[Click eStock] "Netmarble, Weak First Half... Expectations on New Releases"

Effect of SpinX Games Acquisition by Social Casino Game Company Begins to Reflect Partially from Q3

[Asia Economy Reporter Gong Byung-sun] Netmarble posted disappointing second-quarter earnings that fell short of market consensus due to increased marketing and labor costs. However, the success of new releases starting in the third quarter is expected to serve as a momentum driver for the stock price.

According to KB Securities on the 12th, Netmarble's second-quarter revenue was 577.2 billion KRW, down 15.8% year-on-year, and operating profit was 16.2 billion KRW, down 80.2% during the same period. This represents a shortfall of 8.5% and 71.3% against revenue and operating profit consensus estimates, respectively.

Revenue was similar to the previous quarter. Although major games such as The Seven Deadly Sins, Lineage 2 Revolution, Seven Knights 2, and BSR saw revenue declines of 12.3%, 24.1%, 54.0%, and 15.7% respectively compared to the previous quarter, revenue from The Second Country, released on June 10, was reflected. Revenue for the second quarter of this year showed a 1.2% increase compared to the previous quarter.

However, significantly increased operating expenses are interpreted as having negatively impacted earnings. Operating expenses rose 8.7% quarter-on-quarter due to increased labor costs and marketing expenses related to the release of The Second Country. Labor costs increased 7.8% and marketing expenses rose 29.4% compared to the previous quarter.

The success of subsidiaries' new releases in the second half is expected to determine the future direction of the stock price. Starting with the release of Marvel Future Revolution on the 25th, numerous new titles such as Seven Knights 2 Global, Seven Knights 2 Revolution, BTS Dream, and Merge Kuya Island are scheduled for release in the second half. KB Securities analyst Lee Dong-ryun explained, “A rebound in second-half earnings is expected due to the warm reflection of The Second Country’s revenue starting in the third quarter and contributions from new releases.”

The acquisition effect of social casino game company SpinX Games is expected to be partially reflected in the third quarter and fully in the fourth quarter. On the 2nd, Netmarble announced the acquisition of Leonardo Interactive Holdings, a subsidiary of SpinX Games, for 2.5 trillion KRW. Analyst Lee said, “Even considering the boom period after the spread of COVID-19, acquiring a social casino company with strong cash-generating capability will enhance earnings stability,” adding, “Synergies through intellectual property (IP) partnerships with U.S.-based subsidiaries such as Kabam and Jam City are also possible.”

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