Industry dynamics
On the evening of January 18, Beijing time, Microsoft (MSFT) announced that it planned to acquire the world-famous game developer Activision Blizzard (ATVi) for us $68.7 billion. The acquisition includes Activision, Blizzard, King studios and a series of E-sports businesses under Major League gaming. After the acquisition, Microsoft will become the third largest game company in the world in terms of revenue. The transaction is expected to be completed after July 2023.
Main points
High premium acquisitions highlight the value of high-quality content developers.
In this transaction, Microsoft will acquire Activision Blizzard at a premium of US $95 per share and about 45% of the previous closing price, corresponding to 27 times dynamic PE. Not long ago, on January 10, take two also announced that it would acquire Zynga, a well-known mobile game manufacturer, at a high premium of 64%. These two transactions are also the two largest acquisitions in the game industry so far. The high premium acquisition of Microsoft and other companies fully reflects the importance and scarcity of high-quality game content providers. Microsoft’s acquisition PE of Activision Blizzard is higher than the dynamic PE of a number of high-quality A-share and Hong Kong stock game companies such as G-Bits Network Technology(Xiamen)Co.Ltd(603444) . There is room for the valuation level of high-quality game content companies to rise.
The game industry is the core application scenario of the future meta universe.
We reiterate the view that “the game industry is the core application scenario for the future meta universe” in the 22-year annual strategy. Microsoft also said in the acquisition announcement: “this acquisition will accelerate the growth of Microsoft’s game business in the fields of mobile, PC, host and cloud, and provide the cornerstone of building a meta universe.” The overall layout of the Internet giant’s deep combination of software and hardware is expected to accelerate the development of the meta universe industry. Taking Microsoft as an example, in terms of hardware, Microsoft has worked in the field of game consoles for more than 20 years, and also has hololens series headsets in the field of mixed reality. In terms of software, Microsoft will have 30 internal game studios after the acquisition, The company’s product matrix will include the original halo, ancient scroll, my world, and a series of world-famous games such as call of duty, Warcraft and Diablo of Activision Blizzard. Tencent and other Chinese Internet giants have recently begun to layout game related hardware fields while deeply cultivating game content.
Investment advice
We are optimistic about the future development of the game industry, high-quality game content developers are expected to usher in the opportunity to improve the valuation, and the continuous promotion of meta universe technology is expected to open the future growth space of the industry. It is recommended to pay attention to high-quality game manufacturers such as G-Bits Network Technology(Xiamen)Co.Ltd(603444) , Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) , Perfect World Co.Ltd(002624) , heart company, Kingnet Network Co.Ltd(002517) and related targets of meta universe industrial chain such as Wuxi Boton Technology Co.Ltd(300031) , Guangzhou Wahlap Technology Corporation Limited(301011) , Zhejiang Jinke Tom Culture Industry Co.Ltd(300459) , Shanghai Fengyuzhu Culture Technology Co.Ltd(603466) .
Risk tips
The regulation is further tightened, the industry competition is intensified, and the development of new technologies is lower than expected
