PhillipCapital analysts Liu Miaomiao and Paul Chew have initiated &ldquo buy&rdquo on live-streaming company 17LIVE with a target price of $2.30.

 

In a paid April 8 report, the analysts expect 17LIVE&rsquo s revenue growth to resume its upwards trajectory in FY2024. &ldquo After declining for three years, we expect revenue to stabilise this year, and return to full-year growth in FY2025,&rdquo they add. 

 

The analysts point out that 17LIVE&rsquo s monthly active users (MAU) will begin its recovery with a growth rate of around 10% in FY2024 from new content offerings in Southeast Asia, product enhancements and reinvestment into marketing. 

 

Leveraging its IPO as a launchpad, 17LIVE is eager to expand into the Southeast Asia market, where there is currently no dominant player in the industry. The analysts foresee revenue contribution from other regions to increase by about 15% in FY2024 as 17LIVE intends to bring its existing content overseas, noting that the company also aims to expand its Japan V-Liver content to other countries as it matures. 

 

With a net cash balance of US$102.7 million ($137.5 million) as at December 2023, inorganic growth via acquisitions can add more steamers with their accompanying users onto the platform, Liu and Chew add. This network effect will further elevate the appeal of the platform to other streamers and users.

 

At present, 17LIVE is directing its efforts towards profitability, resulting in an uptick in quality MAU, spend rate, and average rate per paying user (ARPPU). Quality MAU comprises 14.4% of its total MAU in Japan and 12.9% in Taiwan. In FY2024, Liu and Chew anticipate an organic MAU growth of about 10% while maintaining a constant paying ratio and ARPPU.

 

&ldquo We are assuming a stable paying ratio and ARPPU from 17LIVE for FY2024 &ndash FY2028. We expect the paying ratio to remain at the FY2023 level of 16%,&rdquo Liu and Chew note.

 

For FY2024, V-Liver and e-commerce are expected to be the main growth drivers. The analysts expect stronger performance in the V-Liver segment as 17LIVE is the market leader in Japan, which could potentially boost income by around 25%. Meanwhile, e-commerce and in-app gaming as the cash cow business will also be emphasised in FY2024, with a projected growth rate of about 30%. 

 

The analysts highlight that cost-efficiency and streamlining cross-border virtual coin purchasing are expected to boost 17LIVE&rsquo s margins further. They note that the company is seeking to halve research and development costs without compromising user experiences to offset higher marketing in FY2024.

 

That said, Liu and Chew expect marketing expenses to slightly creep up in 2HFY2024, depending on the success of the company&rsquo s cost-restructuring. 

 

&ldquo We believe the group can further optimise its revenue and operating model, thereby improving profitability from FY2024 onwards,&rdquo they conclude.

JOINT entertainment offerings across South-east Asia are in the sights of both 17Live Group : LVR -2.44% and mm2 Asia : 1B0 0%, 17Live said on Tuesday (Mar 5).

 

A memorandum of understanding has been signed by livestreaming platform 17Live and media and entertainment company mm2 Asia to collaborate on entertainment marketing and production-related activities.

 

Such activities would include marketing of movies, collaboration between live streamers and mm2 movie projects, as well as the production of long-form animation content.

 

The companies will collaborate to harness respective competitive skill sets in the entertainment industry to bring about new content and offerings to audiences across South-east Asia, the statement said. They will look at investing in entertainment content in the region as well.

 

The agreement will see parties possibly forming a joint venture of a business unit focused on delivering livestream content via a platform co-owned by both companies.

 

LIVESTREAMING platform operator 17Live reported a net loss of US$129.7 million for the second half ended December 2023, widening from the previous year&rsquo s H2 net loss of US$9 million.

 

On Wednesday (Feb 28), the group said that this comes after factoring in US$130.4 million in non-operating expenses versus just US$18 million in H2 FY2022, along with non-cash revaluation losses on financial liabilities at fair value. 

 

The latest half-year period&rsquo s non-operating expenses were incurred mainly from its business combination with Vertex Technology Acquisition Corp (VTAC).

 

Operating revenue for H2 fell 21.7 per cent year on year to US$127.9 million, while total operating expenses dropped 1 per cent to US$51.1 million.

 

Loss per share (LPS) widened to US$0.0224 from US$0.004 in H2 FY2022, and amounted to US$0.0614 for the full-year period versus an LPS of US$0.0226 in the prior year.

 

For FY2023, the group&rsquo s net loss stood at US$247.9 million as opposed to the US$51 million loss reported the previous year.

