[Practical Finance] From Dramas to Games... KOSDAQ Leaders Standing Alone with 'Content' as Their Weapon

CJ ENM and Studio Dragon Lead OTT Golden Age with Dramas
Com2uS, Webzen Also See Rising Expectations from New Releases

[Asia Economy Reporter Minwoo Lee] Kosdaq companies that have demonstrated competitiveness on their own without benefiting from collaborations with large-cap Kospi companies are also attracting investor interest. They have continued their upward trend by building a foundation for the untact (non-face-to-face) era using content such as dramas, K-pop, and games as their weapons.

CJ ENM is a representative example. From the beginning of this year until the 18th, its closing price rose by 17.20%. Considering that the Kosdaq index fell by about 2% during the same period, this is an overwhelming rate of increase. Even though the Kosdaq hit a 20-year high intraday at 995.22 on the 8th and then closed lower for three consecutive trading days, CJ ENM continued its upward momentum undeterred. During this period, it actually rose 15.0% with gains of 5.75% on the 8th, 2.37% on the 11th, and 5.69% on the 12th. This is interpreted as growing expectations due to solid fourth-quarter results last year and the anticipated reopening of the media market starting this year.

According to financial information provider FnGuide, the market consensus for CJ ENM’s fourth-quarter results last year is sales of 950.9 billion KRW and operating profit of 81.2 billion KRW. While sales are expected to decrease by 6.24% compared to the same period last year, operating profit is estimated to increase by 90.24%. Some forecasts even predict sales exceeding 1 trillion KRW and operating profit surpassing 90 billion KRW. Korea Investment & Securities expects CJ ENM to achieve quarterly sales of 1 trillion KRW and operating profit of 91 billion KRW, marking the largest operating profit in a single quarter. The strong performance in media sectors such as dramas and online video services (OTT) is expected to drive the earnings growth.

With its content sales and drama production capabilities highlighted, CJ ENM is expected to continue growing this year. CJ ENM recently handled overseas sales of the globally successful Netflix drama "Sweet Home," earning a 15% commission from related sales. Taewan Oh, a researcher at Korea Investment & Securities, analyzed, "In addition to Netflix, CJ ENM has secured sales channels with global broadcasters that do not have branches in Korea, which will allow it to benefit from the globalization of domestic content."

Studio Dragon, a drama production specialist, is also considered a strong content player on the Kosdaq. As of 2 p.m. on the 19th, its stock price was 99,800 KRW, up 5.6% from the beginning of the year. On the 14th, it rose to 104,000 KRW, marking its highest level since December 2018. With proven capabilities through consecutive hits like "Kingdom" and "Sweet Home," expectations are rising due to benefits from intensified competition among domestic and international OTT platforms.

Researcher Dongryun Lee of KB Securities stated, "Under the leadership of global companies such as Netflix, Walt Disney, and AT&T, investments in OTT platforms and content are strengthening, and Korean video content producers have also laid the groundwork for a leap forward. Major Chinese companies like iQIYI and Tencent are purchasing Korean content and making strategic investments to secure competitiveness in the Asian OTT market, which is noteworthy."

The gaming industry is also growing smoothly. Com2uS is generating excitement as the release of its new title "Summoners War: Hundred Years' War" approaches. The revenue and intellectual property (IP) value of Summoners War, now in its seventh year, remain strong, and the company is aiming for consecutive hits with "Summoners War: Hundred Years' War" (scheduled for March-April) and "Summoners War: Chronicle" (second half of the year). Expectations are already reflected in the stock price, which was 166,300 KRW as of 2 p.m. on the 19th, up 3.48% from the start of the year. Considering that the Kosdaq index declined during this period, this is regarded as a solid performance.

Webzen is also sailing smoothly. The consensus for its fourth-quarter results is sales of 102.6 billion KRW and operating profit of 43.2 billion KRW, expected to increase by 134.2% and 193.9%, respectively, compared to the same period last year. On the 12th, its stock price surpassed the 40,000 KRW mark for the first time in about three years since January 2018. Jaemin Ahn, a researcher at NH Investment & Securities, explained, "Domestic new titles such as 'MU Archangel' and the in-house developed 'R2M' have been performing well since their release last year, and the recently launched 'Youngyo Archangel' entered the top 10 in sales on the Chinese Apple App Store, continuing positive momentum. The highly anticipated Tencent title 'Legend of the Immortal 2' is expected to be released in the first half of the year, further raising expectations."