Hopes for Game’s Success Mostly Priced in
The author is an analyst of KB Securities. He can be reached at drlee@kbfg.com. -- Ed.
Black Desert Mobile to begin OBT in China on Apr 26
— The China Open Beta Test (OBT) for Black Desert Mobile has been scheduled to begin on Apr 26, 2022, ten months after approval by the government (June 2021).
— The game will be co-published by Tencent and iDreamSky and will be playable on 40-plus platforms. The game is likely to see success early on, considering Tencent’s market influence and the popularity of its IPs; four of the current top 10 games in China have been published by Tencent.
Black Desert Mobile likely to see success in China, though expectations are high
— Since the approval of Black Desert Mobile in China, Pearl Abyss has conducted three tests to better localize the game and improve local servicing capabilities. The game is highly anticipated, with Chinese game website 17173.com naming Black Desert Mobile as the most anticipated game of the year.
— It seems to be the optimal time for releasing the game, considering that: (1) lately, the Chinese government has been stringent in granting approval for new games; and (2) most of the highly-ranked games in China have been around for a while.
— Compared to Korea, the top games in China are more widely dispersed across various genres (i.e., MOBA, FPS, and RPG), making it easier for an MMORPG to find success.
— We expect Black Desert Mobile to register daily average revenue of KRW3.0bn in its initial stage and KRW2.2bn for the year (KRW114.3bn in annual royalty income).
Hopes for game’s success mostly priced in
— Shares of Pearl Abyss closed at KRW103,500 on Apr 6, down 25.8% from its 2H21 peak in 2H21, when the stock had enjoyed hype from the announcement of new games and metaverse-related news.
— We expect Pearl Abyss to see its earnings growth gain momentum thanks to the company’s solid game development pipeline, which includes Black Clover (release expected in 2H21), Crimson Desert (release expected in 4Q22), and DokeV (release expected in 2023). Top-line growth should continue, with the company posting revenue of KRW742.7bn (+83.9% YoY) in 2022 and KRW996.2bn (+34.1% YoY) in 2023.
— However, shares are trading at 28.7x 2022E P/E, higher than the 21.6x average of its peers (i.e., NCsoft, Krafton, Netmarble), suggesting that the anticipated success of Black Desert Mobile in China has been mostly priced in. For share price to see further momentum, we believe the game would have to bring about better-than-expected results (e.g., rank among the top 3 games in China).