PhillipCapital analysts Liu Miaomiao and Paul Chew have kept “buy” on 17Live with a lower target price of $1.80 from $2.30 previously following the company’s 1HFY2024 ended June results release.
In their Aug 19 paid report, the analysts highlight 17Live’s revenue in virtual liver (V-Liver) live streaming, which more than tripled in 1HFY2024 to US$4.8 million. This is due to the onboarding of more streamers incentivised by low-cost V-Liver skins.
The company is also developing additional revenue streams, such as its intellectual property (IP) incubator, which selects and nurtures IPs to expand into areas like events and merchandise.
“Operating metrics for V-Liver streaming look healthy, with monthly active user (MAU) and the paying ratio on an upward trajectory. We expect revenue from V-Liver to double y-o-y to US$9.5 million, with this growth rate continuing for the next two years as infrastructure such as virtual reality and awareness improve,” the analysts add.
However, 17Live is not immune to the more pronounced industry-wide trend of post-Covid-19 decline in MAUs. Despite efforts to enhance user retention rates, revenue from the livestreaming business decreased by 36.7% y-o-y, say Liu and Chew.
“We view this correction phase as an inevitable step for 17Live to eliminate non-performing streamers and business units and protect its margins by distancing itself from the price wars initiated by Chinese competitors,” the analysts point out.
That said, Liu and Chew note that 17Live’s MAU has bottomed out in 2QFY2024 after declining for two years, on the back of efforts such as streamer training on engaging in quality conversations with users and community building to improve user loyalty and retention rates.
While average revenue per paying user (ARPPU) and the paying ratio remain strong, PhillipCapital expects the upward trend in MAU to continue in 2HFY2024, thus improving the top line.
The company is also seeking alternative revenue streams, such as its recently launched cross-border e-commerce platform which aims to connect Japanese products with more than 1,300 streamers from Taiwan and Southeast Asia.
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For its 1HFY2024, 17Live’s other revenue which includes e-commerce grew 15% y-o-y. The analysts expect this trend to continue, driven by growing demand for cross-border ecommerce in Taiwan and Southeast Asia.
The company is also negotiating agreements to pay copyright fees to music copyright organisations in the countries where it operates. Although the exact amount has yet to be finalised, PhillipCapital expects it to be substantial.
“While there will be no immediate impact on operations, the cash position may be compromised, which could negatively affect potential inorganic growth,” the analysts add.
PhillipCapital has lowered its revenue and operating income estimates by 19% and 27% respectively to US$210.5 million and US$9.5 million on declining demand in the livestreaming business.
As at 10.48am, shares in 17Live are trading 0.5 cents higher or 0.5% up ay 89.5 cents.
