[Click eStock] "DoubleU Games Excessively Undervalued... Target Price Up"

"Transaction Volume Decreased, but Growth Continues
...Performance Rebound Expected Through Cost Control"

On the 13th, Samsung Securities raised the target price for DoubleU Games to 66,000 KRW, stating that "the third-quarter earnings this year exceeded market expectations. Considering the improvement in profitability through cost control, the stock is currently excessively undervalued." The buy rating was also maintained.

On the same day, Samsung Securities researchers Odonghwan and Yuseungmin said, "Although the transaction volume of the existing social casino continued to decline, resulting in a 12.7% decrease in total sales compared to the same period last year in the third quarter, operating profit increased by 13% year-on-year to 54.1 billion KRW through labor cost control due to workforce reduction and marketing cost cuts. This exceeded market expectations by 13.6%," they said.

Cost efficiency led to improved profitability. Researcher Oh explained, "The marketing expense ratio, which had risen to about 20% of sales, was gradually lowered from this year through channel optimization and efficiency management, decreasing to 13.2% in the third quarter," adding, "The goal is to maintain marketing expenses at around 15% of sales next year." During the fourth quarter, the workforce will be reduced by about 40 people domestically and internationally to lower fixed cost burdens. Although the decline in transaction volume of the existing social casino continues, a rebound in transaction volume has been confirmed since last month, making a sales rebound in the fourth quarter possible.

The acquisition of the Swedish online casino company SuperNation is also an optimistic factor. Researcher Oh said, "The online casino business is expected to be fully launched from the fourth quarter," adding, "Synergies are expected by applying DoubleU Games’ data analysis, marketing know-how, and slot game production capabilities to SuperNation." DoubleU Games plans to expand its business mainly in the UK and Sweden, where it holds licenses, doubling or more than doubling its current annual sales scale of 32 billion KRW within 2 to 3 years.

Researcher Oh added, "Due to the continuous sales decline after the COVID-19 special demand, DoubleU Games’ stock price has fallen to about half over the past two years," but "with the acquisition of SuperNation securing growth potential and profitability improving through cost control, and considering that it holds net cash of about 500 billion KRW, the stock is judged to be excessively undervalued."