2015 2h outlook : korean media industry
TRANSCRIPT
2H15Outlook Report
May 28, 2015
Overweight(Maintain)
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4
13
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25
45
[Summary]
I. 2H15 outlook: A big jump forward
II. Themes and issues
III. Valuation and investment strategies
IV. Top pick and stocks to watchCJ E&MCheil Worldwide, NasmediaKT Skylife, CJ HelloVision KTH, SBS Contents Hub, J Contentree
[Conclusion] Not just recovering, but leaping forward
MediaA big jump forward
Jee-hyun [email protected]
2H15 Outlook 2
Source: Cheil Worldwide, KOCCA, Thomson Reuters, KDB Daewoo Securities Research
[Summary] A big jump forward for the media sectorMedia sector to take a leap forward in 2H
Structural growthNew market, new Model
Increase in Chinese salesEstablishment of local companiesM&A activities
Decrease in content salesto Japan Decrease inadvertising salesto EU Incurred one-off costs
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550
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01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F
(Wbn)(p)Total overseas revenue from broadcasting content and advertising (R)
Media sector index (L)
[Domestic market focus]Limited growth in advertising and high sensitivity to domestic economy and seasonality
Structural growthNew market, new Model
Increase in Chinese sales Establishment of local companiesM&A activities
Decrease in content sales to Japan Decrease in advertising salesto EUIncurred one-off costs
2H15 Outlook 3
Media sector to take a leap forward in 2H
• Note stocks that are likely to advance further after share price recovery
• Following ad market recovery, additional momentum from ad-oriented deregulation
• Overseas marketability already confirmed; Strategy to ensure sustainable growth needs to be formulated
1) Beyond boundaries
• Digital conversion tearing down boundaries
• More opportunities for the ad, content, and pay-TV businesses likely to arise
2) Beyond regulations
• Broadcast ad-oriented deregulation to take effect
• Lifting of advertising restrictions on specific items to stimulate overallad market growth
3) Beyond the domestic market
• Expansion into global markets is essential
• Overseas marketability, and ability to expand into overseas markets, already confirmed
• Time to devise a thorough strategy to ensure sustainable growth
Major themes and issues
• We highlight four themes under the keyword J.U.M.P.
J: Jungle – Changes in the competitive environment
• Competition has mounted due to FTAs and an increase in the number of players
• Collaboration and consolidation likely to arise from deregulationand M&As
U: UHD – Commoditization of UHD TV
• Picture quality improvement in TV gaining momentum
• UHD content is increasing across the media value chain(terrestrial TV networks, cable PPs, and satellite broadcasters)
M: Monetization – Monetization of new business models
• Monetization is important after expansion into new markets
• Tailored business strategies, more sophisticated consumer billing models, and additional content-related businesses
P: Personalization – Single-person households’ media consumption
• Media consumption in an era of increasing focus on single-person households and personalization
• Advertisers have been shifting to new ad media in line with changing consumer behavior
[Summary] A big jump forward for the media sector
2H15 Outlook 4
Media
Notes: Media sector’s OP margin based on nine companies under our coverageSource: Company data, Thomson Reuters, KDB Daewoo Securities Research
Korean media sector’s OP margin and index performance
Media sector to take aleap forward
• Focus on likelihood of media shares not just recovering, but advancing sharply
• In addition to the ad market recovery, deregulation will likely boost media shares.
• Overseas marketability has already confirmed; Strategy to ensure sustainable growth needs to be formulated.
