The “maxing” of Free Fire’s growth potential has spurred Maybank Kim Eng to maintain its “buy” call and target price of US$378 ($507.79) on technology firm Sea.
This is slated to give the counter a 9% upside from its $346.09 price, analyst Lai Gene Lih writes in an Oct 15 note.
His move follows the launch of Free Fire Max – the higher spec version of the game which features better graphics, animation and draw distance which are believed to help re-engage existing users while reaching out to new ones.
See: Sea Limited goes deeper into the red with FY20 net loss of US$1.62 bil despite 101.1% surge in total revenue
So far, the latest version has garnered over 50 million downloads since its launch on Sep 28.
For comparison, the popular Pokemon Go took 19 days to hit 50 million downloads on Play Store, notes Lai.
“While we are cognizant that a chunk of MAX’s downloads could be from the existing Free Fire user base, the point to underscore is that MAX appears to be exhibiting momentum in re-engaging existing users and keeping them sticky, which is an efficient use of capital to maximize return on a successful game,” he elaborates.
Free Fire MAX’s game plan is to offer existing users more immersive game play while allowing them to create new maps. They are also able to play on MAX by linking their progress through Garena’s Firelink technology.
Meanwhile, Lai believes that the latest version of the game will see it being played in “new markets” where users are more affluent and have a tendency to use more premium smartphones.
In 1H2021, Garena came in tops in terms of mobile game net revenue in India, Indonesia, Thailand, Brazil and Mexico – some of the fastest growing economies in the world.
While PUBG was the highest grossing game across Asean, Latin America and India – Lai believes that the immersive nature of MAX could potentially “narrow the gap with PUBG” especially among iPhone users.
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For now, the key risks to both Sea and Garena is in ESG (Environmental, Social and Governance), says Lai. “China’s crackdown, as well as Bangladesh’s 3 month ban of Free Fire (along with other addictive apps) could ignite greater awareness of social risks,” he explains.
Shares in Sea closed up US$2.59 or 0.73% at US$357.09 on Oct 18.
Cover image: file photo
