"Solid" Officient Group

The boss of stranger socialization, by what to meet the growth of the enthusiasm?

When Chinese stocks are cold, it is difficult not to feel surprised that investors are optimistic about Zhiwen Group and then look back at its stock price.

Before the market hours on March 24, EST, Zhiwen Group issued its 2021 annual report, paying dividends to shareholders for the fourth consecutive year. The stock price reacted less than ideally, closing the day with a total market capitalization of $1.422 billion, and the share price fell 3.73% to $7.22. Compared with the issue price of $13.50, the low share price of Zhiwen Group has been going on for about a year.

However, this does not prevent the secondary market from gaining favor with the dazzling label of low price-to-earnings ratio and high dividend. Optimists call it a "real company", compared to the Chinese social media giant Weibo's 14.85 times price-to-earnings ratio, Tinder owner Match Group reached a price-to-earnings ratio of 119 times, and The 5.25 times price-to-earnings ratio of Zhiwen Group was too cheap.

According to last quarter's earnings report, ZWG repurchased a total of $182.4 million worth of American depositary shares at an average price of $12.87. The past many large buybacks and consistently stable dividends have given investors confidence, but there are also worriers who are worried that it will not be able to maintain profitability, and it always seems ethereal to pin hopes on management.

This is the contradiction facing the Zhiwen Group, a well-functioning existing business that can make it stable and profitable, but it cannot meet investors' enthusiasm for sustained growth. To attract more vitality, the heartfelt article needs to continue to exude appeal.

Underrated Momo

One of the most prominent financial reports of The 2021 Financial Report was a loss when measured in accordance with US GAAP. According to the Explanation of The Letter Group, the loss of $4.243 billion came from the fact that "the fair value of the Group in the capital market is significantly lower than the carrying amount of net assets", in other words, the business model is not understood, resulting in the united States investors ignoring the real strength of the Heart.

After the release of the financial report, the stock price of Zhiwen Group fell in response, and the capital that was moved by the wind seemed to have lost confidence. However, there are not a few people who really look at the secondary market and regard the Zhiwen Group as a "cigarette butt stock" whose actual value is higher than the market valuation, and there are still a large number of investors who say that they will continue to hold the shares of the Zhiwen Group, saying that "the price is right, and there is still money to be made."

The reason for investor confidence is the solid cash on the books of The Paper Group. The capital market's undervaluation of The Group will cause impairment of goodwill and intangible assets, but it will not be able to materially force cash outflows, so the $666 million in cash from operating activities in the fourth quarter of 2021 is still firmly lying on the accounts of the Group. Seeking Alpha's overseas analysts believe: "The demand for online dating and online social services is still strong, and The Group will be able to generate significant revenue over the years. ”

This is not the first time that Zhiwen has been underestimated, there are differences in the markets of China and the United States, and the experience of frustration of Zhiwen Group has long been there. When Talking about Momo in 2020, CEO Wang Li mentioned: "We can't find a benchmark in the United States, in fact, we are very much at a loss", "I think our stock price is undervalued, but others may feel overvalued".

Putting aside the above-mentioned intangible asset losses, Zhiwen Group is still the familiar profitable Zhiwen. According to the financial report, the net profit of Zhiwen Group when not measured in accordance with US GAAP was 281 million yuan, and the net profit after adding a large amount of withholding income tax could break through to 488 million yuan. According to data compiled by Bloomberg, as of December 31, 2021, Zhiwen Group's revenue reached 3.674 billion yuan, exceeding the 3.617 billion yuan expected by Wall Street analysts.

There are not many players in the ranks of Chinese stocks who can take their own profits and losses, and in the face of perennial losses, knowledgeable investors usually say that cash flow is more effective than profitable in maintaining the company's good operation. Chen Chunhua, who is currently the dean of the BiMBA Business School of the National Development Research Institute of Peking University, suggested in her March 20 column: "Maintaining cash flow allows companies to gain the time and space to deal with the crisis and maximize the effective value." ”

This leads to another reason why investors are optimistic about The Paper Group. As mentioned in the Group's dividend payment plan, the total amount of cash dividends to be paid is about US$127 million, which is funded by surplus cash on the company's balance sheet, which shows that the company's financial position is very healthy.

