20171018-三星证券-Black_Desert_mobile_pre-orders_starting_soon_7页_528kb

Pearl Abyss Summary

Core Content

Pearl Abyss is a South Korean game development company with a strong focus on MMORPGs, particularly the Black Desert series. The document outlines an analyst's update on the company, including its financial performance, upcoming product launches, and valuation expectations.

Main Points

Upcoming Launches

• Black Desert Mobile is expected to start pre-orders in early November and launch in Korea in early January 2018.
• Pre-orders are anticipated to boost investor confidence and sales expectations.
• The mobile version is expected to perform well, leveraging the global popularity of the Black Desert IP and the growing demand for mobile MMORPGs.

Console Version

• A console version of Black Desert is set for release in Q1 2018.
• The console market is becoming more favorable for MMORPGs, as evidenced by successful titles like Final Fantasy VII and The Elder Scrolls V: Skyrim.
• The company's development capabilities are expected to support the console launch effectively.

Share Price and Market Performance

• Current Price: KRW129,200
• Target Price: KRW160,000, representing a 23.8% upside.
• Market Cap: KRW1.6t/USD1.4b
• Shares Outstanding (float): 12,066,300 (40.8%)
• 52-Week High/Low: KRW129,200/KRW98,900
• Average Daily Trading Value (60-day): KRW34.7b/USD30.6m

Analyst Recommendations

• Recommendation: BUY
• Rating Scale:
  • BUY★★★: 5
  • BUY: 4
  • HOLD: 3
  • SELL: 2
  • SELL★★★: 1

Valuation Analysis

• Forward P/E: 13.3x (still below global peer average)
• Target P/E: 18.0x
• Fair Value: KRW156,983
• Upside: 23.8%
• Peer Valuations (12-month forward):
  • Average: 21.3x
  • Discount: 15%
  • Target P/E: 18.1x

Financial Highlights

Revenue and Earnings

Operating Performance

• Operating Profit: Increased from 12.0b in 2016 to 199.7b in 2017.
• EBITDA Margin: Improved from 84.7% in 2016 to 75.0% in 2019E.
• ROE: Rose from 112.9% in 2016 to 84.1% in 2018E.

Cash Flow

• Cash Flow from Operations: Grew from 23b in 2016 to 185b in 2017.
• Free Cash Flow: Increased from 21b in 2016 to 183b in 2019E.
• Change in Cash: Rose from 22b in 2016 to 178b in 2019E.

Balance Sheet

• Total Assets: Grew from 44b in 2016 to 404b in 2019E.
• Total Liabilities: Increased from 23b in 2016 to 27b in 2019E.
• Total Equity: Rose from 22b in 2016 to 377b in 2019E.
• Net Debt to Equity: Negative, indicating strong financial position.

Valuation Ratios

Key Information

Pre-Order Impact

• The IPO lock-up period for an 8.8% stake (held by employees) expired on Oct 16, leading to a 19.5% jump in share price as overhang risk dissipated.

Sales Performance

• Black Desert (PC) has a strong global presence:
  • Korea: Launched in Dec 2014, reached 15,000 users in OBT, and was top 14 in Jul 2017.
  • Japan: Launched in May 2015, won best game awards in 2015 & 2016, and was the most popular PC game in Jul 2017.
  • Russia: Launched in Oct 2015, won best MMORPG award in 2015 and was most popular in 5 webzines in 2016.
  • North America/Europe: Launched in Mar 2016, ranked as the best MMORPG for 2 years.
  • Taiwan: Launched in Jan 2017, ranked as the best PC game for 6 months.

Past Successes

• The company has a history of successful game launches:
  • Lineage M generated KRW10.9b in sales on the first day.
  • Lineage II: Revolution hit KRW7.6b in sales on the first day.
  • Mu Origin topped gross sales rankings on Google Play within 23 days and remained in the top-20 for 2 years.
  • Blade & Soul (China) topped download rankings on the Apple App Store and reached top-5 gross sales rankings.

Analyst's View

• The analyst maintains a BUY recommendation, citing the company's strong IP, growth in mobile and console markets, and favorable valuation.
• The target price has been raised by 14.3% to KRW160,000 based on a 18x forward P/E.
• The company's shares are expected to rally before the Black Desert Mobile launch due to market anticipation and reduced overhang risk.

Summary

Pearl Abyss is poised for growth with the upcoming launch of Black Desert Mobile and a console version of Black Desert in early 2018. The company has shown consistent revenue and profit growth, with a strong financial position and favorable valuation metrics. The analyst believes the stock is undervalued and has a BUY rating with a KRW160,000 target price, representing a 23.8% upside from the current price. The company's strong IP and market performance make it an attractive investment within the gaming sector.