DouYu International Holdings Limited

DOYU Details

DouYu International Holdings Limited (NASDAQ: DOYU) is a China-based operator of a live-streaming platform and a pioneer in the eSports value chain. The Douyu platform is available on PC and mobile apps and offers a wide array of immersive and engaging games and other live streaming entertainment. In addition, the company provides access to a wide variety of premium eSports content to its users through various collaborations with players across the eSports value chain. As of October 13, 2021, DOYU has 324.41 million American Depository Shares (ADS) listed and outstanding, with 10 ADS representing one ordinary share.

Share Repurchase Program: On August 30, 2021, DOYU commenced a USD 100 million share repurchase program, which authorizes it to buy back its ordinary shares in the form of ADS over the next 12 months using its existing cash balance, subject to its insider trading policy and securities exchange laws. The repurchases can be made via open market, privately negotiated, block trades, or other legally permissible means.

Q2FY21 Results: During Q2FY21 (ended June 30, 2021), the company reported a 6.83% drop in net revenues to RMB 2.34 billion, compared to RMB 2.51 billion during Q2FY20, owing to paying users' consumption reverting to pre-pandemic levels. However, its quarterly average mobile MAUs (Monthly Average Users) increased 3.9% YoY to 60.7 million in Q2FY21. Net loss for Q2FY21 was RMB 147.01 million vs. a net profit of RMB 336.05 million reported in Q2FY20. DOYU exited the quarter with a cash balance of RMB 5.37 billion and no outstanding debt.

Key Risks: The majority of DOYU's user traffic comes from eSports games. As a result, if it fails to maintain its market position in the eSports sector or to recruit consumers through live streaming of popular eSports games, its user base and streamer base could shrink significantly, resulting in lower revenues and cash flows.

Moreover, the Chinese authorities' crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent the company's operations. After the passage of a bill in the US, this could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Outlook: In its Q2FY21 earnings release, the company stated that it intends to invest in proprietary content production and upgrade the functions and content of its video and community-related products to continue extending its content ecosystem to encompass every link of the gaming industry value chain.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

DOYU Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: DOYU's share price has fallen 62.45% in the past six months and is currently close to the lower end of the 52-week range of USD 2.89 to USD 20.54. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 56.82. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 4.58. Considering the significant correction in the stock price, increasing demand for online gaming platforms, China's regulatory crackdown, and other associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 3.75, up 3.02% as of October 13, 2021, 12:08 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

Viant Technology Inc.

DSP Details

Viant Technology Inc. (NASDAQ: DSP) is a people-based advertising software company, which enables marketers and agencies to plan, acquire, and measure their advertising efforts across most channels. Adelphic, the company's self-service demand-side platform, allows marketers and ad agencies to plan, buy, and measure advertising across different channels. It derives its revenue by charging platform fees from its customers, either a percentage of the spending or a set monthly subscription fee and payments for extra features like data and advanced reporting. The company was listed on NASDAQ on February 10, 2021, at an issue price of USD 25.00 per share. As of October 13, 2021, the company's market capitalization stood at USD 761.02 million.

Enhancing Partnerships to add Value: On September 29, 2021, DSP partnered with Catalina, a shopper intelligence, and omni-channel media solutions company, to integrate the latter’s shoppers data within the Adelphic advertising software for boosting cookieless targeting, measurement, and attribution offerings for CPG advertisers. This partnership enables marketers to understand better how their marketing efforts lead to purchases and allows them to track campaign effectiveness in real-time and validate customer purchases independently.

Further, on September 22, 2021, DSP announced to expand its relationship with Integral Ad Science, a global leader in digital media quality, by integrating IAS's CTV fraud pre-bid solution within its Adelphic advertising software, boosting CTV fraud prevention capabilities for brands and agencies.

Q2FY21 Results: The company reported a YoY surge of 65.69% in revenues to USD 50.41 million in Q2FY21 (ended June 30, 2021) compared to USD 30.43 million in Q2FY20, primarily due to growth in the number of active customers and average contribution. However, net loss (attributable to its shareholders) for the company increased to USD 3.66 million in Q2FY21 vs. USD 0.03 million in Q2FY20. As of June 30, 2021, the company had a cash balance of USD 252.27 million and total debt of USD 17.5 million.

Active Customers and Adjusted EBITDA (Source: Q2FY21 Earnings Presentation, August 12, 2021)

Key Risks: In FY20, DSP generated 13.3% and 13.2% of its total FY20 revenue from its top two customers. As a result, the loss of any of these key customers could harm its financial performance. Furthermore, DSP entrusts its servers' power, internet access, and technological security to third-party data center hosting providers (such as Google Cloud Platform and Amazon Web Services). As a result, any service disruption or facility damage could harm the company's operations.

Outlook:

Q3 and FY21 Guidance Range (Source: Q2FY21 Earnings Presentation, August 12, 2021)

Valuation Methodology: Price/Sales Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

DSP Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: DSP's stock price decreased 68.16% in the past six months and is currently leaning towards the lower band of its 52-week range of USD 11.50 to USD 69.16. The stock is currently trading below its 50 DMA level, and its RSI Index is at 51.70. We have valued the stock using the Price/Sales-based relative valuation methodology and arrived at a target price of USD 17.13. Considering the significant correction in the stock price, recent collaborations, strong balance sheet, encouraging outlook, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 13.34, up 5.62% as of October 14, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.