[Click eStock] "DoubleU Games, Undervalued Continues... Stock Price Expected to Rise with Subsidiary Listing"

SK Securities Report

[Asia Economy Reporter Minji Lee] SK Securities maintained a buy rating and a target price of 85,000 KRW for DoubleU Games on the 2nd. This is based on the judgment that the company remains undervalued compared to competitors with similar corporate value and that there is potential for stock price appreciation through the listing of its subsidiary.

In the fourth quarter of last year, DoubleU Games is expected to have recorded sales of 166.5 billion KRW and operating profit of 49.3 billion KRW, representing increases of 30% and 26% year-on-year, respectively. It is estimated that the decline in payment amounts, which had surged significantly in the second quarter due to COVID-19, and the 5.9% drop in the KRW-USD exchange rate compared to the previous quarter had an impact.

Jinman Lee, a researcher at SK Securities, explained, “In the second quarter, payment amounts for DoubleDown Casino and DoubleU Casino slots surged due to lockdowns in major markets such as the United States, but have gradually stabilized entering the second half of the year. Typically, the fourth quarter is the peak season for social casino games due to holidays and festivals, but the impact of COVID-19 kept indoor activity levels high throughout the year, so the usual peak season effect was limited.”

The successful IPO of the leading social casino company is expected to have a positive effect on the listing of DoubleU Games’ subsidiary. Recently, Playtika, an Israeli-based global number one social casino company, successfully listed on the NASDAQ in the United States. It was listed at $27, exceeding the public offering price band of $22 to $24, and currently has a market capitalization of $11.94 billion.

Playtika’s market capitalization is about 13.5 times the expected adjusted EBITDA as of the third quarter of last year, and another competitor, SciPlay, is at about 10.5 times. DoubleU Games’ market capitalization is only about 4.9 times this year’s expected EBITDA. The researcher said, “Considering SciPlay’s similar scale and profitability, DoubleU Games is significantly undervalued. The successful IPOs of competitors also raise expectations for DDI, a subsidiary accounting for about 55% of consolidated operating profit, which is currently pursuing a NASDAQ listing again.”

Finally, researcher Jinman Lee added, “However, for the company’s overall growth recovery, it is judged that better-than-expected performance of new releases or mergers and acquisitions (M&A) utilizing abundant cash assets are necessary.”