With NCSoft's Strength and New Release Expectations... Game ETF Soars

[Asia Economy Reporter Song Hwajeong] Game exchange-traded funds (ETFs) are showing strong performance. This is interpreted as a result of growing expectations for new game releases amid the continued rise in the stock price of the leading game company, NCSoft, since the beginning of the year.

According to the Korea Exchange on the 22nd, KODEX Game Industry has risen 6.54% this year, while TIGER K-Game and KBSTAR Game Theme have recorded solid returns of 5.52% and 4.93%, respectively. Last year, TIGER K-Game fell 5.29%, KODEX Game Industry dropped 3.17%, and KBSTAR Game Theme only rose 1.55%, but this year they are showing distinctly different trends.

This is attributed to the strong stock price of NCSoft, the leading game company, and the expectations for new game releases this year. NCSoft's stock price reached an intraday high of 644,000 won, setting a new 52-week high. NCSoft has risen 16.82% this year and continues its streak of record highs.

The success of 'Lineage 2M,' released in November last year, is driving NCSoft's stock price increase. Since its launch, Lineage 2M has ranked first in App Store sales, demonstrating NCSoft's strength following 'Lineage M.'

An Jaemin, a researcher at NH Investment & Securities, said, "NCSoft's intellectual property (IP) portfolio has increased from six to seven, and significant earnings growth is expected this year." He added, "Lineage 2M is estimated to have recorded 147 billion won in sales and 4.3 billion won in daily sales in the fourth quarter of last year. It shows user metrics similar to Lineage M but with higher sales, which will greatly contribute to NCSoft's earnings growth." NH Investment & Securities forecasts NCSoft's sales and operating profit this year to be 2.55 trillion won and 942.8 billion won, respectively, representing increases of 50.8% and 86.2% compared to the previous year.

Expectations for new game releases among game stocks are also rising. In the case of Netmarble, it is expected to enter a lineup recovery phase this year compared to the relatively weak lineup last year. Researcher An said, "Netmarble plans to unveil its 2020 new releases and future business strategies in the first half of the year." He added, "The currently disclosed new lineup includes 'Magic: ManaStrike,' scheduled for global release in January; 'A3: Still Alive' in the first quarter; 'Seven Knights Revolution' in the first half; and 'Seven Knights 2,' 'The Second Country,' and 'BTS2' in the second half. Additional new releases are likely to be announced at the NPT (Netmarble Together with Press) event scheduled for the first half."

Com2uS is also expected to see earnings growth through new releases. Sung Jonghwa, a researcher at eBest Investment & Securities, said, "Sales have been declining over the past three years due to heavy dependence on 'Summoners War' and weak new release momentum." He added, "This year, while Summoners War continues to serve as a solid cash cow, the success of anticipated new releases such as 'Summoners War: Hundred Years War' (Q2 this year) and 'Summoners MMORPG' (second half of this year) will significantly enhance sales growth potential."