What happened: Vobile Group ("Vobile", or the "Company") announced on 31 January 2023 that it had entered into a placing agreement with a sole placing agent, for the placement of approximately 114 mn shares to no fewer than six independent investors. The placement price is HK$4.12 per share represents a discount of approximately 11.0% to the closing price of HK$4.63 per share as quoted on the Stock Exchange of Hong Kong on 30 January 2023. The placing shares are equivalent to approximately 5.39% of the total existing issued share capital of the Company as at the date of this announcement and approximately 5.11% of the total issued share capital of the Company as enlarged by the allotment and issue of the placement. On the assumption that the share placement is issued pursuant to the placement, the aggregate gross proceeds from the placement is expected to be approximately HK$470 mn and the aggregate net proceeds from the placement is expected to be approximately HK$464 mn. The Company intends to use the net proceeds for repayment of interest-bearing borrowings in order to further position the balance sheet for strategic growth and financial flexibility.
Comments and views: The Company completed the planned acquisition of Particle Culture Technology Group (Hangzhou) Co., Ltd. ("Particle Technology") in the second quarter of 2022, representing an excellent opportunity for the Company to embrace market opportunities to further consolidate its position as the leader in online video content protection and monetization. In the acquisition, Vobile paid RMB854 mn cash to acquire 61.18% of the shares of Particle Technology and its subsidiaries. Meanwhile, in April 2022, Vobile announced the completion of over US$127 mn in HSBC financing for its acquisition of Particle Technologies. From the perspective of operations, the acquisition of Particle Technology will greatly accelerate Fubo's progress into the Chinese market, and the parent company's content protection and subsidiary's video distribution and edge computing businesses can produce strong synergies. In our view, the current results confirm that the acquisition plan was the right choice for the Company in order to seize the opportunity to obtain financing. The Company's cash flow is showing healthy status, but in order to further position the balance sheet for strategic growth and in view of the possibility of future US dollar interest rate increases, we believe that at this stage to carry out a placement of share plan to repay the interest-bearing borrowings will benefit the company's long-term growth. At the same time, we believe that this placement plan can introduce new high-quality long-term investors to the Company and optimize the Company's shareholder structure.
Investment suggestion: We expect Vobile's content monetization business on overseas social platforms and content protection business in China to exceed the market's expectations. Under streaming media and social networking trends, Vobile’s business has expanded rapidly globally. It is generally believed that the global content protection industry is mature and market share growth is challenging, while domestic demand for content protection is highly fragmented and difficult to aggregate, resulting in limited business growth. We believe that growth of the overseas business will come from the diversification of Vobile's technology application, and the domestic fragmented market can be effectively gathered by jointly building a protection platform with local platforms, which has begun to show significant results. The current development pace of the Company is consistent with the strategic deployment proposed in the past, and we are confident in the long-term growth of the Company. Based on Vobile's huge potential for growth and leading profitability in the SaaS industry, we assign a 2023 PS of 6.0x for its valuation. We adopt relative valuation to give a target price of HK$5.79 and maintain "Buy" investment rating.