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View of NCsoft Pangyo R & D Center building. (Photo = NCsoft) |
[Alpha Biz= Reporter Paul Lee] The Korea Credit Rating lowered NCsoft's credit rating outlook for non-guaranteed bonds from 'stable' to 'negative' on the 23rd. The reason for the downward adjustment was that NCsoft's operating profitability declined and its cash flow structure weakened.
"The outlook for credit rating is negative considering increased business volatility due to changes in demand for mobile games and delayed recovery of operating profitability," the Korea Investors Service said in a report. However, the credit rating was maintained as 'AA'.
"With the release of competitors of the LineageLike Multi-access Role Playing Game (MMORPG) in Korea, the life cycle of existing games is getting shorter," the Korea Investors Service said. "NCsoft's unique competitive advantage in the MMORPG market is also weakening." He then said that operating profitability has fallen significantly recently, adding, "Amid a drop in sales, the burden of labor costs has continued to rise significantly in recent years, leading to a significant drop in operating profitability."
The financial structure itself is stable because it maintains a debt-free structure. However, the cash flow structure has weakened recently, and there is a possibility of large-scale funding due to mergers and acquisitions (M & A).
"The possibility of lowering the credit rating could expand if the amount of operating profit on a consolidated basis continues to be less than KRW 500 billion due to falling competitiveness of game content, or if large-scale investment weakens financial capacity significantly," the Korea Investors Service said.
AlphaBIZ Paul Lee(hoondork1977@alphabiz.co.kr)
