Morgan Stanley maintains swim net overweight rating: 44 USD for Target price

Beijing time July 30 Morning News, Morgan Stanley published a study today, the Nasdaq:cyou share rating in the "overweight" (overweight) unchanged, the target price of 44 U.S. dollars.

The following is a summary of the contents of the report:

The network is enriching the game portfolio, including large multiplayer online role-playing games, web games and mobile games. While the upcoming new games will restore growth, the market's recent sales and profitability outlook remains weak. We maintain our "overweight" rating, based on the understated value of the surf net, strong cash flow and stock repurchase schemes.

Earnings exceeded expectations: the net's second-quarter revenue was $182 million, up 24% from a year earlier, in line with the company's previous forecasts. The net of US depository receipts for the second quarter was 1.41 US dollars (up 9% from a year earlier), 4% per cent higher than we expected.

Favorable factors: 1 The total game sales in the second quarter of the tour net increased by 23% compared with the same period last year, mainly because of "Wartune", "Tianlong Eight" and "the Sky of Soul" performance strong; 2 The net advertising revenue from 17173.com in the second quarter grew 52% from the previous quarter, A total of 480 million dollars in net cash, which accounts for 20% to 25% of the company's market capitalisation, was 11% per cent higher than last year. 3. The network has approved a new stock repurchase scheme that could buy up to $100 million worth of shares before July 2015.

Disadvantage: 1 The net profit margin in the second quarter was down 4% from the same period last year, to 51%, mainly due to the growth of research and development costs and marketing expenditure; 2. The forecast for the third quarter revenue growth of the fiscal year 2013 is only 9% to 12%, lower than 2013 in the first half of the year Year-on-year growth rate, mainly due to the "Tianlong eight" commercial speed slowed, a major upgrade package for the game is expected to be released in the fourth quarter; 3 The number of paid subscribers to a large multiplayer online role-playing game is down 25% from a year earlier, with average revenue per user (ARPU) growing by 53% over the same period last year. The reason is that the company has stopped charging low cost players to increase user participation.

Richer Game Portfolio: We note: 1 According to our revenue forecasts for the 2014 fiscal year, the stock has a P/e ratio of 6 times times (excluding 5 times times the impact of cash); 2 The network has a wealth of development in the game portfolio, including more than 3 large multiplayer online role-playing games, 2 to 4 web games and more than 5 mobile games; 3 surfing the latest mobile game "Don't move My Cheese" the number of active users has more than 200,000 people; 4 we anticipate that the new "Tianlong Eight" upgrade package will be released in 2013, thus becoming the main driving force for the growth of net revenue in the 2014.

Potential irritant momentum: the people of existing games grow; new games become popular games; profit margins are improved by better commercialization processes and economies of scale.

The main downside risks: New games fail to meet expectations, lower stock liquidity, higher levels of revenue concentration, and market share losses as a result of competition. (Tangfeng)