2008 Outlook

Excitement is just Beginning
Precautionary Statement
This presentation was made as the dates shown and reflected
management views as of these dates. All financial information
regarding CJ Internet’s business results and forward looking
statements are subject to known risks and uncertainties that may
cause actual results to differ from those stated or implied.
CJ Internet assumes no obligation or responsibility to update the
information provided in the presentation in correspondence to
their respective dates.
Contents
1
Earnings Summary & Outlook
2
Publishing Business
3
Global Outlook & Initiation
4
Investment Highlights
5
Appendix: Company Overview &
Summarized Financial Statements
Earnings Summary & Outlook – 2007 Results
□ Despite competitive environment, historical highs in terms of quarterly results and full year earnings
- 4Q sales: 44.5 bil. won, ٨ 8.6% QoQ and ٨ 47.0% YoY
- 4Q oper. profit: 12.9 bil. won, ٨18.7% QoQ and ٨ 107.8% YoY
- 4Q net income: 5.9 bil. won, ٪ԹԻԶԸ% QoQ and ٨ 67.6% YoY
□
2007 Full Year Results
- Sales: 159.8 bil. won, ↑51.9% YoY
- Oper. Profit: 45.7 bil. won, ↑58.1% YoY
- Net Inc.: 25.8 bil. won, ↑58.3% YoY
2007 Quarterly Results
Full Year Results
Unit: bil. won
Unit: bil. won
44.5
40.9
38.1
36.3
159.8
105.2
11.6
10.2
8.8
10.9
10.2
6.8
6.9
6.1
1Q
2Q
Sales
Oper. Profit
12.9
9.8
3Q
Ord. Inc.
45.7
8.5
6.0
25.2
4Q
Net Inc.
37.3
28.9
25.8
16.3
2006
Sales
2007
Oper. Profit
Ord. Inc.
Net Inc.
1
Earnings Summary & Outlook – ARPU & Paying User Ratio
□ Key Performance Indices also reach new highs
- Paying user ratio reaches 6.4% as no. of paying users jumped ٨ 37% YoY from 348,000 to 477,000 from 4Q 2006 to
4Q 2007
- ARPU also increased ٨ 4 % YoY from 21,967 won to 22,835 won during the same time period
ARPU Trend
Paying User Ratio
(Unit:1,000 persons)
(Unit:1,000 persons)
(Unit: won)
500
445
423
400
12.0%
8,511
8,147
7,553
8,000
348
7,617
7,484
30,000
22,134
21,967
10,000
40,000
403
300
200
477
21,772
8.0%
6,000
22,835
5.3%
20,000
20,350
4,000
4.3%
0
4.0%
0.0%
4Q 061Q 07 2Q 073Q 074Q 07
4Q 06 1Q 07 2Q 07 3Q 07 4Q 07
Mthly Avg. UV
Mthly Avg. ARPU
4Q 06
5.0%
0
0
Mthly Avg. PU
1Q 07
2Q 07
3Q 07
Paying User ratio
4Q 07
Monthly Avg. UV
8,147
8,511
7,553
7,617
7,484
Monthly Avg. PU
348
423
403
445
477
21,967
21,772
20,350
22,134
22,835
4.3%
5.0%
5.3%
5.8%
6.4%
Monthly Avg. ARPU
Paying User ratio
(Source: Korean Click, CJ Internet)
6.4%
2,000
10,000
100
5.8%
2
Earnings Summary & Outlook – Costs & Equity Method Details
□ Operating Costs / Equity Method Details
- Labor cost: expected to increase by 20% YoY due to focus on global business
- Commissions: estimated to rise by 20% YoY due to strong publishing sales
- Marketing: expected to grow 17% YoY due to new games (4.5% of total sales)
- Net equity method loss: slight increase of 0.4 bil. won in ‘08
< Operating Costs >
(Unit: mil. won)
2007
2008 (F)
20,993
25,250
20%
Commissions 74,912
89,646
Marketing
7,299
Depreciation
< Equity Method Details >
2007
2008 (F) Difference
CJIG
-4,801
-6,014
-1,213
20%
CJI Japan
-2,575
-864
1,711
8,562
17%
CJIT2
0
-2,143
-2,143
7,715
10,000
30%
CJI Inc.
