Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Roblox, one of the leading global game platforms, announced on Friday (8 January) that it plans to go public through a Direct Public Listing (DPL), instead of the traditional IPO. Ahead of this direct public listing, <a href="https://www.cnbc.com/2021/01/08/roblox-expects-direct-listing-on-nyse-in-february.html" target="_blank" rel="noopener">Roblox</a> raised $520 million in private financing, valuing the company at $29.5 billion or $45 per share.<div class="content-highlight">Our valuation analysis suggests a base case implied market cap of $50 billion and a target price of $76.20 per share for Roblox. This would represent 69% higher level than its most recent private capital raise of $520 million, valuing the company at $29.5 billion or $45 per share. The direct listing valuation range is from $40.5 billion to $60.5 billion, according to our valuation sensitivity analysis. </div>

Roblox, one of the leading global game platforms, announced on Friday (8 January) that it plans to go public through a Direct Public Listing (DPL), instead of the traditional IPO. Ahead of this direct public listing, Roblox raised $520 million in private financing, valuing the company at $29.5 billion or $45 per share.Our valuation analysis suggests a base case implied market cap of $50 billion and a target price of $76.20 per share for Roblox. This would represent 69% higher level than its most recent private capital raise of $520 million, valuing the company at $29.5 billion or $45 per share. The direct listing valuation range is from $40.5 billion to $60.5 billion, according to our valuation sensitivity analysis. 

Julie Lee

Equity Bottom-Up

Nexon had announced in-line 3Q20 results and lackluster guidance for 4Q20 as expected. Its 4Q20 results may not be strong as its mobile game ranking has declined in Korea during 4Q20, though it can be partially offset by potentially better than expected game industry sales in Korea amid worsening COVID. However, we believe Nexon still has long-term investment value to be unlocked and a few positives may outweigh its near term weak earnings;  1) new games from Embark Studios, and 2) increasing possibility of DNF mobile launch and introduction of two new DNF IP based games. We will examine the details of these positives below.

Nexon had announced in-line 3Q20 results and lackluster guidance for 4Q20 as expected. Its 4Q20 results may not be strong as its mobile game ranking has declined in Korea during 4Q20, though it can be partially offset by potentially better than expected game industry sales in Korea amid worsening COVID. However, we believe Nexon still has long-term investment value to be unlocked and a few positives may outweigh its near term weak earnings;  1) new games from Embark Studios, and 2) increasing possibility of DNF mobile launch and introduction of two new DNF IP based games. We will examine the details of these positives below. 

Nexon (3659.T): Games from Embark Studios and Improving Chance of DNF Launch

Quality-first, Business-perspective Strategy, Urbem (HK) Limited

Steven Chen

Quality-first, Business-perspective Strategy

<ul>
<li>The Shenzhen-based game developer trades at an attractive valuation;</li>
<li>Meanwhile, the business has been growing at a nearly triple-digit rate while maintaining an above 30% return on equity and invested capital;</li>
<li>Should investors buy into this (seemingly quality) growth story?  We want to take a deep dive.</li>
</ul>


The Shenzhen-based game developer trades at an attractive valuation;
Meanwhile, the business has been growing at a nearly triple-digit rate while maintaining an above 30% return on equity and invested capital;
Should investors buy into this (seemingly quality) growth story?  We want to take a deep dive.


European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Codemasters Group Holdings PLC / Event-Driven