I. 2H15 outlook: A big jump forward
Easing of advertising regulations: Enforcement decree of revised broadcasting law to take effect between July and August this year
Overseas revenuefell in 2014 due to Japan’s weakness; Chinese revenue to increase starting in 2015
TIP
3
4
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6
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8
9
60
70
80
90
100
110
120
130
2011 2012 2013 2014 2015F 2016F
(%)(p) OP margin (R) Media sector index (L)
Falling profitabilitySideways stock price trend in 2013, followed by plunge in 2014
OP margin to recover in 2015Dissipation of one-off costsAdditional momentum sources:1) Easing of domestic regulations on advertising 2) Increase in overseas revenue
2H15 Outlook 5
Media
62%
74%
2%
63%
0%
20%
40%
60%
80%
05 06 07 08 09 10 11 12 13 14
Digital/total pay TV
LTE/total wireless telecom
Source: Ministry of Science, ICT and Future Planning, Statistics Korea, KDB Daewoo Securities Research
Note opportunities as pay-TV digital conversion and spread of LTE services reach the final stage
1) Beyond boundaries • Digital conversion tearing down existing business boundaries
• Pay-TV digital conversion (household level) and spread of mobile LTE (individual level)
• Digital conversion reaching the final stage: Focus on opportunities rather than risks(including capex and costs).
I. 2H15 outlook: A big jump forward
Time taken to reach 60% penetration: 10 years for digital conversion of pay TV vs. three years for LTE conversion of mobile phones
TIP
2H15 Outlook 6
Media
Source: KDB Daewoo Securities Research
Expansion of broadcasting value chain in the digital era
1) Beyond boundaries
I. 2H15 outlook: A big jump forward
• In the broadcasting value chain, new revenue sources have formed around the pay-TV platform.
• Platform: Commission markets for VOD distribution and T-commerce transmission
• Content: The VOD market is growing on the back of the availability of various kinds of services, including fixed monthly schemes, packaged products, and mobile clip services.
• Advertising: In-program ad market, including products in placement (PPL) and IPTV ads (which play before VOD content begins)
The pay-TV digital conversion is bringing new business opportunities:
1) The conventional broadcasting value chain is horizontal
2) The digital conversion has expanded the value chain and brought new revenue sources, including VOD ads and T-commerce
TIP
AdvertisingHome shopping,
T-commerce
Production/ programming
Service/distribution Devices
Subscribers
Content providers
- Terrestrial TV- Program providers
Pay TV
- System operators- Satellite TV- IPTV operator (telcos)- OTT operators
Broadcasting fees
Servicefees
Revenue RevenueRevenue
2H15 Outlook 7
Media
Note: Decided on April 24th, 2015 ; Virtual ads, indirect advertising, and sponsorship notices are all in-program adsSource: KCC, KDB Daewoo Securities Research
Details on easing of advertising regulations (enforcement decree of the Broadcasting Act)
2) Beyond regulations
I. 2H15 outlook: A big jump forward
Ad type Details
Total amount of advertising
★ Total ad time regulation introduced; Total ad time is based on program hours.
- Terrestrial broadcasters, etc.: Total ad time per program hour raised to maximum of 18%(previously 10% maximum); Average of 15% (9 min. on average; 10 min. 48 sec. maximum)
- Pay TV, etc.: Ads allowed to take up a maximum of 20% (17% on average) per program hour(10 min. 12 sec. on average; 12 min. maximum)
Virtual ads ★ Ad-eligible programs to expand from only sporting events to sporting events, entertainment shows,
and sports coverage programs
★ Time allowance to expand (for pay TV, etc.): 5% per program hour 7%
Indirect advertising ★ Time allowance to expand (for pay TV, etc.): 5% per program hour 7%
Sponsorship notices
★ Easing of restrictions- Sponsorship notices will be allowed for producers of ad-ineligible products.
★ Expansion of eligible products - For ad-ineligible products of public institutions, public service ads will be allowed.
• Easing of ad regulations appears imminent, mostly on broadcasting ads
• Intention is to strengthen financial conditions of broadcasters that produce “killer content”and to create a fair business environment.
• Total ad time: KCC to abolish individual TV ad regulations, putting a limit only on total ad time;This will mainly benefit terrestrial broadcasters.
• Virtual ads: Advertising opportunities will expand as virtual ads will be allowed on more types of programs.
• Indirect advertising and sponsorship notices: Lifting of ad ban on certain items will help expand accounts.
Regulations related to terrestrial broadcasters:
1) In-program ads (commercial breaks) remain prohibited (but allowed in the case of sporting events and cultural/art events).
2) Virtual and indirect ads: Current allowance(5% of the program hour)will remain unchanged.