 

Operating revenue declined 23.3 per cent to US$278.9 million, which the group attributed to a shift in focus towards higher-margin revenues and returns on investment.

 

Intense competition in the livestreaming business resulted in some competitors offering higher rates of streaming fees to streamers, it added.

 

The group also noted that its e-commerce offering OrderPally turned in a &ldquo solid segmental profit&rdquo .

 

Joseph Phua, chief executive and executive chairman of 17Live, said that the group&rsquo s transition into a listed entity through its combination with VTAC &ldquo created complexities&rdquo due to one-offs and non-cash items in its FY2023 financial results.

 

The merger nonetheless &ldquo spearheaded the group&rsquo s growth trajectory in 2024&rdquo . &ldquo Importantly, gross margins have continued to increase and impressive Ebitda (earnings before interest, taxes, depreciation and amortisation) growth reflects the strong cash flow we continue to achieve in our business.&rdquo

 

Excluding the net effects of one-offs, the group posted an adjusted FY2023 Ebitda increase of 26 per cent to US$20 million versus FY2022&rsquo s actual Ebitda of US$15 million.

 

Gross profit margin for the year improved to 41.2 per cent from 34.7 per cent in FY2022.

 

17LIVE sprang from the dating app Paktor (Cantonese for &ldquo to go on a date&rdquo ), founded by Joseph Phua in 2013 upon graduating from business school.

 

With quick success, Phua &mdash and co-founder Ng Jing Shen (now 17LIVE&rsquo s chief technology officer) &mdash transitioned to focus full-time on Paktor&rsquo s growth.

 

Phua gathered approximately $2 million in working capital to make it happen by &ldquo scraping and borrowing&rdquo from everyone he knew. However, being his first venture into business, the company ran out of money within six months.

 

The Singaporean recalls that his enduring relationship with Vertex Holdings began in July 2013 when the fund management firm under Temasek Holdings approached him, expressing interest in providing capital after recognising the company&rsquo s growth. Initially uninterested, Phua informed the prospective investor that Paktor had no intention to raise funds from external sources.

 

&ldquo We had $2 million in the bank why would we need to fundraise? Why would I need to give up my equity to raise money? It&rsquo s obvious now that I didn&rsquo t know what I was doing. It didn&rsquo t help that the venture capital scene was at its nascent stages across the region,&rdquo he adds.

 

Acknowledging his earlier mistake, Phua approached Vertex in 2014. After detailing the strengths and weaknesses of Paktor and the team&rsquo s efforts to ensure business survival, Vertex Ventures agreed to become the company&rsquo s first institutional investor.

In 2016, bolstered by additional capital from Vertex Asia Fund, YJ Capital, Golden Equator Capital and K2Global, Paktor acquired several other dating apps. During this period, Phua crossed paths with Jeffery Huang, the founder of 17Media, a small company operating a Taiwanese live-streaming platform since 2015.

 

Despite having a sound business model, 17Media encountered cash flow difficulties and other challenges. Recognising synergies between the two companies, Paktor acquired a controlling stake in 17Media. In 2017, the merger of the two entities resulted in the formation of M17, with Phua serving as CEO and co-founder.

 

The next step

 

The company ventured into the Japanese market the same year, asserting it had achieved and sustained a leading position. Currently, 17LIVE is the largest live-streaming platform in Japan and Taiwan, in addition to its operations in Hong Kong, Singapore, the US, the Philippines, India and Malaysia.

 

&ldquo The media platform we built exceeded all expectations. I think it is an amazing business, the kind of business that the more you grow, the more profitable it becomes. When we were running the dating app business, we would be happy when we managed to get $300,000 in revenue per month. 17LIVE was able to generate that revenue in an hour. It is on a completely different level,&rdquo says Phua.

 

With this optimism driving them, M17 set a new goal: A US public listing. Fuelled by aggressive expansion, Phua and the M17 team believed the company was IPO-ready. Despite incurring substantial operating losses due to expansion, the company also demonstrated remarkable revenue growth, surging by 37.8% year-on-year to reach $38 million in 1QFY2018.

 

M17 aimed to be the first Taiwan-based company to list on the New York Stock Exchange (NYSE). However, it gained notoriety for a different reason &mdash becoming the first company in NYSE history to report no trades after ringing the opening bell. The trading had to be cancelled due to share settlement issues and overall underwriting oversight.

 

The aftermath proved to be the toughest period for Phua and M17. Apart from addressing the fallout from Huang&rsquo s disappointment, conveyed through a public social media post, Phua had to undertake substantial company restructuring.

