATION SCENES From AD to IAP, the Driver to Monetisation Efficiency Acceleration
Traffic + Game Traffic + Social Networking Traffic + X
Ads Removal Virtual Shop Different Types of Diamonds Virtual Diamonds Monthly Features VIP subscriptions Virtual Golds
Monetisation
based on
Content Monthly Packages
More
Monetisation
Scenes based
on Content
v
Sending gifts while gaming, live streaming chatting and texting
First Screen Ads Random Ads Interactive Ads
Monetisation
based on v Small Flyer Ads
Traffic
More
Monetisation
Scenes based
on Traffic
Few ads in social networking products, only a small amount of first-screen ads
“Traffic+” Strategy
INDUSTRY OVERVIEW AND MARKET POTENTIAL With Further Infrastructure Development, the Mobile Internet
Industry Will Continue to Experience High Growth
”Revenue in the Mobile Games segment is projected to reach 2020 Global Population Distribution 2019 Smartphone Penetration Rate
Aged 15-65 (million) in Selected Countries (%)
US$55,315m in 2020, resulting in a projected market volume of
US$60,440m by 2025.”
3117 82.9
79.1 77.5
“Revenue in the Online Dating segment is projected to reach US$2,725m
in 2020, resulting in a projected market volume of US$4,230m by 2024.” 59.9 57.2
54.8 54.0
——Statista 45.6 44.9
36.7
31.1
756
(1) 486 440
"In the analysed markets , the average daily time spent on mobile 241 15.9
28
devices has continued to increase from 2017 to 2019. Compared with
Asia Africa Europe Latin North Oceania
the previous two years, the usage of mobile apps in 2019 has increased America America U.K. U.S. FR CN JP IR TR BR VT ID IN PK
by 35% to 3.4 hours. Except for China, France, India and Canada have
seen particularly strong growth in average daily usage hours."
——App Annie 2018-2021 Average Daily Time Spent 2020 Average Daily Time Spent on Internet
on Internet Worldwide (Mins) in Selected Countries in APAC (Hours)
9.5
9.0
155 7.6 7.6
143
“The tough domestic and overseas competitive operating environment 122 132
6.5 6.3 6.3
has enabled the Chinese internet companies to develop unique business 5.5 5.4 5.2
39 39 38 4.2
models and technical know-how, along with capital advantages and 37
preferential policies, they are not only make a difference in developed
markets such as the United States, but also emerging market countries 2018A 2019A 2020E 2021E
such as India and other areas.”
——China Securities PC Mobile PH TH ID MY SG IN VT CN AU KR JP
Source: Statista, 2020 United Nations Population Distribution Worldwide, China Securities Overseas In-Depth Industry Report, App Annie State of Mobile 2020 Report
(1): “The analysed markets” includes Indonesia, China, Brazil, Korea, India, Japan, Canada, United States, Russia, United Kingdom, France and Germany.
“Traffic+” Strategy
OPERATION STRATEGIES Countries Along the “Belt and Road” As Well As High ARPU Regions
Strong paying ability with high penetration rate
of smartphones, the average daily time spent on
Europe mobile devices has increased significantly in
recent years
North America
Sufficient demographic dividend with strong
South Asia mobile user base, high growth potential
Highly mature market, active users with
strong paying ability and good paying habits, MENA
South-East Asia
high acceptance to advertising with
preference to light casual games
Good political relationship with China, “head users” have
extremely powerful paying ability; good infrastructure, The “Belt and Road” policy ensures Chinese companies
people have tremendous online social networking a steady development in the regions, strong GDP growth
demands due to its cultural and religious factors rate, the average daily time spent on mobile devices is
extremely long, lower communication costs thanks to
closer geographic distance
Main Market for Game Other Markets for Game Main Market for Social Networking Other Markets for Social Networking“Traffic+” Strategy
BARRIERS TO ENTRY High Efficiency Middle Platform + Target Traffic + Localised Operation Team
Game Social Networking
• Powerful middle platform enables accurate user acquisition and prediction;
• Localised teams in 12 countries and regions operating in a unique three-tier pyramid structure
formulate monetisation strategies corresponding to different products,
Experienced Chinese operation executive: connect with the head office’s product and technical team
regions and users 1 in a swift manner and oversee the whole business
• Based on traffic, seize the forward-looking direction of “mid-core games” with 2
Experienced and locally born Chinese: report problems promptly to the country manager
and mentor local staff to ensure a smooth operation
a focus on Merge, Puzzle, Sport and Casual categories, increase the IAP
Local staff: familiar with local laws, regulations and customs, fully understand the needs of
3
local users
proportion to achieve dual benefits of “Ads+IAPs”
• Adopt the strategy of “self R&D + Distribution + Investment”, increase R&D • Fine-tuning the local operation, building a product matrix of “main product + market segment
budget for recruiting more outstanding personnel, identify domestic and products” such as “audio-video social networking” and ”gaming social networking” to explore
