Momo (MOMO US) is a Chinese company that operates a mobile social and entertainment platform. In addition to the Momo platform, the company operates the chat and romantic dating app Tantan: We consider the stock for our "Aggressive" portfolio at $ 13.41.
Key factors in investment attractiveness.
1) China: The country is growing its demand for mobile entertainment and the demand for services that are provided by MOTO are expected to continue to grow. #MOTO span indeed from Social Media, Mobile and Dating app: the diversification of services, should promote consumer engagements and increase the potential for income from social advertising and sales of virtual goods.
2) Financial sustainability: The company looks very attractive in terms of its fundamental performance. The growth in demand for the company's products in 2021 could lead to even better financial performance.
In particular, according to Bloomberg's consensus forecast, in 2021 Moto's revenue could increase by 12%, EBlTDA by 10% and net profit by 20%.
It is also important to note that the company has a solid margin of safety: the amount of cash on the balance sheet was in the region of $ 1.6 billion.
Taking into account its total debt of $729 million, net cash is worth about $870 million.
3) Substantial discount on multipliers
Against the backdrop of strong fundamental factors, #MOTO looks very cheap compared to its competitors. The P/S discount is about 488%, EV/EBITDA - about 490%, and P/E -564%
However, it is vital to look at the risks involved:
1) High competition in the sector,
2) Risk of worsening U.S.-China relations.
We do believe that #MOTO is a good opportunity and worth considering for high risk portfolios.
OTB Global Investments,
London, 14 December 2020