Shinhan Investment & Securities on the 22nd said artificial intelligence (AI), mergers and acquisitions (M&A), and improvements in governance will lift both earnings per share (EPS) and the price-earnings ratio (PER) for DoubleU Games. It kept its Buy rating and raised its target price by 43% to 100,000 won. DoubleU Games closed at 65,000 won the previous day.
Shinhan Investment & Securities forecast DoubleU Games' operating revenue this year at 837.8 billion won, up 16.4% from a year earlier. Operating profit is estimated at 288.9 billion won, up 24.4%, with an operating margin of 34.5%.
Kang Seok-oh, an analyst at Shinhan Investment & Securities, said the company's strategy going forward is to use AI to quickly develop and test games in line with trends and to run performance marketing for titles that prove user response, adding that AI game development and service have barriers to entry because they require insight to identify high-demand genres and content as well as experience in performance marketing.
M&A is also expected to proceed with a focus on developers that can efficiently produce competitive casual content. DoubleU Games earlier on the 29th of last month decided to make its subsidiary DoubleDown Interactive (DDI) a wholly owned unit through a tender offer.
DoubleU Games plans to actively deploy 1 trillion won in available funds for AI games and M&A.
Kang said the tender offer will have a 28.6% boosting effect on controlling net income in 2027 compared with the current governance structure, and the price-earnings ratio is expected to fall to 5, adding that a new shareholder return policy to be announced this year is also anticipated.
He added that a PER of 5 based on 2027 estimates once the subsidiary tender offer is completed presents very attractive valuation, and analyzed that the share price does not even reflect about 1 trillion won in available funds that can be deployed for AI game development and M&A.