Putting Aion in perspective
Upgrade to OVERWRIGHT Despite the economic downturn, we revise up our
recommendation on the game sector to OVERWEIGHT to reflect market growth
at home and abroad, driven by a stable sales mix. The sector continued to
under perform, but we have a positive outlook for sales and earnings growth,
given impressive numbers from new games (led by Aion) and the diversification
trend of game genres. The game sector in GMSH universe will post 19.5% and
34.8% sales and operating profit increases for 2009. The sector also boasts
compelling valuations at a 2009E average P/E of 13.5x, lower than the
cosmetics sector (17.3x), the pharmaceutical sector (14.7x), the telecom sector
(12.2x) and the food & beverage sector (9.8x).
Domestic Aion sales to reach W85.2bn in 2009 We expect Aion to
generate W85.2bn in 2009 domestic sales, including W53.2bn from personal
accounts and W32.0bn from Internet cafés. Despite the game’s successful
debut, we conservatively forecast Aion sales vs. the market consensus
(W110.0bn), given the nature of MMORPG’s economic system, the limited user
pool and usage time, and the faster-than-expected polarization among game
users. We should watch closely how Internet café usage time, personal
account expirations and content updates after February relate to Aion sales.
Top pick: Neowiz Games (095660 KS) We revise up our earnings forecasts
for NCsoft (036570 KS) based on our Aion sales estimates, while raising fair
value by 18% to W59,000. However, we maintain HOLD on NCsoft on the
grounds that its current share price is overshot at a 2009E P/E of 22.1x with
the Aion effect overly priced in. Neowiz Games (095660 KS) and CJ Internet
(037150 KS), trading at 2009E P/E multiples of 8.7x and 9.5x, respectively,
feature more attractive valuations. We maintain BUY on the two companies and
revise their fair values to W35,000 (up 20.7%) and W21,000 (up 23.5%),
respectively. We recommend Neowiz Games as our top pick, as the company is
poised to achieve brisk exports alongside strong domestic sale.

Contents
Investment summary
3
Valuation and recommendation
6
Understanding MMORPG’s economic system
11
Functional relation between items supply and revenues
14
AION’s current issues
16
Is it possible to catch two birds with one stone?
17
Aion’s three dilemmas
20
What is the possible revenue for Aion?
24
Company Profile
NCsoft (036570 KS)
CJ Internet (037150 KS)
Neowiz Games (095660 KS)
32