Perfect World Expands Its Global Footprint With Malaysian Subsidiary

Terminating the collaboration with its Malaysia and Singapore based partners, Perfect World (NASDAQ:PWRD) recently announced the formation of its new Malaysia subsidiary. Perfect World is the original developer of Zhu Xian and Chi Bi 3D massively multiplayer online role playing games (MMORPGs) and the exclusive operator of the titles in Malaysia. With the establishment of its Malaysian subsidiary, the company intends to provide faster updates, a fairer environment, more comprehensive services and an enhanced quality experience for players in Malaysia and Singapore. The company feels that a direct marketing effort in the region will help it better understand players demand and take a more targeted approach towards content development.

Perfect World is a Chinese online gaming company which specializes in developing 3D MMORPGs. The company also operates its games in international markets through its subsidiaries, in the US, Europe, Japan and now in Malaysia, as well as licensing games to other international publishers in Indonesia, Brazil, Philippines, Azerbaijan, etc.

While the company’s Chinese user base has shrunk over the years, its international operation has rapidly gained traction. Perfect World’s international gaming revenue nearly doubled in 2011, as per our estimate. While we believe that its Chinese operation could stabilize in the future and continue to be of extreme importance for the company’s valuation, we estimate Perfect World’s growing focus on international markets to be the driving force behind long-term growth of the business.

Our price estimate of $16.23 for Perfect World, is at a considerable premium over the current market price. (Read: Here’s Why We Think Perfect World Is Worth $16)

Check out our complete analysis of Perfect World

Increasing Opportunities In International Market Will Drive Growth

Perfect World witnessed more than 100% annual growth in revenue from international markets in 2011. However, Q1 2012 was a slower season for in-game monetization activities for overseas operations as the company primarily focused on preparing for new game launches and content enhancement for the year ahead. The company has launched a number of new games and expansion packs since then and claims to have a deep and diverse pipeline of additional upcoming games in the year ahead.

In Q3 2012, Perfect World launched Dark Blood and RaiderZ in international markets through its overseas subsidiaries in Japan and the U.S. respectively. It also signed several new agreements to license its games to overseas operators. After its acquisition of US-based Cryptic Studios, Perfect World is working towards developing the much-anticipated game Neverwinter and certain other projects up for launch in 2013.

Partnering with Cryptic Studios and other such specialized R&D studios has strengthened Perfect World’s global R&D capabilities. Going forward, we expect it to continue to attract additional international gamers with new games and expansion packs, resulting in steady revenue growth.

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