[Korea] October 8, 2020

TIGER KRX Game K -New Deal ETF (364990 KS)

Three positives in 2021 : N ext -generation consoles, new title releases, and contactless trend

Mirae Asset Daewoo Co., Ltd. Chang-kwean Kim [email protected] HeeSeok Lim [email protected]

20 21 to mark an inflection point Gaming is at the heart of the entertainment industry ’s future for the gaming industry ó In 2021, the era of gaming anytime, anywhere will begin in earnest. ó Despite COVID-19 and the uncertain economic outlook for 2021, we expect the gaming industry to perform strongly, as: 1) the industry is inherently resilient to economic downturns; 2) gaming is rising in popularity among older adults; and 3) IT technologies are continuing to advance. ó In terms of investment strategy, we recommend focusing on new platforms and/or new title momentum. Key events in 2021 include: 1) the release of next-generation consoles; 2) the full- fledged deployment of cloud gaming; and 3) new title releases by major companies.

New growth opportunities amid Key drivers of the domestic and global gaming markets: N ext -generation consoles, e- the pandemic sports, and mobile games ó We expect Korea’s console gaming and e-sports markets to expand at CAGRs of 12% and 9% through 2024, respectively. ó We estimate the global console gaming and e-sports markets will expand at CAGRs of 7% and 14% through 2024, respectively. ó In Nov. 2020, Sony and Microsoft are due to release next-generation game consoles for the first time in eight years. ó Tech giants (e.g., Microsoft, Google, Amazon, and Apple) are launching cloud gaming services in 2020. We expect competition for game content to intensify in 2021 as 5G networks take hold.

Good entry point Opportune time to invest in TIGER KRX Game K -New Deal ETF; combined OP of its 10 constituents to increase 58% in 2020 and 38% in 2021 ó We forecast the combined revenue of the 10 companies held by the TIGER KRX Game K-New Deal ETF to increase 24% in 2020 and 17% in 2021. ó New title expectations are the biggest source of momentum for gaming stocks, with valuations typically soaring in the run-up to a new title release. ó Currently, the stocks held by the TIGER KRX Game K-New Deal ETF are trading at levels that do not reflect future title releases, making now a good entry point.

TIGER KRX Game K-New Deal ETF constituents

(%) 30 28.5 \

24.7 25 22.1

20

15

10 6.1 4.6 4.5 4.2 5 2.2 2.0 1.2 0 Netmarble Pearl Abyss NCsoft Com2uS Webzen NHN DoubleU Neowiz WeMade Golfzon Games Quantiwise: Mirae Asset Daewoo Research

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. October 8, 2020 TIGER KRX Game K-New Deal ETF

C O N T E N T S

I. Investment summary 3 1. 2021 to mark an inflection point for the gaming industry 3 2. Gaming sector to perform strongly despite uncertainties 3 2. Investment strategy 7

II. 2021 gaming industry outlook 9 1. COVID-19 presents new growth opportunities 9 2. Launch of next-generation consoles 15 3. Cloud gaming to enter the mainstream 16

III. ETF investment points 18 1. Operating profit to soar 58% YoY in 2020, and 38% in 2021 18 2. High P/E should not be a deterrent 20

Mirae Asset Daewoo Research 2 October 8, 2020 TIGER KRX Game K-New Deal ETF

I. Investment summary

1. 2021 to mark an inflection point for the gaming industry

Smartphones have reshaped the mobile gaming market, allowing game developers to take back control from telecom companies. Similarly, we expect the proliferation of cloud computing to simultaneously revolutionize the online and console gaming markets.

The gaming industry combines the characteristics of entertainment and technology. In the long term, IT platforms will take center stage; personal devices like smartphones, tablet PCs, and smart TVs will offer the same content and functionality, only with different display sizes.

Just as 4G mobile technology fundamentally changed the video content market (e.g., YouTube and Netflix), we expect 5G to revolutionize mobile communication and content services, especially gaming.

Microsoft’s game subscription service Xbox Game Pass has more than 15mn subscribers as of Sep. 2020, and the full catalog of Xbox games is now playable via PC and smartphone. Tech giants like Google and Amazon have also joined the race for cloud gaming services.

In 2021, the era of gaming anytime, anywhere should begin in earnest. While such changes in the market environment should initially be centered on tech giants (e.g., Microsoft, Google, Amazon, and Sony), we believe game developers, as key content providers, stand to gain the upper hand in the long term (similar to the dynamics of the OTT market).

2. Gaming sector to perform strongly despite uncertainties

1) Gaming industry is inherently resilient to economic downturns

Korea’s online gaming industry formed against the backdrop of the 1997-98 Asian financial crisis. The launch of StarCraft in 1997 led to the rapid penetration of PC cafés and the emergence of professional gaming as a new occupation.

It was also around this time that gaming became a form of escapism for many people; Lineage 1, which began service in 1998, created a virtual universe separate from the offline world. (An extreme version of such escapism is depicted in the film Ready Player One , where characters spend their lives in a virtual simulation to escape the bleakness of the real world.)

In the gaming industry, economic indicators are largely irrelevant to earnings.

1) The sector is in a growth phase, with evolving platforms serving as growth engines.

2) Gaming is one of the most affordable means of entertainment. Even for paid games, monthly ARPU can be as little as a couple of dollars (ranging up to W30,000).

3) In the gaming sector (like other entertainment sectors), the performance of individual titles matters more to earnings than the broader economy.

Mirae Asset Daewoo Research 3 October 8, 2020 TIGER KRX Game K-New Deal ETF

Figure 1. Korea: Combined EPS of major gaming companies & Figure 2. US: Combined EPS of major gaming companies & consumer confidence index consumer confidence index

(W) (US$) EPS of Korean game companies (L) Korea CCI (R) EPS of US game companies (L) US CCI (R) 5,000 110 2.4 180

4,000 106 1.8 140

3,000 102 1.2 100 2,000 98

0.6 60 1,000 94

0 90 0.0 20 4/00 12/01 8/03 4/05 12/06 8/08 11/95 12/97 1/00 2/02 3/04 4/06 5/08

Source: Thomson Reuters, Mirae Asset Daewoo Research Source: Thomson Reuters, Mirae Asset Daewoo Research

Figure 3. China: Combined EPS of major gaming companies & Figure 4. Japan: Combined EPS of major gaming companies & consumer confidence index consumer confidence index

