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Author | Yixin Lucun
Source: Fuji Research
Hong Kong stocks “the first stock in the Metaverse”, is it a hype or a hype? Feitian Yundong went public, and the prospectus mentioned the word “metaverse” up to 318 times.
Today (October 18), Beijing Feitian Yundong Technology Co., Ltd. (hereinafter referred to as “Feitian Yundong”, 06610.HK) was officially listed on the Hong Kong Stock Exchange, becoming the first Hong Kong-listed company in the Metaverse field.
Feitian Yundong issued 271 million new shares in this IPO, raising a net amount of about 600 million Hong Kong dollars, and the opening price was 2.21 Hong Kong dollars per share, which was the same as the issue price.
As of the close of Hong Kong stocks on October 18, Feitian Yundong closed at HK$2.12 per share, a drop of 4.07%, corresponding to a market value of HK$3.837 billion (equivalent to RMB 3.516 billion).
Feitian Yundong is a Chinese metaverse scene application layer supplier, mainly covering AR/VR content, AR/VR marketing services, AR/VR SaaS, etc. It quoted iiMedia Research in its prospectus that Feitian Yundong ranked first in the AR/VR content and service market in terms of revenue in 2021, with a market share of 2.6%.
Previously, when Feitian Yundong submitted the form for the first time, the word “metaverse” was frequently used 256 times in the prospectus and “out of the circle”. Fuji Research found that the frequency of using the word “metaverse” also hit a new high when Feitian Yundong submitted the table twice, increasing to 318 times.
▲ Source: Poster of the movie “Out of Control Player”According to its prospectus, Fuji Research found that in the first quarter of this year, Feitian Yundong’s revenue was 229 million yuan, a year-on-year increase of 64.95%; in the same period, the adjusted net profit was 40.197 million yuan, a year-on-year increase of 124.74%.
From 2019 to 2021 and the first quarter of 2022, the total R&D investment of Feitian Yundong in the past three years is only 55.699 million yuan, and its path to increase the amount of “yuan” is doubtful.
In an old article in January this year, we focused on Feitian Yundong’s dream-chasing “Metaverse” track after its name change, but its R&D investment is far lower than its international counterparts.
Today, despite the entry of giants such as Meta, Microsoft, and Roblox (VR game platform), the metaverse concept has exploded and investment opportunities have exploded. More stay in the prospectus idea. From the concept of the outlet to the realization of the dream, how will Feitian Yundong “fly to the sky” in the Metaverse after it goes public? As a result, Fuji Research has updated some of the data and charts of the old article in January, the following Enjoy:
After the first year of the Metaverse, the Hong Kong stock market “the first stock of the Metaverse” is here!
At the end of the year and the beginning of the year, Beijing Feitian Yundong Technology Co., Ltd. (hereinafter referred to as “Feitian Yundong”) submitted an IPO prospectus to the Hong Kong Stock Exchange.
According to its prospectus, Fuji Research found that in 2021, the revenue from AR/VR services will account for more than 60% of the current revenue, but the cost of traffic acquisition in the same period will exceed the full year of 2020; thus, its most profitable business is Lowest gross profit margin.
Although the Metaverse is booming, but opportunities and bubbles coexist, can Feitian Yundong really soar into the sky? After all, the journey of the Metaverse is a sea of stars.
The name change is close to the Metaverse, and the platform plan is still in its early stages
Founded in 2008, Feitian Technology, the predecessor of Feitian Yundong, was listed on the New Third Board in 2017. In the early days, it aimed at the mobile game market, then gradually turned to the AR/VR field, and withdrew from the New Third Board in 2019.
In 2021, the concept of the metaverse broke out, and Feitian Technology in the palm of the hand was preparing to build a metaverse platform – Feitian Metaverse, and changed its name to Feitian Yundong in November, announcing the strategic layout of the metaverse field.
