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Source = DoubleU Games
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[Alpha Biz= Paul Lee] Eugene Investment & Securities raised its target price for DoubleU Games from 67,000 KRW to 69,000 KRW on Thursday, citing improved earnings expectations driven by revenue growth from new businesses. The firm maintained its "Buy" rating. DoubleU Games' closing price on the previous trading day was 47,600 KRW.
Eugene Investment & Securities stated, “SuperNation, which was incorporated as a subsidiary in Q4 2023, achieved a 56% year-over-year revenue growth last year, and it is expected to achieve record-high revenue in Q1 2024.” The firm further forecasted a 7% profit growth for DoubleU Games this year.
Additionally, the securities firm noted that “PaxyGames, which will be incorporated this month, is currently setting new monthly revenue records and is expected to generate over 10 billion KRW in quarterly revenue from Q2 2024.” It also projected that new game releases in the second half of the year will accelerate revenue growth.
As the direct-to-consumer (DTC) sales ratio expands, platform fee costs as a percentage of revenue are expected to decrease. Analyst Jung stated, “DTC sales grew from 6% in H1 2023 to nearly 10% in H2 2023. This year, the company will focus on expanding DTC revenue not only for its main title, DoubleDown Casino (DDC), but also for DoubleU Casino (DUC).” Given that competitors’ DTC ratios exceed 25%, Jung expects a meaningful improvement in profitability.
Furthermore, the strong KRW-USD exchange rate has been beneficial for DoubleU Games, as most of its revenue is recognized in USD. Jung added, “As of the end of last year, DoubleU Games held approximately 820 billion KRW in cash, a significant portion of which is in USD, leading to a notable increase in non-operating income in Q1 2024.”
Eugene Investment & Securities also pointed out that despite a decline in stock price since the beginning of the year, DoubleU Games' price-to-earnings ratio (PER) for 2024 has dropped to 5.5x, which is considered low given its growth potential and profitability, making it an attractive buy.
The firm projected DoubleU Games' 2024 revenue and operating profit to grow by 10% and 17%, respectively, compared to the previous year. Analyst Jung explained, “Excluding the impact of the SuperNation acquisition, the company only achieved 1% growth last year, reflecting the slowdown in the social casino market. However, despite limited revenue growth, the company managed to improve profitability through more efficient marketing expenditures.”
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