(US$) (JPY) EPS of Chinese game companies (L) China CCI (R) EPS of Japanese game companies (L) Japan CCI (R) 5 98 2,000 60

4 97 1,500 50

3 96

1,000 40 2 95

500 30 1 94

0 93 0 20 12/04 8/05 4/06 12/06 8/07 4/08 11/95 5/98 11/00 5/03 11/05 5/08

Source: Thomson Reuters, Mirae Asset Daewoo Research Source: Thomson Reuters, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 4 October 8, 2020 TIGER KRX Game K-New Deal ETF

2) Gaming is rising in popularity among older adults

Figure 5. Lineage ’s monthly unique users by age group Figure 6. Lineage M ’s monthly unique users by age group

Other 2% 50+ 0-29 4% 4%

40-49 33%

30-39 65% 30-49 92%

Source: Nielsen KoreanClick, Mirae Asset Daewoo Research Source: Nielsen KoreanClick, Mirae Asset Daewoo Research

Figure 7. Lineage 2M ’ s monthly unique users by age group Figure 8. Anipang 2 ’s s monthly unique users by age group

0-29 0-29 0% 0%

50+ 24% 30-49 30%

50+ 30-49 70% 76%

Source: Nielsen KoreanClick, Mirae Asset Daewoo Research Source: Nielsen KoreanClick, Mirae Asset Daewoo Research

Figure 10. Hangame Matgo ’s monthly unique users by age Figure 9. Pmang Poker ’s monthly unique users by age group group

0-29 13% 0-29 27% 50+ 41% 30-49

50+ 26% 61%

30-49 32%

Source: Nielsen KoreanClick, Mirae Asset Daewoo Research Source: Nielsen KoreanClick, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 5 October 8, 2020 TIGER KRX Game K-New Deal ETF

3) IT technologies are continuing to advance

One of the biggest changes in IT technologies expected in 2021 is the rapid deployment of 5G networks. While 4G technologies led to the rise of OTT platforms such as YouTube and Netflix, 5G technologies should drive: 1) the take-off of cloud (streaming) gaming; and 2) the development of virtual reality (VR) and augmented reality (AR) gaming.

The AR/VR gaming markets are still in the very early stages of development. As such, there are a lot of uncertainties surrounding the pace of technology development, the pricing of hardware, the quality of game content, and consumer perceptions.

Digi-Capital projects AR/VR gaming revenue to reach US$1bn by 2022, with AR games expected to outgrow VR games in terms of revenue.

Although revenues are small, AR/VR gaming has strong potential to create new markets, opening up opportunities for start-ups and small/medium-sized game developers.

That said, we believe it is premature to make long-term projections regarding the size and profitability of the AR/VR gaming markets. As past experience shows (with PC gaming outgrowing the console market and then mobile gaming overtaking both console and PC gaming), new technologies can reshape the landscape despite low initial expectations.

The gaming market is characterized by low visibility because it is difficult to predict consumer responses and revenue models. We expect the AR/VR gaming markets to expand as games become more immersive and people spend more time on gaming.

Figure 11. Gaming revenue and growth rate by sector

50%

Mobile games

40%

Note: Size of bubble = relative revenue in 2023 Giants, 30% steady growth, consolidation

Sector revenue share revenue Sector (2023) 20% PC game hardware Indies, high-growth, investments PC games (online) 10% Console games Console games (physical sales) Console game (digital sales) VR games PC games hardware PC games Console games (physical sales) Web E-sports AR games VR hardware games (digital sales) Game ads (online) -15% -5% 5% 15% 25% 35% 45%

Sector revenue growth (2018-23)

Source: Digi-Capital, Mirae Asset Daewoo Research

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3. Investment strategy

1) New platforms

Gaming, like other entertainment services, provides content, but does so in the digital space.

The most notable step in the evolution of gaming platforms was the release of eighth- generation consoles by Sony (PlayStation) and Microsoft (Xbox One X) in 2013. Since then, US gaming companies have enjoyed an extended rally, and their EPS has grown more than 10- fold.

The eighth-generation game consoles stood out from their predecessors by taking software- based gaming to the online space. Internet connectivity brought gameplay to a new level, allowing multiple players in separate locations to play online simultaneously.

These consoles also reshaped the industry by: 1) allowing purchased games to be downloaded (removing the need for physical copies); and 2) creating new revenue models through sales of in-game items and monthly subscriptions for multiplayer games.

Figure 12. Major Nasdaq gaming stocks: 2010-20 relative share performance

1,800 ATVI EA TTWO Nasdaq

1,600

1,400

1,200

1,000 PS4, Xbox One 800 releases 600

400

200

0 10 11 12 13 14 15 16 17 18 19 20

Source: Bloomberg, Mirae Asset Daewoo Research

Figure 13. Major Nasdaq gaming stocks: 2013-19 EPS chg.

(US$) 4 2013 2019 3.36 2.95 3

1.96 2

0.96 1 0.32

0

ATVI EA TTWO -0.34 -1

Source: Bloomberg, Mirae Asset Daewoo Research

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2) New title momentum

Analyzing gaming companies is challenging, due to: 1) the difficulty of predicting new titles’ commercial performance (a key earnings variable); 2) limited access to key information (e.g., new title release schedules); and 3) the subjective nature of new title expectations (a key factor in valuations).

Nevertheless, we believe gaming stocks look attractive. Korean gaming companies (e.g., NCsoft, Netmarble, and Nexon) have reduced their earnings volatility since 2015, supported by the development of strong lineups of successful titles across the PC and mobile spaces and the domestic and global markets.

The rapid expansion of the global mobile gaming market is creating new opportunities for Korean gaming companies. Moreover, with the cloud gaming market taking shape (aided by the convergence of mobile, PC, and console games), Korean companies are teaming up with tech giants.

For gaming companies, the release of new titles and the waning popularity of existing titles typically lead to wide fluctuations in earnings. Nevertheless, we believe online games have a longer life cycle than most entertainment products. For example, StarCraft and Lineage , which were released in 1997 and 1998, respectively, are still contributing to earnings.

The chances of a new online game becoming a big hit are very slim, but if it does happen, the rewards are enormous. Investors keep a close eye on upcoming titles, as their release schedules and market performance are key determinants of stock performance and earnings.

Accordingly, we believe the best entry points for gaming stocks are: 1) early in the new title release process (after the release schedule is confirmed), when expectations have yet to be reflected; and 2) the first quarter following the release of a new title, when commercial potential is confirmed.

