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Trade Idea: Bilibili Inc. A Chinese entertainment platform backed by Tencent and Alibaba

14 March 2019  |  Trading Ideas

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Trade Idea: Bilibili Inc

Overview

Bilibili (NASDAQ: BILI) is a leading online entertainment platform for young generations in China hosting video contents and offering mobile games. The company is founded in 2009 in China and went public on NASDAQ in March 2018.

  • Bilibili reported 4.1 billion RMB ($865 million AUD) in revenue in 2018 (+67.3% year-over-year). Revenue from mobile games increased by 340% compared to 2015.
  • Average monthly paying users increased to 4.4 million.
  • Bilibili and Taobao Marketplace, China’s largest mobile commerce platform under Alibaba Group, has entered into a business collaboration agreement in e-commerce since December 2018. Revenue from e-commerce has increased by 390% in 4Q18 year-over-year.

Revenue and income

Bilibili reported 4.1 billion RMB in revenue (approximately 865 million AUD, assumed exchange rate of 0.21 AUD to RMB) and 729 million RMB (154 million AUD) in operating loss.

Revenue from mobile games increased to 2.9 billion RMB in 2018, which is 34times of the number in 2015. The company released two big games in 2016 and 2017 and those contributed to its growth in mobile games segment.

Bilibili has kept growing its revenue each quarter. The company reported 1.1 billion RMB in revenue in the last quarter. To the contrary, operating loss kept increasing and the profit margin was -25.0% in 4Q18.

Looking into revenue by segment, revenue from mobile games has decreased since 2Q18. Instead, live broadcasting and VAS which used to be the company’s core business increased to 202 million RMB and revenue from advertising also increased to 160 million RMB. In the last quarter, revenues from segments other than mobile games accounted for 40% of total revenue.

Key metrics

Average monthly active users (MAUs) increased by 29% to 92.8 million in 4Q18 year-over-year. Mobile MAUs reached 79.5 million.

Average monthly paying users (MPUs) reached 4.4 million, a 298% increase from the same period in 2017. MPUs for mobile games reached 0.9 million, a 36% increase from the same period in 2017.

The ratio of paying users to active users (MPUs/MAUs) remained higher in 2018 than the previous year, and reached 4.7 in the last quarter. The company started premium membership program in January 2018 and it contributed to the growth.

According to the company’s presentation, users average daily time spent on the platform was 78 minutes (excludes mobile games) and average daily video views were 436 million (+107% YOY) in 4Q18 that contributed to the increase of advertising revenue. 89% of video views were from PUGV (Professional User Generated videos). Number of monthly video submission of PUGV increased to 1.7 million in 4Q18 from 692 million in 4Q17 (+148% year-over-year).

In 4Q18, revenue from others segment surged by 287% to 80 million RMB. Revenue from e-commerce contributed to this leap.

Taobao

Bilibili and Taobao Marketplace, China’s largest mobile e-commerce destination under Alibaba Group, announced business collaboration in e-commerce market in December 2018. Bilibili also announced the acquisition of NetEase comics assets in December 2018. The company is trying to monetize those intellectual properties aggressively.

Cost structure

Cost of revenue was 83% in 4Q18 which has been on a rise trend since 1Q18. In 4Q16, expenses increased substantially due to the increased compensation for mobile game revenue increase.

Looking into cost of revenue breakdown, content cost increased to 15% in 4Q18 compared to 12% in 4Q17 that is primary due to the expansion of anime and drama titles.

Balance sheet

Total asset: 7.6 billion as of Sep 2018

10.4 billion as of Dec 2018

Total asset increased by 2.8 billion from September 2018 which is primarily due to the investment by Tencent Holdings Limited (00700.HK) of approximately 317.6 million USD in cash. Bilibili has both Alibaba and Tencent, two tech giant in China, as its shareholder.

Market situation and future forecast

The stock doubled the price after IPO and the market cap is 5.6 billion USD as of March 6, 2019. EV is 5.8 billion USD. EV/ Revenue is 9.4.

Bilibili expects to gain 1.27 – 1.29 billion RMB in revenue in 1Q19 (+48.6% from 1Q18).


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The original article was published by Stockclip, Inc. on 03/03/2019.

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