After the name change, Feitian Yundong has closely followed the Metaverse, calling it a leading provider of the Metaverse scene application layer (or AR/VR content and service market) in China in its prospectus, and has begun to build its own Metaverse platform.
▲ Source: pinterestThe prospectus quoted iResearch data showing that in terms of revenue in 2020, Feitian Yundong accounted for 2.3% of the Chinese AR/VR content and service market, ranking first; in the Chinese AR/VR service market segmented in the same period, Occupy 12.6% share, ranking first.
The shareholder structure of Feitian Yundong before the IPO shows that controlling shareholders Wang Lei and Li Yanhao hold 49.66% of the shares through Brainstorming Café; its institutional shareholders include Tongchuang Weiye, Xi’an Zhiyao, Saifu Dynamics, etc.
From 2018 to 2021 and the first quarter of 2022, Feitian Yundong’s revenue was 164 million, 251 million, 339 million, 595 million and 229 million yuan; in the same period last year, revenue increased by 64.95% year-on-year.
During the same period, adjusted profits were 47.097 million, 41.879 million, 61.609 million, 105.081 million and 40.197 million respectively.
In addition, Feitian Yundong has maintained an overall gross profit level of around 30% in recent years. From 2018 to 2021 and the first quarter of 2022, its gross profit margins are: 41.7%, 30%, 30.9%, 29.5% and 32.0%, respectively.
However, Fuji Research found that the cash flow from Feitian Yundong’s operating activities fluctuated: -1.257 million, 25.627 million, 24.948 million, and 24.485 million from 2018 to 2021; the first quarter of 2021 and the first quarter of 2022 It is -11.085 million yuan and -12.605 million yuan.
For 2018 and the first half of 2020, the operating cash flow was negative; Feitian Yundong explained that the former granted a credit period to corporate customers due to the transformation of its core business; the latter, due to the impact of the epidemic, slowed down customer payments, resulting in trade and other Accounts receivable increased.
As of March 31, 2022, Feitian Yundong’s cash and cash equivalents were 198 million yuan; of which, the net cash from financing activities was 12.756 million yuan.
A prospectus mentioned “Metaverse” up to 318 times. Although Feitian Yundong expects the high growth of AR/VR business, it also admitted in the risk item: Feitian Metaverse platform plan is very preliminary, and there is no certainty. Monetize the business model; its anticipated expansion, investment in new products and services, can put enormous pressure on operations, finances, etc.
According to Fuji Research, although it has been closely following the hotspots of the Metaverse after the name change, the content of Feitian Yundong is doubtful, and it is more stuck in the prospectus concept; there is still a long way to go from the concept of the outlet to the realization of the dream. to go.
Whether it can turn its dream into reality and how to improve its performance level is not only related to its IPO breakthrough, but also the bottom-level logic of persuading the capital market to continue to “pay” in the future.
AR/VR services account for 70%, and traffic costs erode profits
Feitian Yundong’s revenue consists of two parts: AR/VR business and non-AR/VR business (IP and others); currently, AR/VR business, which accounts for over 90%, is the sole lead.
From 2018 to 2021 and the first quarter of 2022, the revenue from AR/VR business was 75.149 million, 188.940 million, 265.697 million, 558.324 million and 228.781 million; the current revenue accounted for 45.8%, 75.3%, 78.5% and 93.8% And 100%, from 2019 onwards, one family will gradually dominate.
In terms of split, Feitian Yundong’s AR/VR business mainly includes three business lines: AR/VR services, AR/VR content, and AR/VR SaaS.
Among them, AR/VR services provide customers with solutions, including the placement of AR/VR interactive content advertisements, etc., which is the main source of revenue.
According to the prospectus, Feitian Yundong has entered the AR/VR service market since 2017, and achieved profitability in the segmented market in the same year; during the track record period, it has provided AR/VR smart marketing services to over 40 advertisers. Promote more than 200 advertising products.
