Huya Earnings: Upgrading Capital Allocation to Standard Amid Special Dividend and Share Buyback

We are upgrading Huya’s Morningstar Capital Allocation Rating to Standard from Poor following the announcement of a $150 million special dividend, or an equivalent of 15% of the company’s market capitalization. We previously wrote that the lack of distribution was the main the reason why shares were trading at significant discount to the value of its net cash. But now that the company is committed to distribute that cash, shareholders should feel more assured. Despite the recent run-up in Huya’s share price, we still see upside, as the $4.40 closing price on March 20 still implies a 23% discount to the company’s $5.70 per share net cash position.