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 Europe 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 Steam, a popular game download site. Sector: Internet Software 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 Champions Online 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 Lord 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 2 NCsoft 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 Germany 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 3 NCsoft 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.