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Game maker GungHo blows by rivals

by Kazuaki Nagata

Staff Writer

GungHo Online Entertainment Inc.’s presence on the stock market has been growing rapidly on the growth of its monstrously popular smartphone game “Puzzle and Dragons.”

After starting the year at ¥84,200, GungHo’s stock price had climbed to ¥1.26 million at Friday’s close on the Jasdaq. This brought its market value to ¥1.45 trillion, sending it past rivals Gree Inc. and DeNA Co.

GungHo, which debuted on the Jasdaq in March 2005, even passed Nintendo Co. on Tuesday before the iconic video game maker bounced back Wednesday. It is also close to eclipsing Internet giant Rakuten Inc.

Hiroshi Naya, an analyst at Ichiyoshi Research Institute, said the stock prices of video game companies shoot up rapidly when they create hit products.

“Originally, the stock prices of video game firms had momentum . . . I think this has partially shifted from Gree and DeNA to GungHo,” Naya said.

The rise in GungHo’s stock price is being driven by its smartphone game “Puzzle and Dragons,” short-handed to “Pazu Dora,” which combines dungeons and dragons style combat with puzzle-solving.

“Puzzle and Dragons,” released in February 2012, became a sensation after TV commercials for it aired in October. It has since passed 13 million downloads in Japan, which has an estimated 43 million smartphone users.

“The best indicator for growth is the number of downloads,” Naya said.

The company’s earnings are gung-ho as well. Last week, it announced ¥18.6 billion in operating profit for the January-March quarter, about 75 times higher than last year, on sales that have skyrocketed to ¥30.9 billion from ¥3.2 billion. It also boasts an operating profit margin greater than 60 percent.

Naya said firms that offer mobile phone games have very high profit margins and grow fast, which is one reason why their stock prices can shoot up rapidly.

He also said GungHo appears to be aiming for “Puzzle and Dragons” to be a long-time seller, with download rising for years, although it is unclear how long its ultra-rapid growth will continue.