3) Regulations on sponsorship notices will ease(e.g., expansion of eligible items/accounts).
TIP
2H15 Outlook 8
Media
Domestic ad market growth and outlook
2) Beyond regulations • The government is working to devise policies to boost the overall ad market.
• Loosening of regulations on ads for alcoholic beverages, powdered infant formula, formulated milk, medical services, and prescription drugs
• Boosting new media advertising (based on smart media)
• Discussions are underway on ways to improve the smart ad production environment, promote standardization, assess advertising effects (statistics), and nurture relevant professionals.
I. 2H15 outlook: A big jump forward
Domestic ad market grew only 0.6% YoY in 2014, to W9.6tr.
For 2015, we expect the market to expand 3.9% YoY to W10tr.
TIP
Source: Company data, PwC, KDB Daewoo Securities Research
-40
-20
0
20
40
0
3
6
9
12
91 93 95 97 99 01 03 05 07 09 11 13 15F 17F
(%, YoY)(Wtr) Domestic ad market size (L)Growth rate (R)
Market recoveryDeregulation
Korea/Japan World Cup Economic recovery;
South AfricaWorld Cup
Sewol ferry disaster;decrease in SEC
earnings
2H15 Outlook 9
Media
Source: Cheil Worldwide, KOCCA, Thomson Reuters, KDB Daewoo Securities Research
Increasing correlation between media share prices and overseas revenue
3) Beyond thedomestic market
• The most effective way to sidestep the impact of domestic regulations is to go global.
• The correlation between media share prices and overseas revenue has increased since 2010.
• Overseas revenue helps ease the impacts of macro conditions and seasonality on earnings and share prices.
I. 2H15 outlook: A big jump forward
In 2014, overseas revenue stagnated; Broadcast content business was hurt by drop in Japanese revenue, while ad business was weighed down by decrease in European revenue.
For 2015, we expect both the content and ad businesses to show revenue growth in China. Also, M&A deals and overseas network expansion should provide an additional boost.
TIP
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550
1,100
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01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F
(Wbn)(p)
Total overseas revenue from broadcasting content and advertising (R)
Media sector index (L)
Correlation between overseas revenue and media sector performance has increased since 2010
2H15 Outlook 10
Media
Source: KDB Daewoo Securities Research
Evolution of the Korean Wave: Currently in the third phase (i.e., expansion into China)
3) Beyond thedomestic market
• Thanks to the evolution of the “Korean Wave,” Korea’s cultural phenomenon is developing into an industry.
• Among global markets, Japan is the main market for offline dramas, while the US and Europe are strong markets for online music.
• Currently, the industry is paying keen attention to the Chinese content/ad market(both online and offline).
I. 2H15 outlook: A big jump forward
Korean Wave content market in China encompasses online and offline channels:
- Online: Youku(e.g., right totransmit content)
- Offline: TV broadcastersand film box office
TIP
China
My Love from the Star;
Running Man
Online/offline
US/EU
„Gangnam Style‰
Online
Japan
Popularity ofBae Yong-joon
Offline
First Second Third
Cultural phenomenon(fads, temporary)
Potential revenue(industry development,
sustainability)
2H15 Outlook 11
Media
Source: KDB Daewoo Securities Research
Sustainable business lineup is necessary to ensure overseas expansion
3) Beyond the domestic market
• For overseas projects, marketability and likelihood of success in expansion have already been confirmed.
• The success of overseas projects is inherently unpredictable
• It is time to form detailed strategies for establishing sustainable business lineups and ensuring overseas growth.
• Companies need to make steady business plans and lineups.
I. 2H15 outlook: A big jump forward
Overseas projects are hard to reflect in enterprise value due to their highly unpredictable business nature, no matter how well they perform.
Only if overseas subsidiaries are established and provide a sustainable business lineup can overseas business be reflected in enterprise value.
TIP
2H15 Outlook 12
Media
Source: KDB Daewoo Securities Research
Two-track strategy: JV + direct operations
3) Beyond thedomestic market
• Two-track strategy: Joint venture (JV) + overseas subsidiaries
• A JV can lead to faster monetization and reduce errors in the early stages.
