Evaluating the IGG (799.HKEX) Positive Profit Announcement.

 IGG (799.HKEX) released a positive profit announcement after trading hours on 7 February

(On paper, it looks great as profits grew by 3600%. But in real, it was really expected if anyone had seen the 1H 2024 Financials)

As such, using 1H 2024 Financials to reference to see if there are any improvements

Positives

1) App Business Revenue went from 409 million in 1H 2024 to 691 million in 2H 2024. Representing a good 68% increase and a positive traction is seen.

2) Doomsday and Viking Rise both performed better in 2H 2024 compared to 1H 2024.

Doomsday 2H 2024 = 507m vs 1H 2024 = 493m

Viking Rise 2H 2024 = 391m vs 1H 2024 = 309m

3) Revenue is up as well compared to 1H 2024.

2H 2024 = 3.005 billion vs 1H 2024 =2.735 billion

Negatives

1) Profit from Core Business in 2H 2024 is lower than 1H 2024.

2H 2024 = 294 million vs 1H 2024 = 356 million

Conclusion

Scorecard: 6.5/10

Lords Mobile Revenue likely have decreased which led to the drop is core business profit as it is the game that has the least reinvestment of revenue into marketing and ads (and as such better gross and core profit margin)

It is not a bad result from the looks of revenue but in terms of profit it definitely is not as ideal.

At $4.51 HKD , it represents a PE of 8 which is not expensive when compared to index but is relatively expensive for small and mid cap hk games coy.

Much attention will be on the growth target and profitability of its App Business for 2025.

If they can pull off another 50% Revenue Growth from 2H 2024 to 1H 2025, this probably means 2 billion revenue(in 2025 for App Business) It would represent a good growth driver if profitability follows.

I think it will likely retrace again on market open on Monday.

Much attention will turn towards the earnings call in March as management would have data of 1st 2 months of 2025 to share as well as their view of 2025 prospects.

Lastly, in Citi's research report, it predicted net profit of 673 million and revenue of 5.94 billion with a target price of 4.50 HKD. The net profit of 580 million and revenue of 5.74 billion both missed their estimates.