[Korea] September 10, 2020 Game s (Overweight/Maintain) Kakao Games to overshoot to the upside Mirae Asset Daewoo Co., Ltd. Chang-kwean Kim
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[email protected] Game performance trends Analysis of game performance trends in July and August (Sensor Tower data) We analyzed the revenue trends of major titles using data from mobile app data provider Sensor Tower. Our figures are based on a statistical analysis and may differ from actual revenue, depending on the time series and sample size. Thus, our figures should be viewed as a reference for the performance trends of each title, rather than as absolute values. New title expectations to drive Initiate our coverage on Kakao Games with a Buy rating and TP of W42,000 momentum The release schedule for blockbuster titles is the most important variable in the valuation of game companies. Generally speaking, game stocks trade at high P/Es when frequent new releases provide sustained momentum. Shares of NCsoft, Netmarble (251270 KS/CP: W189,000), and Pearl Abyss (263750 KQ/CP: W196,700) have traded at average P/Es of 24x, 50x, and 14x, respectively, since their IPOs. Notably, expectations for blockbuster titles caused the valuations of Netmarble and Pearl Abyss to surge right after their IPOs (with P/Es reaching 80x and 200x, respectively). Kakao Games’ offering price implies a 2020F P/E of 19x; our target price implies a P/E of 30x. Notable stocks in 3Q20: Webzen Small/mid -sized game stocks to monitor in 2H20: Webzen and JoyCity and JoyCity The market is expecting both Webzen (069080 KQ/CP: W36,750) and JoyCity (067000 KQ/CP: W22,250) to deliver record revenue, backed by the solid performance of existing titles and the commercial success of new titles.