On Friday, Citi upgraded IGG Inc. (799:HK) (OTC: IGGGF) stock from Neutral to Buy, increasing the price target to HK$4.50 from the previous HK$4.00. The upgrade followed IGG's report of a satisfactory first half of 2024, with revenues meeting the firm's expectations at HK$2.74 billion, marking a 9% year-over-year increase.
This performance was attributed to the stability of its existing game Lords Mobile (LM) and the growth of its new ventures in Doomsday, virtual reality (VR), and additional platform (APP) businesses.
IGG's adjusted net profit for the first half of 2024 surpassed Citi's estimates by 7%, reaching HK$347 million. This beat was largely due to the increasing profits from the APP business, which boasted higher gross profit margins and controlled operating expenses, particularly in sales and marketing.
Additionally, IGG reinstated its regular interim dividend at a 30% payout ratio and announced a share buyback program at 10% of attributable profit, effectively returning 40% of its profits to shareholders in the first half of the year.
The firm's confidence in IGG is bolstered by the strong performance of its Doomsday, VR, and APP businesses, along with the stabilization of LM. These factors are expected to provide better growth visibility for IGG, aided by the company's effective diversification strategy.
Citi also noted the potential of three new titles set to be tested by the end of 2024, which may follow the successful business models of IGG's existing games.
The new price target of HK$4.50 is based on a multiple of 5.5 times the estimated earnings per share (EPS) for 2025, which is projected to be HK$0.82. With a tax rate of 44%, the upgrade reflects a positive outlook for IGG's future performance and its ability to deliver value to its shareholders.
InvestingPro Insights
IGG Inc. (IGGGF) showcases a robust financial position with a market cap of $470.38 million USD and an attractive P/E ratio of 5.07, according to real-time data. The company's performance is further highlighted by a notable P/E ratio adjustment for the last twelve months as of Q2 2024, standing at 4.11. This is coupled with a PEG ratio for the same period at a mere 0.02, suggesting potential for growth at a reasonable price.
InvestingPro Tips for IGGGF reveal that the company not only has a perfect Piotroski Score of 9, indicating high financial health, but it also holds more cash than debt, providing a strong liquidity position. Additionally, the company's net income is expected to grow this year, which aligns with Citi's positive outlook and the upgraded price target. These metrics and insights from InvestingPro Tips, which include dozens more on their platform, provide investors with a comprehensive understanding of the company's financial health and growth potential.
It's worth noting that IGG Inc.'s revenue has grown by 19.49% over the last twelve months as of Q2 2024, reaching $704.59 million USD, which supports the company's strategic diversification and the successful performance of its APP business as highlighted in the article. With such promising financial data and expert insights from InvestingPro, investors have additional reasons to consider the potential upside of IGG Inc.'s shares.
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