[ET Net News Agency, 28 November 2018] J.P. Morgan downgraded China Literature (00772)
to "underweight" from "neutral" and cut its target price to HK$35 from HK$58.
The research house said many internet companies recently posted 3Q results with cautious
comments on the outlook. JPM's channel checks also suggest the user time spent for major
content consumption formats has slowed down.
JPM is concerned about the growth outlook for China Literature's online reading business
(~80% of total revenue) because of weakening monetization of users from Tencent channels,
and competition on user time spent.
While consolidation of New Classics Media (NCM) is revenue and profit accretive, JPM
does not expect the valuation impact to offset the deterioration of core reading given
that NCM, as a content producer, is subject to a relatively low valuation multiple. In
addition, the deal is 70% financed by the issuance of new shares, so the EPS impact is
diluted. (KL)
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00772 CHINA LIT
Nominal 
24.800 -0.400 (-1.587%) Others
28/11/2018 13:54
[I-bank focus]JPM lowers China Literature (00772) to HK$35
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