NCsoft (036570) Korea – Equity Research

Cruising along Internet

Buy Aion Collector's Edition maintains the No. 2 ranking in PC game sales in US 26 Aug 2009 and Bloomberg: 036570 KS Aion, which ends close beta testing on Aug. 17, is scheduled for open beta testing and Target Price (12M, W): 280,000 commercialization in September in US and Europe. Aion Collector's Edition, which cost Share Price (08/25/09, W): 134,000 US$59.99 to download, maintains the No. 2 ranking in weekly PC game sales according to Expected Return (%): 109.0 , a popular game download site. Sector: Internet and Services EPS Growth (09F, %): 636.9 At MMORPG.com, Aion beat out its rival WoW (World of Warcraft) by a large margin and Market EPS Growth (09F, %): 54.3 ranked No.1. The sustainability of Aion's success will be confirmed by the trend in weekly P/E (X): 13.6 unique hits for Aion at MMORPG.com, which reflects gamersÊ interest. Market P/E (08/25/09F, X): 14.4

Table 1. Top 10 unique hits at MMORPG.com (unique hits) Market Cap (Wbn): 2,906 Rank In a week In a month Shares Outstanding (mn): 22 1 Aion 103,450 Aion 379,777 Avg Trading Volume (60D, '000): 554 2 World of Warcraft 52,284 World of Warcraft 176,804 Avg Trading Value (60D, Wbn): 81 3 Warhammer Online 35,779 Star Wars: The Old Republic 116,568 Margin Balance ('000 sh): 485 4 32,471 Warhammer Online 113,948 Dividend Yield (09F, %): 0.7 5 EVE Online 32,010 Champions Online 104,979 Free Float (%): 64.1 6 Star Wars: The Old Republic 31,809 Darkfall 104,069 52-Week Low/High: 24,400/193,000 7 Atlantica Online 30,351 Age of Conan 99,945 8 Fallen Earth 26,518 EVE Online 99,379 Beta (12M, Daily Rate of Return): 0.8 9 Karos Online 25,596 Atlantica Online 95,117 Price Return Volatility (12M Daily, %,SD): 4.4 10 Age of Conan 23,524 City of Heroes 88,785 Foreign Ownership (%): 15.9 Rank In 6 months In a year Major Shareholder(s): 1 Aion 1,273,858 Warhammer Online 2,587,132 T. J. Kim et al. (26.48%) 2 Warhammer Online 794,819 Aion 1,855,798 Mirae Asset Mgt. et al (14.38%) 3 Darkfall 688,371 Darkfall 1,616,847 Treasury stock (9.41%) 4 Star Wars: The Old Republic 674,274 World of Warcraft 1,263,936 5 World of Warcraft 623,219 Age of Conan 1,258,214 Price Performance 6 Age of Conan 598,572 of the Rings Online 1,202,976 (%) 1M 6M 12M 7 Atlantica Online 536,187 Atlantica Online 1,092,539 Absolute 2.7 86.6 161.2 8 Lord of the Rings Online 519,292 EVE Online 1,021,776 Relative -3.9 36.6 154.6 9 EVE Online 517,859 Star Wars: The Old Republic 966,909 10 The Chronicles of Spellborn 444,466 The Chronicles of Spellborn 916,522 Note: Based on August 25, 2009, the ranking is calculated by the popularity, number of unique hit, the characteristic of site is in Table 6. Source: mmorpg.com, Daewoo Securities Research

FY Sales OP OP Margin NP EPS EBITDAFCF ROE P/E P/B EV/EBITDA Share price (Wbn) (Wbn) (%) (Wbn) (W) (Wbn) (Wbn) (%) (x) (x) (x) 420 KOSPI 12/07 223 47 21.1 45 2,205 56 19 10.4 22.2 2.3 13.3 320

12/08 240 46 19.0 27 1,334 57 10 6.4 39.4 2.6 15.6 220

12/09F 473 235 49.7 201 9,831 252 179 39.5 14.0 4.7 10.4 120

12/10F 571 313 54.9 297 14,526 333 230 40.0 9.5 3.2 7.1 20 12/11F 677 397 58.7 403 19,673 419 302 37.5 7.0 2.2 4.8 8/08 12/08 4/09 8/09 Source: Company data, Daewoo Securities Research estimates Chang Kwean Kim +822-768-4321 [email protected]

