Latest Game License Approvals Bring Much-Needed Relief to the Sector; Publisher Shares Undervalued

After an eight-month freeze, China has finally resumed new game license approvals, according to Bloomberg News. The past license freeze weighed on company earnings and negatively affected investor sentiment, but April 11's positive development should bring much-needed relief to a sector that has been shaken by negative headlines. We keep our fair value estimates and earnings forecasts unchanged for our coverage of the publishers, as we were already expecting new licenses to come back this year. Besides earnings, we think the greater implication here is that the Chinese government is committed to maintaining a vibrant domestic video game sector--a notion that has been questioned by investors over the past year.