• Establishing an overseas subsidiary can help ensure business sustainability and stronger growth over the medium to long term.
I. 2H15 outlook: A big jump forward
KEEPCALM
AND
SET UPSHOP
Joint ventures help improve short-term results, but restrictions on equity ownership and business flexibility may limit growth.
Establishing an overseas subsidiary can be riskier than forming a JV, but the prospect of full revenue recognition can be attractive.
TIP
2H15 Outlook 13
Media
Source: KDB Daewoo Securities Research
Key themes in 2H15
II. Themes and issues: J.U.M.P.
J.U.M.P. • 2H15 keyword: J.U.M.P.
• J: Jungle - Changes in the competitive environment
• U: UHD - Commoditization of UHD TV
• M: Monetization - Monetization of new business models and new markets
• P: Personalization - Changes in content and ad market driven by single-person households
2H15 media industry trends: Changing competitive landscape, earnings improvement, higher pixel counts, and personalization
TIP
U
M
Jungle: Rapidly changing competitive landscape
UHD: Rising penetration
Monetization: With growth story in place, monetization now the key
Personalization: Media consumption by
single-person households
J
P
2H15 Outlook 14
Media
Source: KDB Daewoo Securities Research
Media industry to undergo major changes in competitive structure starting in 2H
II. Themes and issues: 1) Jungle
1) Jungle:A dog-eat-dog world
• Jungle: Changes in the competitive landscape to pick up speed
• Media content: Opening of the program provider (PP) market under the ROK-US FTA;Growing demand from China
• Pay-TV competition variables: 1) Telcos’ expansion into the pay-TV market and 2) digital conversion
• Deregulation, M&As, and partnerships may result in industry cooperation/consolidation.
Changes in market competition may lead to higher ARPU for media content.
Korea’s pay-TV ARPU is among the lowest in the world.
Netflix may enter the Korean market next year.
TIP
Market integration
Easing uncertainty
Evolving domesticPlatform strategy
Expansion into China
Overseas services entering Korean market
Establishment of a newsegment
New entrants
OTTNetflix
Content-platformintegration
Domestic:Exclusivecontent
China:Broadcasting, film
Pay TV: C&M
Multiplex:Megabox
ContentM&A
2H15 Outlook 15
Media
Source: Broadcast industry status report, KCTA, KDB Daewoo Securities Research
Pay-TV market consolidation is underway, but still has a long way to go (19 operators)
II. Themes and issues: 1) Jungle
1) Jungle:Industry consolidation
• The Korean pay-TV market has been weighed down by stiff competition.
• The digital broadcast conversion has caused investments and costs to rise;ARPU growth has stagnated due to price discount pressures amid competition.
• Some companies (C&M, etc.) were placed on the M&A market amid deregulation, signaling industry consolidation.
• A successful merger would likely improve the involved firms’ enterprise values.
The pay-TV industry’s history is marked by consolidation.
TIP
2120
25 2323
21
18 19
11 10
0
10
20
30
40
05 06 07 08 09 10 11 12 13 14
(no.)
IPTV Satellite Cable SO (individual) Cable MSO
2H15 Outlook 16
Media
Source: Display Search, LG Display, KDB Daewoo Securities Research
UHD TV penetration to exceed 10% in 2015, as more UHD TV content becomes available
II. Themes and issues: 2) UHD
2) UHD:“My neighbor’s got aUHD TV!”
• UHD: Early stage of UHD TV commoditization
• Higher pixel counts are catching on with consumers more quickly than past TV trends.
• UHD TV penetration is anticipated to exceed 10% this year.
