June 26, 2012 Company Report NCsoft (036570 KS) Game Daewoo Securities Co., Ltd. Guild Wars 2 momentum should begin to grow Chang-kwean Kim +822-768-4321 Game successes should lead to upward earnings forecast revisions
[email protected] Since NCsoftÊs listing, the companyÊs shares have been determined by the pace of its operating profit growth. Over the past 11 years, the companyÊs shares have traded within a wide P/E range (6~60x) due to their vulnerability to various variables (e.g., expectations for online game market growth, regulatory risks, new game setbacks, delays to service launches, and surges in new game-related revenues). NCsoft has announced the commercial launch schedules and pricing policy for Blade & Soul. And we believe that the launch of Guild Wars 2 is also imminent. The Buy (Maintain) success of these potential blockbusters should lead market watchers to raise their 2012 (especially 3Q) and 2013 earnings forecasts for NCsoft. And these upward Target Price (12M, W) 510,000 Share Price (06/25/12, W) 286,500 earnings forecast revisions should provide a boost to the companyÊs shares. Expected Return (%) 78.0 Generally speaking, upward earnings forecast revisions that occur after a game EPS Growth (12F, %) 66.8 finds success tend to be significant, since it is difficult to exactly estimate the Market EPS Growth (12F, %) 18.8 extent of the success beforehand. P/E (12F, x) 31.1 Market P/E (12F, x) 9.1 Momentum from Guild Wars 2 should grow during July~August KOSPI 1,825.38 Since its open-beta testing, Blade & Soul has showed a stellar performance relative Market Cap (Wbn) 6,272 Shares Outstanding (mn) 22 to NCsoftÊs other games (e.g., Aion (launched in 2008) and TERA (2011)).