Author Topic: YY - YY Inc.  (Read 7557 times)

SnarkyPuppy

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Re: YY - YY Inc.
« Reply #10 on: August 13, 2018, 06:50:14 PM »
~$300mm USD loss in P&L due to GAAP accounting noise (GAAP requires YY to book a paper loss for the option sold to Tencent to sell HUYA)

Implied 8% revenue growth guidance for YY live for Q3 (vs upper 20% for last few quarters).  On call, management says this is largely due to the World Cup being shown at the same time as peak YY hours - and they've already seen a reversal back to normal trends post-world cup (per management conference call).   

My SOTP with YY at $80 per share and HUYA at $30 per share (all figures in USD):
- $2bn Cash
- $1.9bn HUYA (45% ownership, 30% holdco discount)
- $300bn BIGO (see post above)
- ($800bn) NCI to back out HUYA-standalone cash (HUYA reports standalone publicly now)
= Implied remaining value for YY live of $1.6bn = ~3x FCF (FY19 sell side estimates of $500mm).

Viewed another way, YY live earned ~$400mm pretax or ~$280mm FCF over the TTM (5.7x implied YY live price).  This is a growing and capital light business.   

In terms of a margin of safety, if you value the cash, HUYA, and BIGO at $0 then YY live trades at ~13.8x TTM FCF.   

Price seems absurd to me.     


ZenaidaMacroura

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Re: YY - YY Inc.
« Reply #11 on: September 06, 2018, 03:33:20 AM »
Does Amazon talk about the economics of Twitch in annual and quarterly filings?
I know this is late but twitch loses money.  It's value is mostly strategic currently and they are going to try somethings to change that in 4th quarter...

MrB

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Re: YY - YY Inc.
« Reply #12 on: January 08, 2019, 09:52:57 AM »

Aqul

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Re: YY - YY Inc.
« Reply #13 on: January 15, 2019, 07:08:50 PM »
~$300mm USD loss in P&L due to GAAP accounting noise (GAAP requires YY to book a paper loss for the option sold to Tencent to sell HUYA)

Implied 8% revenue growth guidance for YY live for Q3 (vs upper 20% for last few quarters).  On call, management says this is largely due to the World Cup being shown at the same time as peak YY hours - and they've already seen a reversal back to normal trends post-world cup (per management conference call).   

My SOTP with YY at $80 per share and HUYA at $30 per share (all figures in USD):
- $2bn Cash
- $1.9bn HUYA (45% ownership, 30% holdco discount)
- $300bn BIGO (see post above)
- ($800bn) NCI to back out HUYA-standalone cash (HUYA reports standalone publicly now)
= Implied remaining value for YY live of $1.6bn = ~3x FCF (FY19 sell side estimates of $500mm).

Viewed another way, YY live earned ~$400mm pretax or ~$280mm FCF over the TTM (5.7x implied YY live price).  This is a growing and capital light business.   

In terms of a margin of safety, if you value the cash, HUYA, and BIGO at $0 then YY live trades at ~13.8x TTM FCF.   

Price seems absurd to me.   

I was going through the 20F today and 2017 FCF exceeds 400mm USD (after counting SBC as an expense). With over 2Bn of net cash as of the latest balance sheet, this things is approaching a 20% FCF yield. Chinese equities have dislocated, but this seems too good to be true. I'll keep doing more work on this and see if there is something glaring that I am missing.

SnarkyPuppy

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Re: YY - YY Inc.
« Reply #14 on: January 15, 2019, 07:24:12 PM »
~$300mm USD loss in P&L due to GAAP accounting noise (GAAP requires YY to book a paper loss for the option sold to Tencent to sell HUYA)

Implied 8% revenue growth guidance for YY live for Q3 (vs upper 20% for last few quarters).  On call, management says this is largely due to the World Cup being shown at the same time as peak YY hours - and they've already seen a reversal back to normal trends post-world cup (per management conference call).   

My SOTP with YY at $80 per share and HUYA at $30 per share (all figures in USD):
- $2bn Cash
- $1.9bn HUYA (45% ownership, 30% holdco discount)
- $300bn BIGO (see post above)
- ($800bn) NCI to back out HUYA-standalone cash (HUYA reports standalone publicly now)
= Implied remaining value for YY live of $1.6bn = ~3x FCF (FY19 sell side estimates of $500mm).

Viewed another way, YY live earned ~$400mm pretax or ~$280mm FCF over the TTM (5.7x implied YY live price).  This is a growing and capital light business.   

In terms of a margin of safety, if you value the cash, HUYA, and BIGO at $0 then YY live trades at ~13.8x TTM FCF.   

Price seems absurd to me.   

I was going through the 20F today and 2017 FCF exceeds 400mm USD (after counting SBC as an expense). With over 2Bn of net cash as of the latest balance sheet, this things is approaching a 20% FCF yield. Chinese equities have dislocated, but this seems too good to be true. I'll keep doing more work on this and see if there is something glaring that I am missing.

1. government risk
2. competition risk (direct, other streaming types)
3. supplier cost risk (e.g. streamers in a strong position to, over time, ask a larger % of the gross profit - mitigated somewhat by network effects)

20%+ FCF yield with growing revenues makes it interesting but those are the key downside variables I'd focus on

Aqul

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Re: YY - YY Inc.
« Reply #15 on: January 15, 2019, 07:50:13 PM »
Right, those are key diligence items. I wanted to ensure this company isn't a melting ice cube (or has some other dramatic issue), before spending more time on it.

Gregmal

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Re: YY - YY Inc.
« Reply #16 on: January 15, 2019, 07:56:27 PM »
I really like this the more I look into it. No position yet, what I need to get a better grasp on is the stickiness of their market position. Otherwise this kind of seems like its potentially a mini IAC type of company in China... Its hard to argue against the cash and equivalents aspect of the SOTP. The question really comes down to what is the catalyst? I don't see one short term.

Aqul

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Re: YY - YY Inc.
« Reply #17 on: January 15, 2019, 08:15:00 PM »
Here's an interesting framework from Andreessen Horowtiz: https://a16z.com/2018/12/13/16-metrics-network-effects/

Agree on the lack of catalyst, but if this is a natural oligopoly space, and this company is one of the winners, then you don't need a short-term catalyst at these prices. The cash build alone will get you a great return.

constala

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Re: YY - YY Inc.
« Reply #18 on: January 16, 2019, 12:41:35 AM »
if you need a catalyst, there is a clear one. They have the option to buy 100% of BIGO. That would use their idle cash + consolidate a very high growth business, giving them (even) better valuation optics.
Everything in moderation, including moderation.

MrB

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