[Into the Stocks] Clear Downtrend for Kakao Games... Sales 'Wavering' Due to Performance of Flagship Games

On the 6th, a sharp drop of 14.24%... Price fell from the 90,000 won range to the 70,000 won range this month
Accounting for 72% of total Q3 sales... Criticism of structure relying on 'Odin'

[Asia Economy Reporter Gong Byung-sun] Kakao Games' downward trend is becoming clear. Although there is high expectation for growth momentum, the poor performance centered on Kakao Games' flagship game, "Odin," is acting as a greater burden.

According to the Korea Exchange on the 10th, Kakao Games plummeted 14.24% on the 6th. At that time, it was the eighth largest decline among all stocks. Since the beginning of this month, Kakao Games' stock price has started to falter. The stock price, which maintained the 90,000 KRW range until the end of last month, quickly dropped to the 70,000 KRW range.

Kakao Games attracted investors' attention to the extent that it recorded a "ttasang" on its listing day, September 10 last year. This was the result of high evaluation of sales growth centered on Odin. "Ttasang" refers to the phenomenon where the opening price is twice the public offering price, followed by hitting the upper price limit.

Odin's growth was steep. In July last year, it surpassed NCSoft's Lineage M and Lineage 2M to rank first in combined daily sales on Google Play and Apple App Store. As of the third quarter of last year, Kakao Games' sales nearly quadrupled compared to the previous quarter, thanks to Odin.

However, there were also concerns. The developer of Odin is not Kakao Games but "Lionheart Studio," raising doubts about Kakao Games' in-house development capabilities. The sales structure overly dependent on Odin was also pointed out as a problem. As of the third quarter of last year, Odin's sales accounted for 72% of the total.

In November last year, Kakao Games acquired Lionheart Studio to eliminate doubts about its development capabilities and to secure momentum. Lionheart Studio is currently developing Kakao Games' anticipated title for next year, "Uma Musume Pretty Derby." Lionheart Studio is also expected to develop games based on non-fungible tokens (NFTs) in the future.

Kakao Games' Sales Relying on Odin... Sales of Odin Expected to Decline Due to Emergence of Competitors and User Disappointment

However, Kakao Games is shaking along with Odin. On the 6th, Ebest Investment & Securities estimated Odin's sales for the fourth quarter of last year at 141.2 billion KRW, a 58% decrease from the previous quarter. Odin's future performance is also expected to be sluggish. Sales for the first and second quarters of this year are forecasted at 122.2 billion KRW and 115.4 billion KRW respectively, indicating a gradual decline.

The emergence of competitors has dealt a blow to Odin's sales. NCSoft's new title "Lineage W" has reclaimed the top spot in combined daily sales on Google Play and Apple App Store. User disappointment with Odin itself has also grown. Complaints are emerging that there is no new content and feedback to users' protests is delayed.

If securities firms lower their target prices in the future, there is a possibility of further short-term decline. Ebest Investment & Securities, the only firm to present a target price for Kakao Games this year, lowered it from 125,000 KRW to 110,000 KRW. Sung Jong-hwa, a researcher at Ebest Investment & Securities, explained, "The growth potential of major games is significantly sluggish, which burdens short-term corporate valuation."