From 2018 to 2021 and the first quarter of 2022, the revenue from AR/VR services was 47.102 million, 137.103 million, 141.701 million, 376.341 million and 165.574 million, accounting for 28.7%, 54.6%, 41.9% and 63.2% of the current revenue. and 72.3%.
The second largest business line is AR/VR content. During the track record period, Feitian Yundong provided AR/VR content development for 40 customers and accumulated more than 100 AR/VR content project development experience.
The third largest business line is the AR/VR SaaS business entered for the first time since 2019; as of March 31, 2022, its AR/VR SaaS paid subscription users exceeded 2,200.
From 2019 to 2021 and the first quarter of 2022, the revenue from AR/VR SaaS was 6.514 million, 9.238 million, 20.588 million and 9.522 million respectively, accounting for 2.6%, 2.7%, 3.5% and 4.2% of the current revenue.
During the same period, the gross profit margin of AR/VR SaaS was 50.5%, 52.9%, 54.7% and 57.9%.
In terms of gross profit margin, among the three business lines of AR/VR, AR/VR SaaS has the highest gross profit margin, followed by AV/VR content, and AV/VR services are lower than the former two.
From 2018 to 2021 and the first quarter of 2022, the gross profit margin of AR/VR content was 46.1%, 47.9%, 47.2%, 46.2%, 55.3%; the gross profit margin of AR/VR service was 12.3%, 21.2%, 19.4%, 21.7% and 23.0%.
Fuji Research found that the gross profit margin of AR/VR services is low, or due to the high cost of traffic acquisition.
According to the prospectus, from 2018 to 2021 and the first quarter of 2022, Feitian Yundong’s traffic acquisition costs were 51.3 million, 115.3 million, 138.4 million, 311.5 million, and 126.7 million yuan, respectively, and the total revenue cost in the same period accounted for 53.7%, 65.6%, 59.2%, 74.2%, 81.5%.
In addition, or due to business promotion needs such as AR/VR SaaS, Feitian Yundong’s overall distribution and sales expenses are also increasing, with 800,000, 5.5 million, 7.3 million, 13.7 million, and 3.1 million in 2018-2021 and the first quarter of 2022, respectively. million. In the prospectus, Feitian Yundong attributed part of the reason to the increase in staff costs, but as of the reporting period, it had 59 full-time employees.
In the “post-traffic” era, the cost of online traffic is getting higher and higher, and the cost of advertising and marketing is also high; the wind of traffic involution seems to be blowing into the Metaverse.
According to Fuji Research, at present, the revenue from AR/VR services has accounted for half of Feitian Yundong’s revenue. If it cannot manage traffic costs, it may further erode profits; although traffic and marketing can be exchanged for revenue growth in the short term However, from the perspective of long-term competition, building a core moat for AR/VR content and services is the key.
Low R&D investment ratio
2021 is regarded as the first year of the “metaverse”: Roblox, the “first stock of the metaverse”, landed in the US stock capital market; the global Internet giant Facebook changed its name to Meta and officially entered the metaverse…
China’s metaverse outlet is also here!
According to data from iResearch, in terms of revenue, the market size of China’s AR/VR content and services will be 11.5 billion yuan in 2020, grow to 21.7 billion yuan in 2021, and is expected to reach 103.9 billion yuan in 2025. At present, there are more than 5,000 competitors in this market.
Specific to the more subdivided China AR/VR service market: the market size in 2020 is 1.13 billion yuan in terms of revenue; it is expected to increase from 2.78 billion in 2021 to 18.5 billion in 2025.
Although the related industries have great potential under the Metaverse, they are still in the early stage of development, and the industry concentration is not high. It is foreseeable that the competition will be fierce in the future, and there will be many variables in the industry structure.
There is a footnote: Feitian Yundong, the No. 1 domestic AR/VR content and service industry in 2020, only occupies less than 3% of the market share.
