Author Topic: YY - YY Inc.  (Read 8837 times)

king888

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YY - YY Inc.
« on: June 27, 2013, 08:54:44 PM »
YY

Business model of YY is very interesting and profitable.

The press calls YY a gaming platform or social network site . But that is not what YY really is .

YY is a live streaming platform that any user can create a room to broadcast his/her content and viewer can join the room and chat, text or buy a virual item for the room owner.

The usages are variety. In the past until recent , most rooms are for singing shows or playing MMORPG . And users who are famous can make more than $10,000/month by just singing in YY .

Now YY is trying to broaden the usages of its platform. The company can create live room for a conference . The private room for training session for employee . And the next big thing is "Online Education" . EDU uses YY to broadcast the online course and viewers have to pay before join the course.

YY has the infrastructure to support the streaming and also the payment system to help content creators monetize. This is a real winner in this space . If YY can execute this model overseas , it can be even bigger than Youtube .

http://www.techinasia.com/yy-david-li/

http://www.forbes.com/sites/tomiogeron/2012/06/11/yy-com-chinas-unique-real-time-voice-and-video-service-with-a-virtual-goods-twist/



claphands22

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Re: YY - YY Inc.
« Reply #1 on: February 03, 2014, 09:52:01 PM »
Hey King,

There was a great Seeking Alpha article on YY that expanded on a short thesis: http://seekingalpha.com/article/1593492-yy-do-you-know-what-you-own 

On top of that article, I would check out YY's prospectus -- read their related party transactions, and where they originally got their adverting revenue.  I have put way too much time on trying to figure out how YY actually makes money and I can't figure it out. Definitely check out YY.com website and try to be a consumer of the content...it's...special.   


SnarkyPuppy

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Re: YY - YY Inc.
« Reply #2 on: July 15, 2018, 04:53:38 PM »
    Does anyone follow this?   Looks extremely cheap - you're getting a business growing 20% per year at ~2-3x FCF.     

    There's a writeup on VIC which explains the business/background - I won't rehash but some high level headlines:
    • YY Live (core business) is a Chinese live streaming/broadcasting operator.  Musicians, dancers, gamers, etc perform live and in return receive tips from viewers.   YY earns 50% of the tips and shares the other 50% with the artists/artist agents. 
    • Dominate position - strong network effects as top artists attract more viewers who attract more top artists.
    • Chairman and CEO is the founder - David Li (returned to CEO spot in 2017).   Owns 12% of the company (and 71% of voting rights)
    • Financials -> GM and EBIT margins masked because of consolidation of recently IPO'd business 'Huya'
    • Off balance sheet asset in 'Bigo'

    At 98.43 per ADS you're paying (USD figures):
    • 65mm fully diluted SO
    • MC = $6.4bn
    • Cash = $1.7bn
    • Mezz Equity and NCI = $2mm (note: the financials show $79mm of mezz equity, but this is held at HUYA which is discussed further below)
    • EV = $4.7bn

    So for $4.7bn you get 3 assets (Huya, Bigo, and core YY live):

    Huya
    • Live streaming for video games.
    • IPO'd in May 2018 - YY effectively sold off it's 100% ownership (to tencent) via the IPO.
    • YY retained 45% ownership of the company. Tencent has a right, exercisable between March 8, 2020 and March 8, 2021, to purchase additional shares in HUYA Inc. to reach 50.1% of HUYA Inc.ís total voting power. 
    • HUYA's financials are currently consolidated within YY's as YY has > 50% voting control.  This will change if/when Tencent exercises it's right to purchase more of HUYA as described above
    • FY2017 38.8mm Monthly Active Users
    • 4 year non compete w YY Live
    • HUYA trades at $36.93 = $7.4bn market cap.  YY's ownership (45%) = $2.35bn

    Bigo
    • Bigo Live is another live streaming platform based in Singapore.  Focus is on Southeast Asia, with significant market share gains in Thailand, Vietnam, Indonesia, Singapore, Malaysia and the Philippines. The company is now entering other key markets where the app is gaining good traction. This includes South America, North America, Europe, Russia and the Middle East.
    • Hidden asset for YY - completely off balance sheet/P&L
    • Founded in 2016.   David Li (CEO of YY) is the founder/CEO of Bigo. It looks to be his expansion of the YY Live business model to international markets
    • Revenues of $300mm in 2017 and profitable as of October 2017
    • The company is forecasting $1bn in revenue and $200mm in profit for FY2018.   
    • 200mm users as of February 2018 and monthly active users of 37 million. 
    • June 2018 - YY Invested $272mm in series D prefs shares of Bigo.  Total series D was $365mm.  YY was an existing investor - became largest shareholder.  YY management personally bought $70mm.   
    • YY has the right to purchase more than 50.1% of voting power in June 2019.
    • YY % ownership isn't disclosed, but YY was a 20% investor headed into series C and became the largest shareholder after the series D.  I loosely estimate their ownership at 30% which is probably on the low end
    • A company growing revenue 3x yoy is probably worth more than 5x profit, but a 5x multiple would value this at $1bn which means YY's ownership (~30%) is worth $300mm

    YY Live (core business)