Typically, the valuation of gaming stocks is around 10-20x P/E, with expected sales from new titles additionally being factored in as new title releases draw near.

Given the concentration of new title releases in 4Q20 and 2021, we expect valuation premiums to begin to be applied to Korean gaming stocks going forward.

Figure 14. NCsoft: Quarterly revenue growth vs. share performance

(W) YoY quarterly revenue growth (L) Share price (R) (%) 1,200,000 250

200 1,000,000

② Early reflection of new title launch 150 ① Dissipation of new title 800,000 - Lineage 2M began to be and earnings momentum priced in 1.5 years ahead of release 100

600,000

50

③ 1H20 earnings momentum and 400,000 new title expectations * 2H20 0 - Lineage 2M Asia release - TL beta - Blade & Soul 2 domestic release 200,000 * 2021 - Lineage 2M US/Europe rollouts -50 - Blade & Soul 2 global release - Aion 2 global release - TL release

0 -100 1/17 7/17 1/18 7/18 1/19 7/19 1/20 7/20

Source: Bloomberg, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 8 October 8, 2020 TIGER KRX Game K-New Deal ETF

II. 2021 gaming industry outlook

1. COVID-19 presents new growth opportunities

With people forced to spend more time at home during the COVID-19 pandemic, the global gaming/e-sports industry has displayed significant growth in 2020. Indeed, we have seen sharp increases in (free) mobile game DAUs this year, starting in China in 1Q and Western Europe/India in 2Q.

Once schools and businesses normalize fully, daily user traffic is likely to decline sharply from the levels seen during the peak of the pandemic. However, a significant portion of users acquired during the pandemic will likely continue to play free online games and eventually become paying users.

On a negative note, COVID-19 has caused global supply chain disruptions in the gaming industry. In Feb. 2020, Nintendo announced that shipments of its best-selling Switch consoles (manufactured in China) had been delayed. The pandemic also halted the production of highly anticipated video games such as Cyberpunk 2077 and The Last of Us Part II .

At present, China is the world’s largest gaming market, followed by the US, Japan, Korea, and the UK. By platform, mobile games account for the largest segment, followed by PC and console games. Notably, the e-sports market (which is integrated across gaming, media, and entertainment) has been growing more rapidly than the traditional gaming market.

Figure 15. Global gaming market overview

Source: PWC, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 9 October 8, 2020 TIGER KRX Game K-New Deal ETF

1) Korea

Korea is the world’s fourth-largest gaming market after China, the US, and Japan, recording US$8.2bn in gaming/e-sports revenues in 2019.

The Korean market is characterized by a relatively high share of PC games (vs. other regions). However, the country’s mobile gaming market has been expanding rapidly; indeed, from 2015 to 2019, mobile gaming revenue nearly doubled.

Korea accounts for roughly 20% of the global PC online/in-game item market (by revenue). Meanwhile, the country’s e-sports revenue reached US$230mn in 2019 and is forecast to expand at 9.4% CAGR over the 2019-24 period. We estimate its e-sports revenue growth to slow to 10% in 2020 amid COVID-19 but bounce back to 13.2% in 2021.

We forecast mobile gaming to grow 11.9% YoY in 2020 and 10.5% in 2021, driving overall gaming market growth. With regard to console games, a key area of focus is in-game item sales (microtransactions), which are forecast to increase by 22.1% in 2020, 28.2% in 2021, and 32.4% in 2022 on the back of increased cloud adoption and the releases of next-generation systems.

Table 1. Korea: Gaming market growth (US$bn) 2019 -24 F 2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F CAGR Total market size 5.9 6.4 7.1 7.6 8.2 8.7 9.4 9.9 10.6 11.2 6.55% E-sports 0.1 0.1 0.1 0.2 0.2 0.2 0.3 0.3 0.3 0.3 9.43% Consumer contribution 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 7.83% Ticket sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.3% Media rights 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 13.52% Sponsorships 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 8.75% Stream advertising 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.16% Games 5.8 6.3 6.9 7.5 8.0 8.6 9.2 9.7 10.3 11.0 6.48% Advertising 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 4.01% Mobile/console/PC 5.7 6.2 6.9 7.4 7.9 8.5 9.1 9.6 10.2 10.8 6.51% Mobile games 1.4 1.7 2.1 2.4 2.7 3.1 3.4 3.6 3.8 4.0 7.74% App-based social/casual gaming 1.3 1.6 2.0 2.3 2.7 3.0 3.3 3.5 3.7 3.9 7.98% Browser-based social/casual gaming 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.0 -5.21% Console/PC games 4.3 4.5 4.8 5.0 5.2 5.4 5.7 6.0 6.4 6.9 5.83% Console 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.4 11.57% Digital console game sell-through 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.91% Online/microtransactions 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.3 27.88% Physical console game sell-through 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0 -17.81% PC 4.1 4.3 4.6 4.8 5.0 5.2 5.5 5.7 6.1 6.5 5.57% Digital PC game sell-through 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 11.37% Online/microtransactions 4.1 4.2 4.5 4.7 4.9 5.1 5.4 5.6 5.9 6.3 5.45% Physical PC game sell-through 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -11.09% Source: PWC, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 10 October 8, 2020 TIGER KRX Game K-New Deal ETF

2) Japan

Japan, which is recognized as a traditional gaming powerhouse, is the world’s third largest gaming market. The country’s gaming and e-sports revenues reached US$18.6bn in 2019, and are forecast to expand at a CAGR of 3.9% over the 2019-24 period.

Japan’s mobile gaming revenues have more than doubled since 2015 (driving growth in the broader gaming market), and are forecast to rise from US$11.8bn in 2019 to US$14.6bn in 2024 (4.4% CAGR). We estimate mobile games to account for 65% of the country’s gaming market (by revenue) in 2024.

Japan’s mobile gaming market is a relatively closed market in which most hit games are based on manga/anime IP.

Notably, the Japanese market is characterized by a relatively high share of console games, with physical (disc-based) sales representing the lion’s share of total console gaming revenues. In 2019, physical games accounted for 62% of Japan’s console revenue, but the share of physical games is projected to decline to 41% by 2024. From 2019 to 2024, we forecast Japan’s console gaming revenue to increase at a CAGR of 1%.

Over the 2019-24 period, we forecast PC gaming revenues—95% of which come from online downloads and in-game item sales—to grow at 5% CAGR. All in all, it appears that the Japanese gaming market’s shift to next-generation gaming platforms is progressing at a gradual pace.