Jee-Hyun Moon +822-768-3615 [email protected] Please carefully read important notices in the last pages of this report. NCsoft

Figure 1. Weekly unique hits for Aion at MMORPG.com Figure 2. Monthly unique hits for Aion at MMORPG.com ('000) ('000) 200 Weekly 800 Monthly

150 600

100 400

50 200

0 0 Aug 14 Aug 21 Aug 28 Sep 4 Sep 11 Sep 18 Aug 14 Aug 21 Aug 28 Sep 4 Sep 11 Sep 18

Source: mmorpg.com, Daewoo Securities Research Source: mmorpg.com, Daewoo Securities Research

Figure 3. Semi-annual unique hits for Aion at MMORPG.com Figure 4. Annual unique hits for Aion at MMORPG.com ('000) ('000) 2,000 Semi-annually 3,000 Annually

1,500 2,250

1,000 1,500

500 750

0 0 Aug 14 Aug 21 Aug 28 Sep 4 Sep 11 Sep 18 Aug 14 Aug 21 Aug 28 Sep 4 Sep 11 Sep 18

Source: mmorpg.com, Daewoo Securities Research Source: mmorpg.com, Daewoo Securities Research

Figure 5. Aion weekly ranking

Jun 14 Jul 5 Jul 26 Aug 16 Sep 6 Sep 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Steam Direct2Drive 15 (Rank)

Note: Based on revenue, the characteristic of each site is in Table 6. Source: Steam, Direct2Drive, Daewoo Securities Research

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Table 2. Aion CollectorÊs Edition and Standard Edition Aion Collector's Edition Aion Standard Edition Price $59.99 ($69.99 as a box in offline-store) $49.99 Package includes a 30-day subscription (37 days if purchased online) Aion Collector's Edition Bonus Items: Sprint Ring, Stat-Boosting Hat, and XP Tailsman (available when game goes live): Contents Black Cloud Earring (gives an HP and MP boost) Package includes a 30-day subscription Special character title ("Pioneer of Aion") with stat boost Color dye to tint one in-game item Two character emotes (Disco and Samba Emotes) Source: Company Data, Daewoo Securities Research

Table 3. Top 10 weekly sales of PC games Steam Dircet2Drive 1. Left 4 Dead / Valve 1. Champions Online (pre-order) / Cryptic 2. Aion Collector's Edition (pre-order) / NCsoft 2. Fallen Earth (pre-order) / Fallen Earth, Icarus Studios 3. Counter-Strike: Source / Valve 3. Aion Collector's Edition (pre-order) / NCsoft 4. Kiling Floor / Tripwire Interactive 4. Rise of Flight / neoqb 5. Team Fortress 2 / Valve 5. Civilization 4: The Complete Edition / Firaxis 6. Fallout Collection / Interplay 6. The Sims 3 / The Sims Studio 7. The Orange Box / Valve 7. Fallout 3 / Bethesda Softworks 8. Hearts Of Iron III / Paradox Interactive 8. Hearts of Iron III with Sprite Packs Bundle / Paradox Interactive 9. Valve Complete Pack / Valve 9. Call of Duty 4: Modern Warfare / Infinity Ward 10. 1701 A.D. Gold Edition / Aspyr Media, Inc. 10. Neverwinter Nights 2 Complete Bundle / Obsidian Note: Based on the sales result in August 9~15, the ranking is calculated by revenue size Source: Steam, Direct2Drive, Daewoo Securities Research

Table 4. Type of Aion sales in US and Europe # Type Details 1 Pre-order The term means both types 2 and 3 When customer only buys a beta key for $5, customer can decide to pay the remainder when Aion is commercialized. Only available offline. 2 Pre-sale Benefits: Early game access (48 hours before commercialization) Access to Aion server character pre-selection Access to all BETA event weekends When customer purchases full package: $49.99 (Standard), $59.99 (CollectorÊs Edition). 3 Pre-tail Only available online. Digital downloads available at Steam, Direct2Drive Source: Company data, Daewoo Securities Research

