20210708-西牛证券-虎视传媒-01163.HK-Geographic_and_product_portfolio_expansion_26页_1mb

AdTiger (01163.HK) Summary

Core Content

AdTiger (01163.HK) is an online advertising platform offering one-stop services to advertisers and media publishers. The company operates through two main models: acting as an agent to connect with media publishers' platforms via resellers or placing advertisers' ads directly on those platforms. It has expanded its operations into the Chinese market since 2020 Q4, partnering with major platforms like ByteDance, Kuaishou, and iFeng.com, and has established subsidiaries in China to facilitate this growth.

Main Viewpoints

• Globalization Strategy: AdTiger's entry into the Chinese market is a key part of its globalization strategy. It collaborates with top-tier media platforms to place ads effectively, leveraging the Matthew Effect to potentially outperform market growth.

• Overseas Recovery: The overseas market experienced a strong rebound in 2021 Q1, with a ~70% YoY increase in revenue. This recovery is attributed to a more favorable stance from the new U.S. government towards China, which eased tensions and improved traffic flow.

• New Income Sources: AdTiger plans to diversify its revenue streams by introducing SaaS services and participating in app development. These initiatives are expected to provide additional monetization opportunities through in-app purchases and ad placements.

• AdTensor Technology: The company uses its proprietary AdTensor platform to optimize ad placement and performance, supporting real-time monitoring, analysis, and creative adjustments. AdTensor also offers a template library to assist advertisers in creating and optimizing content.

• Pricing Models: AdTiger employs CPA (Cost per Action) and CPC/CPM (Cost per Click/Cost per Thousand Impressions) pricing models. CPA is used for comprehensive user acquisition services, while CPC/CPM is applied for limited agency services. The company also receives performance-based rebates from media publishers.

• Customer Segmentation: Advertisers are categorized into display-driven and performance-driven types. Performance-driven advertisers (e.g., app developers) prefer CPA models, while display-driven advertisers (e.g., tourism, media) use CPC/CPM models. In 2020, 47.2% of revenue came from app developers, and 44.7% from e-commerce.

Key Information

Financial Highlights

Valuation

• Stock Rating: BUY
• Target Price: HK$ 1.35
• Current Price: HK$ 0.88
• 52-Week Range: HK$ 0.68 – 1.55
• Market Cap. (HKD, bn): HK$ 0.5

Risk Factors

• Higher-than-expected R&D expenses
• Tighter data protection policies
• Slow new business development
• Escalating conflicts between China and other countries

Strategic Expansion

AdTiger has established a presence in China through subsidiaries Adtiger Technology (Feb 2021) and Hainan Adtiger Information Technology (May 2021). The company is targeting sectors such as internet service providers, education, social networking, gaming, and e-commerce in the Chinese market.

Industry Overview

• Value Chain: Advertisers are at the top of the value chain, followed by agencies (media, client, and integral), and media publishers at the bottom. AdTiger positions itself as an integral agency, offering a wide range of services from user acquisition to ad optimization.

• Market Size:

  • Worldwide: Digital ad spending is projected to grow significantly, reaching USD 455.3bn in 2021, with display and search ads contributing 55.2% and 40.2% respectively.
  • China: The total ad market size contracted by 14.2% in 2020 to RMB 744.2bn, with online ad spending accounting for RMB 564.3bn. The online marketing market in China is expected to grow at a CAGR of 18.9% from RMB 983.2bn in 2021 to RMB 1,965.9bn in 2025.

Impact of Apple's Data Privacy Policies

• App Tracking Transparency (ATT): Requires apps to ask for permission before using IDFA for user tracking. This has led to a drop in ad effectiveness on iOS, but the feature is not expected to be detrimental to AdTiger's long-term strategy.

• Private Relay: A new iOS 15 feature that obscures web browsing data from advertisers. It does not affect the Chinese market due to regulatory constraints.

Investment Thesis

AdTiger's globalization strategy and expansion into the Chinese market, combined with its plans for SaaS and app development, position it for robust growth. The company's ability to adapt to new data privacy regulations and leverage its AdTensor platform for optimization is a key strength. The recovery in the overseas market and the potential for app monetization further support its investment case.

Conclusion

AdTiger (01163.HK) is well-positioned for growth through its strategic expansion into the Chinese market, its diverse range of services, and its technological capabilities. The company's valuation suggests a significant upside, and its ability to navigate regulatory and market challenges enhances its long-term prospects.