• Starting in 2H, terrestrial TV networks, cable PPs (CJ E&M), and satellite TV operators (KT Skylife) are anticipated to step up UHD TV content operations
Content providers’ big shift:
- Terrestrial TV networks tobegin UHD content productionand programming in 2H
- CJ E&M (Korea’s largestcable PP) launched UXN, achannel dedicated to UHDcontent
- Skylife TV launched two UHDcontent channels
TIP
5%
13%
21%
28%
32%
0
10
20
30
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210
220
230
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250
260
2014 2015F 2016F 2017F 2018F
(%)(mn units)
Global TV shipments (L)
UHD TV penetration rate (R)
2H15 Outlook 17
Media
Source: KDB Daewoo Securities Research
Monetization to begin in 2015
II. Themes and issues: 3) Monetization
3) Monetization • Monetization: Businesses start to make money after a growth story is in place.
• Monetization is important after forming and entering into new markets.
• Strategies to strengthen business sustainability are under review.
• More sophisticated monetization models and more diverse business models are needed.
2014 2015 2016
Formation of story- Confirmation of
Chinese market viability
- Policy easing proposals
Monetization- Strategies for Chinese
operations
- Realization of regulatory easing
- Business model diversification
Business lineup- Localization efforts
- Recovery of market growth
- Increase in contribution of new businesses
2H15 Outlook 18
Media
Source: CJ E&M, Thomson Reuters, KDB Daewoo Securities Research
CJ E&M shares are rallying as the company has delivered profit for two straight quarters
II. Themes and issues: 3) Monetization
3) Monetization:Share prices to trendupward if earningscontinue to improve
• Share prices should trend upward in line with improving earnings over the long term
• CJ E&M could be a case in point:
• Despite improvement in the recognized competitiveness of content, CJ E&M turned to red on a quarterly basis two times in the past two years.
• This year, however, the company remained in the black in 1Q despite unfavorable seasonality, leading to a share price rally.
Improvement in recognized competitiveness is leading to earnings growth.
TIP
1,000
1,500
2,000
2,500
3,000
-8
-4
0
4
8
1Q13 3Q13 1Q14 3Q14 1Q15 3Q15F
(Wbn)(%)
CJ E&M OP margin (L)
CJ E&M market cap (R)
2H15 Outlook 19
Media
Note: Survey of 308 single households in 2015; Displaying the most chosen answers and percentageSource: Job Korea, Visual Dive, KDB Daewoo Securities Research
Single people spend the largest share of time consuming media content
II. Themes and issues: 4) Personalization
4) Personalization:Single-personhouseholds’ mediaconsumption
• Personalization of media driven by increasing focus on single-person households
• Increasing focus on single-person households’ media consumption changing the media content market landscape
• The ad market is also developing and expanding as advertisers shift focus to single people with large purchasing power.
Single people spend the largest share of time consuming media content.
TIP
63.6%
Satisfied with daily routine
56.5%
Satisfied overall
with single-person
household life
83.7%
Encounteredfeelings of loneliness
29.9%
Watch TV/movies to relieve loneliness
2H15 Outlook 20
Media
Source: KISDI, Nasmedia, Cable TV VOD, KDB Daewoo Securities Research
VOD market’s growth is driving up fixed-rate monthly subscription sales and the IPTV ad market
II. Themes and issues: 4) Personalization
4) Personalization:Single-personhouseholds’ mediaconsumption
• Major indicator for personalized media consumption is VOD consumption.
• VOD market’s growth is driving up digital conversion in the pay-TV market and the unit price of VOD content.
• Recently, fixed-rate monthly subscription package sales and IPTV ad billings have also been on the rise.
VOD: Video on demand
IPTV ad slots have been completely sold out since July 2014
TIP
0
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0
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600
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2011 2012 2013 2014 2015F
(Wbn)(Wbn)
Cable VOD revenue (L)
IPTV VOD revenue (L)
IPTV monthly plans revenue (R)
IPTV ad billings (R)
2H15 Outlook 21
Media
Note: Based on the data of nine media companies under our Universe, Source: Each company, Korea Creative Content Agency, Thomson Reuters, KDB Daewoo Securities Research
Shares gaining momentum in 2015 on the back of growth in margins and overseas revenue
III. Valuation and investment strategies
Riding the wave of margin growth and overseas expansion
• Media sector’s share performance depends on policy, short-term earnings, and long-term growth story.