Electronic Arts agreed on 14 December a reported £945 mn cash counter-offer for Codemasters (604p per share) to disrupt Take-Two's £759 mn already accepted cash and shares offer.
<ul style="list-style-type: disc;">
<li>
For an implied EV of £892.15 mn (Codemasters has £50.747 mn of net cash).
</li>
<li>
The deal represents 7.4x EV/Fwd Revenue, 28.5x EV/Fwd EBITDA and 31.5x P/Fwd E.
</li>
<li>The court meeting and the EGM are expected to be held on December 21, 2020. The transaction is expected to close in Q1 2021.</li>
</ul>
<ul>
<li>
Codemasters shares went up by almost 20% to 640p, above the 604p offer price, suggesting market believes in the possibility of an increased bid by Take-Two. 
</li>
<li>
Take-Two has $2.2 bn of net cash.
</li>
</ul>
No longer the main objective is to sell the largest number of consoles, but to accumulate the largest number of players. Electronic Arts is interested in the racing games business of Codemasters. The move feels defensive because Take-Two is one of its main rivals and many of Electronic Arts' franchises are weakening relative to leaders.
A deal with Electronic Arts would bring under the same umbrella EA's sports and driving games (FIFA soccer and Need for Speed franchises) and Codemasters’ racing simulators.
By using a blended average of the median multiples of EV/Fwd EBITDA and P/Fwd E, a valuation up to 720p per share could be justified, c. 10% upside to current levels (and 19% over EA's bid). Recommendation is LONG Codemasters, TP 720p.
<ul>
<li>an equity value of £1,098 mn (EV of £1,047 mn).</li>
</ul>
Codemasters shares closed at 658p on 16 December, c. 9% above EA's offer.
A shareholder meeting to consider the offer has been scheduled for next Monday.

Electronic Arts agreed on 14 December a reported £945 mn cash counter-offer for Codemasters (604p per share) to disrupt Take-Two's £759 mn already accepted cash and shares offer.


For an implied EV of £892.15 mn (Codemasters has £50.747 mn of net cash).


The deal represents 7.4x EV/Fwd Revenue, 28.5x EV/Fwd EBITDA and 31.5x P/Fwd E.

The court meeting and the EGM are expected to be held on December 21, 2020. The transaction is expected to close in Q1 2021.



Codemasters shares went up by almost 20% to 640p, above the 604p offer price, suggesting market believes in the possibility of an increased bid by Take-Two. 


Take-Two has $2.2 bn of net cash.


No longer the main objective is to sell the largest number of consoles, but to accumulate the largest number of players. Electronic Arts is interested in the racing games business of Codemasters. The move feels defensive because Take-Two is one of its main rivals and many of Electronic Arts' franchises are weakening relative to leaders.
A deal with Electronic Arts would bring under the same umbrella EA's sports and driving games (FIFA soccer and Need for Speed franchises) and Codemasters’ racing simulators.
By using a blended average of the median multiples of EV/Fwd EBITDA and P/Fwd E, a valuation up to 720p per share could be justified, c. 10% upside to current levels (and 19% over EA's bid). Recommendation is LONG Codemasters, TP 720p.

an equity value of £1,098 mn (EV of £1,047 mn).

Codemasters shares closed at 658p on 16 December, c. 9% above EA's offer.
A shareholder meeting to consider the offer has been scheduled for next Monday.

Electronic Arts' Disruptive Counter-Offer

<ul>
<li>IGG looks like an unusual beaten-down stock, as the industry that the company operates is actually benefiting from the pandemic and booming;</li>
<li>Is Mr. Market misunderstanding any of the business fundamentals, or is he correct in terms of any possible value trap?</li>
</ul>


IGG looks like an unusual beaten-down stock, as the industry that the company operates is actually benefiting from the pandemic and booming;
Is Mr. Market misunderstanding any of the business fundamentals, or is he correct in terms of any possible value trap?


United States

Electronic Arts Inc. develops, publishes, and distributes branded interactive entertainment software worldwide for video game consoles, personal computers, handheld game players, and cellular handsets. The Company also provides online game-related services.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Electronic Arts (EA US)

Roblox Valuation Analysis

Our base case valuation for Roblox is $50 billion and a target price of $76.20 per share. This would represent 69% higher than its most recent...

Douglas Kim

Nexon (3659.T): Games from Embark Studios and Improving Chance of DNF Launch

Nexon still has investment value to be unlocked. A few positives may outweigh near term weakness; 1) new games from Embark Studios, and 2) DNF...

Julie Lee

Fire Rock: A Value Play or Value Trap?

Another superior-return, fast-growing gaming business trading at an attractive level. Should investors buy into this (seemingly quality) growth...

Steven Chen

Electronic Arts' Disruptive Counter-Offer

A bidding war is likely. A valuation up to 720p per share could be justified (c. 10% upside to current levels). Recommendation is LONG Codemasters.

Jesus Rodriguez Aguilar

IGG: Deep Value or Value Trap?

Is Mr. Market being too pessimistic about IGG, which operates in a booming industry benefiting from the pandemic, or is he correct in terms of any...

Steven Chen

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)