PhillipCapital analysts Liu Miaomiao and Paul Chew have initiated “buy” on live-streaming company 17LIVE with a target price of $2.30.
In a paid April 8 report, the analysts expect 17LIVE’s revenue growth to resume its upwards trajectory in FY2024. “After declining for three years, we expect revenue to stabilise this year, and return to full-year growth in FY2025,” they add.
The analysts point out that 17LIVE’s monthly active users (MAU) will begin its recovery with a growth rate of around 10% in FY2024 from new content offerings in Southeast Asia, product enhancements and reinvestment into marketing.
Leveraging its IPO as a launchpad, 17LIVE is eager to expand into the Southeast Asia market, where there is currently no dominant player in the industry. The analysts foresee revenue contribution from other regions to increase by about 15% in FY2024 as 17LIVE intends to bring its existing content overseas, noting that the company also aims to expand its Japan V-Liver content to other countries as it matures.
With a net cash balance of US$102.7 million ($137.5 million) as at December 2023, inorganic growth via acquisitions can add more steamers with their accompanying users onto the platform, Liu and Chew add. This network effect will further elevate the appeal of the platform to other streamers and users.
At present, 17LIVE is directing its efforts towards profitability, resulting in an uptick in quality MAU, spend rate, and average rate per paying user (ARPPU). Quality MAU comprises 14.4% of its total MAU in Japan and 12.9% in Taiwan. In FY2024, Liu and Chew anticipate an organic MAU growth of about 10% while maintaining a constant paying ratio and ARPPU.
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“We are assuming a stable paying ratio and ARPPU from 17LIVE for FY2024 – FY2028. We expect the paying ratio to remain at the FY2023 level of 16%,” Liu and Chew note.
For FY2024, V-Liver and e-commerce are expected to be the main growth drivers. The analysts expect stronger performance in the V-Liver segment as 17LIVE is the market leader in Japan, which could potentially boost income by around 25%. Meanwhile, e-commerce and in-app gaming as the cash cow business will also be emphasised in FY2024, with a projected growth rate of about 30%.
The analysts highlight that cost-efficiency and streamlining cross-border virtual coin purchasing are expected to boost 17LIVE’s margins further. They note that the company is seeking to halve research and development costs without compromising user experiences to offset higher marketing in FY2024.
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That said, Liu and Chew expect marketing expenses to slightly creep up in 2HFY2024, depending on the success of the company’s cost-restructuring.
“We believe the group can further optimise its revenue and operating model, thereby improving profitability from FY2024 onwards,” they conclude.
As at 10.52am, shares in 17LIVE are trading 4 cents higher or 3.88% up at $1.07.
