HanbitSoft Improves Financial Structure Through 'Land Price Increase' Despite Poor Performance

[Asia Economy Reporter Jang Hyowon] HanbitSoft gained book profits through the revaluation of real estate assets. This is interpreted as an effort to improve the deteriorated financial structure due to continued poor performance.

According to the Financial Supervisory Service's electronic disclosure on the 30th, HanbitSoft revalued the land and building located in Mapo-gu, with a book value of 10.4 billion KRW, estimating it at 16.7 billion KRW. The land value rose from 10.3 billion KRW to 16.6 billion KRW, while the building value fell from 150 million KRW to 120 million KRW.

Accordingly, HanbitSoft's total assets will increase from 43.1 billion KRW at the end of last year to 49.4 billion KRW. The proportion of investment real estate in total assets is also expected to rise from the previous 24% to 34%.

The revaluation gain of 6.3 billion KRW will be incorporated into the capital account as retained earnings. As of the end of Q1 this year, HanbitSoft's total equity stands at 15.3 billion KRW. The debt ratio is 156.8%. Once the revaluation gain is reflected in equity, the debt ratio is expected to fall to the 111% range.

This real estate is estimated to have been purchased by HanbitSoft in early 2001 before its listing. The purchase price was about 2.4 billion KRW for the land and 400 million KRW for the building. Over 19 years, the land value increased by 14.2 billion KRW, resulting in approximately seven times the revaluation gain.

Previously, in 2012, HanbitSoft also revalued this real estate and reflected a gain of 6.3 billion KRW in the book value. At that time, the book value of the land increased from 2.4 billion KRW to 8.7 billion KRW. The debt ratio decreased from 247% the previous year to 130%.

In 2017, the company again conducted asset revaluation, reflecting an additional land revaluation gain of 1.6 billion KRW. At that time, the debt ratio, which was 95%, dropped to 68%.

This increased equity through asset revaluation rather than operational performance improvement. In 2012, HanbitSoft's sales decreased by 7%, and the net loss continued at 250 million KRW. In 2017, it recorded an operating loss of 1.4 billion KRW.

HanbitSoft is a company that services online games such as "Granado Espada" and "Audition," as well as mobile games like "Club Audition" and "City Fisher." Last year, on a consolidated basis, it recorded sales of 43.5 billion KRW and an operating loss of 300 million KRW. Over the past five years, except for an operating profit of 600 million KRW in 2018, it has posted losses.

An official from the financial investment industry said, "Asset revaluation is a book profit without cash inflow or outflow, so it helps improve the financial structure but does not explain the company's growth potential," adding, "It is necessary to look at the company's performance trends and growth drivers."