IGG:MacVisit,Lords Mobile growing on track

IGG’s newly launched strategy game, Lords Mobile, is growing on track andwill potentially contribute to 20% revenue growth in FY16, according tomanagement. Meanwhile, its core existing titles, Castle Clash (60% of FY15revenue) and Clash of Lords I & II (17%), are stable. Upcoming titles in thepipeline include Casino, Tiger, and two sand-box games from the companyand its acquired Nerd Kingdom.

Key takeaways

Lords Mobile growing on track. Lords Mobile is a real-time war themestrategy game with RPG elements. The game was launched in late-March2016. Since then, gross billings have been growing, from US$3mn in April toUS$8mn in May and to US$8mn in June. With major updates and marketingcampaigns, the title may potentially generate US$10mn in July, according toIGG. The US is the biggest market for Lords Mobile, with about a 40%revenue contribution. Global DAU is about 400k currently. The revenue mixbetween iOS and Android is roughly half each. The company expects moreupside to Lords Mobile to come from China and Japan. Lords Mobile iscurrently being revamped to comply with the new game publishing rules inChina, and IGG expects to more aggressively promote the title in China afterobtaining official approval on the title. The company expects the contributionfrom China for Lords Mobile could likely exceed that of the US.

Solid top-line growth, but ad spend may weigh on margins. On the back ofthe current run rate of Lords Mobile of about US$8–10mn, IGG expects 20%revenue growth in FY16. Nevertheless, the company continues to spend heavilyon advertising to attract new gamers. Its adverting spend has been about US$4–5mn for Lords Mobile alone in recent months. To put this in perspective, thecompany expects the Lords Mobile standalone NPM will likely be in the singledigitpercent to low-teens percent range in FY16 compared to the overall adjustedNPM of 22% in FY15. The company believes earnings growth should lag behindrevenue growth in FY16. Scale matters, and based on its current outlook, thecompany believes ad spend should stabilize at current levels.

Core CC and COL remain stable. The performance of Castle Clash (60% ofFY15 revenue) and Clash of Lords I & II (17%) is stable in terms of grossbillings and user base, and the company is looking to maintain the currentperformance going forward. IGG is beginning to make more of an effort in newmarkets, including the marketing of an Arabic version. The company alsorecently set up an office in Russia for local game development and publishing.

Modest visibility on upcoming titles. In 2H16, IGG plans to launch Casino andTiger. Casino is a suite of several popular casino games that add to IGG’spreviously launched casino games, including Texas HoldEm Poker. Tiger is areal-time strategy game with castle building and hero collections. IGG and itsacquired Nerd Kingdom are each developing a sand box game. The timelinelooks to be late-FY16 or FY17 for IGG’s sand box game. Nerd Kingdom’s sandbox game, called TUG, may likely launch in FY17, according to the company.

Conclusion

With a concentrated game portfolio, IGG is launching Lords Mobile and tappinginto overseas developers, eg, it acquired US-based Nerd Kingdom to enhancegrowth. China remains a large but relatively underpenetrated market for IGG.