international game developing teams for investment deeply the preferences and needs of users in market segments
10-Year Data Accumulation: Underlying Data Intercommunication and Fast Data Reuse Ability
Data Integration Analysis Platform User Quality Prediction Formulate Lower Operation Analyse User
Product Strategy Cost Behaviours
Technology R&D Platform Product Agile Development Solo Cells
Product Operation User
Middle Platform
Personalised Content
AI Machine Learning Platform
Recommendation
Business Performance
R&D Data User Acquisition Data Monetisation Data
Efficient Monetisation
Improvement Platform“Traffic+” Strategy
RISK MANAGEMENT STRATEGIES Deepening the Localisation Strategy; Avoid Risks From Different Domains
•Comply with messages and features •Data resource sharing between internal
implementation to prevent inappropriate middle platforms with fast transfer or reuse
behaviours of users or streamers •Do not excessively obtain user data, pay
•Continue to develop and expand new product attention to user privacy, and protect user
data security
types in order to achieve risk diversification
•Work with leading cloud platforms for data
•Products localisation to fade out the Chinese storage and key encryption during
label Product Data transmission
•Strengthen our own legal team, familiarize
Policy Personnel •Localisation team in different countries and
with local policies and regulations and work regions
closely with local lawyers •Maintain a good relationship with
•Formulate different distribution, operation government officials to achieve
and development strategies according to endorsement by local regulatory authorities
different regional policies •Regular training provided for streamers and
•Be cautious and modest towards political encourage healthy and positive content to
matters attract higher quality users“Traffic+” Strategy
FUTURE GROWTH STRATEGIES “Long-duration, High-stickiness and High-payment” Strategy on Content Platforms for
Business Scale Expansion and Sustainability
Circulation of global traffic ecology and realization of unlimited traffic
By expanding the global landscape, synergy will be formed among “traffic+” users
Enrich monetization scenes and further expand business scope
Continue to increase R&D investment and launch more high-quality applications to form product clusters
to achieve sustainable development
Pay special attention to market segments and increase key market penetration
Explore the differentiated needs of users in vertical markets, diversify product type to achieve full
coverage of target users
Balance between stability and explosion in content platforms
Deeply cultivating “game” and “social networking” businesses, social networking brings steady and
continuous growth while game help to achieve explosive growth“Traffic+” Strategy
PEER COMPARISONS Newborn Town Deserves for a PE Re-rating Driven by High Earnings Growth
Stock Code Company Comparisons P/E(2020E) P/S(2019A*)
Top Chinese internet company operating content platforms with a focus on social
Tencent Holdings
00700.HK networking and game businesses, multiple product segments in each business 39.6 14.4
Limited
line
“Go Overseas” company focusing on self-developed games and game distribution,
02400.HK X.D. 31.9 5.9
its TapTap platform focuses on advertising monetisation
Top company in global social networking industry, in addition to its flagship app
MTCH Match Group Tinder, it has a series of market segment products, with high similarity to the 354 14.2
product type of Newborn Town
Similar business scope with Newborn Town including live streaming and social
YY YY networking, its flagship app Bigo Live is the short-term competition target of 6.1 1.8
Newborn Town
Similar business model and scale to Newborn Town, main competitor in MENA
YALA Yalla Group 32.9 18.9
markets which focuses on audio chat room product and game
Average 92.9 11.0
(1)
09911.HK Newborn Town Inc. N/A 19.2 3.8
P/E(2020E) Source：Wind Institutional Edition
(1): The EPS of Newborn Town Inc. is based on the research report issued by SBI Capital on September 28, 2020
* The market capitalization of the above companies are based on the closing prices on October 21, 2020; and the revenues are based on the 2019 annual report03 FINANCIAL METRICS
“Traffic+” Strategy
REVENUE ANALYSIS Strong Growth over the Past 5 Years, Another Huge Success in 2020
Five-Year Revenue Overview (RMB million) Revenue by Segments (RMB million)
+87～105%
730-800
+6500%
+40.8%
+52.2% 420-450
+32.8%
390 6.4 +20～40%
277 310-350
182 251
137
2019Q1-Q3 2020Q1-Q3
2016 2017 2018 2019 2020Q1-Q3 Advertising Revenue Value-Added Service Revenue
Overall Gross Profit Margin (%) R&D Expenses as a Percentage of Total Revenue (%)
7.5
77.6
+2.3%
+11.0% 5.2
66.6
2019H1 2020H1 2019H1 2020H1“Traffic+” Strategy
CASH FLOW ANALYSIS Healthy and Sound Financial Position Resulting in Positive Cash Flow
Cash and Cash Equivalents (RMB million)
Total Assets (RMB million)
1,167
372
+50%
+103%
778
31/12/2019 30/06/2020
183
Cash and Cash Equivalents as a Percentage of Total
Assets (%)
31.9
23.5 +8.4%
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