 

Trimming various roles linked to the IPO&rsquo s success drew attention from Taiwan&rsquo s labour department, intensifying media scrutiny. Despite taking over a few months, the dust eventually settled, allowing the M17 team to regroup and resume its growth trajectory.

 

Throughout the ordeal, Phua stresses the importance of moving forward and evolving, enabling him to &ldquo cover the scars.&rdquo He adds: &ldquo As long as I keep on taking the next step, I know I can eventually bring the company to where I wanted it to be.&rdquo  

 

 

On the evening of Jan 26, Singapore&rsquo s sole successful spac company, 17LIVE, declared the immediate resignation of its CEO, Alex Lien, citing &ldquo personal family reasons&rdquo . Joseph Phua, former and current CEO, admitted to the unusual announcement but assured The Edge Singapore that it was &ldquo not a surprise.&rdquo

 

&ldquo Of course, we expected [Lien] to continue leading the business for some time to come, so his resignation was not something we anticipated &mdash especially within the first month into the year,&rdquo says Phua. 

 

17LIVE only started trading on the Singapore Exchange S68 2.14% as a merged entity with Vertex Technology Acquisition Corp on Dec 4, 2023. Since trading as 17LIVE on Dec 8, its share price has dropped $1.85 to around $1.30 as of Feb 2. For VTAC investors who paid $5 for the IPO shares, that is clearly a much bigger hit.

 

Shareholders might not welcome Lien&rsquo s resignation so soon after the listing. &ldquo It is not something that we did not have context for. We have been aware of it for quite a while,&rdquo says Phua. 

 

He says that as 17LIVE&rsquo s primary operations are in Japan, Lien had to oversee the company&rsquo s day-to-day affairs distant from his family in Taiwan. This translates to numerous sacrifices made by Lien over the past year.

 

Consequently, the board concurred to acknowledge Lien&rsquo s resignation and reinstated Phua to the role he vacated in 2020. &ldquo As we understood where it was coming from, it was a little easier for us to accept it. However, it was not something we saw coming at all.&rdquo

 

Lien assumes the senior advisor role for one year to facilitate the transition. His journey with 17LIVE began in September 2022 as group COO and he ascended to group CEO by March of the following year. Before his tenure at 17LIVE, Lien held key management roles in renowned Fortune 500 companies, including Starbucks and Electronic Arts.

 

Preceding Lien, venture capitalist Hirofumi Ono held the reins as 17LIVE&rsquo s CEO, succeeding Phua, who transitioned to company chairman. Ono spearheaded the company&rsquo s business strategy and growth in Japan, steering it resiliently through the pandemic.

 

Now that Phua has returned to his old job, he expects to stay on and not see himself as an interim. He expects to lead the team for years, highlighting that the company has ample room to grow. &ldquo One thing that is helpful to alleviate any concerns is that [Lien&rsquo s] replacement is not new. I am one of the pioneers of the live-streaming industry in the region. I built the company from the ground up in 2016 and am familiar with the operations inside out.&rdquo

 

Growth strategy

 

Despite the significant leadership shakeup, Phua says there will be no deviations from the company&rsquo s growth strategy. The focus remains on business expansion through M& A, driving product initiatives for the virtual liver (V-Liver) segment and actively pursuing commerce initiatives.

 

Aside from that, the company is aggressively expanding its market share in various markets by signing up more exclusive content creators. The platform has over 87,000 live streamers who have signed contracts spanning one to seven years. 

 

17LIVE has plans to scale its presence in Southeast Asia, where the live-streaming industry is forecasted to grow significantly. According to Frost & Sullivan, the market size for live-streaming in Southeast Asia is expected to increase from US$1 billion ($1.3 billion) in 2023 to US$2.1 billion in 2027, representing a CAGR of 19.2%. 

 

Beyond expanding its live streamer and user base in the region, 17LIVE is set to forge partnerships with media and entertainment giants across Southeast Asia, says co-founder and chief technology officer Ng Jing Shen. This strategy mirrors existing collaborations, exemplified by the alliance with Japanese video game powerhouse Sega.

 

In November 2023, Sega released Like a Dragon Gaiden, a spin-off title of its widely successful video game series Yakuza. 17LIVE Shop was integrated into the Yakuza (Like a Dragon Gaiden) x 17LIVE Shinjuku Vision Appearance Contest. Aside from allowing viewers to make purchases and payments on the platform, top-ranked streamers in the event could win the right to appear in a Shinjuku Station Vision advertisement for the game series&rsquo highly anticipated latest instalment, Like a Dragon: Infinite Wealth.

