Phoenix New Media reported 2Q19 results (Press Release, Conference call transcript). Highlights:
- $200mm Payments for Step1 of the amended Yidian sale agreement have been received (Koneko comments on the amended agreement)
- Management confident in 20% revenue growth for FY19 and expects “at least 20% year-over-year revenue growth in the coming two to three years“
- Management expects significantly lower operating loss neat year and breakeven within 3 years
- Tadu online reading business expected to meet performance and profitability targets in the purchase agreement
- New monetization strategies for Real Estate and Fashion verticals
- 九霄缳神记 GOD SLAYER game is in beta testing (rated 9.6/10 at Chinese gaming community TapTap)
- Guidance for special dividend raised to 25-50% of Yidian proceeds (prior 15-25%). Timing is uncertain due to the change in the transaction structure, but “we will also consider a partial payment once we have secured the rest of the $50mm deposit“. So an initial dividend is possible in 4Q19 and the balance would probably be in 3Q20.
- Price was the primary reason for amendment of the Yidian sale agreement with weak market conditions and falling comp valuations.
Updated Valuation guideline:
Additional information will be available when Phoenix TV releases its Interim Results (board meeting scheduled for 8/16) and an Information Circular for shareholder approval of the revised Yidian sales agreement.
Considering FENG’s low current valuation, it would be interesting to see Phoenix TV purchase shares on the open market with cash it receives from any special dividends paid by FENG.
DISCLOSURES
The author is a shareholder of Phoenix New Media. The author does not make any recommendation regarding any investment in any company mentioned in this article. Investors are encouraged to check all of the key facts cited here from SEC filings and other sources prior to making any investment decisions.
Koneko Research 
why wouldnt Feng just do a share buyback instead of having the parent company buy shares with dividend proceeds?
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It’s great that FENG is going to deliver a significant portion of the Yidian proceeds to shareholders. This could come through dividends, share buyback, or both.
If FENG does not want to increase the total amount of cash delivered beyond the revised guidance then it would send a positive signal to FENG shareholders if PTV bought shares. And it would also be favorable for PTV to increase its investment at this low valuation.
Any investor who thinks buyback is superior to dividend should simply reinvest his/her dividend. The accretion is the same.
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In a tax free world, I would agree with your statement. But arnt there tax implications to consider? Wouldnt a buyback be more tax efficient?
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Many investors, including PTV, will not be paying tax on the dividend.
For international companies I think a meaningful cash dividend sends a strong signal about corporate governance and therefore has a long-term intangible benefit. Delivery of value through share buyback is more opaque. Many companies announce them and then don’t execute.
I’m very pleased that FENG will pay a very large dividend. I would not be disappointed if the company reserved some portion of the Yidian proceeds for share buyback, but it’s not really a big issue to me.
I would be pleased to see PTV raise its stake in FENG as an indication of confidence in FENG’s growth initiatives and future value.
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thanks, that makes a lot of sense. I appreciate your thoughtful analysis.
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