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CMGE Technology Group Ltd 00302

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Stock XHKG Rating as of
HKD 1.26 +0.08 (6.78%)
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As of Delayed Price Closed
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Company Report

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CMGE Earnings: Cutting Fair Value by 14% as Quality Takes Over Marketing in Gaming Market

Ivan Su

CMGE’s 2023 results were materially below our expectations, and we are cutting our fair value estimate by 14% to HKD 2.40 per share. The latest reduction in valuation reflects our more pessimistic view of revenue from the company’s upcoming game pipeline. While we still view CMGE’s shares as undervalued, there remains a lack of visibility around CMGE’s long-term launch pipeline. Therefore, our preferred picks in the Chinese video game space remain NetEase and Tencent.

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Price vs Fair Value

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00302 is trading at a 52% discount.
Price
HKD 1.15
Fair Value
HKD 8.50
Uncertainty
High
1-Star Price
HKD 2.15
5-Star Price
HKD 1.35
Economic Moat
Pdq
Capital Allocation
Ftnhczpw

Bulls Say, Bears Say

Bulls

CMGE was one of the first game companies to announce a metaverse project based on its legacy Sword and Fairy franchise.

Bears

The lack of a strong game development track record remains an overhang on the durability of CMGE’s current business model.

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Trading Information

Previous Close Price
HKD 1.18
Day Range
HKD 1.19–1.27
52-Week Range
HKD 0.95–2.63
Bid/Ask
HKD 1.25 / HKD 1.26
Market Cap
HKD 3.47 Bil
Volume/Avg
24.6 Mil / 16.8 Mil

Key Statistics

Price/Earnings (Normalized)
551.23
Price/Sales
1.16
Dividend Yield (Trailing)
—
Dividend Yield (Forward)
—
Total Yield
—

Company Profile

CMGE is an IP-based mobile game developer and publisher in China with 55 licensed IPs and 68 proprietary IPs as of the end of 2021. The company has over 80 games on the shelf and over 20 games with lifecycles of over three years. Average monthly active users, or MAUs, of CMGE games reached 19.1 million in 2021. The market share of CMGE for online gaming grossing income in 2021 was around 1%.
Sector
Communication Services
Industry
Electronic Gaming & Multimedia
Stock Style Box
Small Value
Total Number of Employees
832
Website
https://www.cmge.com

Competitors

Valuation

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Metric
00302
NTES
TTWO
Price/Earnings (Normalized)
 551.2313.5070.52
Price/Book Value
 0.533.452.86
Price/Sales
 1.164.194.48
Price/Cash Flow
 12.6812.3924.53
Price/Earnings
00302
NTES
TTWO

Financial Strength

Metric
00302
NTES
TTWO
Quick Ratio
 1.242.530.62
Current Ratio
 1.712.650.82
Interest Coverage
 −0.39—−19.85
Quick Ratio
00302
NTES
TTWO

Profitability

Metric
00302
NTES
TTWO
Return on Assets (Normalized)
 0.08%18.60%−6.34%
Return on Equity (Normalized)
 0.09%28.51%−11.18%
Return on Invested Capital (Normalized)
 0.21%20.77%−7.46%
Return on Assets
00302
NTES
TTWO
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Electronic Gaming & Multimedia Industry Comparables

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Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
NETTF
NetEase Inc Ordinary Shares—Rxrvv$61.0 Bil
NTES
NetEase Inc ADRBmwwqfpTxjwvt$60.4 Bil
NTDOY
Nintendo Co Ltd ADR—Vqys$56.4 Bil
NTDOF
Nintendo Co Ltd—Nyys$55.5 Bil
EA
Electronic Arts IncQyrkmxwjgZqscv$34.3 Bil
TTWO
Take-Two Interactive Software IncPrfhkqbjKhcqgc$24.4 Bil
RBLX
Roblox Corp Ordinary Shares - Class ANvmysrkkYjmlx$22.7 Bil
NEXOF
NEXON Co Ltd—Dxfbj$13.6 Bil
NEXOY
NEXON Co Ltd ADR—Xznpc$13.6 Bil
BILI
Bilibili Inc ADRMmbvrvqdDnck$5.3 Bil

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