Equity Analysis /
Thailand

YGGDRAZIL Group PCL: 1 game = 98% growth in 2021, 5 games =? in 2022

  • From a service-based to product-based model

  • 1Q-2Q22—HSH beta-2, new IP, and ZooRacers

  • 33% profit growth with scope for another 30% upside

Napon Jaisan
Napon Jaisan

Equity Research Analyst

Bualuang Securities
4 April 2022

Since the XA (a rights offering, stock dividend, and warrant) on Feb 11, YGG’s stock price has been volatile. But we believe the digestion period has ended and it’s time to focus on the firm’s fundamentals. In 2022 we expect YGG to realize huge profits from its game biz and metaverse projects, which will drive YoY earnings growth in the 33-80% range. Our fully-diluted target price upsizes from Bt13 to Bt14 and our call shifts up from HOLD to BUY. 

From a service-based to product-based model

YGG plans to shift from a service-based to a product-based business model through intellectual property (IP) licensing. In 2021 the firm expanded digital production capacity across virtual production services. It is in talks with some major studios in China and OTT platforms over possible co-productions. We now conservatively assume revenue growth of 15% for its VFX and animation businesses. In 2021, YGG’s core profit shot up 98% YoY with only one game launched—Home Sweet Home: Survive in Mar 2021. During 2022 the firm will launch at least five games. Therefore, we expect strong earnings growth in 2022.