Not only that, according to Fei’s prospectus, Fuji Research found that Feitian Yundong also faced the risk of relying on major customers and suppliers to concentrate.
From 2018 to 2021 and the first quarter of 2022, the revenue of Feitian Yundong TOP5 customers accounted for 47.4%, 46.1%, 38.5%, 39.2% and 30.7% of the current revenue; in the same period, the TOP5 suppliers accounted for about 50.8% of the total revenue and cost %, 49.9%, 41.1%, 45.1% and 54.2%.
To a certain extent, Feitian Yundong’s previous business focused more on the Metaverse industry chain, and the “element content” remains to be discussed.
Even some time ago, research and development may not be the focus of its investment. Fuji Research found that, compared with the high traffic acquisition cost year by year, Feitian Yundong’s R&D investment ratio was low, and it was only hovering in single digits as of the first quarter of this year.
From 2018 to 2021 and the first quarter of 2022, its R&D investment was 7.58 million, 11.425 million, 15.046 million, 21.703 million and 8.152 million respectively, and the current revenue accounted for only 4.6%, 4.6%, 4.4%, 3.6% and 3.6%.
Or because of this, Feitian Yundong stated in the prospectus that the fund-raising is planned to be used to enhance research and development capabilities, develop the Feitian Yuan Universe platform, and select mergers, acquisitions and strategic investments; and plans to complete the Feitian Yuan Universe platform in three stages. Construct.
In the first stage, the infrastructure construction is completed, and the UGC model is planned to improve the content diversity; in the second stage, the content is further improved, and more life scenarios are covered by acquiring digital assets and upgrading the system; in the third stage, improving the ecosystem and assisting Users conduct commercial activities within the platform.
In November 2020, Feitian Yundong released the Feitian Yuan Universe platform, which is expected to set up virtual commercial blocks, exhibition halls and other business scenarios; however, the platform plan is still in the preliminary stage, and there is no definite monetization model.
Perhaps, we can compare it with Tsinghua University’s “Metaverse Development Research Report 2020-2021”: Since the Metaverse industry is still in the early stage of development, it has the characteristics of immature and unstable emerging industries, at least there are capital manipulation, public opinion bubbles, industrial Ten risk points such as involution, the industry and the market need to return to rationality.
▲ Source: pinterestEven if it successfully breaks through the “first stock of the Metaverse” in Hong Kong stocks, Feitian Yundong will not be able to escape the laws of the industry, and increasing the “element content” is only the first step in a slow journey.
The Metaverse is still a sea of stars, and investment needs to be more cautious
At the moment, the entire screen is filled with the Metaverse.
Is this a vent that takes advantage of the momentum? Or a distant future? Or a short-lived bubble?
At the earliest, the “Metaverse” originated from the science fiction novel “Avalanche”, which is a virtual world built by computer computing power; while “Ready Player One” released in 20218 and “Out of Control Player” released in 2021, let science fiction The director depicts the many possibilities of the metaverse.
Although there is still a long way to go before “dream shines into reality”, investors are already paying for the Metaverse: In March 2021, “the first share of the Metaverse” Roblox landed on the New York Stock Exchange, igniting investor enthusiasm; in Facebook After changing its name to Meta (the abbreviation of Metaverse), the concept of metaverse swept the secondary market.
However, the capital market that votes with feet will always return to rationality and reality after waking up. Even as the globally recognized “metaverse first stock”, Roblox has experienced several surges and crashes. To a certain extent, Feitian Yundong, which sprints into the “first stock of the Metaverse” in Hong Kong stocks, may not avoid a similar fate.
Perhaps, as the creator of the “Oasis” in the movie “Ready Player One” said: The real world is the only place you can eat well, because reality is real.
Under the birth of the wind, the Metaverse is indeed the future sea of stars; but before reaching the sea of stars, there is still a slow journey, the industry still needs to be down-to-earth, and investment needs to be rational and prudent!
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