HUYA Inc.

HUYA Details

HUYA Inc. (NYSE: HUYA) is a China-based company that operates a live streaming platform with an extensive and active community of live game streamers. HUYA collaborates with e-sports event organizers, game developers, and publishers to develop e-sports live streaming, one of the most popular content genres on its platform. It also offers non-game entertainment content, including talent shows, anime, and outdoor activities. As of September 20, 2021, the HUYA's market capitalization stood at USD 2.18 billion, with 237.10 million American Depository Shares (ADS) listed and outstanding (each ADS representing one Class A ordinary share).

Management Change: On September 03, 2021, HUYA's current Chief Financial Officer (CFO), Catherine Xiaozheng Liu, resigned from her position effective September 08, 2021. Concurrently, Ashley Xin Wu has been promoted to Vice President of Finance, who will take up Ms. Liu's duties and report to Mr. Rongjie Dong, Chief Executive Officer (CEO). Ms. Wu has been part of the company since September 2017 and, up until now, served as the leader of finance.

Q2FY21 Results: The company reported YoY growth of 9.83% in total net revenues to RMB 2.96 billion in Q2FY21 (ended June 30, 2021) compared to RMB 2.70 billion in Q2FY20. The Live Streaming segment, which accounted for 87.06% of the total net revenue in Q2FY21, reported YoY growth of 0.55%, whereas the Advertising and others segment improved by 189.89% YoY. Net income for HUYA reduced to RMB 186.25 million in Q2FY21 vs. RMB 206.76 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents (including short-term deposits and investments) of RMB 10.74 billion and no outstanding debt.

Key Risks: As of March 31, 2021, Tencent Holdings Limited owned 69.7% of HUYA's common stock, thus gaining substantial control over its operations. This constrains the ability of other shareholders to influence corporate decisions. Moreover, the Chinese authorities' recent crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent the company's operations. This is after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

HUYA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: HUYA's stock price decreased 64.68% in the past six months and has breached its previous 52-week range of USD 8.81 to USD 36.33. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 29.77. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 10.72. Considering the correction in the stock price, decent balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 8.70, down 5.54% as of September 20, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Gold Resource Corporation

GORO Details

Gold Resource Corporation (NYSE: GORO) is a mining company that produces metal concentrate and doré, which consists of precious metals such as gold and silver and base metals like copper, lead, and zinc. GORO's Mexican subsidiary Don David Gold Mine has six projects, including the Arista underground mine at the Aguila project, its principal mineral production project that provides ore to its processing facilities, also located at the Aguila complex.

Driving Growth through Horizontal Acquisition: On September 07, 2021, GORO signed an agreement to acquire Aquila Resources Inc., a development-stage mining company focused on the United States Upper Midwest, under which 100% of the equity interests in Aquilla will be exchanged for 0.0399 shares of GORO, representing consideration of CAD 0.09 per Aquilla share (the total purchase consideration amounts to CAD 30.9 million). Upon transaction closing, GORO and Aquilla shareholders will own about 85.1% and 14.9%, respectively, of the combined entity on a fully diluted basis. The merger is expected to be accretive to GORO's shareholders in the short to medium term by multiple factors, including the beginning of production at the Back Forty Project (expected to start by FY24 end).

Q2FY21 Results: The company reported a YoY surge of 146.27% in total revenues to USD 30.84 million in Q2FY21 (ended June 30, 2021) compared to USD 12.52 million in Q2FY20. The Concentrate sales, which accounted for 88.42% of the total revenue in Q2FY21, reported a sharp uptick of 1.77x, whereas the Doré sales improved by 18.06% YoY. GORO reported a net income of USD 1.28 million in Q2FY21 vs. a net loss of USD 1.81 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 30.54 million and no outstanding debt.

Key Risks: Prices of gold, silver, and base metals on the global market, which are highly volatile and uncontrollable, significantly impact GORO's business. Hence, any unfavorable movement in their prices could negatively impact its financials. In addition, GOLD operates as a gold mining company, which requires several ongoing permits from the government and local authorities. Therefore, the issuance of stricter regulations or non-compliance with required laws could adversely affect the company's profitability.

Outlook:

Updated FY21 Guidance (Source: Press Release, September 07, 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

GORO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: GORO's stock price decreased 55.56% in the past nine months and is currently leaning towards the lower band of its 52-week range of USD 1.57 to USD 3.78. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 34.17. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 1.99. Considering the correction in the stock price, strong balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 1.60, down 4.76% as of September 20, 2021, 2:55 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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