[Into the Stocks] Netmarble "Am I Left Out?"... Between Metaverse, NFT, and High Valuation

[Asia Economy Reporter Lee Seon-ae] Game stocks that have joined the metaverse and non-fungible token (NFT) themes are showing strong momentum day after day. Most game stocks have jumped on the rally after announcing business entry news, but Netmarble stands out as being left out. Although Netmarble has also ventured into the metaverse and NFT businesses, its stock price appears sluggish, hindered by poor performance and high valuation.

According to the Korea Exchange on the 18th, Netmarble's stock price, which soared to the 200,000 KRW range last year, has been moving in the 140,000 to 150,000 KRW range this year and has been stuck at 120,000 to 130,000 KRW in recent months. First, the performance is poor. Netmarble's cumulative sales for Q3 decreased from 1.8609 trillion KRW in 2020 to 1.7546 trillion KRW this year, and operating profit dropped from 189.5 billion KRW to 97 billion KRW. This is due to the failure of new releases to succeed. While existing games that drove Netmarble's performance are on a downward sales trend, the anticipated new release, "Marvel Future Revolution," did not meet market expectations after its late August launch.

Netmarble CEO Kwon Young-sik explained, "The decline in indicators of existing games combined with the poor performance of new releases resulted in no improvement in Q3 performance."

Netmarble has actively entered the recently spotlighted metaverse sector by establishing subsidiaries. Netmarble's subsidiary Netmarble F&C established Metaverse Entertainment last August and is preparing a Meta Idol project. In October, it acquired Nine M Interactive, which possesses meta-human technology, and formed a strategic partnership with Kakao Entertainment. Through a VFX research center scheduled for completion in the first half of 2022, it plans to expand its business areas by developing new IPs based on the metaverse and linking them with games.

Samsung Securities analyst Oh Dong-hwan evaluated, "Once the project is concretized, market expectations for Netmarble's metaverse business are expected to rise," calling it a secured new growth engine.

Netmarble is also preparing to develop blockchain games. Although specific details have not been disclosed, a briefing session is planned early next year with various lineups. New releases are also anticipated. The domestic release of "Seven Knights Revolution" is scheduled for the first half of 2022, and titles such as "The Second Country," "Merge Kungya Island," and "BTS Dream" are expected to be launched globally.

However, despite securing new growth engines, many hold conservative investment opinions due to poor performance and valuation. Sung Jong-hwa, an analyst at Ebest Investment & Securities, said, "It is positive that Netmarble is actively promoting its metaverse business through its subsidiary Netmarble F&C in the P2E (Play to Earn)-based NFT digital asset (games and various assets outside games) and metaverse industries, which are currently the hottest topics in the gaming and stock markets." However, he added, "Almost every Korean game company has announced plans to promote NFT games and metaverse businesses, but based on the announcements so far, it is difficult to say that Netmarble is particularly differentiated or ahead compared to some leading companies related to NFT and metaverse." He continued, "Above all, the current basic performance is too poor, and even when including the equity values of NCSoft, Coway, HYBE, Kakao Bank, and Kakao Games, the valuation is relatively high compared to other game companies, which is a burden."