[Click eStock] "SundayToz, New Release Success Essential for Stock Price Rise"

Cape Investment & Securities

[Asia Economy Reporter Minji Lee] Cape Investment & Securities stated on the 31st that for SundayToz's stock price to show a full-fledged upward trend, the success of new releases is essential. The investment opinion remains a buy, and the target price has been raised by 7% from the previous level to 28,000 KRW, considering the new releases scheduled for the second half of the year.

In the first quarter, SundayToz recorded sales of 23.4 billion KRW and an operating profit of 2 billion KRW, slightly below market expectations. The increase in marketing expenses due to new releases and the decline in revenue from existing games were factors that led to the results falling short of market forecasts. Jinseong Choi, a researcher at Cape Investment & Securities, said, “The first-quarter results fell short of expectations as the decline in existing mobile games intensified. Marketing expenses increased due to the release of the new title BT21, but the new release's performance was below expectations.”

The performance of the two new titles released in the first half of this year is considered somewhat disappointing. ‘BT21 Popstar,’ released in March using the Line Friends IP in the Asian market, and ‘Nemo’s Ocean Life,’ released this month, have not achieved significant success since their launches, marking a lackluster performance for new titles following ‘Disney Pop Town.’

Accordingly, the success of upcoming new releases is crucial to driving a substantial rise in the stock price. Considering that recent new titles had somewhat weak IP power, expectations for new titles based on global IPs have grown stronger.

A positive aspect is that advertising revenue has been stably secured. Researcher Choi explained, “The increase in the number of games due to new releases and the stable growth of advertising revenue, a high-margin business segment, have established a profit base. Advertising revenue growth is expected to be possible based on the global launches of previously released games.”

Meanwhile, the second quarter is expected to show improvement as the results of new releases launched in March and this month are reflected. KTB Investment & Securities projected SundayToz’s second-quarter sales at 23.1 billion KRW and operating profit at 3.6 billion KRW. Researcher Jinseong Choi explained, “Although the target price was raised due to a change in the base period considering the new releases in the second half, success is necessary for a full-fledged upward trend in the stock price.”