(4 Pages, 3 graphs and tables)

• We believe Tencent will try to transfer users from (刺激战场) to (和平精英), a game that recently received code approval;
• We therefore estimate the annual gross billing of may be more than RMB 10 bn. If it can be launched in July, it will bring RMB 6 bn gross billing in 2019, and its net profit maybe more than RMB 2 bn.
• We maintain BUY rating, and raise our TP from HK$406 to HK$427.

PUBGm’s game code issue might be solved
We estimate that ’s game code issue might be solved. Previously this game cannot be monetized because it didn’t have game code approval. Tencent acquired the game code of on April 10, whose gameplay mode is very similar to , in our view. We believe the user traffic of will be transferred to the in various ways.  Monetization will be realized in the new game.
 
PUBG mobile has large traffic but limited monetization
According to QuestMobile, was China's No.1 game with MAU of 186 mn (vs HOK’s 185mn) and No.2 game with DAU of 69.2mn (vs HOK’s 81.5mn) in February. Yet it generates no revenue so far because it doesn’t have game code approval.
 
<Peaceful Elite>'s annual gross billing will be >RMB 10 bn
<Peaceful Elite>'s monetization method might include skins, Battle Pass, and other items. We estimate first-month gross billing might reach RMB 1.5bn and steady state gross billing will be ~RMB800 mn, with annual gross billing reaching over RMB 10 bn. If it can be launched in July, it will bring RMB 6bn to Tencent’s top line in 2019. After considering the amortization, we believe the game might add Rmb2bn to Tencent’s bottom line. The monetization of PUBG mobile will greatly enhance Tencent's medium and long-term profitability. We maintain the BUY rating and raise the target price from HK $406 to HK $427.

Click to download the full report