 

&ldquo We do these types of collaborations often in Taiwan and Japan. It presents advertisers with a unique marketing approach while also providing our creators with brand partnership deals that they may not be able to acquire independently. We are looking to establish these collaborations in Southeast Asia with the local giants,&rdquo says Ng.

 

The company also hopes to tap into the V-Liver growth in Southeast Asia. 17LIVE witnessed strong growth momentum in its V-Liver business, with an average of 2,000 V-Liver monthly active streamers and 75,000 active users in 2Q2023, representing a y-o-y increase of 6.5 times and 2.1 times, respectively. The company has also recorded a strong engagement, with an average of approximately 30,000 V-Liver spenders per month in 2Q2023, a 2.7 times increase y-o-y.

 

However, Ng understands that it may be hard for regular people to understand why live streamers with animated avatars are appealing. To explain, Ng says that V-Livers are part of the growing Japanese animation (Anime) culture. He says that more people are getting into anime-related content, which is clear from the increased media consumption.

 

In 2020, Netflix revealed that over 100 million households worldwide watch at least one anime title on the platform. Anime titles consistently made the top 10 list in nearly 100 countries that year. Fast forward to the first half of 2023, Netflix disclosed its most-watched anime titles, with the first season of Demon Slayer racking up a staggering 95.8 million hours in views.

 

Meanwhile, anime-related conventions have continued picking up across the region. Anime Festival Asia &mdash held since 2008 in various Asian countries &mdash drew 145,000 attendees to Suntec Convention Centre in 2022. In 2019, before the pandemic, it drew 120,000 participants. 

 

Brands are also increasingly embracing collaborations with virtual streamers for ad campaigns. These partnerships feature fashion retailer Uniqlo and electronics giant Razer.

 

The 17LIVE team is actively developing new tools for V-Livers, aiming to seize a larger share of the rapidly expanding virtual streaming market in Japan and Taiwan. In a notable move, in April 2023, 17LIVE incorporated Live2D functions into its broadcasting features. This enables users to easily upload avatars from their smartphones and engage in virtual streaming without additional hardware or software &mdash significantly reducing barriers to becoming a V-Liver.

 

The efforts to grow this business include developing its existing proprietary IP, Bushilive and marketing its new IP, GanGun Girls, which launched on Dec 25, 2023. &ldquo Once we are happy with the business path in those markets, we will bring our capabilities to Southeast Asia and build the base here,&rdquo says Ng.

 

Gaining investor confidence

 

While 17LIVE is optimistic about untapped opportunities, the company acknowledges the need for time for stakeholders unfamiliar with the creator economy to grasp its potential. Over half (62.53%) of the issued share capital of the spac shares were redeemed before the despac completion. Institutional investors, including Fullerton Fund Management and NTUC, fully redeemed their shares in the company.

 

Still, Ng emphasises the company&rsquo s unwavering commitment to delivering value to its stakeholders. He adds: &ldquo Live-streaming is quite new in this part of the world, so it will take some time for us to get the word out about our business. In terms of financials, we have been pretty solid. We have been ebitda positive since 2020 and we are a growth company with robust skills developed for this industry with a proven track record in Taiwan and Japan. I think it is a solid opportunity for investors.&rdquo  

 

Phua concurs, adding that the company has remained profitable, aside from amassing sizeable cash flow, bringing it to a much stronger position than ever before.

 

As of June 30, 2023, 17LIVE&rsquo s cash and cash equivalents stood at US$39.9 million. Phua adds: &ldquo And, of course, there&rsquo s me returning to head the company. I believe no person in Asia knows the live-streaming business better than I do. Everybody else emulated the monetisation model my team and I built.&rdquo  

 

&ldquo We are working hard to grow the business and I believe 2024 and 2025 will be the years we can prove the strategy we have laid out.&rdquo  

 

THE chief executive officer of live streaming platform 17Live, Lien Chien-Lin, has resigned.

 

In an announcement on Friday (Jan 26), the company said that Lien left for personal family reasons, and will be appointed as senior adviser for a year to assist in the transition. Joseph Phua, co-founder and current non-executive chairman, will be redesignated as executive chairman and chief executive officer from Jan 26.

 

Phua was previously the chief executive officer from September 2016 to June 2020.

 

Tan Hup Foi, an existing independent non-executive director, will be redesignated as lead independent director as well.

 

Phua said: &ldquo Having led the company through its various phases of growth since its founding through the last eight years as co-founder, CEO and chairman, I am confident I will be able to drive the company to greater heights alongside our experienced team.&rdquo