Table 2. Japan: Gaming market growth (US$bn) 2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F 2019-24F CAGR Total market size 11.5 13.7 15.4 17.2 18.6 19.8 21.0 21.6 22.1 22.5 3.91% E-sports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 24.38% Consumer contribution 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20.98% Ticket sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 32.59% Media rights 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 31.05% Sponsorships 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20.85% Stream advertising 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.58% Games 11.5 13.7 15.4 17.2 18.6 19.7 21.0 21.6 22.1 22.5 3.88% Advertising 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.5 0.5 4.87% Mobile/console/PC 11.2 13.4 15.1 16.8 18.2 19.3 20.6 21.1 21.6 22.0 3.86% Mobile games 6.1 7.9 9.2 10.6 11.8 12.7 13.7 14.1 14.4 14.6 4.44% App-based social/casual gaming 4.1 6.1 7.5 9.1 10.4 11.4 12.5 13.0 13.4 13.7 5.71% Browser-based social/casual gaming 1.9 1.8 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 -7.88% Console/PC games 5.2 5.5 5.9 6.2 6.4 6.6 6.9 7.1 7.2 7.4 2.75% Console 2.8 3.0 3.1 3.2 3.3 3.3 3.4 3.4 3.4 3.5 1.02% Digital console game sell-through 0.4 0.5 0.6 0.7 0.8 0.9 0.9 1.0 1.0 1.1 6.67% Online/microtransactions 0.3 0.3 0.4 0.4 0.5 0.6 0.6 0.7 0.8 1.0 15.38% Physical console game sell-through 2.2 2.1 2.1 2.1 2.0 1.9 1.8 1.7 1.5 1.4 -7.11% PC 2.3 2.5 2.8 3.0 3.1 3.3 3.6 3.7 3.8 3.9 4.46% Digital PC game sell-through 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 13.27% Online/microtransactions 1.9 2.3 2.6 2.8 3.0 3.2 3.4 3.6 3.7 3.8 5.01% Physical PC game sell-through 0.2 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.0 -19.92% Source: PWC, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 11 October 8, 2020 TIGER KRX Game K-New Deal ETF

3) China

China is the world’s largest gaming/e-sports market by revenue. The Game Publishing Committee of China estimates the number of gamers in mainland China at 640mn as of end- 2019.

China’s gaming/e-sports revenues reached W28.7bn in 2019 and are forecast to expand to W39bn in 2024 (6.3% CAGR). In 2019, mobile games accounted for 71.8% of the country’s gaming market (by revenue).

China’s gaming market is highly concentrated, with the two largest companies Tencent and NetEase together controlling nearly 80%.

Over the years, Tencent and NetEase have acquired a number of overseas game developers (e.g., Riot Games, Supercell, Jumpship, Bungie). This M&A-driven growth strategy has facilitated R&D upgrades.

In 2019, the value of China’s PC gaming market reached US$7bn. Despite PC gamers’ continuous move toward mobile channels, mobile games are unlikely to fully replace PC games. Indeed, the average time and money spent on PC games by hardcore gamers have been trending upward. Meanwhile, the massive success of Tencent’s PUBG Mobile hints at the strong prospects of mobile games in terms of engagement and margins.

A recent market development worth noting is the rise of Bytedance’s gaming platform. Bytedance, a Chinese internet start-up behind a collection of rising new media apps, including TikTok and Jinri Toutiao, operates a gaming platform focused on casual games for its over 500mn existing users.

Meanwhile, Korean gaming firms lost access to China due to restrictions on Korean content amid the backlash to THAAD deployment. In our view, the timing of the resumption of Chinese operations is one of the key variables for Korean game stocks.

Table 3. China: Gaming market growth (US$bn) 2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F 2019-24F CAGR Total market size 15.2 19.1 23.6 25.8 28.7 31.6 34.1 35.9 37.6 39.1 6.35% E-sports 0.0 0.1 0.1 0.2 0.3 0.4 0.5 0.6 0.6 0.7 14.43% Consumer contribution 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 19.77% Ticket sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.79% Media rights 0.0 0.0 0.0 0.1 0.1 0.2 0.2 0.2 0.3 0.3 16.07% Sponsorships 0.0 0.0 0.0 0.1 0.1 0.2 0.2 0.2 0.2 0.2 12.28% Stream advertising 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 10.19% Games 15.1 19.1 23.5 25.6 28.4 31.2 33.6 35.4 37.0 38.5 6.25% Advertising 0.2 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.5 0.5 5.71% Mobile/console/PC 14.9 18.8 23.2 25.3 28.1 30.8 33.2 35.0 36.6 38.0 6.26% Mobile games 9.3 13.1 16.8 18.3 20.6 22.7 24.4 25.4 26.2 26.8 5.32% App-based social/casual gaming 9.0 12.8 16.5 18.1 20.4 22.5 24.2 25.3 26.1 26.6 5.44% Browser-based social/casual gaming 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.1 0.1 0.1 -9.88% Console/PC games 5.6 5.7 6.4 7.0 7.4 8.1 8.8 9.5 10.4 11.3 8.7% Console 0.0 0.0 0.1 0.2 0.4 0.5 0.7 0.8 0.9 1.0 20.96% Digital console game sell-through 0.0 0.0 0.0 0.1 0.1 0.2 0.2 0.3 0.3 0.4 31.6% Online/microtransactions 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 33.7% Physical console game sell-through 0.0 0.0 0.1 0.2 0.3 0.4 0.4 0.5 0.5 0.5 14.33% PC 5.6 5.7 6.3 6.7 7.0 7.5 8.2 8.7 9.4 10.3 7.85% Digital PC games sell-through 1.1 1.1 1.2 1.3 1.4 1.5 1.7 1.9 2.2 2.5 12.85% Online/microtransactions 4.5 4.6 5.0 5.4 5.7 6.0 6.5 6.8 7.3 7.8 6.51% Physical PC game sell-through 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -11.74% Source: PWC, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 12 October 8, 2020 TIGER KRX Game K-New Deal ETF

4) US

We expect the overall US gaming market (based on revenue) to grow at 6.3% CAGR from US$29.6bn in 2019 to US$40.1bn in 2024.

We project the combined revenue of PC and console gaming to expand at 6.7% CAGR from US$14.7bn in 2019 to US$20.3bn in 2024 (accounting for half of total US gaming revenue), driven by: 1) growth in digital PC game sell-through and online/microtransaction revenue; and 2) the release of next-generation consoles in November 2020.

