Hong Kong company reporting season

Meitu eyes purchasing power of selfie lovers after losses narrow

PUBLISHED : Friday, 24 March, 2017, 8:59pm
UPDATED : Friday, 24 March, 2017, 10:46pm

Selfie app maker Meitu posted narrower losses after weeks of volatile stock trading as the company continues to look for ways to monetise its beauty-savvy user base.

The adjusted net loss last year was 540.5 million yuan (US$78.5 million) compared with a loss of 710.5 million yuan in 2015, Meitu said in its first results announcement since its December stock market debut.

Revenue jumped 112.8 per cent to 1.6 billion yuan, with smartphones accounting for 93 per cent of sales, the company said on Friday.

Meitu, known for its apps that let users beautify their selfies, said it expects to see a larger part of revenue this year from advertising and e-commerce that targets its largely female user base.

“Our losses will further narrow this year. There’s no question about that,” chairman Cai Wensheng said at a press conference on Friday. “We believe revenue growth from advertising and e-commerce will be faster than mobile phone sales.”

Meitu confident of global success despite bumps in the road

In December Meitu raised US$629 million in Hong Kong’s biggest tech initial public offering since 2007. But doubts about its ability to make profits have kept its shares hovering near their IPO level during the first two months of public trading.

After it was added to the Shenzhen-Hong Kong stock connect on March 6, mainland investors, who are more familiar with the brand, pushed its shares 80 per cent higher in 10 days.

However, the stock price fell off a cliff this week, tumbling as much as 30 per cent in the last 90 minutes of trading on Monday.

Local media reported that Hong Kong’s Securities and Futures Commission had requested trading records for Meitu three times since its IPO but Meitu denied it had been contacted by regulators.

“The volatility has been too much after we were included in the stock connect,” Cai said. “We don’t like that. We hope regulators can help look into the situation as soon as possible.”

The shares advanced ahead of the results announcement on Friday, closing 3.5 per cent higher at HK$15.5.

“It’s a company that doesn’t really fit into Hong Kong’s stock market culture,” said Alex Wong Kwok-ying, a fund manager at Ample Finance Group. “Most investors here like companies with stable profits.”

It’s a company that doesn’t really fit into Hong Kong’s stock market culture
Alex Wong Kwok-ying, Ample Finance Group

Wong said the volatile trading in the past weeks had largely been a result of speculation.

“Last year’s earnings numbers are not important. Investors will focus on its user number growth and the progress in preparing for future monetisation.”

Meitu said it logged 520 million monthly active users for its photo and video-streaming apps in January, compared with the 456 million in October 2016. More than 500 million of its 1.2 billion accumulated users are outside of mainland China, according to Cai.

As its next step to monetise the user base the company plans to launch an e-commerce platform for fashion products in the first half of this year

Ryan Roberts, a Hong Kong-based analyst at MCM Partners, said Meitu has great potential to earn profits given that most of its users are young urban women with strong purchasing power.

“The demographic of its user base is perfect for maternity products, cosmetics and apparel, which are the sweet spots for commerce,” Roberts said.

“People who use Meitu’s products appreciate the beauty aspect of things. Those type of consumers are different from average e-commerce consumers who shop on prices.”