Game industry outlook from historical view
PC replacement to provide a boost to online game development The
penetration of 64bit PC will accelerate in 2010. Over the past 20 years,
32bit PC has been the mainstream, but with the rollout of the Windows7
operating system, 64bit PC will become the industry standard in terms of
both hardware and operating systems. Upgraded PC specifications and
heightened broadband capacity will provide a strong boost to online game
and content development. The rollout of 64bit PC is also a boon for the
online game sector. Online platforms will also make up a greater share of
the global game market. Online games will likely expand from Asia to North
America and Europe. Korean game companies with strength in platforms are
set to benefit.
Overseas royalty revenue growth to continue in 2010 Online platforms'
share of global game market is forecast to rise from 11% in 2008 to 17% in
2010. The Korean game market should also expand by 21% to W4.1tr in
2010. Overseas royalty revenue growth should gain further momentum. In
particular, exports to China and Southeast Asian regions will increase. The
Korean market share in North America, Europe, and Japan should also grow.
Korean game exports are forecast to rise 26% to W1.87bn in value in 2010.
Maintain OVERWEIGHT The game sector has gained 146% so far this year,
outperforming the broad market. The strength of game stocks will be
maintained based on improved fundamentals in view of bright earnings
forecasts for 2010 amid new game launches and overseas royalty income
growth. We maintain OVERWEGITH on the game sector. Our top picks are
Neowiz Games (095660 KS) and NCsoft (036570 KS) for a fair value of
W53,000 and W192,000, respectively.