Interim results on track for a record year. The company reported interim 2023 results showing revenue of HK$1,002MM and earnings of HK$0.01. There is no consensus as all estimates are full year.

Digital content is very much direct to consumers, and it all needs protection. With the move of streaming Direct to Consumer (DTC). Through streaming, digital content has moved to a DTC model. According to FlixPatrol.com, the top three streaming services (Netflix, Amazon Prime and Disney+) alone account for nearly 600MN and all that content needs to be protected in ways that weren’t used when we all subscribed to Cable.

AI derived fakes make trouble for IP protection. The emergence of AI to develop fakes and appropriate content is of growing importance to content developers. The company is currently protecting NFTs and developing new products to keep pace with appropriated content used in AI generated content.

Substantial technology moat. The technology behind Vobile’s success is well defended and highly valuable. In the last five years, its proprietary technology has helped it grow at a five-year CAGR of 120%. To understand the value of its technology, while it only has 11 granted U.S. patents, those 11 patents are cited by companies such as Google, and IBM in their own U.S. patents 396 times.

Revisions to estimates. We are lowering our 2023 EPS estimates to HK$0.03 from HK$0.05 primarily due to higher sales and marketing and R&D costs. We are initiating 2024 estimates of HK$2,800MM for revenue and HK$0.07 for earnings.

Attractive valuation. The shares sell at a discount to peers, despite its dominant and well protected IP and high margins.