Netmarble, Which Experienced Volatile Swings Due to Big Hit, May Be Reassessed Based on Earnings

[Asia Economy Reporter Oh Ju-yeon] Netmarble, which experienced sharp stock price fluctuations last year due to rising expectations for the equity value of Big Hit Entertainment and Kakao Games, is drawing attention to whether it can be re-evaluated this year based on new releases and performance.

According to FnGuide, a financial information company, Netmarble's estimated revenue for Q1 this year, as projected by three or more securities firms, is 711.8 billion KRW, a 33.6% increase compared to the same period last year, and operating profit is expected to rise 390.5% to 100.3 billion KRW. The revenue and operating profit for Q4 2020, which is about to be announced, are also estimated to record 89 billion KRW and 74.5 billion KRW respectively, up 25.1% and 74.1% year-on-year.

There is growing interest in whether this expected increase in performance can serve as a momentum for the stock price, which plummeted at the end of last year.

Netmarble's stock price surged last year, buoyed by the rising equity values of Kakao Games and Big Hit, which were newly listed. Netmarble holds a 24.87% stake in Big Hit, making it the second-largest shareholder after Big Hit CEO Bang Si-hyuk (43.44%), and also owns 5.63% of Kakao Games, benefiting significantly from last year's IPO market frenzy.

Thanks to Kakao Games, which recorded an unprecedented subscription competition rate, Netmarble's equity value soared nearly fourfold, with its stock price skyrocketing from around 95,000 KRW on June 9 to 204,500 KRW in early September, a 115.26% surge. The stock price, which had fully reflected expectations for Big Hit's listing in October, then slid sharply, halving in just over two months. As of the closing price on October 30, it fell to 117,000 KRW, and Netmarble's stock price has since been stagnating in the 120,000 KRW range for three months.

During this period, individual investors bore the brunt of investment losses. On September 7, when the stock price peaked, individuals purchased Netmarble shares worth 9.232 billion KRW at an average price of 197,322 KRW. As the stock price dropped more than 40% by the end of October, individuals are estimated to have cut losses amounting to 7.5 billion KRW. In contrast, foreign investors bought shares worth 73 billion KRW during this period (September 7 to October 30), partially realizing profits of about 54 billion KRW from November and holding the remaining shares in anticipation of the next upward phase. Individuals who were caught in the surge and cut losses have recently repurchased shares worth 63.2 billion KRW over the past three months, betting on new releases and expected performance growth.

Lee Min-ah, a researcher at Daishin Securities, diagnosed, "In Q1 this year, the success of ‘Seven Knights 2’ will be reflected, and with reduced marketing expenses, operating profit is expected to improve by 451% year-on-year to 112.3 billion KRW." This is an upward revision compared to market estimates.

Lee evaluated, "Considering the equity value of investment companies, the current stock price is at an appropriate level," adding, "There is potential for stock price appreciation depending on the success of new releases this year."