As of the end of 2021, the cash and cash equivalents held by Zhiwen Group reached 15.7 billion yuan, with total current assets of 9.411 billion yuan and total current liabilities of 2.516 billion yuan, which is fully unpaid debt pressure. In addition, the operating cash flow of The Company has also been higher than the net income level for a long time, as exemplified by the net cash flow of 666 million yuan and 488 million yuan of income from operating activities in the fourth quarter.

Matrix molding, disenchantment live

Looking back on the development career of Zhiwen Group, live broadcasting has always been an unavoidable topic.

As Liu Zhichao, a popular user in the field of Snowball TMT, summed up: "From the perspective of the development of the entire mobile Internet industry, Momo has better met the specific needs of some users in the early stage of mobile Internet, and found the best path to monetize users in the subsequent trough period - live broadcasting." The accumulation of users in the past + the difficulties encountered at that time + the monetization path of live broadcasting, these three points promoted Momo to become the hottest Chinese stock in those two years. ”

Even today, live broadcasting can still be called the trump card business of Zhiwen Group. For the whole year of 2021, the revenue sources of Zhiwen Group are mainly divided into four items: live video services, value-added services, mobile marketing and mobile games, although the revenue of live broadcasting business has decreased compared with last year, but the 8.379 billion yuan of revenue driven by it still takes away the largest share.

On the other hand, listed companies have always been anxious about the second growth curve, the main business is stable, the capital that will not be satisfied will always be hungry for new stories, specifically falling on the head of Zhiwen Group, the market's requirements are to solve the "live broadcast revenue dependence". The approach of Zhiwen Group is also very simple: first, it remains stable in its core business; second, it is uneasy about the status quo in its strategic layout.

First of all, looking at the core business, what was not mentioned earlier is that although the live video service is still the backbone of the group's revenue, its proportion is decreasing. Looking at the overall business layout, the approach of Zhiwen Group is not to cut off the "leg" of live broadcasting, but to try its best to operate and promote other business lines to achieve two-legged walking.

The new fulcrum found by The Company is a value-added service that mainly includes virtual gift revenue and membership subscription service revenue. In 2021, the value-added service revenue of Zhiwen Group reached 5.972 billion, an increase of 16.8% year-on-year, contributing 40.97% of the revenue. The growth of this part of the revenue and the decline in the revenue of the live broadcasting business have further shrunk the proportion of live broadcasting in the overall revenue of Zhiwen, from 64.15% in 2020 to 57.49% in 2021.

In addition to value-added services, the game business of Zhiwen Group also showed a year-on-year growth rate of 164% in the fourth quarter of 2021, and the annual revenue reached 47.8 million yuan. Station B and Tencent have proved the revenue-generating ability of games as a "cash cow" business, although the current game business of Zhiwen Group is still small, and it can be considered from the dimension of long-term layout, and the game line has its own development potential.

After the basic disk is stable, how to kill the competition in the Red Sea has become a more important thing for the Zhiwen Group, which is the second test of the market for Zhiwen, which requires it to have the foresight of strategic layout.

In recent years, Douyin, Kuaishou and video numbers have appeared in turn, objectively causing a situation in which the live broadcast field is now divided. In 2020, YY sold itself to Baidu, behind which it also reflected the fierce fighting of the domestic live broadcast track, creating a product matrix and forming a synergy effect to become the dream of more players.

Wang Li revealed in the conference call that Momo and Tantan contributed income to Zhiwen as the main APP, and other multiple apps around social networking were gradually commercialized. At present, Zhiwen Group has a number of subdivisions such as audio social, video social, and real social, and the total revenue of the new APP in 2021 has increased by 3 times. The audio and video social product Hertz and pairs, which are mainly engaged in the sinking domestic market, have achieved profitability in the fourth quarter, and soulchill, a voice social APP for the Middle East and North African market, is now equivalent to the sum of hertz and pairs.