-98
-98
0
0
845
-
Anipark
1,304
2,228
924
Other
3,178
3,496
10%
Other
-333
0
333
Total
114,097
137,799
21%
Net Total
-6,891
-389
Labor cost
Bad debt
YoY
(Unit: mil. won)
-6,502
3
Earnings Summary & Outlook – 2008 Outlook
□ Publishing business will be main growth driver for 2008, increasing 18% YoY from 94 bil. won to 110 bil. won
- Sales portion has increased from 37% in 2005 to 58% in 2007
□
□
2008 Earnings Outlook
2008 Expected Sales Breakdown
- Sales: 190 bil. won, ↑18.9% YoY
- Web Board: 66.2 bil. won, ↑14.5% YoY
- Oper. Profit: 52.2 bil. won,↑14.2% YoY
- Publishing: 110.4 bil. won, ↑18.0% YoY`
- Ord. Inc.: 45.2 bil. won, ↑21.2% YoY
2008 Sales Breakdown
2008 Outlook
Your Text here
(bil.won)
200.0
190.0
120.0
160.0
8.3
84.5
80.0
80.0
26.6
25.7
18.1
28.9
25.2
16.3
45.7
37.3
25.8
52.2
45.2
5.7
6.7%
31.2
36.9%
7.3
6.9%
42.2
40.1%
0.0
56.4%
7.0%
110.4
58.1%
58.6%
34.8%
40.0
47.6
93.6
13.3
5.2%
105.2
120.0
105.2
84.5
40.0
190.0
159.8
159.8
160.0
(bil.won)
200.0
55.7
53.0%
57.8
36.2%
66.2
0.0
2005
Sales
2006
Operating Profit
2007
Ordinary Inc.
2008(F)
Net Inc.
2005
2006
Web Board
2007
Publishing
2008(F)
Other
4
Contents
1
Earnings Summary & Outlook
2
Publishing Business
3
Global Outlook & Initiation
4
Investment Highlights
5
Appendix: Company Overview &
Summarized Financial Statements
Publishing Business – No. 1 Publisher in Korea
□
After CJ Group acquisition, CJ Internet’s publishing sales has grown 73.2% CAGR from 2005 to 2007
□
“Sudden Attack” is first game to hold No. 1 market share in PC Café for 66 consecutive weeks
□
Most successful publisher in Korea: Publishing 24 games with 17 making over 100 mil. won
Publishing Track Record
93.6
41.1
31.2
25.5
15.4
3.9
2
2002
13
24
17
16
8
2003
2004
Publishing Sales
2005
2006
No. of Games
2007
5
Publishing Business – Solid Game Sourcing
In-house Game Studios
CJIG
Anipark
Your
Text here
Aramaru
Your
Text here
• Acquired 53% stake in 2005, invested 7.1
bil. won
• Acquired 23% stake in 2005, invested 1.5
bil. won
• Capital: 22 bil. won
• Developed baseball game “MaguMagu”
• Developed “Nova 1492” and “Theos Online”
• Developed MMORPG “Ys Online”
“Koongya Adventure”
• Developing 3 more games
• Developing more games
• Established in 2005
• 100% Subsidiary
Outsourcing Partners
Domestic Partners
Overseas
Your
TextPartners
here
• GameHI : Sudden Attack
• SEGA : Co-development of Super Monkey Ball
• KOG : Grand Chase
• KOEI : Uncharted Waters, Dynasty Warriors Online
• Softmax : SD Gundam Capsule Fighter
• Bandai & Namco : SD Gundam Publishing
• Maiet : Gunz Online
• Ndoors : Goonzu Online
• Inix soft : Kal Online
• Falcom : Co-developing of Ys Online
• Beijing Perfect World: Perfect World
6
Publishing Business – Continuing the Momentum
□
“Perfect World” selects CJ Internet to publish first Chinese in Korea (Oct. 2007)
□
“Dynasty Warriors” and “Dragonball” will be the next foreign big title’s to be published (2H 2008)
- “Dynasty Warriors” will be published as first game in China operations
Big Titles
2H 2007
Perfect World
2H 2008
Dynasty Warriors
Dragonball
7
Publishing Business – 2008 Game Line-up
□ Game Line-up for 2008
- 1H 2008: 3 games to be commercialized (“Koongya”, “Oz Chronicles”, and “Here We Go")
- 2H 2008: 5 games to be commercialized (“Prius”, “Kero King”, “Relic Online”, “Dynasty Warriors”, “Dragonball”)
1H 2008
2H 2008
Game
Developer
Genre
Open Beta
Commercialization
Koongya Adventure
CJIG
Casual RPG
2007 4Q
2008.1.24
Oz Chronicles
Anipark
Action RPG
2008 1Q
2008.3.27
Here We Go
CJIG
Action / Adventure
2008 1H
2008 1H
Kero King
Bandai Korea
Sports Casual
2008 1H
2008 1H
Prius Online
CJIG
MMORPG
2008 1H
2008 2H
Relic Online
Freezm On
Casual Action
2008 2H
2008 2H
Dynasty Warriors
Koei
Action / Strategic
2008 1H
2008 2H
Dragonball Online
Bandai Korea
Casual MMORPG
2008 2H
2008 2H
8
Contents
1
Earnings Summary & Outlook
2
Publishing Business
3
Global Outlook & Initiation
4
Investment Highlights
5
Appendix: Company Overview &
Summarized Financial Statements
Global Outlook & Initiation – Online Game Major Market
□
Korea is within the Top 3 countries in the world in terms of online game market size (U$ 2.2 bil.)
