[Click eStock] "SOOP Resolves Accounting Risks, Boosting Earnings Expectations"

End of Accounting Fraud Controversy... Limited Decline in Performance
Business Expansion and Performance Improvement Expected Through PlayD Acquisition

There is an analysis that SOOP has resolved risks by changing the controversial advertising revenue recognition method and that expectations for improved performance have increased due to the acquisition of an advertising agency.

On the 12th, Samsung Securities maintained its 'Buy' investment opinion on SOOP and raised the target price by 14.3% to 160,000 KRW. The closing price the previous day was 84,300 KRW.

On the 10th, SOOP changed the controversial game content advertising revenue recognition method from gross revenue to net revenue. As a result, total revenue for last year decreased by 3.7%, and advertising revenue decreased by 16.3%, but there was no impact on operating profit. It is evaluated that the scale of the revenue decline was minimal compared to the controversy's impact. It is expected that the risk of accounting fraud will be quickly resolved due to SOOP's proactive response.

The business is expected to expand further. The day before, SOOP announced that it would acquire a 70% stake in PlayD from Nasmedia and KT for 73.5 billion KRW. PlayD is a digital advertising specialized agency ranked among the top five in Korea based on transaction volume. The enterprise value at acquisition is 105 billion KRW, about 24.4 times last year's net income, but it holds net cash and short-term financial instruments worth approximately 50 billion KRW. SOOP is expected to increase its operating profit by about 4 billion KRW annually through the acquisition of PlayD. Additionally, based on PlayD's sales network, SOOP's platform advertising sales are expected to be promoted.

Concerns about a decline in viewers exist but are considered limited. Samsung Securities analyst Oh Dong-hwan said, "Although SOOP's total number of viewers has slightly decreased over the past 10 years, the loyalty of the core user base has increased, leading to steady growth in paying users and average revenue per user (ARPU), resulting in an average annual operating profit growth of 28% over eight years," adding, "While it will take time for overseas services to settle, the expansion of simultaneous broadcasts by popular streamers will accelerate activation."