[Click eStock] "Webzen Expects Record 4Q Performance Thanks to Mu Archangel and R2M"

Mu Archangel on Track for Long-Term Success
Highly Profitable In-House Developed R2M Also on the Rise

[Asia Economy Reporter Minwoo Lee] Webzen is expected to achieve its highest quarterly performance ever in the fourth quarter of this year. This is because 'MU Archangel,' released in May, has entered a long-term hit phase, and 'R2M,' which is directly developed with its own intellectual property (IP) and has high profitability, continues to be successful.

On the 30th, Hyundai Motor Securities forecasted that Webzen would record sales of 116.2 billion KRW and operating profit of 50.9 billion KRW in the fourth quarter of this year. This would be the highest quarterly performance ever. These figures represent increases of 166% and 249%, respectively, compared to the same period last year. It is expected to significantly surpass the surprise performance in the third quarter (sales of 106.9 billion KRW, operating profit of 63.5 billion KRW). The operating profit margin is projected to reach 43.8%, the highest since 44.1% in the first quarter of 2018.

The steady success of MU Archangel, released on May 27, was a key factor. Hyundai Motor Securities researcher Hyunyong Kim explained, "Following an average sales ranking of 6th to 7th in the third quarter, it is judged to have entered a long-term hit phase by maintaining a 7th to 8th place ranking in the fourth quarter as well. Although a downward stabilization of sales is inevitable, the expected sales of over 67 billion KRW this year are likely to be achievable next year as well." Sales related to the MU IP, including MU Archangel, MU Origin 1/2, and MU PC Online, are expected to be around 150 billion KRW both this year and next year.

Additionally, the strong performance of R2M, which is directly developed with its own IP and has high profitability, supported the good results. R2M is judged to be able to maintain a sales ranking of 5th to 6th in the fourth quarter, following an average ranking of 3rd to 4th in the third quarter. Next year, sales are expected to significantly exceed this year's forecast of 63 billion KRW. R2 sales (excluding PC/overseas annual 10 billion KRW, all R2M) are expected to reach the 70 billion KRW range this year, more than doubling compared to the same period last year, and approach 100 billion KRW next year.

The sequential overseas expansion of the two major new titles, MU Archangel and R2M, is also a positive factor. The release of MU Archangel in North America and Europe, and R2M in Taiwan, North America, and Europe, is expected to be possible as early as the first half of next year. Researcher Kim said, "Although the financial impact of releases in North America and Europe is not large, if the self-developed R2M succeeds in Taiwan, which is favorable for massively multiplayer online role-playing games (MMORPGs), the currently minimal overseas sales of the R2 IP will be added, strengthening the IP's status. The success of R2M is also raising expectations for 2 to 3 self-developed titles currently in preparation, with plans for sequential releases starting in the second half of next year," he analyzed.

Positive developments from China are also anticipated. Researcher Kim stated, "It is known in the market that the publishing license (content business permit in China) for 'Quanmin Qiji 2,' published by Tencent in early July, has been issued, and the closed beta test (CBT) in the second half of the year is understood to have proceeded according to schedule. The official release of Quanmin Qiji 2 is expected to be possible early next year or in the first half of next year, which is expected to act as a mechanism to increase the currently annual overseas MU sales, which are in the 60 billion KRW range, again as a high-margin source."

However, despite these factors, Hyundai Motor Securities did not provide an investment opinion or target price for Webzen. The closing price of Webzen on the previous trading day was 34,350 KRW.