2Q review: Consolidated sales at Com2us grew 2.2% y-y and 7.6% q-q to KRW129.4b in2Q—meeting consensus—on rises in sales from Summoners War and baseball games.    Summoners War sales likely climbed 5% q-q on item package promotions that celebratedthe game’s 3-year anniversary. Such events lifted marketing costs 58.1% q-q to KRW19b,which caused operating profit to fall 2.2% q-q to KRW49b (in line with consensus).    Summoners War lifespan further extended: Summoners War’s quarterly saleshave remained solid at around KRW100b even three years after its launch, buoyed bycontent updates and promotions. In 2H, Com2us plans to release a fifth content update(guild-siege warfare) and hold an e-Sports tournament World Arena Championship,which should help extend the title’s lifespan that much longer.    To release potential blockbusters from 2018: Com2us plans to launch five titles in2H—Chain Strike (RPG), Ace Fishing VR (sports), Dance Ville (casual), Birdie Crush(sports), and Heroes War II (RPG)—but these are largely casual game. Thus, the firm’sfuture performance depends more heavily on the success of Skylanders Mobile andSummoners War MMORPG (both due out next year).    Needs new smash hits for valuation to rise further: We maintain our HOLDrating on Com2us with a 12-month target price of KRW120,000 (based on 10x forwardP/E, the global mobile-game industry average). Despite Summoners War-relatedpositives—such as its extended lifespan and growth in intellectual-property power via adebut in the e-Sports arena—we believe the company needs another smash hit if itsvaluation is to rise any further, noting that the risk related to the firm’s dependence on asingle title has increased. Without an external trigger (such as M&A activity), it should besome time before shares rebound, especially as the next potential blockbusters will notlaunch until next year.

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