Asia Ex-J Consumer/ Transport analyst

Valerie Law, CFA

Equity Capital Markets

China Literature / Equity Capital Markets

China Literature (CHLIT), an online publisher of literary works in China, is seeking a HK-listing. It operates in the digital media space and contends with publishing heavyweights such as <a href="https://www.smartkarma.com/entities/530" target="_blank" data-smartkarma-citation="entities:530:1">Phoenix New Media Ltd Adr (FENG US)</a> , <a href="https://www.smartkarma.com/entities/17285" target="_blank" data-smartkarma-citation="entities:17285:1">China South Publishing A (601098 CH)</a> and Amazon's Kindle. Despite having a database for 72% of total literary works in China on their platforms, the company only managed to report a profit in FY16 helped by some non-core gains. If channel stickiness persists on their platforms and those on Tencent's (main shareholder), monetization of content will become easier over time.   The deal size is estimated to be USD 800m with a valuation of  ~ USD 2bn according to a <a href="http://www.reuters.com/article/us-tencent-holdings-china-literature-ipo-idUSKBN19P0ER" target="_blank">Reuters report</a>. News sources also quoted <a href="https://www.smartkarma.com/entities/26" target="_blank" data-smartkarma-citation="entities:26:1">Tencent Holdings Ltd (700 HK)</a> having plans to hold at least 50% in the company after the spinoff. In this article, we will provide the company background and brief history, followed by some early thoughts on the following questions: 1. What was the company’s growth track record?2. How will the company grow near-term?3. What are some operational risks to consider?4. How are other players faring?5. At what valuations should CHLIT trade?

China Literature (CHLIT), an online publisher of literary works in China, is seeking a HK-listing. It operates in the digital media space and contends with publishing heavyweights such as Phoenix New Media Ltd Adr (FENG US) , China South Publishing A (601098 CH) and Amazon's Kindle. Despite having a database for 72% of total literary works in China on their platforms, the company only managed to report a profit in FY16 helped by some non-core gains. If channel stickiness persists on their platforms and those on Tencent's (main shareholder), monetization of content will become easier over time.   The deal size is estimated to be USD 800m with a valuation of  ~ USD 2bn according to a Reuters report. News sources also quoted Tencent Holdings Ltd (700 HK) having plans to hold at least 50% in the company after the spinoff. In this article, we will provide the company background and brief history, followed by some early thoughts on the following questions:  1. What was the company’s growth track record?2. How will the company grow near-term?3. What are some operational risks to consider?4. How are other players faring?5. At what valuations should CHLIT trade?

China Literature IPO Preview: Time to Monetize Its Rich Content Library

China

China Literature is the largest online literature platform in China

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China Literature (772 HK)

China Literature IPO Preview: Time to Monetize Its Rich Content Library

China Literature (CHLIT), an online publisher of literary works in China, is seeking a HK-listing. It operates in the digital media space and...

Valerie Law, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)