IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

Huya IPO Valuation: Better off Buying YY's Shares

Huya IPO Preview: What's All the Fuss About?

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

M17 Entertainment Ltd / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/27041" target="_blank" data-smartkarma-citation="entities:27041:1">M17 Entertainment Ltd (YQ US)</a> filed for an NYSE IPO to raise $115 million on 11 May. It is a leading live streaming platform in Developed Asia (such as Taiwan and Japan).Live streaming IPOs seem quite in vogue with the recent listing of <a href="https://www.smartkarma.com/entities/26983" target="_blank" data-smartkarma-citation="entities:26983:1">HUYA Inc (HUYA US)</a> along with <a href="https://www.smartkarma.com/entities/26978" target="_blank" data-smartkarma-citation="entities:26978:1">Inke Inc (1368478D HK)</a> and Douyu expected to list this year. Our overall view is that investors seeking exposure to the live streaming market are better off with players with proven monetisation models such as <a href="https://www.smartkarma.com/entities/285" target="_blank" data-smartkarma-citation="entities:285:1">YY Inc ADR (YY US)</a>. Our recommendation is based on our view that M17’s fundamentals are unattractive because:<ol class=""><li>Japan is forecasted to overtake Taiwan as the largest live streaming geography in Developed Asia by 2020. Unsurprisingly, M17 talks up its increasing share gains in Japan. However, Taiwan will remain M17’s largest live streaming market and accounted for around 40% of live streaming monthly active users (MAUs) in 1Q18. M17’s live streaming paying users has steadily increased from 14K in 1Q17 to 32K in 4Q17. Troublingly, excluding Japan, M17’s live streaming paying user growth has remained relatively flat since 3Q17.</li><li>M17’s live streaming monthly ARPPU (average revenue per paying user) has declined from $389 in 3Q17 to $355 in 1Q18. We believe that the decline is due to the lower monthly ARPPU of Japanese users. We estimate that in 1Q18, M17’s live streaming monthly ARPPU in Japan was almost half of non-Japan geographies. As Japan will be a key growth geography, M17’s live streaming monthly ARPPU will likely remain under pressure.</li><li>M17 is the only loss-making platform among listed live streaming peers which reflects its lower scale and higher revenue sharing fees to streaming hosts. We believe M17’s ability to report an operating profit in the near-term is challenging due to rapidly increasing user acquisition costs (S&amp;M divided by MAUs). M17’s user acquisition costs have rapidly grown from $0.5 in 1Q17 to $11.7 in 1Q18.</li></ol>We will provide a view of valuation once the IPO price range is announced.

M17 Entertainment Ltd (YQ US) filed for an NYSE IPO to raise $115 million on 11 May. It is a leading live streaming platform in Developed Asia (such as Taiwan and Japan).Live streaming IPOs seem quite in vogue with the recent listing of HUYA Inc (HUYA US) along with Inke Inc (1368478D HK) and Douyu expected to list this year. Our overall view is that investors seeking exposure to the live streaming market are better off with players with proven monetisation models such as YY Inc ADR (YY US). Our recommendation is based on our view that M17’s fundamentals are unattractive because:Japan is forecasted to overtake Taiwan as the largest live streaming geography in Developed Asia by 2020. Unsurprisingly, M17 talks up its increasing share gains in Japan. However, Taiwan will remain M17’s largest live streaming market and accounted for around 40% of live streaming monthly active users (MAUs) in 1Q18. M17’s live streaming paying users has steadily increased from 14K in 1Q17 to 32K in 4Q17. Troublingly, excluding Japan, M17’s live streaming paying user growth has remained relatively flat since 3Q17.M17’s live streaming monthly ARPPU (average revenue per paying user) has declined from $389 in 3Q17 to $355 in 1Q18. We believe that the decline is due to the lower monthly ARPPU of Japanese users. We estimate that in 1Q18, M17’s live streaming monthly ARPPU in Japan was almost half of non-Japan geographies. As Japan will be a key growth geography, M17’s live streaming monthly ARPPU will likely remain under pressure.M17 is the only loss-making platform among listed live streaming peers which reflects its lower scale and higher revenue sharing fees to streaming hosts. We believe M17’s ability to report an operating profit in the near-term is challenging due to rapidly increasing user acquisition costs (S&amp;M divided by MAUs). M17’s user acquisition costs have rapidly grown from $0.5 in 1Q17 to $11.7 in 1Q18.We will provide a view of valuation once the IPO price range is announced. 

M17 Entertainment IPO Preview: Stream It from the Sidelines