In this briefing:
- Nexon to Increase Focus on Mobile Gaming Amidst Talks of Possible Sale of the Company
- Nexon Controlling Stake Sale: Tax Situation Assessment & Tender Implications
- Bull Or Bear? Latest Global Liquidity Readings
- Risk of Future LNG Supply Glut as Bubble of New Projects Grows
- Japan E-Commerce: Digital to Influence 45% of All Retail Sales by 2025
1. Nexon to Increase Focus on Mobile Gaming Amidst Talks of Possible Sale of the Company
- The global gaming market is transitioning towards mobile gaming, which currently captures around 50% of market share. This has resulted in Korean gaming company Nexon slowly shifting its focus towards mobile games.
- Over the year’s Nexon’s mobile gaming segment has grown faster than the PC online segment. When looking at the five-year revenue CAGR between the two business segments, the PC online segment has grown at a CAGR of 9.4% over FY2013-18 while the mobile games segment has grown at a double digit CAGR of 14.1% over the same period.
- For the mobile gaming segment, in the future, Nexon’s primary focus includes developing mobile games based on IPs of older PC games.
- The company has a steady line up of mobile games planned for FY2019, with ten titles set to release in the first half.
- On our estimates, Nexon seems over-valued, currently trading at a FY1 EV/OP of 9.6x compared to its five-year historical median of 7.7x.
2. Nexon Controlling Stake Sale: Tax Situation Assessment & Tender Implications
This post looks at the tax situations that Nexon’s Kim may be facing for each of the two options and the signals that he may be sending with regard to his decision. Also, this post discusses how each option may impact on mandatory tender offer which is a crucial point for current massive short buildup on Nexon Japan shares.
3. Bull Or Bear? Latest Global Liquidity Readings
- Global Liquidity bottoming out, but Central Banks not yet easing
- US Fed only withdrew $30bn in Q1, versus $350 bn in Q4
- PBoC still tightening through OMOs
- ECB on ‘pause’
- QE4 is coming in 2019, but no evidence it has started yet
4. Risk of Future LNG Supply Glut as Bubble of New Projects Grows
The rapidly improving outlook in the LNG industry over the last few years, reinforced towards the end of 2017 by the unexpected growth of demand from China, has set off a proliferation of new LNG projects especially from the US (Exhibit 1).
In its latest LNG Outlook report, Royal Dutch Shell (RDSA LN) is projecting from 2023 onwards a significant gap between the future LNG demand and the existing supply including the capacity under construction that could require up to 100mtpa of new LNG project sanctions by 2023.
The race to gain market share in the projected LNG demand-supply gap has produced an aggregated capacity of proposed new projects of up to 475mtpa, a number larger than the total LNG traded volume in 2018 of 319mtpa and way above the capacity required to meet the future growth in LNG demand.
Exhibit 1: Funnel of proposed LNG projects getting bigger
5. Japan E-Commerce: Digital to Influence 45% of All Retail Sales by 2025
E-commerce is set to account for 15% of retail sales in 2025, double the size of any other channel, and become the biggest channel for physical merchandise by 2023.
However, recent research, which considers online sales in a store context, suggests that already in 2016-17, 35.3% of all retail sales were at least partly a result of online interactions through an omnichannel process.
By 2024, total EC sales including omnichannel transactions are expected to hit 44.6% of all retail sales or approximately ¥76.4 trillion.
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