We expect mobile gaming revenue to increase from US$12.9bn in 2019 to US$17.3bn in 2024 (6.0% CAGR). However, YoY growth will likely slow from 17.7% in 2017 to 4.3% in 2024. Of note, in the US market, the combined revenue of PC and console gaming typically exceeds mobile gaming revenue, unlike in Korea and China.

We expect gaming ad revenue to grow at a CAGR of 3.5% from US$1.7bn in 2019 to US$2bn in 2024, buoyed by: 1) the flourishing ad industry; and 2) US consumers’ high purchasing power.

E-sports is the fastest growing gaming category in North America. We expect the US e-sports market to grow at 12.8% CAGR from US$290mn in 2019 to US$520mn in 2024. Stream advertising, sponsorships, and media rights account for the lion’s share of US e-sports revenue, followed by merchandise and ticket sales.

Table 4. US: Gaming market growth (US$bn) 2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F 2019-24F CAGR Total market size 18.9 20.7 22.7 25.0 27.2 29.1 31.4 33.5 35.2 37.1 6.4% E-sports 0.1 0.1 0.2 0.2 0.3 0.3 0.4 0.4 0.5 0.5 12.72% Consumer contribution 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 10.43% Ticket sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 13.31% Media rights 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.2 17.48% Sponsorships 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 11.65% Stream advertising 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 9.26% Games 18.8 20.6 22.6 24.9 27.0 28.8 31.1 33.1 34.8 36.7 6.33% Advertising 1.1 1.2 1.3 1.4 1.5 1.6 1.6 1.7 1.8 1.8 3.47% Mobile/Console/PC 17.7 19.3 21.3 23.4 25.5 27.3 29.5 31.4 33.0 34.9 6.49% Mobile games 6.3 7.5 8.9 10.4 11.7 12.6 13.4 14.3 15.0 15.6 6.02% App-based social/casual gaming 5.9 7.0 8.5 10.1 11.3 12.3 13.2 14.0 14.7 15.4 6.31% Browser-based social/casual gaming 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.2 0.2 -6.88% Console/PC games 11.4 11.9 12.4 13.0 13.8 14.7 16.0 17.1 18.1 19.2 6.88% Console 7.9 8.2 8.5 8.8 9.1 9.5 10.0 10.3 10.3 10.5 2.75% Digital console game sell-through 2.0 2.3 2.6 2.9 3.3 3.7 4.0 4.3 4.5 4.7 7.33% Online/microtransactions 0.7 0.9 1.0 1.2 1.4 1.6 1.9 2.1 2.5 2.8 15.11% Physical console game sell-through 5.2 5.0 4.8 4.7 4.5 4.2 4.1 3.8 3.4 3.0 -7.68% PC 3.4 3.7 3.9 4.2 4.6 5.2 6.1 6.8 7.7 8.8 13.53% Digital PC games sell-through 0.8 0.6 0.6 0.7 0.7 0.8 0.9 1.0 1.1 1.3 11.33% Online/microtransactions 2.5 3.0 3.2 3.4 3.9 4.4 5.2 5.8 6.6 7.5 14.06% Physical PC game sell-through 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -13.52% Source: PWC, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 13 October 8, 2020 TIGER KRX Game K-New Deal ETF

5) Global

We expect the global gaming market (including e-sports) to grow at 6.5% CAGR from US$130.9bn in 2019 to US$171.1bn in 2024.

Market growth will likely be driven by: 1) continued solid growth in mobile gaming revenue in both developed and emerging markets; and 2) a pickup in the PC gaming market arising from the high popularity of e-sports and the releases of spin-offs and sequels to blockbuster games.

In 2021, we believe gaming subscription services will take root, led by tech stalwarts such as Microsoft and Amazon. Having witnessed the fast adoption of subscription services in the music and video content markets, tech giants and gaming companies will likely strive to nurture the high-margin, sustainable subscription business model as a new growth driver.

We expect the combined revenue of the global console and PC gaming markets to grow from US$54.5bn in 2019 to US$73bn in 2024.

We project mobile gaming revenue to expand from US$71.4bn in 2019 to US$98bn in 2024. With 5G expected to proliferate gradually over the next five years, a variety of more advanced mobile games will likely become available, further boosting the mobile e-sports market.

We expect gaming ad revenue to grow from US$4bn in 2019 to US$4.8bn in 2024. Of note, we project e-sports revenue to double from US$1.1bn in 2019 to US$2.2bn in 2024 (14.4% CAGR).

Table 5. Global gaming market growth (US$bn) 2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F 2019-24F CAGR Total market size 82.7 95.3 108.3 119.5 130.9 141.8 153.4 162.2 170.6 179.1 6.48% E-sports 0.3 0.4 0.6 0.8 1.1 1.3 1.6 1.8 2.0 2.2 14.36% Consumer contribution 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.3 13.44% Ticket sales 0.0 0.0 0.0 0.1 0.1 0.0 0.1 0.1 0.1 0.1 14.41% Media rights 0.0 0.1 0.1 0.2 0.3 0.4 0.5 0.6 0.6 0.7 17.81% Sponsorships 0.1 0.2 0.2 0.3 0.4 0.5 0.6 0.7 0.7 0.8 13.25% Stream advertising 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.3 10.73% Games 82.5 95.0 107.8 118.8 129.9 140.7 152.1 160.6 168.9 177.2 6.41% Advertising 2.8 3.2 3.4 3.7 4.0 4.1 4.2 4.4 4.6 4.8 3.9% Mobile/Console/PC 79.6 91.8 104.4 115.1 125.9 136.7 147.9 156.2 164.3 172.4 6.49% Mobile games 35.7 45.9 55.6 63.4 71.4 78.9 85.9 90.6 95.0 98.8 6.7% App-based social/casual gaming 31.6 42.2 52.2 60.3 68.6 76.3 83.4 88.4 92.9 96.9 7.16% Browser-based social/casual gaming 4.1 3.7 3.4 3.2 2.9 2.7 2.5 2.3 2.1 1.9 -7.76% Console/PC games 43.9 45.9 48.8 51.7 54.5 57.7 62.0 65.6 69.3 73.6 6.21% Console 21.7 22.4 23.5 24.8 26.0 27.2 28.7 29.9 30.8 31.8 4.12% Digital console game sell-through 4.9 5.7 6.5 7.6 8.7 9.9 11.1 12.0 12.8 13.4 9% Online/microtransactions 2.2 2.6 3.0 3.5 4.0 4.7 5.5 6.3 7.3 8.5 16.24% Physical console game sell-through 14.6 14.2 14.0 13.7 13.3 12.6 12.2 11.6 10.7 9.9 -5.67% PC 22.3 23.5 25.3 26.9 28.5 30.6 33.3 35.7 38.5 41.8 7.98% Digital PC games sell-through 3.8 3.6 4.0 4.3 4.6 5.1 5.7 6.3 7.1 8.0 11.69% Online/microtransactions 17.0 18.6 20.1 21.6 22.9 24.7 26.9 28.7 30.9 33.4 7.78% Physical PC game sell-through 1.4 1.3 1.2 1.1 1.0 0.8 0.7 0.6 0.5 0.5 -13.01% Source: PWC, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 14 October 8, 2020 TIGER KRX Game K-New Deal ETF