• Revenue is still largely swayed by policy factors due to high concentration on domestic market
• In the short term, shares likely have limited upside potential without earnings growth.
• Share re-rating is unlikely without long-term growth potential.
• Three determinants of share performance all likely to be favorable in 2015 Easing of regulations, recovery of margins, and improved long-term growth potential(confirmed by overseas success)
Media sector’s OP margin and overseas revenue to improve simultaneously in 2015
TIP
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2011 2012 2013 2014 2015F 2016F
(%)(p)Media sector index (L)OP margin (R)Overseas revenue growth (R)
2014: shares and profitability slumped;overseas revenue growth also fell
2015: expectations for profitability as well as acceleration of overseasrevenue growth
2H15 Outlook 22
Media
CJ E&M’s 12-month forward P/B band
Major global media companies’ earnings forecast and valuation (Wbn, %, x)
J Contentree’s 12-month forward P/B band
Notes: KDB Daewoo Securities estimates for CJ E&M and J Contentree; Data for other companies are based on the consensusSource: Bloomberg, KDB Daewoo Securities Research
III. Valuation and strategies: Global peer group
0
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(W) Adj. price1.8x
1.5x
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0.7x
Company Revenue (Wbn) OP (Wbn) OP margin (%) NP (Wbn) PE (x) P/B (x) ROE (%)14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F
CJ E&M (Korea) 1,233 1,306 1,370 -13 41 49 -1.0 3.2 3.5 233 117 69 6.6 23.3 39.5 1.0 1.6 1.5 16.4 7.1 4.0 SBS Media Holdings 450 463 500 29 34 39 6.5 7.4 7.8 17 30 32 42.2 23.3 21.8 1.1 1.0 1.0 2.5 4.4 4.5 J Contentree 394 398 411 35 39 45 8.9 9.8 10.9 15 25 27 - 23.9 21.8 2.4 2.6 2.4 -0.1 12.3 12.0 Fuji Media Holdings (Japan) 6,227 6,033 6,113 248 262 298 4.0 4.3 4.9 193 194 223 20.3 18.5 16.3 0.6 0.7 0.6 3.3 3.6 4.0
Walt Disney (US) 51,102 57,019 61,713 11,902 14,866 16,541 23.3 26.1 26.8 7,853 9,401 10,367 23.4 21.8 19.3 4.0 3.9 3.5 17.7 18.2 21.5 Time Warner 28,818 31,184 33,288 6,294 7,817 9,076 21.8 25.1 27.3 4,031 4,240 5,038 18.6 18.2 14.7 2.9 2.6 2.4 12.9 16.1 20.1 Viacom 14,429 15,091 15,626 4,273 4,177 4,814 29.6 27.7 30.8 2,503 2,426 2,795 11.7 11.4 10.0 11.4 7.5 7.5 53.2 60.3 73.7 Discovery 6,599 7,145 7,582 2,171 2,301 2,433 32.9 32.2 32.1 1,200 1,286 1,431 18.2 17.6 15.2 2.7 4.0 3.8 17.3 20.4 23.0 ITV (EU) 4,491 4,993 5,316 1,266 1,361 1,482 28.2 27.3 27.9 808 1,077 1,176 23.0 17.0 15.5 10.6 8.6 6.6 49.8 52.3 46.2 RTL Group 8,122 7,204 7,397 1,401 1,362 1,422 17.3 18.9 19.2 913 881 918 19.5 17.7 16.8 4.5 4.5 4.4 21.8 25.1 26.6 Huayi Brothers (China) 406 560 692 146 221 283 35.9 39.5 40.9 153 187 235 75.2 57.1 45.6 9.8 9.0 7.8 15.2 16.3 16.7 Beijing Enlight Media 207 290 380 65 117 160 31.2 40.3 42.0 56 91 123 131.1 76.6 58.9 13.9 12.1 10.4 12.2 13.4 15.1
