August 14, 2012 Industry Report Mobile Games (Overweight) Shares to rise on 3Q earnings growth and overseas success Daewoo Securities Co., Ltd. Chang-kwean Kim Significant improvements in mobile user indicators in July +822-768-4321
[email protected] According to Nielsen KoreanClick (a survey firm), mobile game user indicators improved drastically in July. Among domestic Android phone users, the number of game users jumped 29.7% MoM in July, while total time spent on mobile games soared 44.6% MoM. In July, two social network games, Rule the Sky (by JCE) and Tiny Farm (Com2uS) remained dominant in terms of total time spent. These two games respectively accounted for 11.2% and 10.1% of the overall time users spent playing mobile games in the month. Rule the Sky remained the leader despite the fact that it has been a year since its rollout. In July, eight of GamevilÊs and Com2uSÊs games were among KoreaÊs 49 most popular mobile games (in terms of time spent), vs. seven in May and 12 in June. 2Q Earnings at Com2uS and Gamevil exceeded the consensus The 2Q results of Com2uS and Gamevil exceeded the consensus. Com2uSÊs 2Q operating revenues and operating profit soared 163.3% YoY and 905.0% YoY, respectively. Gamevil also posted surges in operating revenues (up 55.1% YoY) and operating profit (up 57.3% YoY). We raised our 2012 EPS estimates for Com2uS and Gamevil by 4.9% and 2.5%, respectively. Share rally likely on 3Q earnings growth and overseas success Although they have already experienced surges, we believe that mobile game shares in the KDB Daewoo Universe have further upside potential, as they are likely to benefit from a virtuous cycle (smartphone proliferation an increase in users in Korea and abroad increases in new popular games and genres game companies’ earnings growth).