2. Launch of next-generation consoles

Microsoft and Sony have launched marketing campaigns ahead of the upcoming releases of their ninth-generation consoles. Preorders for the Xbox Series X and Series S were opened on Sep. 22, and Sony has hosted a series of PlayStation 5 showcase events. Notably, US gaming stocks such as Activision Blizzard, Electronic Arts (EA), and Take-Two have enjoyed protracted rallies since 2013, when the PlayStation 4 and Xbox One—both of which featured built-in internet connectivity—first hit shelves.

Game developers are planning a soft transition to ninth-generation consoles. (The Xbox Series X will support full backwards compatibility and Smart Delivery.) In the console game market, platform exclusivity plays a bigger role than hardware performance in market share dynamics. However, game developers are increasingly deploying timed exclusivity in an effort to boost revenue.

Figure 16. Consoles by generation

First (1972-80) Magnavox Odyssey, Pong, Coleco Telstar Second (1976-92) Fairchild Channel F, Atari 2600, Mattel Intellivision Third (1983-2003) NES, Sega Master System, Atari 7800 Fourth (1987-2004) TurboGrafx-16, Sega Genesis, Neo Geo, Super NES Fifth (1993-2006) Sega Saturn, PlayStation, Nintendo 64 Sixth (1998-2013) Dreamcast, PlayStation 2, GameCube, Xbox Seventh (2005-17) Xbox 360, PlayStation 3, Wii Eighth (2012-present) Wii U, PlayStation 4, Xbox One, Nintendo Switch Ninth (future) PlayStation 5, Xbox Series X 1970 1980 1990 2000 2010 2020 2030

Source: Wikipedia, Mirae Asset Daewoo Research

Table 6. Xbox Series X vs. PlayStation 5 Xbox Series X PlayStation 5

Price US$499 TBD Release date Nov. 10 TBD CPU 8x cores; 3.8GHz AMD Zen 2 8x cores; 3.5GHz AMD Zen 2 AMD RDNA2 AMD RDNA2 GPU - 1.825GHz - 2.23GHz - 12.0 TFLOP s , 52 CU s - 10.28 TFLOP s, 36 CU s RAM 16GB GDDR6 16GB GDDR6 Storage 1TB 825GB Max. resolution 8K 8K HDR support Yes Yes Optical drive 4K Ultra HD Blu-ray 4K Ultra HD Blu-ray Backwards compatibility Xbox, Xbox 360, Xbox One PlayStation 4 Pro, PlayStation 4 Source: Press reports, Mirae Asset Daewoo Research

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3. Cloud gaming to enter the mainstream

Cloud gaming has begun to move into the mainstream amid advances in relevant technologies and internet infrastructure. Microsoft (xCloud), Apple (Apple Arcade), and Google (Stadia) launched cloud gaming services in 2019, and Amazon (Luna) also unveiled a streaming video game service recently.

There are still many challenges ahead, including infrastructure/connectivity issues (e.g., long waiting times, differing network speeds by country, etc.). Revenue models also remain uncertain, especially in the US and Europe, where game downloads have taken root as the primary business model. Furthermore, it has yet to be determined who will pay for the immense data traffic surge that will accompany cloud gaming market growth.

We forecast the cloud gaming market to enjoy growth momentum over the next three to five years. Considering cloud computing is increasingly taking center stage in content production (music, videos, dramas, films, webtoons, etc.), we think it will also dominate mobile, console, and PC gaming sooner rather than later.

The robust growth prospects of cloud gaming should lead to the re-rating of global game developers with competitive game IP.

Figure 17. Cloud gaming market size Figure 18. Consolidation of the global game industry

(US$mn) (US$bn) 500 Sep 2014Microsoft/ Jul 2011 Mojang Jul 2016 Electronic Arts/ (2.5) Nov 2015 400 Feb 2011 Tencent/ PopCap Activision Tencent/Riot Jan 2014 Supercell (1.3) Blizzard/ Games, 70% Zynga/NaturalMotion 84.3% (8.6) King Digital 300 CAGR: +46% (0.5) (0.2) Mar 2012 (5.8) Zynga/OMGPop 200 (0.2)

100

0 2011 2012 2013 2014 2015 2017 2017 2018 2019 2020F 2021F 2022F 2023F

Source: Statista, Mirae Asset Daewoo Research Source: App Annie, Financial Times , Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 16 October 8, 2020 TIGER KRX Game K-New Deal ETF

In the 2000s, cloud games failed to gain ground due to technological limitations. Now, 5G adoption and surging demand for mobile content amidCOVID-19 are giving rise to new opportunities, with global tech giants such as Microsoft, Google, Amazon, Nvidia, and Tencent locking horns to establish early dominance in cloud gaming.

We think that Korean game developers are well-positioned, given their competitive advantage in PC games (supported by their strong online gaming bases).

As time goes by, we expect market competition to shift from platforms to content development, and revenue models to diversify further (increasing prominence of digital game sales, in-game item sales, advertising, e-sports, etc.).

Among domestic cloud (console) game developers, we are positive on the growth prospects of: NCsoft ( Project TL and Fuser ) and Netmarble ( Seven Knights: Time Wanderer ) in light of their highly anticipated console titles. Meanwhile, we note that Hanbit Soft ( Audition ), JoyCity (Freestyle ), SNK (The King of Fighters ), Nexon ( Kartrider ), and Krafton ( PlayerUnknown's Battlegrounds ) have promising/competitive IP. Pearl Abyss ( Black Desert ) and Krafton ( Tera ) offer game services via SK Telecom’s xCloud service.

