Umamusume: Unable to Sustain Initial Success

The author is an analyst of NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com. -- Ed. 

 

Umamusume’s ranking has fallen since September due to operational issues. However, with several new titles (including Eversoul and Ares) on the way, we anticipate accompanying share price momentum.

Umamusume: Unable to sustain initial success

- Although sticking to a Buy rating, we lower our TP on Kakao Games from W75,000 to W55,000. We have trimmed down our future sales forecasts, reflecting both a drop in Umamusume’s sales ranking (due to a recent operations controversy) and the pushing back of the release dates for some new games. However, given high anticipation towards new titles (Eversoul, Dysterra, Ares, and XL games) under preparation to be rolled out through 1H23, share price momentum should start gathering once launch schedule details appear.

- The firm recently released a teaser video for Ares: Rise of the Guardians, (Ares) which is slated to be rolled out in 1Q23. The new title’s developer, Second Dive (CEO Ban Seung-chul) boasts past success with Dark Avenger. The teaser video for ARES shows that the game will be a sci-fi MMORPG set in the near future. With the gameplay action to allow the players’ characters to utilize various power suits and vehicles, Ares is expected to differentiate from existing MMORPG games.

3Q22 preview: OP to arrive below expectations

- We expect Kakao Games to post consolidated 3Q22 sales of W340.2bn (-27.0% y-y, +0.4% q-q) and OP of W62.7bn (+46.7% y-y, -22.6% q-q), with OP missing both our previous estimate of W89.9bn and consensus of W80.8bn. After a new character (Kita-san Black) update in July, Umamusume stood first in Google Play Store’s sales rankings, recording daily sales of W15bn. However since September, Umamusume’s sales status has fallen significantly due to operational issues—as of Sep 28, it ranked only 55th in Google’s sales rankings. However, on Sep 30, the company unveiled remedy plans, opting to wrap up the Kita-san Black pick-up event early and announcing improvements to its operation policies. Responding to these initiatives, Umamusume’s has returned to 10th place in the sales rankings in early October.

- Odin Taiwan’s ranking has also slipped since July, failing to continue its initial success and likely harming Kakao Games’ 3Q22 sales. However, Odin continues to deliver healthy sales performance in Korea, recording first place in the two major app markets once again following a new class update at end-September.

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