Gravity Co., Ltd.

GRVY Details

Gravity Co., Ltd. (NASDAQ: GRVY) is a publisher and developer of online and mobile games based in South Korea. Ragnarok Online, the company's principal product, is a popular online game that is currently available in 91 markets and countries, including Japan and Taiwan. As of January 05, 2022, GRVY’s market capitalization stood at USD 489.90 million, with 6.95 million American Depository Shares (ADS) listed and outstanding, with each ADS representing one ordinary share.

Latest News:

• Geographical Expansion: On December 13, 2021, Gravity Game Hub Pte. Ltd., GRVY's wholly-owned subsidiary in Singapore, officially launched Ragnarok: The Lost Memories, a Cinematic Newtro RPG mobile game, in the Philippines, Singapore, and Malaysia. Previously, Gravity Game Arise Co., Ltd., GRVY's wholly-owned subsidiary in Japan, has officially launched NBA RISE TO STARDOM, a sports mobile game, in Japan on November 24, 2021.

9MFY21 Results:

• Growth in Revenues: GRVY reported a YoY increase of 8.12% in its total net revenues to KRW 317.34 billion during 9MFY21 (ended September 30, 2021) compared to KRW 293.51 billion during 9MFY20, due to increased revenues from Ragnarok X: Next Generation in Southeast Asia, launched on June 18, 2021, and Ragnarok Origin in Japan, launched on June 28, 2021.
• Expansion in Net Income: The company recorded a net income of KRW 64.66 billion during 9MFY21 vs. KRW 47.57 billion during 9MFY20.
• Strong Balance Sheet: As of September 30, 2021, the company had cash and cash equivalents (including short-term investments) of KRW 226.17 billion and no outstanding debt.

Region-Wise Revenue Mix (Source: Q3FY21 IR Presentation, November 2021)

Key Risks:

• Product Concentration: In FY20 and FY19, Ragnarok Online contributed around 20.8% and 10.5% of GRVY's overall sales, respectively. In FY20 and FY19, the mobile game Ragnarok M: Eternal Love accounted for 43.6% and 80.0% of total revenues. As a result, if the Ragnarok gaming universe does not continue to evolve, update, and improve, the client base will shrink, and the company's financials could suffer.
• Reliance on Third-Party Developers: In 2020, third-party online and mobile games accounted for 74.5% of GRVY's revenue, with Dream Square's mobile games accounting for 69.8%. As a result, any conflict with such important third-party developers could harm the company's bottom line.

Outlook:

Major Upcoming Launches (Source: Q3FY21 IR Presentation, November 2021)

GRVY Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

GRVY's stock price has fallen 47.77% in the past nine months and is currently trading in the lower band of its 52-week range of USD 64.14 to USD 223.00. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 38.26.

Considering the significant correction in the stock price, strong balance sheet, geographical expansion, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 69.36, down 1.62% as of January 05, 2022.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

CuriosityStream Inc.

CURI Details

• Launch of Smart Bundle: Curiosity Stream has launched the Smart Bundle, an upgraded premium tier offering available via smartbundle.com, on December 21, 2021. The bundle includes 4K access to CURI's films, shows, and series and complimentary access to five other leading subscription services dedicated to entertainment that encourages learning, exploration and extends boundaries.
• Recent Partnerships: On December 16, 2021, CURI stated that it had expanded its worldwide reach through several distribution partnerships, bringing its content and products to more than three million new subscribers in new countries and territories and various new languages. In addition, CURI has formed a new distribution collaboration with Viaplay,  a streaming service provider based in Stockholm. Viaplay members in the Nordic and Baltic countries will be able to watch CURI's digital content. CURI has also formed new global alliances with Colombia's El Espectador, Telekom Slovenije in Central Eastern Europe, and China's Shanghai Media Group and CCTV.

9MFY21 Results:

• Rise in Topline: CURI reported YoY growth of 55.64% in revenues to USD 43.99 million during 9MFY21 (ended September 30, 2021) from USD 28.26 million during 9MFY20, driven by an increase in subscription and license fee revenues.
• Surge in Losses: It witnessed an increase in net losses to USD 26.23 million during 9MFY21 vs. USD 22.80 million during 9MFY20.
• Increase in Total Paying Subscribers: CURI's total paying subscribers for the period grew 43% YoY to 20 million.
• Healthy Balance Sheet: As of September 30, 2021, the company's cash and cash equivalents (including short-term investments) stood at USD 80.85 million and had no outstanding debt.

Key Risks:

• Customer Concentration Risk: CURI's top three clients contributed 41% and 35% of total sales in FY20 and FY19. Such reliance on a small number of particular clients for revenue could harm the company's financial health.
• Payment Processing Risk: Payment processing is entrusted to third parties by CURI. Should these third parties refuse or are unable to continue processing payments on CURI's behalf, it may be forced to find alternate means of collecting payments, which may harm its customer acquisition and retention and, ultimately, its financial situation.

Outlook:

• FY21 Estimates: As of Q3FY21, revenues are expected to be over USD 71 million in FY21, indicating an increase of 80% YoY.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CURI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CURI's share price has fallen 56.57% in the past nine months and is currently trading close to the lower band of its 52-week range of USD 5.57 to USD 24.0. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 35.34. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 7.17.

Considering the company's growth prospects, various initiatives to monetize digital content, decent fundamentals, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 5.75, down 3.36%, as of January 05, 2022.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.