SEOUL, KOREA - On Jun 12, Gamevil announced plans for capital increase after the market closed. The company will issue 971,417 new shares, equivalent to 17.5% of the current shares outstanding (5,550,959). The capital increase will be through a public subscription, with 65% of new shares allocated to domestic investors and 35% to overseas institutions. Management plans to raise funds to acquire or invest in local and overseas mobile development companies and expand globally.
- A discounted public subscription, rather than offering new shares to existing shareholders as preferred bidders, will dilute value for existing shareholders. We estimate EPS will dilute 9% after the capital increase, but shares fell as much as 14.9% on Jun 12. We believe any further pullbacks due to the capital increase should be considered opportunities to buy.
- Based on the Jun 12 closing price of W95,300, shares are trading at 19.6x 2013 PE. Our TP equates to 23.4x 12MF PE (EPS W5,417, PEG 1.0x 2012-2015 EPS CAGR 23.4%).
