[After CB Issuance] Joycity, Yield Rewarding Long Wait

Increase in Game Revenue Last Year Due to COVID-19 Impact
Positive Performance Outlook This Year... Strengths in Specialized Game Genres
First CB Issued in October 2018... Conversion Price 3,227 KRW

[Asia Economy Reporter Hyungsoo Park] Joycity is seeing continued conversion right claims on the first series of convertible bonds (CB) issued three years ago.

According to the Financial Supervisory Service on the 21st, an investor holding Joycity convertible bonds exercised conversion rights worth 1.3385 billion KRW on the 16th. The 414,782 common shares resulting from the exercise of the conversion rights will be listed on the 3rd of next month. The conversion price is 3,227 KRW, and based on the previous day's closing price of 9,690 KRW, the yield reaches 200%.

Previously, in October 2018, Joycity privately issued the first series of convertible bonds worth 16 billion KRW to raise operating funds. Investments were made by Value-Up Mid-term Specialized Solution New Technology Investment Association No.1 and IBK Financial Group Synergy IB Mezzanine New Technology Association, among others. The convertible bonds had a zero percent coupon rate, meaning no separate interest was paid before maturity. Conversion rights could be exercised from October 2019 to September 2023. The initial conversion price was 13,455 KRW, but due to free capital increases and repricing caused by market price declines, the conversion price was lowered to 3,227 KRW.

2018 was a period when Joycity’s operating profit sharply declined. While expenses increased due to the development of new mobile games, profitability worsened as the release of new games was delayed. During this period of poor performance, the stock price was at a bottom level but rebounded from the second half of the following year. Last year, as time spent at home increased due to COVID-19, online and mobile game users grew, causing the stock price to rise rapidly. Joycity’s stock price tripled over the course of one year.

Joycity recorded operating revenue of 165.4 billion KRW, operating profit of 20.5 billion KRW, and net profit of 11.7 billion KRW last year. Compared to the previous year, sales increased by 60.4%, operating profit rose by 139.5%, and net profit turned positive.

Since releasing the online basketball game 'Freestyle' in 2004, Joycity has continued to grow. Subsequently, 'Freestyle Football' and 'Freestyle 2' gained popularity one after another. Even after 17 years since the release of the Freestyle series, it continues to achieve steady results centered on dedicated users. The company is renewing its highest performance annually, mainly in China, and is building an intellectual property (IP) collaboration structure.

The war game 'Gunship Battle' and its sequel 'Warship Battle' have recorded cumulative downloads reaching 100 million worldwide. Based on Disney’s intellectual property, 'Pirates of the Caribbean: Tides of War' was released in May 2017 and continues to generate steady revenue.

Expectations for this year’s performance are also high. Samsung Securities researcher Donghwan Oh explained, "Joycity applies a genre-specialized revenue model, maintaining the long-term popularity of existing games," adding, "They continue growth by releasing new titles applying famous IPs to proven existing game formats."

He further predicted, "This year, growth from last year’s releases 'Crossfire Warzone' and 'Tera Endless War,' along with the launch of Project NEO and new King of Fighters IP titles, will increase revenue in the war simulation genre."