Mirae Asset Daewoo Research 17 October 8, 2020 TIGER KRX Game K-New Deal ETF

III. ETF investment points

1. Operating profit to soar 58% YoY in 2020 and 38% in 2021

In our view, now is an opportune time to invest in the TIGER KRX Game K-New Deal ETF, as its constituents (10 gaming stocks) are projected to report marked earnings expansion despite the uncertain economic outlook amid the COVID-19 pandemic.

The ETF’s holdings look cheap—except for Netmarble and WeMade—considering that new title expectations have yet to be priced in. Netmarble’s stock has gained on IPO expectations, and WeMade shares have advanced due to the likely recognition of large payments related to copyright infringement lawsuits.

We forecast the combined revenue of the 10 constituents to jump 24% YoY in 2020 and 17% in 2021, combined operating profit to soar 58% in 2020 and 38% in 2021, and combined OP margin to climb 21.7% in 2020 and 25.6% in 2021. Of note, new gaming platform revenue models could be introduced amid the launches of cloud games and ninth-generation consoles, and several new titles are set to hit the market in 2021.

Figure 19. TIGER KRX Game K-New Deal ETF constituents: Figure 20. TIGER KRX Game K-New Deal ETF constituents:

Combined revenue Combined OP

(Wbn) (Wbn) (%) 14,000 4,000 OP (L) OP margin (R) 30

+17% YoY 12,000 25 3,000 +38% YoY 10,000 +24% YoY 20 +8% YoY 8,000 +58% YoY 2,000 15 6,000 -10% YoY 10 4,000 1,000

2,000 5

0 0 0 2018 2019 2020F 2021F 2022F 2018 2019 2020F 2021F 2022F

Source: Bloomberg, Mirae Asset Daewoo Research estimates Source: Bloomberg, Mirae Asset Daewoo Research estimates

Figure 21. TIGER KRX Game K-New Deal ETF constituents: Figure 22. TIGER KRX Game K-New Deal ETF constituents:

2020F P/E and ROE 2020F P/E and EPS growth

(P/E, x) 15 (P/E, x) 58 60 60 Netmarble Netmarble 50 50 WeMade 40 40

30 30 NCsoft NCsoft 22 22 20 NHN 20 Webzen NHN Pearl Abyss Pearl Abyss Webzen 10 DoubleU 10 Golfzon Com2uS Neowiz Com2uS Neowiz Golfzon (ROE, %) DoubleU (EPS games, %) 0 0 0 5 10 15 20 25 30 0 50 100 150

Source: Bloomberg, Mirae Asset Daewoo Research estimates Source: Bloomberg, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 18 October 8, 2020 TIGER KRX Game K-New Deal ETF

Table 7. TIGER KRX Game K-New Deal ETF constituents: Annual earnings (Wbn) 2018 2019 2020F 2021F 2022F NCsoft Revenue 1,715 1,701 2,592 3,355 3,691 YoY -2% -1% 52% 29% 10% OP 615 479 945 1,408 1,576 YoY 5% -22% 97% 49% 12% Netmarble Revenue 2,021 2,179 2,557 2,902 3,101 YoY -17% 8% 17% 13% 7% OP 242 203 260 386 450 YoY -53% -16% 28% 49% 17% Pearl Abyss Revenue 405 536 526 550 700 YoY 336% 32% -2% 5% 27% OP 168 151 185 180 247 YoY 182% -10% 23% -3% 37% Com2uS Revenue 482 469 514 653 703 YoY -5% -3% 9% 27% 8% OP 147 126 128 181 202 YoY -25% -14% 2% 41% 11% NHN Revenue 1,265 1,489 1,671 1,877 2,077 YoY 39% 18% 12% 12% 11% OP 70 87 121 154 183 YoY 101% 24% 39% 28% 19% DoubleU Games Revenue 483 514 667 695 735 YoY 51% 6% 30% 4% 6% OP 136 155 204 224 245 YoY 68% 14% 32% 10% 9% Webzen Revenue 219 176 270 311 324 YoY 32% -20% 53% 15% 4% OP 69 52 88 122 132 YoY 56% -25% 70% 39% 8% Neowiz Revenue 215 254 297 347 382 YoY 24% 18% 17% 17% 10% OP 23 33 68 90 101 YoY 107% 44% 108% 32% 12% WeMade Revenue 127 114 125 164 181 YoY 16% -11% 10% 31% 10% OP -36 -9 8 30 39 YoY -705% -74% -188% 272% 28% Golfzon Revenue 199 247 288 298 315 YoY -1% 24% 17% 4% 6% OP 28 32 56 73 81 YoY -25% 15% 74% 30% 10% Total Revenue 7,131 7,679 9,508 11,152 12,207 YoY 7% 8% 24% 17% 9% OP 1,460 1,307 2,064 2,850 3,257 YoY -7% -10% 58% 38% 14% Source: Bloomberg, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 19 October 8, 2020 TIGER KRX Game K-New Deal ETF

2. High P/E should not be a deterrent

Netmarble and Pearl Abyss went public at around the same time. At one point, Netmarble’s P/E approached 80x, while Pearl Abyss’s multiple surpassed 200x, boosted by expectations for new titles developed in time for their IPOs. Since then, however, the two stocks’ average P/Es have diverged markedly. We attribute this divergence to differences in the timing of new title releases (rather than to differences in game development capabilities or IP value).

NCsoft’s P/E has exhibited a relatively defined pattern over the long term, surging during periods of lofty new title expectations, and declining during periods of low visibility on game launches (irrespective of the popularity of previous games).

The P/E of NCsoft has ranged between 20x and 50x over the past 20 years. Notably, despite steady increases in annual revenue and operating profit, its P/E has fallen significantly under the following conditions:

1) Dashed expectations for new launches: In the past, NCsoft’s share price has plunged when new title expectations have not been met, either due to delays (e.g., Tabula Rasa ) or weaker- than-anticipated revenue generation (e.g., Blade & Soul ). During such instances, NCsoft has traded at a low P/E due to the loss of share momentum (despite the continuing contributions of existing games and the addition of new revenue streams).

2) Earnings surprise driven by new titles: Shares of NCsoft soared from W20,000 to W100,000 right before Aion was released in November 2008, which gave rise to concerns of overheating. Revenue from Aion was recognized fully starting in 1Q09, driving end-2009 EPS to W8,560. Despite, NCsoft’s fivefold share price rally, it traded at only 11.6x P/E.

