[Click eStock] "Netmarble, Investment Rating Upgraded to 'Buy'"

Entering Undervalued Zone from Next Year
Ebest Investment & Securities "Maintains Netmarble Target Price at 145,000 Won"

[Asia Economy Reporter Gong Byung-sun] Ebest Investment & Securities has raised its investment rating for Netmarble to 'Buy.' Ebest Investment & Securities analyzes that the company will enter an undervalued phase starting next year.

On the 15th, Ebest Investment & Securities upgraded Netmarble's investment rating from the previous 'Hold' to 'Buy.' The target price was maintained at 145,000 KRW. The closing price on the previous day was 122,500 KRW.

Until now, Netmarble has not escaped controversy over being overvalued. Since its KOSPI listing on May 12, 2017, Netmarble has been plagued by overvaluation concerns, and a decline in growth is expected this year as well. However, it is anticipated to enter an undervalued phase starting next year. Sung Jong-hwa, a researcher at Ebest Investment & Securities, explained, "Mid-October is an appropriate time to evaluate corporate value (valuation) based on next year's earnings forecasts," adding, "There are multiple new releases scheduled for Q4 this year."

In fact, starting with the global release of 'Seven Knights 2' in November, 'Seven Knights Revolution' will be unveiled in Korea and Japan. Additionally, new titles such as 'BTS Dream: TinyTAN House' and 'Merge Kuya Island' are also scheduled for release in the global market. 'Second Country,' which was first released in Korea, Japan, Taiwan, Hong Kong, and Macau, will be launched worldwide in the first quarter of next year.

The acquisition of the global social casino company 'SpinX Games' will require future verification. On August 2, Netmarble invested 2.5 trillion KRW to acquire 100% of SpinX Games' shares. SpinX Games' revenue in the first half of this year increased by 46% compared to the same period last year, exceeding the growth rate of the social casino market. However, Ebest Investment & Securities analyzes that it is necessary to observe whether this is structural growth targeting the 20s and 30s demographic or if a significant portion reflects one-time factors.

Meanwhile, Ebest Investment & Securities estimated Netmarble's Q3 revenue this year at 666.7 billion KRW, a 3.8% increase from the same period last year, and operating profit at 62.7 billion KRW, a 28.3% decrease over the same period. These figures fall short of market consensus estimates of 702 billion KRW and 77.3 billion KRW for revenue and operating profit by 5.03% and 18.89%, respectively. Researcher Sung explained, "These figures reflect the sales of 'Second Country,' released in June, and 'Marvel Future Revolution,' launched globally in August."