Hope & fear amid move into China market
􀅜 Buoyant online game market in China
According to iResearch, China will account for 46.9% of the global online game market by
2012. With online games increasingly popular in China, competition has been intensifying
and product diversification accelerating. In addition, value is being added to the sector.
􀅜 China a battlefield for Taiwanese operators
Most Taiwanese online game companies eyeing the China market either set up their own
firms or grant licenses to Chinese operators, the latter if they have R&D capability. Each
business model has its own strengths and weaknesses. Success hinges on market appeal and
product life cycle prolongation (to at least 3-6 months). Massive data storage, efficient
connectivity, player load and plug-in technologies are also key factors.
􀅜 Taiwan online game shares more overpriced than regional peers
Taiwan’s online game shares have surged this year as consumers pursue stay-at-home
activities and on the back of the China theme, which in turn reflects significant earnings
growth in 2009 and emerging contribution in 2010. Currently, most Chinese and Korean
online game shares are trading below 15x 2010 forecast EPS, while most Taiwanese
counterparts are above 15x. As Taiwanese online game companies are more pricey than
regional peers, we are Underweight the sector.