[THE INVESTOR] Investors sold off shares of Netmarble Games -- Korea’s leading mobile game maker -- after disappointing second quarter earnings combined with a rather glum outlook.
The firm’s shares plummeted 11.27 percent on Aug. 9 to close at 126,000 won, a record low since it went public on May 12 last year. The decline was propelled by net selling by institutional and foreign investors following its earnings report.
Netmarble said its sales in the second quarter fell 7.3 percent on-year to 500 billion won (US$444 million) while operating profit declined by 40.8 percent from a year earlier to 62.2 billion won.
“Sales of major games including ‘Lineage 2: Revolution’ have been declining due to fierce competition among domestic massively multiplayer online role-playing games,” said Kim Sung-eun, an analyst at Korea Securities and Investments.
Although Netmarble saw higher sales than archrival Nexon, which recorded 472 billion won sales in the second quarter, both companies saw a fall from last year.
Market observers are mostly concerned about delays in launching new titles, including Netmarble’s highly anticipated mobile title “Blade & Soul Revolution,” according to multiple analysts.
“Netmarble said that it is aiming to release ‘Blade & Soul Revolution’ by the end of the year -- later than the timeframe the company indicated in its first-quarter earnings call. The company cited efforts to improve game competitiveness as the main reason for the delayed development,” Samsung Securities analyst Oh Dong-hwan wrote in a report.
“We believe ‘Blade & Soul Revolution’ will be launched in the fourth quarter. The company also revealed that it is aiming to roll out ‘Seven Knights 2,’ ‘BTS World,’ and ‘Phantom Gate’ by the year-end.”
Investors take delays in the fast-changing, competitive game industry as a blow to game makers’ earnings, analysts said.
Netmarble Games' much-anticipated mobile title “Blade & Soul Revolution”
A total of 13 brokerage firms including NH Investment & Securities and Mirae Asset Daewoo have lowered the target price for the game maker. One of the stiffest cut was of 23.5 percent by Samsung Securities, from 170,000 won to 130,000 won.
Other game companies like NCSoft and Com2uS also saw their share price decline by 5 percent and 19 percent, respectively, over the past month as they also have pushed back the release of new titles.
Some critics believe the newly adopted 52-hour a week working system is a setback for game companies. “The gaming industry is likely to be hit the hardest from the new system and it won’t be easy to recover,” Lee Chai-won, CEO of Korea Investment Value Asset Management, said.
However, Netmarble CEO Kwon Young-sig is still positive about the company’s efforts to become a global game maker.
“We are focusing on strengthening global competitiveness rather than concentrating on short-term profits,” he said on Aug. 8 during a conference call.
One silver lining was its performance in overseas markets. Netmarble’s global sales expanded to 71 percent in the April-June period from 68 percent in the previous quarter. Overseas sales were up 26.5 percent from the same period last year.
“There are still some hopes of reviving investor sentiment. They are acquisitions and game licenses pending in China, which will be investment catalysts,” Hana Financial Investment researcher Hwang Seng-taek said.
On Aug. 10, shares in Netmarble climbed up 0.79 percent, or 1,000 won, to close at 127,000.
By Park Ga-young (firstname.lastname@example.org)