    • Music/Dancing/Talk Shows - largest contributor to revenue (2018).   Other categories:  gaming, dating shows, finance, outdoor activities/sports, animation/comics themes
    • 78mm monthly active users as of 2018Q1
    • 46% gross profit margins (direct costs include sharing revenue 50% with broadcasters/agencies)
    • Sales/Marketing = 6% of revenue;  G&A = 5% of revenue
    • $434mm EBIT FY2017
    • FY16 Revenue YoY% = 34%;  FY17 Revenue YoY% = 30%
    • FY17 EBIT = $434mm; Net Income = $400mm
    • Should easily do $500mm+ by FY19

    So putting the above together, at 98.43 you're paying $6.4bn and you're getting:
    • $1.7bn cash
    • $3.35bn stake in Huya
    • $300mm stake in Bigo (although probably worth a lot more)
    • Remaining = $1bn for a business doing $400-500mm in FCF growing 20% a year

    There's some regulatory risk here  (New regulations were put in place during 2017 by the Ministry of Commerce (MOC) and the State Administration of Radio, Film and TV (SARFT) limiting the behavior of live streamers and raising accountability for platforms. Agents mentioned that restrictions included no midriff (area between chest and waist) exposure, no filming on beds and limited cleavage, to name just a few. Implementation of these rules has only recently been enforced with many sanctions since February 2018).   Seems that YY is fine so far and if anything, the larger streaming operators may benefit from some regulatory entrenchment.   

    But, the key risk here IMO is a combination of competition and agency consolidation:   Agency (supplier) negotiating power & competition -> spending pressures to retain agencies/broadcasters (these are direct costs for YY as they split revenue 50% with agencies/broadcasters).  This will take some time to get comfortable with - but at the current valuation you're basically paid back in 2-3 years.  [/list]

    Curious if others have spent time on this?
    « Last Edit: July 15, 2018, 04:58:09 PM by SnarkyPuppy »

    gaia10

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    Re: YY - YY Inc.
    « Reply #3 on: July 16, 2018, 05:33:47 AM »
    Hey SnarkyPuppy,

    Could you share your source on management's Bigo revenue and profit projection? Btw, I agree with you on most of these points.
    « Last Edit: July 16, 2018, 05:49:56 AM by gaia10 »

    DooDiligence

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    Re: YY - YY Inc.
    « Reply #4 on: July 16, 2018, 05:40:10 AM »
    Does Amazon talk about the economics of Twitch in annual and quarterly filings?
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    villainx

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    Re: YY - YY Inc.
    « Reply #5 on: July 23, 2018, 08:54:26 PM »
    From my limited understanding, none of the various business/operating units or even any other companies in the various live stream business has come out as a dominant/leading platform/player, right?

    So any of Huya/Bigo/YY platform are at risk of being left behind by another company/platform?  My simple analogy would be Tencent/Sina on which weibo platform would dominant.  At the time, I sided with Sina/Weibo, but the sheer adoption rate of WeChat and QQ overcame the supposedly more upscale Weibo.  Or is that a bad analogy?

    Spekulatius

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    Re: YY - YY Inc.
    « Reply #6 on: July 24, 2018, 03:48:51 AM »
    Does Amazon talk about the economics of Twitch in annual and quarterly filings?

    I havenít seen any, but I havenít looked to closely either. From a user perspective, it seems that Twitch loses to YouTube. I watch some streams from gamers every once in a while and most games stream using Twitch and YouTube simultaneously. You can typically hw many users are on which platform and typically 80-90% are on YouTube. YouTube als seems better at setting up donations or chatting. Hence I doubt that Twitch is a meaningful business for AMZN.
    To be a realist, one has to believe in miracles.

    SnarkyPuppy

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    Re: YY - YY Inc.
    « Reply #7 on: July 24, 2018, 04:48:06 AM »
    From my limited understanding, none of the various business/operating units or even any other companies in the various live stream business has come out as a dominant/leading platform/player, right?

    So any of Huya/Bigo/YY platform are at risk of being left behind by another company/platform?  My simple analogy would be Tencent/Sina on which weibo platform would dominant.  At the time, I sided with Sina/Weibo, but the sheer adoption rate of WeChat and QQ overcame the supposedly more upscale Weibo.  Or is that a bad analogy?

    It's definitely a risk.   Maybe too simplistic, but at what price would you pay for a business w/ this risk? At some point it's a good stock regardless of its terminal value.   ~2-4x cash flow seems reasonable to me. 

    villainx

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    Re: YY - YY Inc.
    « Reply #8 on: July 24, 2018, 07:00:35 AM »
    It's definitely a risk.   Maybe too simplistic, but at what price would you pay for a business w/ this risk? At some point it's a good stock regardless of its terminal value.   ~2-4x cash flow seems reasonable to me. 

    Thanks for the response.  Just trying to understand the competitive landscape.  It's hard 1) because I'm too old to understand appeal of live streaming and 2) relating that to what's happening in China magnifies. 

    YY has it's hand on several different niches it seems.  But is it a race for scale, and at what point does it become clear who is the leader.  Is it a winner takes all type of model? 



    abyli

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    Re: YY - YY Inc.
    « Reply #9 on: August 13, 2018, 03:43:38 PM »
    https://seekingalpha.com/pr/17243913-yy-reports-second-quarter-2018-unaudited-financial-results

    Second Quarter 2018 Highlights

    Net revenues increased by 44.6% to RMB3,773.2 million (US$570.2 million) from RMB2,609.0 million in the corresponding period of 2017.
    Non-GAAP net income attributable to YY1 increased by 51.6% to RMB873.2 million (US$132.0 million) from RMB576.2 million in the corresponding period of 2017.