Barclays Initiates Coverage of CMGE with an Overweight Rating and a 12-month
Price Target of US$32
Hong Kong, Apr 4, 2014 - (ACN Newswire) - Barclays initiates coverage of China
Mobile Games and Entertainment Group Limited ("CMGE" or the
"Company") (Nasdaq: CMGE), the largest publisher and a leading
developer of mobile games in China, with an Overweight rating and a 12-month
price target of US$32.
Barclays issued a detailed report on CMGE on April 3, 2014. CMGE is given an
Overweight rating and a 12-month price target of US$32, given its: 1) leading
position in integrated mobile games publishing and development; 2) extensive
and diversified games portfolio; and 3) multifaceted publishing
channels/platforms. We expect potential share price catalysts from: 1)
overseas expansion initiatives; 2) the traction and revenue opportunity from
51PK.com; and 3) the rising penetration of its Game Center app via
MediaTek's handsets. Our US$32 price target is based on 15x our 2015E
non-GAAP EPADS of US$2.13, implying a PEG ratio of 0.19x, which we believe is
reasonable considering the hit-or-miss nature of new games' success, the
shorter life cycle of mobile games, and potential execution risks.
Barclays believes that CMGE's integrated publishing and self-development
model leads to a more diversified game portfolio and lower concentration of
revenues compared to its peers. CMGE operates a total of 717 game titles, with
72 social games and 645 single player games as of end-2013. It plans to launch
c50 new social games in 2014, 15 of which are to be self-developed. The
contribution of social games to CMGE's revenue increased from 17.6% in
2012 to 63% in 2013.
Also, multifaceted publishing channels present good value proposition to
developers. CMGE's broad and solid relationships with various
distribution partners/platforms (including third-party app stores, telcos,
chipset and handset manufacturers), as well as its in-house knowledge of games
development, mean it presents a strong value proposition to small, fragmented
mobile games developers.
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