Meitu Stock Up 9% on Crypto, Dividends
On December 5, the Hong Kong stock market witnessed an enthusiastic surge among cryptocurrency-related stocks. A standout performer in this context was Boyaa Interactive, whose stock price soared over 29%, reminiscent of a rocket launch, catching the attention of many investors. Another player, Bilibili, didn't lag behind either, experiencing a notable rise of 20%, showcasing a robust bullish trend. Meanwhile, Meitu Inc. also kicked off the morning with substantial market volume, seeing its stock price jump with an increase of over 9%, although it later underwent a slight correction.
This upswing in cryptocurrency-related stocks is closely intertwined with Bitcoin's remarkable milestone of exceeding $100,000. As the front-runner in the cryptocurrency sector, Bitcoin's price climb often stirs considerable excitement across the entire cryptocurrency market, influencing the price trajectories of associated stocks. However, in addition to the overall fervor in the crypto market, Meitu’s stock jump also stemmed from the company's recent announcement regarding its dividend strategy.
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On the evening of December 4, Meitu made a significant announcement revealing plans to sell its holdings in cryptocurrencies starting from November 2024. As of December 4, 2024, the company successfully liquidated its entire cryptocurrency portfolio, including approximately 31,000 Ether and 940 Bitcoins. This divestment decision enabled Meitu to secure a substantial cash influx, with Ether generating around $100 million and Bitcoin contributing approximately $80 million.
Looking back at the acquisition history of these cryptocurrencies, Meitu had invested in Ether and Bitcoin during March and April of 2021, at a total cash outlay of about $50.5 million and $49.5 million, respectively. Simple calculations reveal that Meitu reaped an impressive profit of around $79.63 million from this sale, which translates to approximately 571 million yuan in current exchange rates.
In recent years, the cryptocurrency market has undergone a phenomenal rally, with prices skyrocketing to unprecedented levels, leading to astonishing gains. Bitcoin has led this charge, successfully breaching the $100,000 barrier and consistently resetting its historical highs. Against this backdrop, Meitu’s decision to cash out at this opportune moment undoubtedly stands as a shrewd business move.
Meitu elaborated on its rationale for the divestment in the announcement. Recently, the company’s imaging and design services—primarily based on paid subscription models—have demonstrated robust growth with high market demand. The management team aims to enhance investment in this core business area to ensure ongoing expansion and upgrades. After thorough discussions and analyses, the board concluded that liquidating cryptocurrency holdings would not only yield impressive returns but also significantly boost the company’s liquidity, providing ample funding for future business development.
Over the years, Meitu’s performance has shown a clear upward trajectory. In 2021, Meitu recorded revenues of 1.666 billion yuan, although it suffered a net loss attributable to shareholders of 44.51 million yuan. However, in the following years, Meitu turned its fortunes around. By 2022, revenue climbed to 2.085 billion yuan, and the company achieved a net profit of 94.14 million yuan; in 2023, revenues further rose to 2.696 billion yuan, with net profits skyrocketing to 378 million yuan. In the first half of 2024, Meitu continued to maintain its upward momentum, recording a year-on-year revenue increase of 28.57%, reaching 1.621 billion yuan, and net profits showing a 33.30% rise to 303 million yuan. Adjusted net profits, excluding non-operating items, reflected an impressive annual growth of 80.3%. This adjusted figure is crucial since it excludes the impacts of non-operating losses, such as cryptocurrency impairment losses, thus accurately portraying the core business's growth dynamics and profit potential.
Plans for utilizing the proceeds from the cryptocurrency sale are well-defined. Meitu has announced plans to allocate approximately 80% of the net sale profits to pay a special dividend. According to this scheme, a special cash dividend approximately amounting to 0.109 HKD per share will be distributed. This move undeniably stands to reward shareholders with tangible benefits, thereby bolstering their confidence and loyalty towards the company. The remaining net proceeds from the sale will be used as general operating funds, specifically intended to expand the group’s subscription-based imaging and design services, providing necessary financial support for business expansion to help it standout in the market.
From a cash flow perspective, by mid-2024, Meitu had total cash and cash equivalents amounting to 352 million yuan, with total liquid financial resources reaching 1.299 billion yuan, indicating a healthy overall financial status. This data somewhat alleviated the concerns of some investors who feared that the dividend initiative might utilize too much funding at the expense of normal operations. Shareholding distribution suggests a relatively high ownership percentage held by major shareholders such as Cai Wensheng and Wu Zeyuan. Consequently, they will likely benefit significantly from the upcoming dividend distribution, underscoring their influential roles within the company.