NETDRAGON (00777) overseas game rapid growth potential return attraction

NETDRAGON(00777) is mainly engaged in the development and operation of online games, education business, mobile solutions, and mobile marketing business, etc. The recently released "Draft Measures for the Administration of Online Games" mentioned that online games should not set inducement rewards such as daily login bonuses, first-time prepayments, and continuous top-ups. All online games must set user deposit limits. The market interprets this as unfavorable to the gaming industry. In the past twenty years, NETDRAGON has generally received fewer negative news in terms of regulatory issues. Public opinion criticism has mostly been directed at game companies, such as "pay-to-win mobile games," "skin-changing games," and "brainwashing marketing," which are generally unrelated to NETDRAGON. The player base of the group is generally mature and loyal players who have accurate understanding and requirements for the game itself. Their user stickiness is relatively high, so short-term inducement rewards mentioned in the new draft, such as "first-time recharge rebate," as well as measures to attract loyalty like "daily check-in," are generally not part of NETDRAGON's consistent strategy. In other words, the impact on them should be minimal. In terms of revenue layout, gaming is one of NETDRAGON's two main businesses, accounting for 52.2% of its revenue, while 46.7% of its revenue comes from the education technology business (listed in the U.S.: MYND). In terms of regional distribution, NETDRAGON's overseas games have also seen rapid growth in recent years, especially in influential overseas markets such as the Middle East. In this situation, the negative impact of future policies will be relatively small. Another point worth noting is that NETDRAGON has a good dividend record in the past, never interrupting its semi-annual dividends since listing for 16 years, including 4 special dividends, with a total of 36 dividends distributed, totaling HKD 16.68 per share. As of now, it has distributed HKD 4.93 per share in dividends since 2021. Based on the current price, NETDRAGON's dividend yield on a TTM basis exceeds 15%. In terms of trend, despite the recent unfavorable market sentiment for the sector, based on the factors mentioned above and an observation of the monthly chart, NETDRAGON has some support around HKD 10, with a potential return attraction given its main resistance around HKD 18 in recent years, representing a medium-term value play. Source: etnet; Author: Ed Financial Director, Chen Zhengshen. Disclaimer: The article only provides discussion for shareholders and should not be considered as investment advice. The author does not own any of the mentioned Hong Kong stocks. The stock market carries risks, and investment should be cautious!