January 29, 2015 / 4:55 AM / 5 years ago

UPDATE 2-Naver misses estimates as chat app Line's revenue disappoints

* Naver Q4 operating profit 196 bln won, 12 pct below consensus

* Games revenue at messaging app unit Line disappoints

* Games revenue accounts for up to 60 pct of Line’s gross sales

* Naver shares slide 4.5 pct in afternoon trade (Recasts with company and analyst comments)

By Joyce Lee

SEOUL, Jan 29 (Reuters) - Naver Corp said quarterly profit climbed 30 percent but it fell short of estimates on weaker sales of a hit game for its messaging app Line, sending shares in the South Korean web portal firm tumbling.

The popular Japan-based messaging app unit Line Corp is Naver’s main earnings driver but its share price made little progress in 2014, and investors are keen to see the progress of new taxi and payment services and whether Line can come up with more hit games.

Fourth-quarter operating profit came in at 196 billion won ($180 million), 12 percent below an average estimate in Thomson Reuters I/B/E/S analyst survey.

“Line Taxi and Line Pay need to build up a user base and successfully settle into the market for investors to consolidate confidence in the messaging app’s profitability, said Kim Dong-hee, an analyst at Meritz Securities.

Shares in Naver were down 4.5 percent in afternoon trade compared with a flat broader market. That was despite a rise in its annual dividend payment to 782 won per share, compared to 734 won at end-2013.

Although net revenue for Line rose 62 percent, up from 57 percent in the previous quarter - that was also short of expectations and company noted sales for its popular battle game Line Rangers had slipped. Games account for around 60 percent of Line’s gross sales.

Line has more games in various genres planned for the first and second quarter, Naver said, but declined to give details.

“There are ups and downs quarter to quarter, but Line is in the black per annum. In 2015, we don’t plan any particular cost control but will support business expansion,” a Naver executive said in a conference call.

Naver says it has the financial capacity to help Line grow but many analysts believe the unit needs to attract a major strategic investor or pursue an IPO to keep up with its bigger rivals.

Despite much speculation, Naver opted not to list the subsidiary last year saying Line would get a better valuation if it built up its business further. A spokesman said there had been no change in listing plans for Line.

Line is one of the few messaging app operators that disclose some earnings figures. While it has earned plaudits for being profitable, it lags Facebook Inc’s WhatsApp and Tencent Holding Ltd’s WeChat in terms of monthly active users.

Line had 181 million monthly active users as of end-2014, up 37 percent from a year earlier. By comparison, WhatsApp had more than 700 million as of early January while WeChat had 468 million as of the third quarter. ($1 = 1,085.2400 won) (Editing by Edwina Gibbs)

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