On the other hand, P/E has historically soared in the run-up to new title launches, reflecting expectations for future revenue contributions. Shares of NCsoft fluctuated between 2001 and 2003, before the release of Lineage II . And high expectations leading into the releases of Tabula Rasa in Korea and Blade & Soul in Korea/China, pushed up the stock’s P/E valuation to 30x-50x.

Figure 23. NCsoft's P/E trend: New title expectations have historically peaked right before release

(x) Lineage 2M, Lineage Tabula Rasa Guild Wars 2 (US/EU) Lineage B&S 2, 60 (US) Lineage II (US/EU) Aion Lineage M B&S 2M Aion 2 B&S 52.9 (global) 51.3 52.3 (China) 50 50.1 B&S 2, Aion 2

40 37.9 33.8 30

20 21 18.1 (2020F) 10 13.5 12.9 12.3 12.9 6.8 0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Source: Bloomberg, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 20 October 8, 2020 TIGER KRX Game K-New Deal ETF

Figure 24. Netmarble P/E trend

100.0 2018 Expectations for B&S Revolution release and launch of L2R in China 80.0

50x 60.0

40.0

L2R release B&S Revolution release 20.0 (12/16) (12/18)

0.0 5/17 11/17 5/18 11/18 5/19 11/19 5/20

Source: Bloomberg, Mirae Asset Daewoo Research estimates

Figure 25. Pearl Abyss P/E trend

250.0 Black Desert M (2/18) 200.0

150.0

100.0

50.0 14.4x

0.0 9/17 3/18 9/18 3/19 9/19 3/20

Source: Bloomberg, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 21 October 8, 2020 TIGER KRX Game K-New Deal ETF

Appendix 1

Important disclosures and disclaimers Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates do not have any special interest in the subject company and do not own 1% or more of the subject company's shares outstanding.

Analyst certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director, or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading, and private client divisions. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein.

Disclaimers This report was prepared by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws, and accounting principles, and no person whose receipt or use of this report would violate any laws or regulations or subject Mirae Asset Daewoo or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person, and such person shall not be treated as a client of Mirae Asset Daewoo by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, its affiliates, and their directors, officers, employees, and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Daewoo may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views, and analytical methods of the analysts who prepared them. Mirae Asset Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Daewoo, its affiliates, and their directors, officers, employees, and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making, or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Daewoo. For further information regarding company-specific information as it pertains to the representations and disclosures in this Appendix 1, please contact [email protected] or +1 (212) 407-1000.

Distribution United Kingdom: This report is being distributed by Mirae Asset Securities (UK) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: Mirae Asset Daewoo is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This report is distributed in the U.S. by Mirae Asset Securities (USA) Inc., a member of FINRA/SIPC, to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934, as amended. All U.S. persons that receive this document by their acceptance hereof represent and warrant that they are a major U.S. institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Mirae Asset Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Mirae Asset Securities (USA) Inc. Mirae Asset Securities (USA) Inc. accepts responsibility for the contents of this report in the U.S., subject to the terms hereof, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through Mirae Asset Daewoo. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This report is distributed in Hong Kong by Mirae Asset Securities (HK) Limited, which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. All other jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Mirae Asset Daewoo or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Mirae Asset Daewoo and its affiliates to any registration or licensing requirement within such jurisdiction.

Mirae Asset Daewoo Research 22 October 8, 2020 TIGER KRX Game K-New Deal ETF

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Mirae Asset Daewoo Co., Ltd. (Seoul) Mirae Asset Securities (HK) Ltd. Mirae Asset Securities (UK) Ltd. One-Asia Equity Sales Team Units 8501, 8507-8508, 85/F 41st Floor, Tower 42 Mirae Asset Center 1 Building International Commerce Centre 25 Old Broad Street, 26 Eulji-ro 5-gil, Jung-gu, Seoul 04539 1 Austin Road West London EC2N 1HQ Korea Kowloon United Kingdom Hong Kong Tel: 82-2-3774-2124 Tel: 852-2845-6332 Tel: 44-20-7982-8000

Mirae Asset Securities (USA) Inc. Mirae Asset Wealth Management (USA) Inc. Mirae Asset Wealth Management (Brazil) CCTVM 810 Seventh Avenue, 37th Floor 555 S. Flower Street, Suite 4410, Rua Funchal, 418, 18th Floor, E-Tower Building New York, NY 10019 Los Angeles, California 90071 Vila Olimpia USA USA Sao Paulo - SP 04551-060 Brazil Tel: 1-212-407-1000 Tel: 1-213-262-3807 Tel: 55-11-2789-2100

PT. Mirae Asset Sekuritas Indonesia Mirae Asset Securities (Singapore) Pte. Ltd. Mirae Asset Securities (Vietnam) LLC Equity Tower Building Lt. 50 6 Battery Road, #11-01 7F, Saigon Royal Building Sudirman Central Business District Singapore 049909 91 Pasteur St. Jl. Jend. Sudirman, Kav. 52 -53 Republic of Singapore District 1, Ben Nghe Ward, Ho Chi Minh City Jakarta Selatan 12190 Vietnam Indonesia Tel: 62-21-515-3281 Tel: 65-6671-9845 Tel: 84-8-3911-0633 (ext.110) Mirae Asset Securities Mongolia UTsK LLC Mirae Asset Investment Advisory (Beijing) Co., Ltd Beijing Representative Office #406, Blue Sky Tower, Peace Avenue 17 2401B, 24th Floor, East Tower, Twin Towers 2401A, 24th Floor, East Tower, Twin Towers 1 Khoroo, Sukhbaatar District B12 Jianguomenwai Avenue, Chaoyang District B12 Jianguomenwai Avenue, Chaoyang District Ulaanbaatar 14240 Beijing 100022 Beijing 100022 Mongolia China China

Tel: 976-7011-0806 Tel: 86-10-6567-9699 Tel: 86-10-6567-9699 (ext. 3300) Shanghai Representative Office Ho Chi Minh Representative Office 38T31, 38F, Shanghai World Financial Center 7F, Saigon Royal Building 100 Century Avenue, Pudong New Area 91 Pasteur St. Shanghai 200120 District 1, Ben Nghe Ward, Ho Chi Minh City China Vietnam

Tel: 86-21-5013-6392 Tel: 84-8-3910-7715

Mirae Asset Daewoo Research 23