[Click eStock] KakaoGames Still Undervalued... Rising Expectations for New Releases Like Elyon and Odin

Rising Expectations for Elion's Overseas Launch
Strong Momentum from New Titles like Odin and Yeongwonhoegwi

[Asia Economy Reporter Minwoo Lee] Kakao Games is expected to achieve better-than-anticipated performance with new titles such as Elion, set for overseas release, and Odin, scheduled for domestic launch.

On the 9th, Ebest Investment & Securities upgraded its investment opinion on Kakao Games from 'Hold' to 'Buy' and raised the target price by 37%, from 51,000 KRW to 70,000 KRW. The closing price on the previous day was 55,300 KRW. This decision was based on the expectation that, following results within the forecast range for the fourth quarter of last year, performance will improve this year driven by new releases.

In the fourth quarter of last year, Kakao Games recorded consolidated sales of 142 billion KRW and operating profit of 16.6 billion KRW, representing increases of 34.25% and 69.19% respectively compared to the same period the previous year. Although these figures were 4.10% and 6.32% below market consensus, they were generally in line with expectations.

Elion, a PC massively multiplayer online role-playing game (MMORPG) released on December 10 last year, has shown a better-than-expected start. Despite the impact of reduced PC bang operations due to COVID-19 and the subscription-based payment model, it achieved approximately 10 billion KRW in sales within one month of release. Fourth-quarter sales were around 8 billion KRW, with recognized revenue at about 6 billion KRW, estimating an average daily revenue of approximately 300 million KRW from an accounting perspective.

It is expected that this year’s performance will improve due to upward revisions in Elion’s overseas sales, raised targets for another new title Odin, and newly reflected revenue estimates for Eternal Return: Black Survival.

Firstly, through the fourth-quarter earnings conference call, Kakao Games stated that Elion, scheduled for release mainly in North America and Europe in the fourth quarter of this year, is expected to achieve success exceeding not only domestic results but also those of Black Desert Global. Black Desert recorded quarterly net royalty sales in the low to mid 10 billion KRW range in North America and Europe until 2019. The total quarterly sales reached the high 30 billion KRW range. Therefore, it is analyzed that Kakao Games is targeting global quarterly total sales of over 40 billion KRW for Elion in the early stages of release. Researcher Seong Jong-hwa of Ebest Investment & Securities explained, "From a conservative perspective, early quarterly sales were estimated at around 30 billion KRW, which is a significant upward revision compared to the previous forecast of the high teens in billions per quarter."

Expectations are even higher for the mobile MMORPG new title Odin. Ebest Investment & Securities raised the estimated average daily sales for Odin’s first quarter after its planned release in the second quarter of this year from 600 million KRW to 800 million KRW.

Eternal Return: Black Survival, a PC battle royale game developed by Nimble Neuron, a development subsidiary of the affiliate Neptune, was released on the Steam platform on October 14 last year. The initial concurrent user scale of the game is evaluated to be comparable to Battlegrounds. Researcher Seong said, "This year, all anticipated schedules will be activated, including Odin’s domestic and Taiwan releases, and overseas releases of Eternal Return and Elion. Although the current valuation is high based on this year’s figures, the valuation for next year is still undervalued considering premium factors such as profit growth potential, development, publishing, and platform competitiveness, and the competitiveness of the Kakao IP ecosystem."

This content was produced with the assistance of AI translation services.