Shares
of
NCsoft,
a
South
Korean
video
game
developer,
are
currently
being
overlooked
by
the
market
and
are
up
for
grabs
at
a
“very
cheap”
price,
according
to
Schroders
fund
manager
Vera
German.
While
NCsoft
shares
are
only
traded
in
South
Korea,
they
are
accessible
to
U.S.
and
European
investors
through
ETFs.
NCsoft
accounts
for
3.41%
of
the
Global
X
Video
Games
&
Esports
ETF
and
4.1%
of
the
Global
X
Video
Games
&
Esports
UCITS
ETF
.
The
company’s
shares
have
been
hit
hard
over
the
past
few
years,
with
the
stock
price
declining
significantly
from
its
peak
in
2021
and
falling
40%
over
the
past
12
months.
German,
co-manager
of
the
Emerging
Market
Value
strategy
at
Schroders
,
attributes
the
sell-off
to
several
factors.
These
include
concerns
about
the
company’s
reliance
on
its
aging
Lineage
game
franchise,
which
accounts
for
nearly
three-quarters
of
its
revenue,
and
a
perceived
lack
of
new
hit
titles
in
its
pipeline.
Combined
with
doubts
over
the
company’s
ability
to
adapt
to
changing
trends
in
the
gaming
industry,
these
issues
have
led
many
investors
to
steer
clear
of
NCsoft’s
stock.
“For
us,
that’s
exactly
where
the
opportunity
lies.
Because
of
course,
once
there
is
a
catalyst,
once
the
revenue
looks
better,
that
will
be
in
the
price
almost
instantly,”
German
told
CNBC
Pro
at
the
most
recent
London
Value
Investor
Conference.
“When
we
started
looking
at
it,
one
of
the
first
things
that
struck
us
was
that
the
shares
were
very
cheap.”
What
will
push
shares
higher?
The
value
investor
believes
that
NCsoft
is
well-positioned
for
future
growth.
The
company’s
balance
sheet
includes
net
cash
of
1.5
trillion
South
Korean
won
($1.1
billion),
and
its
cash
flow
generation
has
been
strong.
German
also
sees
opportunities
for
NCsoft
to
improve
its
margins,
which
—
in
the
low
double
digits
—
lag
behind
its
closest
peers
in
Korea.
For
example,
gaming
developers
Krafton
and
Nexon
averaged
35%
to
45%
on
EBITDA
margins
respectively.
Another
potential
catalyst
for
NCsoft,
according
to
German,
is
the
release
of
a
game
called
“Throne
and
Liberty”
in
the
near
future.
The
game
has
been
repeatedly
delayed
over
the
past
few
years
after
being
first
released
for
testing
in
2016.
In
addition,
NCsoft
also
announced
a
cost-cutting
program
and
a
share
buyback
program
earlier
this
month
which
have
already
boosted
the
company’s
stock
price
by
around
10%.
This
optimism
has
led
her
to
take
a
contrarian
stance
on
NCsoft.
Most
analysts
have
a
hold
rating
on
the
stock,
giving
shares
only
a
2%
upside,
according
to
FactSet
data.
“We
love
buying
companies
where
all
the
sell
side
is
very
negative
because,
to
us,
this
means
the
market
sees
no
chance
of
development
for
the
company,”
German
explained.
“So
we’re
very
happy
to
be
in
that
position
to
be
fully
contrarian
to
the
market.”