Tyngdkraftsmannen

$GRVY's recently approved game Ragnarok: Dawn is developed by Guangdong Xinghui Teamtop Interactive Entertainment, which already developed several top-ranking games in China in the past. They signed the deal in January 2023. The game will probably launch in Q4/Q1. $GRVY did not show the game on its list of upcoming launches, because the approval came after the last presentation. $GRVY's approval of Ragnarok Online in China also is not a chance hit of an application made many years ago, as some speculated. (Ragnarok Online has been successful since 2002 in other countries.) The game is developed by Shanghai Taren Network Technology and the agreement was signed in July 2021. Taren will develop two additional mobile games for Gravity and distribute them in China. Ragnarok Online will launch this June 28. It's impossible to know how any game will do (except that the Ragnarok Next Generation launch later this year in China should do well, because it did great in so many countries already). But I'm confident the Ragnarok IP is strong enough that Gravity will at least keep the earnings at a level that makes the current multiple way too cheap. Eventually they will probably get another hit game. They will certainly launch a fair number of Ragnarok games in 2025 as well and the business model is highly profitable. Regarding the capital allocation, I am reassured by the fact that the same management team runs the parent company and there bought back a lot of stock over the years and keeps paying dividends. The odds are that we have to wait quite some time before they finally do something with their big cash hoard, but I think it is wrong to assume that the cash is basically worthless, because they will NEVER do anything with it, when they have already proven at the parent company that they are willing to do buybacks/dividends. They most likely will do an acquisition, because they stated that as the likely plan. As I value the cash at 60% of face value due to poor capital allocation, they could overpay by 67% and it would be neutral to my valuation. As the market seems to value the cash at <= 30% of face value, even such a deal should boost the market value of the stock. (Odds are they overpay because they are not experts at acquisitions and those acquisitions are poor on average.) It actually would be a good time to make an acquisition, because a lot of gaming companies trade at cheap multiples after the COVID-hangover. So it seems possible that they even make a decent or a good deal, which would obviously be a lot better for the intrinsic value.

Gravity out with great Q2 results Revenues +45% QoQ and +148% YoY EBIT +22% QoQ and +138% YoY. Incredible results for a company that was/is priced as if earnings would rapidly fall off a cliff. Ragnarok Origin seems to be a great moneymaker! $GRVY