China Securities initiated coverage on iClick (NASDAQ: ICLK)

at Buy with a target price of US$20

China Securities initiated coverage on iClick Interactive Asia Group Limited (NASDAQ: ICLK) at Buy with a target price of US$20 on 25 March 2021, representing an upside of 76.7% from 24 March 2021 closing price of US$11.32.

Established in Hong Kong in 2019, iClick has since established a strong foothold in the AdTech marketing platform industry. It is currently the largest independent third-party online marketing technology platform, holding leading position in the independent online marketing and enterprise data solution industry, and aims to facilitate the transition of enterprises towards SaaS marketing.

China Securities believes that the emerging WeChat private domain highlights the attractiveness of a decentralized platform, and third-party service providers, such as iClick, is expected to benefit from the upgrade of mini programs in the medium-to-long-term. According to the financial results of Tencent, as of 30 June 2020, the MAU of WeChat (China and international version) grew by 6.5% year-on-year (yoy) to 1.2 billion, showcasing a massive business potential of social e-commerce. The focus of mini programs upgrade in 2021 is to promote transaction growth within the ecosystem. China Securities thinks that the further upgrade of mini programs will lead to a breakthrough in the bottleneck of client acquisition, and help merchants to reach target users more easily.
 

Through its high-quality channels, such as Tencent, iClick has accumulated a large overseas client base. As of 2019, iClick had over 3,000 brand customers and provide retail and FMCG clients with various scenario-driven marketing services and data support. China Securities sees the potential of iClick's marketing solutions' clients moving towards its enterprise SaaS services, which would further drive business growth. As of the third quarter of 2020, iClick has collaborated with 150 enterprise clients, and helped them to consolidate internal data, build data center as well as to develop customized customer life cycle management solutions. Thus, China Securities expects the number of iClick's customers will double in 2021.

On 26 January 2021, iClick received strategic investment from Baozun Inc. As part of the transaction, Baozun and iClick have entered into a strategic cooperation framework agreement, pursuant to which both parties will collaborate in developing a full-cycle, closed-loop e-commerce service model, covering areas such as system development, IT services, digital marketing, store operation, customer services and warehousing and fulfillment services, in order to better serve its potential brand partners. China Securities believes the collaboration with Baozun is in line with iClick's transformation towards an enterprise CRM SaaS platform. It is expected that the collaboration will be a win-win situation for both parties, while helping iClick to strengthen its technological and operating know-how as well as further diversifying its product pipelines.

Based on the aforementioned factors, China Securities initiated at BUY. The target price US$20 is based on the PS valuation commonly used by SaaS companies, with 10x 2022 P/S for its enterprise SaaS solution and 3x 2022 P/S for its marketing solution (benchmarking against Joy Spreader).