Performance of New Titles Key to Share Price Rebound
The author is an analyst of NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com. -- Ed.
Gamevil’s anticipated new title, Arcana Tactics, failed to maintain its initial performance, with its sales rankings trending downwards. The company’s EV is undervalued considering the value of its Com2uS stake, yet the lack of a new hit title is leading to a discount.
Performance of new titles key to share price rebound
- We raise our TP for Gamevil from W33,500 to W43,500, as the rising value of the company’s 29.4% stake in Com2uS is driving up its EV. However, we maintain a Hold rating, considering that: 1) the recently launched Arcana Tactics failed to maintain its sound initial results, with its sales rankings trending downwards; and 2) the company has failed to deliver any successful new titles over the past few years. Depending on the performance of Project C and The Walking Dead, slated for release in 2H21, the value of the company’s game business may rebound.
- Gamevil is preparing a lineup of four additional titles for 2021—side-scrolling RPG Slime Hunter: Wild Impact (scheduled for release on May 11), a defense game (1H21), Project C (idle RPG; 2H21), and The Walking Dead (collecting RPG; 2H21). Investors should focus on the performance of these new titles.
- As a holding company, Gamevil recognizes the performance of its major subsidiary Com2uS as profit or loss. We expect Gamevil’s earnings to grow alongside that of Com2uS, depending the performance of Com2uS’s new title, Summoners War: Lost Centuria.
- The company recently acquired a 13% stake in the cryptocurrency exchange Coinone. We positively view both the firm’s efforts to diversify its business portfolio as a holding company and the potential utilization of blockchain technology in its game business.
1Q21 preview: Results to meet consensus
- We forecast 1Q21 sales of W33.9bn (-2.9% y-y, +39.9% q-q) and OP of W5.5bn (-11.5% y-y, +405.1% q-q), with OP meeting consensus of W5.1bn. We estimate game business revenue at W27.8bn (+8.7% y-y, +14.8% q-q), reflecting a portion of the initial performance from Arcana Tactics (released on Mar 9), but the game business is likely to report a loss.