Smooth Sail for Shadow Arena and EVE Games
The author is an analyst of Shinhan Investment Corp. He can be reached at mj1224@shinhan.com. -- Ed.
1Q20 OP of KRW46.2bn (+28% QoQ) surpasses consensus (KRW38.3bn)
PearlAbyss posted operating profit of KRW46.2bn (+28% QoQ) for 1Q20, surpassing the market consensus (KRW38.3bn). Sales from Black Desert increased across all platforms (PC, mobile, console). User payments for the PC version increased 42% QoQ in the domestic, North American, and European markets combined. The console version saw new and returning users surge 250% and 350% QoQ, respectively, with the addition of cross-platform play (XboxOne, PlayStation 4). Mobile sales also climbed 11% QoQ on the game’s second anniversary update in Korea and first anniversary update in Japan.
Marketing spend fell 44% QoQ to KRW9.4bn, owing to the completion of Black Desert IP platform expansion and releases in new regions.
Smooth sail for Shadow Arena and EVE games
PearlAbyss plans to launch the Early Access version of its action battle royale game Shadow Arena on Steam on May 21. It will be available globally with support in 14 languages. The game attracted more than 100,000 users for the global closed beta test (CBT). As a battle royale genre game, it will likely enjoy a stable lifecycle going forward by expanding into esports.
EVE China published by NetEase was launched on April 27. NetEase will provide its own streaming for EVE Echoes on May 17 and announce the global release schedule at a later date. The delayed launch of PearlAbyss’s three new blockbuster games (Crimson Desert in 4Q21, DokeV in 2022, Plan8 in 2023) has been a disappointment, but it is positive that the company is continuously rolling out new games.
Upgrade to BUY and raise target price to KRW240,000
We upgrade PearlAbyss to a BUY rating and raise our target price to KRW240,000. Black Desert is doing better than anticipated. Expectations are rising for new games (Shadow Arena, EVE series). Our target price is based on 2020F PER of 17x (domestic and overseas peer average).