The author is an analyst of KB Securities. He can be reached at drlee@kbfg.com. -- Ed.
Maintain HOLD and cut our target price by 8.8% to KRW146,000
We maintain HOLD and cut our TP by 8.8% to KRW146,000 for Netmarble. We have derived our TP using the sum-of-the-parts valuation model, and have revised down 2021E and 2022E OP by 8.9% and 2.0%, respectively, in light of the company’s sluggish 1Q21 results.
1Q21 earnings miss consensus on tepid revenue for existing games
Netmarble reported 1Q21 revenue of KRW570.4bn (-8.6% QoQ, +7.0% YoY) and OP of KRW54.2bn (-34.3% QoQ, +165.2% YoY), which missed the market consensus by 15.8% and 37.2%, respectively. We attribute the sluggish results to a decline in revenue for existing games ahead of new title rollouts in 2Q21. In particular, Marvel Contest of Champions suffered a 26.9% QoQ drop in revenue on seasonality, while Seven Knights 2 saw a 16.2% QoQ decline as revenue stabilized post-launch (daily average revenue: KRW1.7bn in 4Q20 → KRW700mn in 1Q21).
High hopes for Ni No Kuni: Cross Worlds
Anticipation over Ni No Kuni: Cross Worlds (release slated for 1H21) remains high. The game is based on IP for RPG Ni No Kuni, co-produced by game developer Level 5 and animation production company Studio Ghibli, and is known to feature music by the studio’s representative composer Joe Hisaishi. The Ni No Kuni series has racked up cumulative sales of 2.80mn units so far and works by Studio Ghibli and Joe Hisaishi have amassed large followings, indicating that Ni No Kuni: Cross Worlds should be successful. We expect the game to gross KRW31.2bn in revenue for 2Q21 (KRW1.6bn in daily average revenue)—on par with the initial revenue recorded by Seven Deadly Sins: Grand Cross.
Revenue contribution from new games to grow in 2H21, but valuations at lofty levels considering lower revenue for existing games
Netmarble is also scheduled to roll out a string of other new games—including MMORPGs (e.g., Seven Knights Revolution, Marvel Future Revolution), the rhythm game BTS Dream, and Merge Kuya Island—in 2H21. While momentum from new games has come to the fore, share price valuations are at lofty levels considering the hit to fundamentals from lower revenue for existing games. Shares are currently trading at 31.2x 12m fwd P/E.
Netmarble: Earnings Disappoint Ahead of New Title Rollouts - BusinessKorea
Read More
No comments:
Post a Comment