Wang Li said that Zhiwen's goal is to "have more than a dozen profitable applications in the next 3-5 years that occupy a leading position in certain segments." "Overseas markets will also become an important part of the company's growth strategy, third-party platform data.ai data show that the restart of the Indonesian market exploration, in the second half of the year, Indonesia's user and revenue scale is ahead of Tinder, December turnover is 1.4 times that of Tinder."

To convince people

As the answer sheet handed over by listed companies to the public, the financial report reveals far more information than imagined. What can be analyzed from the data is not only the company's achievements in the past period of time, but also the real tendency of this behemoth to develop in the future.

The 2021 annual report of Zhiwen Group inadvertently dissects investors, although they adhere to the business logic of the asset-light model, they have always been "real" as the core. The two keywords of pragmatism and pragmatism have always been the externalized presentation of the requirements of Zhiwen.

It is because the Zhiwen Group has always maintained a sense of control.

As mentioned earlier, among the Internet companies, the profit is a minority, the loss is the majority, the marketing style of play was once regarded as having "Internet genes", rather than burning money but also making a big deal of the countless companies. This situation does not exist in the Zhiwen Group, the past financial reports show that the marketing expenditure of the Zhiwen Group has basically maintained at about 650 million yuan, and the year-on-year growth rate has remained negative since Q3 of 2020, and the second quarter of last year has not raised the cost of exploring the re-launch in the Indonesian market.

In 2021, the marketing expenses of Zhiwen Group were 2.604 billion yuan, down 7.5% compared with 2020. In the conference call after the earnings report, the management of The Company also mentioned that they aimed to maximize revenue in terms of customer acquisition, and achieved a small increase in MAU through a lower budget.

At the end of 2021, the monthly active users of Momo APP were 114.1 million, compared with 113.8 million in the same period of 2020. QuestMobile's "2022 Panoramic Ecological Traffic Spring Report" report shows that the total number of users of Zhiwen Group in January 2022 ranks first in the stranger social track. According to the survey of Ai Media Consulting's "China Mobile Social Industry Research Report in the First Half of 2021", 46.9% and 35.5% of the respondents respectively said that they were users of Momo and Tantan, ranking first and second in the social software rankings except QQ and WeChat, and the position of the two strategic cores was relatively stable.

The pragmatism of the Zhiwen Group can be divided into two aspects, one of which is investment caution.

According to the 2021 Q3 performance report of Zhiwen Group, their investment in TV and film production in the quarter was 48.5 million yuan, which is not a luxury for the film and television content industry. Compared with high-risk and high-investment pure commercial films, Zhiwen prefers art-oriented avant-garde films and breaks through word-of-mouth with small costs. A successful film and television is the result of a comprehensive balance of multiple factors, the first film produced by Tang Yan has been shortlisted for the Venice Film Festival, and now in the face of a highly uncertain film market, it is better to gently accumulate industry experience than to expand indiscriminately.

The second aspect of pragmatism lies in the company's generosity in dividends. According to the disclosure of the annual report, The Paper Group will pay shareholders on a $0.64 per ADS distribution commencing on April 29, 2022. "The dividend yield is close to 10%, cash and equivalents are $15.7 billion, and the market value is $1.47 billion." Liu Zhichao, who has earned 3.5 times on Momo, joked that investors do not have to worry about the value of The Zhiwen Group's investment, but should worry about the low stock price of the Zhiwen Group and directly privatize.

In this era of rapid travel, the concepts of AI, VR, metaverse and so on are hanging on the lips of everyone, we believe that technology can change the future, but we should also see that this game of chess is accidentally falling into nothingness.

In the post-earnings call, the management of Zhiwen Group still stressed that in the future, they will continue to focus on improving the user experience and solving the retention problem of female users and faceless users by enriching the presentation of information cards and broadening the form of connection and interaction. Pragmatic and not pragmatic, not eager to alleviate the anxiety of imagination by telling new stories to alleviate the anxiety of the imagination of the company is now more rare, the steady and steady Zhiwen Group in the proof of honest people also have excellent stocks, with generous concessions to retain investors, with business growth to find long-term value, stranger social track vitality, may be stronger than we think.