Com2uS Holdings
The author is an analyst for NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com -- Ed.
Zenonia, Com2uS Holdings’ first game release after its transition to a publishing-based model, is showing healthy early sales. Despite excessive marketing cost execution, we believe that marketing costs will be controlled effectively from the company’s next new game launch.
New games expected
Maintaining a Hold rating, we lower our TP on Com2uS Holdings from W49,000 to W37,000. Despite the successful launch of Zenonia (released in June), our new TP reflects cuts to our OPM estimates (2023E and beyond) for the game business due to excessive initial marketing costs.
Hovering around the number-20 spot, Zenonia ranked 23rd in the Google Play Store in terms of Korean sales as of Aug 3. We expect operating income to turn to black in 3Q23, given that initial large-scale marketing cost execution should be wrapped up. In addition to the 3Q23~4Q23 launches of Heir of Light: Eclipse (September) and Alchemist (November), we look forward to continuing healthy results for Zenonia.
2Q23 review: Turn to loss
On a consolidated basis, Com2uS Holdings posted 2Q23 sales of W32.3bn (+12.0% y-y, -11.2% q-q) and operating loss of W12.4bn (TTL q-q), with operating income missing our estimate (operating loss of W5.9bn).
Despite healthy early sales of Zenonia, marketing cost execution was heavy at the publisher, and operating income entered the red. In 2Q23, marketing costs increased to W12.3bn (+403.4% y-y, +529.6% q-q) on advertising for the launch of Zenonia. However, marketing costs should stabilize from 3Q23. A turn to loss was also recorded in net income due to the recognition of impairment losses at subsidiary Com2uS.