Kakao Games has recently been experiencing poor performance. Due to a decline in sales from its core business of gaming, the company reported losses in the first quarter of this year, following a loss in the fourth quarter of last year. Once reaching 116,000 won, the stock price has now fallen to around 13,000 won. Kakao Games is focusing resources on its core business to aim for a rebound.
According to the gaming industry on the 11th, Kakao Games reported revenues of 122.9 billion won in the first quarter of this year, a decrease of 31% compared to the same period last year. Operating losses were 12.4 billion won, marking two consecutive quarters of losses, with the deficit widening compared to the fourth quarter of last year (6.3 billion won). By institutional sector, mobile game revenues decreased by 41% year-on-year and 15% quarter-on-quarter to 96.1 billion won, leading to the decline in performance. In contrast, revenues from PC and online games increased by 72% year-on-year and 30% quarter-on-quarter to 26.8 billion won. This is interpreted as the positive impact of deferred revenue recognition from the publishing of "PlayerUnknown's Battlegrounds" and "Path of Exile."
The poor performance of Kakao Games is the result of a combination of factors, including gaps in new game releases, declining revenue from existing games, and restructuring focused on core businesses. As the popularity of "Odin: Valhalla Rising" and "Umamusume: Pretty Derby," which had driven performance, decreases, the only new mobile game released in the first quarter, "Valhalla Survival," also failed to succeed. This follows the disappointing performance of the new RTS game "Stormgate," released in August last year.
The stock price reflects this situation. The stock price, which once peaked at 116,000 won in 2021, has fallen to 13,860 won as of the close on the 8th. Analysts have been lowering target prices. DAISHIN SECURITIES has reduced Kakao Games' target price from 17,000 won to 13,000 won, citing that the first-quarter results fell short of expectations and that there is not much anticipation for new releases. DAISHIN SECURITIES noted, "With the low hit rate of new releases, the momentum for new game launches will be limited," adding that "for the stock price to rebound, results exceeding market expectations need to be realized, but until then, a conservative approach is necessary."
Kakao Games is currently reorganizing its non-core businesses. Recently, it sold a 39.4% equity stake in Neptune, a domestic game company, to Krafton for approximately 165 billion won. Last year, it sold its equity in Senna Technology, a wireless communications device subsidiary, and withdrew from some operations of Kakao VX, a golf-related subsidiary. The resources secured through the divestment of non-core businesses will be reinvested in new game releases and expansion into global markets.
Jo Hyuk-min, Chief Financial Officer (CFO) of Kakao Games, commented on the sale of equity in Neptune, stating, "Currently, there is no decided use for the secured liquidity, but we plan to prioritize reviewing opportunities for expanding the new game lineup and for equity investment."
Kakao Games is expected to focus on its core business of gaming this year, following the principle of "selection and concentration." The company is particularly focused on the second quarter. As the organizational restructuring is winding down and promising titles are beginning to emerge, the second quarter will see the large-scale closed beta test (CBT) of the console-based AAA online action role-playing game (RPG) "Chrono Odyssey" presented to global users through the Steam platform. The target launch date is the fourth quarter of this year.
Additionally, action roguelite shooter "Section 13," 2D pixel graphic side-scrolling action RPG "Guardians Order," zombie survival simulator "God Save Birmingham," and massively multiplayer online role-playing game (MMORPG) "Project Q" are planned to be revealed sequentially throughout the year.
Han Sang-woo, CEO of Kakao Games, stated, "We are focusing on restructuring our business around core sectors while considering expanded platforms and genres for game development."