- Korea market expected to grow CAGR 17% during 2007~2009 period while global market forecast is 14%
□
Global online game market to reach US$ 12 billion by 2010
-
China and Korea will account for 45% or US$ 5.4 billion of total online game market in 2008
Global Market Trend
Korea Market Trend
(Unit: U$ 100 million)
(Unit: bil. won)
Your Text here
2,894
120.0
2,495
105.0
92.0
2,114
80.0
1,777
65.0
1,440
48.0
1,019
36.0
18.0
12.9
8.0
12.8
5.3
8.1
2004
2005
U.S.
(Source: iresearch Inc., 2007)
2006
23.5
18.0
2007
China
26.7
20.6
2008(F)
28.5
24.0
2009(F)
30.6
754
28.0
452
2010(F)
2002
2003
2004
2005
2006
2007
2008(F)
2009(F)
Global
(Source: Korea Ministry of Culture and Tourism, 2007)
9
Global Outlook & Initiation – Moving Towards Online
□ Reasons for Growth of Global Online Game Industry
- Increased investment in casual games
Publishers, retailers, aggregators and developers significantly increased their investments over the past few years.
A large number of new entrants including console makers are driving the market forward.
- Consumers spend more time online
Continuing shift of consumers spending time online compared to other forms of entertainment (i.e. TV or listening to music)
Increased broadband penetration enhances game experience and game content.
□ New Entrants in Online Game Industry
Activision
AOL
Blizzard Entertainment
Disney Interactive Studios
Dreamworks SKG
Fox Entertainment Group
Fox Interactive
Microsoft
MTV Networks/MTV Games
NDS Group
News Corporation
Paramount Pictures
Real Networks
Sony Pictures Entertainment
Time Warner
Walt Disney Internet Group
Warner Bros. Interactive
Viacom, Inc
Yahoo
Opportunity
“Consolization”
&
M&A, J/V’s
10
Global Outlook & Initiation – Major Publisher
□
In 2006, CJ Internet was within Asia’s Top 10 publishers: generating more than US$ 2 billion and should exceed
US$ 2.5 billion in 2008
□
Despite being one of top publishers in both Korea and Asia, there is a high discrepancy in foreign ownership
2005
2007
2006
(Unit: bil. won)
CJ Internet
Foreign
Ownership (Apr.10)
2008(F)
190.0
159.8
105.2
84.5
26.6
28.9
25.7 18.2
25.2 16.3
Oper. Profit
Sales
45.7 37.3
52.2
Ordinary Inc.
31.2
Net Inc.
(Unit: bil. won)
160.0
128.1
102.2
Neowiz
Games
5.6%
45.2
25.8
87.2
17.6
25.9
10.7 7.9
43.0
15.1 8.5
Oper. Profit
Sales
21.7
22.3
16.1
Ordinary Inc.
227.5
24.9%
28.5
Net Inc.
(Unit: bil. won)
232.8
39.5
248.4
222.6
34.3%
NC Soft
72.0
Sales
81.6
66.7
51.8 47.3
Oper. Profit
38.1
46.9
58.3
Ordinary Inc.
45.1
54.9
76.3
Net Inc.
59.8
11
Global Outlook & Initiation – Current Operations
□
Current overseas offices: Japan, China & U.S.
