Pearl Abyss:Black Desert mobile pre-orders starting soon

Black Desert mobile launch imminent: Pearl Abyss should start taking pre-ordersfor Black Desert mobile early next month, so we expect the title to launch in Korea in earlyJanuary at the latest, given the usual one- or two-month lag between pre-orders andrelease. Anticipation of sales should rise as the start of pre-orders should dispel worriesover a delayed launch. The game is likely to succeed, given the global popularity of its IP, ahike in domestic mobile MMORPG sales, and the firm’s development capabilities.

    Expansion into consoles to pay off: A console version of Black Desert is scheduledfor release in 1Q18. The original title has become popular in major video game markets ofthe US, Europe, and Japan, so we expect the console version to succeed as well. Anincreasing number of MMO games (eg, Neverwinter and Final Fantasy) are performingwell in the console market, which should create a favorable environment for Black Desert.

    Overhang dissipates: An IPO lock-up period for an 8.8% stake (held by employees)expired on Oct 16. Shares, which had priced in overhang risks, have since jumped19.5% as the stake holders keeping their shares in anticipation of the upcoming launch.

    Valuation to rise prior to Black Desert mobile launch: Shares in game firmstend to fluctuate both before and after the release of a big-name title. Pearl Abyss istrading at 13.3x forward P/E, which still offers plenty of upside in our view whencompared to a global peer average and a usual valuation uptrend ahead of a launch. Wethus raise our 12-month target price by 14.3% to KRW160,000 (based on 18x forwardP/E).