Table 5. Schedule of Aion service in US and Europe Date Details Sales of beta key May 14~ Sales of package June 17~ 3rd July 2~6 Asmodian levels 1~20 4th July 17~20 Elyos and Asmodian levels 1~25 Close beta testing 5th July 31~Aug. 3 Elyos and Asmodian levels 1~30 6th Aug. 14~17 Elyos and Asmodian levels 1~30 NCsoft will participate at game show in Marketing in Europe Germany Aug. 19~23 Participants can experience Aion at the show 1st Early Sep. Different from Korea, kind of close beta testing with bigger scale Open beta testing 2nd Mid Sep. Different from Korea, kind of close beta testing with bigger scale US Sep. 22 Pre-order provides 48 hour early access before commercialization Commercialization Europe Sep. 25 Pre-order provides 48 hour early access before commercialization Source: Company data, Daewoo Securities Research

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Table 6. Information of each site that releases ranking of pc games Site name Ranking term Base Introduction

Daily, weekly, Popularity MMORPG.COM delivers news and is a community for the MMORPG genre. It covers 347 games, has MMORPG.com monthly, yearly (unique hits) 1,780 guilds (communities), 1,098,628 members, 2,905,520 posts.

Steam is a pioneer in an online gaming platform that provides the ability to distribute games and other content directly to more than 15 million gamers around the world. Steam opens up new channels of distribution and allows for non-traditional product offerings while increasing profit margins to content creators. Steam Weekly Revenue Valve, which operates Steam, is an entertainment software and technology company founded in 1996 and based in Bellevue, Washington. The companyÊs debut title, Half-Life®, has won over 50 Game of the Year Awards and was named "Best PC Game Ever" in November 1999, October 2001, and April 2005 issues of PC Gamer, the world's best-selling PC game magazine.

Direct2Drive, a digital download retail store, allows gamers to download PC games directly to their hard drives and offers game publishers a new channel to sell both their new and catalog PC game titles.

IGN Entertainment, which operates D2D, is a unit of Fox Interactive Media, Inc. and a leading Internet media and services provider focused on the videogame and entertainment enthusiast markets. IGN's Direct2Drive (D2D) Weekly Revenue properties collectively attract more than 31 million unique monthly users worldwide. Their network of videogame-related properties (IGN.com, GameSpy, FilePlanet, TeamXbox, 3D Gamers, Direct2Drive and others) is the web's number one videogame information destination and attracts one of the largest concentrated audiences of young males on the Internet. They also own and operate the popular movie- related website, Rotten Tomatoes, and one of the leading male lifestyle websites, AskMen.com. In addition, they provide technology for play in videogames.

Source: Company data, Daewoo Securities Research

4 Important Notices Equity Research for International Investors (ERII)

As of the publication date, Daewoo Securities Co., Ltd. issued equity-linked warrants with NCsoft as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies. As of the publication date, Daewoo Securities Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of NCsoft as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies. This report is a translation excerpt of the Korean version publicly released on August 25, 2009. Analyst of the subject company or member of the analyst's household does not have any financial interest in the securities of the subject company and the nature of the financial interest (including without limitation, whether it consists of any option, right, warrant, future, long or short position). This report reflects the sole opinion of the analyst without any external influences by third parties.

Ratings Distribution Analyst Industry Ratings of Daewoo Securities Buy Relative Performance of +20% or greater Overweight Industry fundamentals are favorable or improving Trading Buy Relative Performance of +10% or greater, but with variability/volatility Neutral Industry fundamentals are steady without any material changes Hold Relative Performance of -10% and +10% Underweight Industry fundamentals are unfavorable or worsening Sell Relative Performance of -10% Note: 1) Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. 2) Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development. Source: Daewoo Securities

Ratings and Target Price History (Share price (----), Target price (----), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆))

(W) NCsof t[BUY/W280,000] 350,000

300,000

250,000

200,000

150,000

100,000

50,000

0 8/07 11/07 2/08 5/08 8/08 11/08 2/09 5/09 8/09

This report has been provided by the research division of Daewoo Securities Co., Ltd. The stock ratings, target prices, estimates and overall viewpoints are from the research division of Daewoo Securities. Investors can access Daewoo SecuritiesÊ research through Daewoo research direct (www.bestez.com), FirstCall Research, Reuters, FnGuide, WiseFn, and Bloomberg (DWIR). This document was prepared by Daewoo Securities Co., Ltd. („Daewoo‰). Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith. The information has not been independently verified. Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy or completeness of the information and opinions contained in this document. Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. This document is for information purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments. This document may not be reproduced, further distributed or published in whole or in part for any purpose.

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