Preparing 20 New P2E Games for 2022
The author is an analyst of NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com. -- Ed.
Com2uS Holdings’ share price has slipped as of late on falling prices for its crypto assets, uncertainties towards the P2E game market, and tepid earnings. But, viewing most of this bad news as already being reflected, we await to see the performance of its upcoming P2E games.
Preparing 20 new P2E games for 2022
- Although adhering to a Buy rating, we lower our TP on Com2uS Holdings from W175,000 to W125,000. Its share price has been dropping as of late on uncertainties towards its P2E business in relation to the delisting of Luna Coin, as well as other unfavorable factors (including recording operating losses for 1Q22 due to poor performance for its subsidiaries). However, we point out that the firm is aggressively preparing to dominate the early P2E market, with a number of new P2E titles to be launched in 2H22.
- Com2uS Holdings decided to replace Terra (the main net of C2X) on Mar 13, putting an end to previous uncertainties. It is still undecided as to whether to replace the Layer 1 blockchain with other coins, or to build its own mainnet. The mainnet replacement may cause a brief delay in the release of P2E games, but it has a total of 20 games ready to be released within 2022, including eight in-house developed games.
1Q22 review: Earnings arrive weak
- Com2uS Holdings announced consolidated 1Q22 sales of W24.1bn (-25.0% y-y, -29.2% q-q) and operating losses of W3.2bn (TTL), with operating income disappointing both our estimate of W3.3bn and consensus of W5.3bn. Of note, as a holding company, the firm records equity-method gains from subsidiaries as investment income from affiliates in addition to its game business earnings. Accordingly, it suffered overall operating losses due to a sharp decrease in investment income from affiliates to W1.2bn (-87.2% y-y, -89.3% q-q). Moreover, earnings at Com2uS (major subsidiary) proved tepid on falling game sales and operating losses for WYSIWYG Studios, and Coinone’s 1Q22 performance was harmed by a decline in cryptocurrency transactions.
- Operational revenue remained stable at W22.9bn (-0.6% y-y, -1.2% q-q), but labor costs rose to W12.4bn (+28.1% y-y). Operating losses were aggravated by aggressive recruitment of personnel in line with Com2uS Holdings’ preparations for its P2E game platform business. We expect profitability to improve upon the company’s slated full-fledged releases of P2E games in 2H22.