Netmarble, the world’s third­biggest game publisher, has made a high­profile debut in South Korea’s largest listing in seven years as investors seek to tap into the success of Asia’s fastest growing mobile game maker. The company climbed as high as 9.2 percent in early Friday trading before settling at Won162,500, 3.5 percent higher than its initial public offering a report at Financial Times says.

The group, famous for its latest hit Lineage II: Revolution, raised Won2.66tn ($2.3bn) in the country’s largest listing since 2010. The IPO has drawn much interest from investors on the belief that “content providers” — new­economy companies that trade in games, software or media — would eclipse the industrial conglomerates that have historically dominated Asia’s fourth­largest economy.

Investors have poured cash into the country’s content providers, drawn by the narrative that South Korea is positioned as a leading Asian pop­culture power. The companies are breathing life into the country’s stagnant economy amid the declining competitiveness of its traditional manufacturing industries. Naver, the country’s top search engine, has become the fifth­largest stock on the country’s main board with a market capitalisation of Won28tn, ahead of industrial groups such as Posco, Kia Motors and LG Electronics.
CJ E & M, South Korea’s leading media company, has been added to the MSCI Korea index ahead of big companies such as Daewoo Shipbuilding and Marine Engineering and Hyundai Merchant Marine. Analysts say Netmarble’s strength lies in its ability to come up with a steady stream of hit games, unlike Asian rivals such as Mixi or GungHO, which have failed to extend their strong performance after releasing megahit titles.

“It has a competitive DNA in developing hit games continuously in a short period,” said Jang Won­yeol, analyst at Shinyoung Securities. “Its earnings are expected to grow sharply this year thanks to the huge popularity of the mobile Lineage game.”

However, there are also concerns that the shares are overvalued. The company was priced at more than 70 times 2016 earnings, much higher than rivals — NCSoft traded at 29 times earnings and Nexon at 45 times as of Thursday’s close.

Netmarble’s listing comes amid solid market sentiment in South Korea, with the benchmark index Kospi hitting record highs in recent days. The company, which is 22 per cent owned by Chinese internet group Tencent, has made rapid inroads into the region and the US with popular games such as Seven Knights, Everybody’s Marble and Marvel Future Fight.

The role­playing game Lineage 2: Revolution became the world’s highest grossing mobile
game in February after its December release in South Korea. The company said it would use proceeds from the IPO to help fund a global expansion that has included the acquisition of the Vancouver studio of US rival Kabam, and puzzle game developer SGN — now called Jam City — for $130m in 2015.

The company reported Won1.5tn in 2016 revenue, which has grown more than fivefold in two years. The US accounts for one­fifth of its sales and Japan for one­tenth. The company is eyeing more overseas acquisitions using funds raised in the IPO. “The key will be how successful it can become in overseas markets amid stiff competition. But
the outlook seems bright as the company is good at localizing its games,” Mr Jang said.

Source: Ft.com

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