- Reviewing several markets in S.E. Asia for 2008
□
Will focus on overseas business in 2008
- CJIG developed games to be actively exported (“Magu Magu” to Taiwan in Aug. 2007)
- Pro-actively seek new partners either through J/V’s or M/A’s
Key Success Factors:
- Conglomerate commitment
- Successful commercialization know-how
- Stable game pipeline from in-house
China JV (with T2CNT2CN-Major shareholder is GigaMedia,
GigaMedia, Nasdaq listed)
• Partner : Well experienced Game Publisher in China
• Invest : US$ 5 mil. (CJ Internet)
• Establish in April 2007 and begin operations in 1Q 08
development & strong network for
outside sourcing
U.S. (CJ Internet Inc.Inc.-100% subsidiary)
• Invested US $2 million in May 2005
• Planning business, market research and
seeking partnership
Japan JV (CJ Internet Japan – CJ Internet 55%, SoftBank Group 45%)
• Invested 2.6 bil. yen (CJ Internet 1.4 bil. yen, SoftBank Group 1.2 bil. yen)
• Operation of Netmarble Japan since March 2005
• Offering 41 games in service (Including 10 Publishing games)
• Peak concurrent users of 25,000 (As of Mar. 2007)
12
Investment Highlights
Well-diversified Publishing portfolio & High Visibility
Currently publish 25 games with 68% of games producing revenue of over
100 mil. won per month
Successful track record despite competitive environment
Publishing sales jump from 31.2 bil. won in 2005 to 93.6 in 2007
Why
CJ Internet?
Total sales leap from 84.5 bil to 159.8 bil. won during same time period
Strong upside in raising number of paying users
Avg. no of paying users increased 61% from 271,830 in 2005 to 437,259 in 2007
Global Initiation
Exporting in-house games & starting China operations
With $100 million will be pro-active in pursuing joint ventures/M&A’s
13
Thank You
www.cjinternet.com
Contents
1
Earnings Summary & Outlook
2
Publishing Business
3
Global Outlook & Initiation
4
Investment Highlights
5
Appendix: Company Overview &
Summarized Financial Statements
Company Overview – Snapshot & Share Price Info.
Company Snapshot
□
Acquired by CJ Group in 2004
□
Well –diversified publishing portfolio including web board games totaling over 50 games
□
Revenue in 2007 reached 160 bil. won (U$ 170 mil.), 52% growth YoY
□
Korea’s No. 1 Game: “Sudden Attack” has No. 1 M/S in PC Café market for 64 consecutive weeks (Jan. 2008)
□
Registered no. of users: 24 million and unique visitors over 7.5 million per month
□
Overseas business: Japan, China, & U.S.
□
Total no. of employees: 359 (End of 2007)
Share Price Info. & Shareholder Breakdown
□
Shares outstanding: 22,787,444 shares
□
Price (as of April 10): 16,700 won
□
Market Cap: 381 bil. won / US$ 371 mil.
□
Daily avg. Vol. (2007) : 441,359 shares
□
52 week High/Low : 25,200 won/15,200 won
□
BVPS (2007) : 8,568 won
□
ROE (2007) : 13.9%
□
EPS (2007) : 1,132 won
CJ Group,
27.3%
Others, 61.4%
J.H. Bang, (Netmarble Founder)
5.1%
J.H. Lee, 1.3% (CJ Group, Chairman)
Foreign, 5.9%
(1Q 2008)
14
Company Overview – Business Model
Web Board Game Business Model
□
Monthly Subscription & Game Item Sales
Monthly subscription fee (Premium Service),
game items or entertainment content
User
Premium Service: Provide additional game money for casual games
& make entertainment content available
Avatar Contents: Character avatar to decorate small human animation figure or
game avatar to provide game money
Entertainment Contents: VOD service such as movies, dramas and comics
for additional game money
Publishing Business Model
□
Monthly Subscription & Game Item Sales
User
Monthly
Subscription Fee or
Game Item Sales
Service
Revenue Sharing
Game Developer
Provide variety of
game contents such as
FPS, RPG etc.
15
Appendix: Summarized Balance Sheet
(mil. won)
2007
2006
2005
2004
Current Assets
149,899
130,853
119,354
74,929
Fixed Assets
79,319
64,323
52,310
58,227
Total Assets
229,217
195,176
171,665
133,156
Current Liabilities
32,141
18,689
18,137
10,630
L/T Liabilities
1,993
2,277
1,498
301
Total Liabilities
34,134
20,966
19,637
10,931
Paid-in Capital
11,385
11,359
11,122
11,022
Capital Surplus
136,820
136,228
128,725
120,162
Retained Earnings
53,530
31,146
18,157
-1,468
Shareholders’
Equity
195,084
174,210
152,028
122,225
16
Appendix: Summarized Income Statement
(mil. won)
2007
2006
2005
2004
Sales
159,777
105,207
84,543
141,386
Gross Profit
70,808
48,748
45,283
55,078
Oper. Inc.
45,680
28,897
26,571
33,607
Non-Oper. Inc.
6,910
5,587
6,523
1,852
Non-Oper. Exp.
15,268
9,307
7,354
44,856
Ordinary Inc.
37,322
25,178
25,741
-9,397
Net Inc.
25,791
16,300
18,156
-14,310
17