Shares of Glory Star New Media Group, a Nasdaq-listed digital media platform and content provider in China, are expected to regain an upward momentum due to the company’s strong revenue growth and the use of blockchain and artificial intelligence (AI) technologies in its systems.
According to a recent research report released by Dongxing Securities (Hong Kong), it is expected that Glory Star will achieve a 50% year-on-year revenue growth in 2021, compared with a 16.72% increase in 2019 and an 88.16% growth in 2020.
Last year, the Beijing-based company’s advertising revenue surged 116% from 2019, representing 84.6% of the company’s total revenue. In this segment, the company will probably outpace its peers, which are expected to grow by 24% on average this year, thanks to its strategy of attracting users with high-quality video content, said the report.
Dongxing Securities has initiated research coverage of Glory Star with price-to-sales ratio of 2.21, a corresponding price target of US$6.05 per share, and a rational valuation of US$409 million for the next 12 months.
Since its establishment in 2016, Glory Star has pioneered a unique, new business model integrating e-commerce services with premium video content. With the use of blockchain and AI technologies in its systems, the company has become a leading online digital media and entertainment company in China, with a strong track record both in terms of viewership and production capabilities. The company launched its signature lifestyle video series, namely Cheers, in 2017 and its Cheers App, in 2018 to integrate e-commerce services with professionally generated content (PGC).
During the first quarter of this year, the number of downloads for the Cheers App exceeded 192 million while the number of daily active users reached 7.1 million. The number of stock keeping units (SKUs) on its Cheers e-Mall platform amounted to 36,887 with a gross merchandise value of 432 million yuan (US$66.35 million).
On May 6, 2021, the company announced that it had separated the operation of its Cheers e-Mall from its Cheers App and that it would operate the e-Mall platform independently going forward.
Dongxing Securities expected that sales on Cheers e-Mall would double this year from 2020, given that the overall PGC e-commerce markets would achieve a compound annual growth rate of 32.5% between 2020 and 2024. It said Cheers e-Mall and Cheers App had become the two strongest growth engines of Glory Star.
The brokerage firm added that Glory Star had explored many new ways to monetise its online traffic by forming partnerships with internet giants including Alibaba, JD.com, iFlytek and ByteDance and extending to new areas such as AI speech recognition, augmented reality, mobile payment and new energy vehicles. It said these synergies would continue to help boost the value of the company’s online traffic.
Univest Securities has also initiated research coverage of Glory Star with a “buy” rating and US$6.5 price target. It said the company’s new approach to the e-commerce sector and production of high-quality video content would help it realise outsized earnings in the coming few years.
“We do not agree with the current valuation which implies that Glory Star is trading at only 0.9 times 2021 sales multiples versus the peer group target of 3.5 times,” James Jang, Director of Research at Univest Securities. “The company has a demonstrated track record of top-line growth and profitability and its novel approach to the e-commerce segment should allow it to monetise additional assets, such as gaming, to realise greater market share.”
Univest Securities said Glory Star was currently operating under a new model by offering interactive live streaming events to push sales while such model would help boost the return of investment (ROI) for the company’s partners. It added that the company’s professionally scripted and produced programs would give viewers a better sense of security around the target merchandise.
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