Anticipation Building towards Business Expansion Plans
The author is an analyst of NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com. -- Ed.
NHN’s game division, which currently centers upon web-board games, recently announced plans for an expansion into the NFT market. Armed with a wide array of technologies in the areas of cloud, commerce, and fintech, the company is poised to deliver sound results going forward.
Anticipation building towards business expansion plans
- Although adhering to a Hold rating, we raise our TP on NHN from W80,000 to W90,000. We favorably view NHN’s effort to transform into a comprehensive technology player specializing in cloud, commerce, fintech, and content. Moreover, the firm recently announced plans to release NFT-related games.
As of late, non-fungible token (NFT) games have become one of the hottest topics in not only the game industry, but also the stock market. Responding to this trend, NHN is planning to launch NFT-related games after having signed an MOU with Wemade Tree, a Wemade subsidiary specializing in blockchain business. It is highly likely that NHN will collaborate with Wemade Tree in launching a new shooting RPG game, Project NOW (scheduled for launch in 2022). Reflecting these aspirations, we upwardly adjust the target P/E applied to NHN’s game business from 13x to 15x, arriving at our new TP. In addition to NFT-related games, the company is preparing to release four new titles, including Dragon Quest Keshi Keshi (Dec 1, 2021), Guns Up Mobile, and a PvPE fighting game based upon a famous Japanese IP.
However, we maintain a Hold rating for now given that: 1) NHN’s core IT business continues to post operating losses; 2) it remains to be seen whether the NFT venture will prove successful; and 3) the firm still generates OP mainly from its web-board domain, with its new businesses having yet to contribute significantly to OP.
3Q21 review: Earnings arrive sound
NHN posted consolidated 3Q21 sales of W472.5bn (+12.7% y-y, +2.4% q-q) and OP of W27.9bn (+1.9% y-y, +17.2% q-q), with OP beating our both our estimate of W27.8bn and consensus of W25.9bn. Helped by peak seasonality for web-board games during the Chuseok holidays, NHN enjoyed brisk sales growth and improved OP. Having previously been stagnant for a period, Payco payment transaction volume upped 9% y-y to W1.9tn.