Zhejiang Huace Film & TV 326 550 667 73 142 190 22.4 25.9 28.5 67 119 156 77.7 50.6 38.5 9.3 5.5 4.8 15.3 14.8 13.7
Shanghai New Culture 106 273 361 26 72 95 24.2 26.2 26.4 21 55 71 110.4 67.4 51.3 16.2 8.7 7.3 12.4 16.9 14.6 Average 8,779 9,465 10,102 1,994 2,344 2,638 20.4 22.4 23.5 1,290 1,438 1,619 45.8 31.7 27.5 6.5 5.1 4.6 17.9 20.1 21.1
2H15 Outlook 23
Media
Cheil Worldwide’s 12-month forward P/E band
Major global ad agencies’ earnings forecast and valuation (Wbn, %, x)
Cheil Worldwide’s 12-month forward P/B band
III. Valuation and strategies: Global peer group
Notes: KDB Daewoo Securities estimates for Cheil Worldwide; Data for other companies are based on the consensusSource: Bloomberg, KDB Daewoo Securities Research
0
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1.7x
Company nameRevenue (Wbn) OP (Wbn) OP margin (%) NP (Wbn) P/E (x) P/B (x) ROE (%)
14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F
Cheil Worldwide (Korea) 2,666 2,673 2,863 127 157 174 4.8 5.9 6.1 102 124 136 19.5 20.3 18.6 2.0 2.2 2.0 13.2 13.1 12.6
Dentsu (Japan) 7,053 6,058 7,080 1,281 890 1,195 18.2 14.7 16.9 773 527 740 41.7 30.1 22.3 1.9 1.7 1.6 4.9 5.7 7.4
Hakuhodo DY holdings 10,948 10,656 10,974 356 362 385 3.3 3.4 3.5 192 198 209 25.0 22.9 21.6 1.9 1.8 1.7 7.9 8.6 8.4
Asatsu-DK 3,517 3,222 3,344 41 42 49 1.2 1.3 1.5 37 39 44 33.5 30.7 27.4 1.1 1.0 - 3.3 2.9 -
BlueFocus (China) 19,993 19,888 20,999 2,463 2,683 2,912 12.3 13.5 13.9 1,868 2,046 2,221 18.9 16.5 15.0 2.8 2.5 2.4 14.3 15.5 16.2
Guangdong Advertising 16,135 16,467 17,088 2,048 2,089 2,207 12.7 12.7 12.9 1,163 1,173 1,241 17.5 17.3 16.0 7.7 6.8 6.7 35.6 36.4 40.1
WPP PLC (UK) 10,146 11,724 12,436 1,582 1,733 1,900 15.6 14.8 15.3 1,007 1,195 1,317 23.4 17.2 15.5 2.6 2.6 2.4 12.9 16.2 17.0
Omnicom Group (US) 7,939 8,211 8,548 830 931 1,031 10.5 11.3 12.1 503 513 577 20.2 18.1 15.8 4.5 4.1 4.0 24.5 21.7 24.5
Publicis Groupe (EU) 1,017 1,526 1,909 136 220 286 13.4 14.4 15.0 122 167 222 75.6 38.7 29.3 8.4 6.8 5.7 11.6 19.0 20.4
Interpublic Group (US) 1,078 1,545 1,833 103 185 233 9.6 12.0 12.7 73 129 162 63.2 42.7 32.8 13.5 11.3 8.2 23.1 30.8 27.5
Average 8,049 8,200 8,711 897 929 1,037 10.1 10.4 11.0 584 611 687 33.9 25.4 21.4 4.6 4.1 3.9 15.1 17.0 19.4
2H15 Outlook 24
Media
Major global pay-TV companies’ earnings forecast and valuation (Wbn, %, x)
III. Valuation and strategies: Global Peer Group
Notes: KDB Daewoo Securities estimates for CJ HelloVision and KT Skylife; Data for other companies are based on the consensusSource: Bloomberg, KDB Daewoo Securities Research
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Company Revenue (Wbn) OP (Wbn) OP margin (%) NP (Wbn) P/E (x) P/B (x) ROE (%)
14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16FCJ HelloVision (Korea) 1,270 1,279 1,350 102 126 140 8.0 9.8 10.4 26 69 80 29.3 15.0 13.0 0.8 1.1 1.0 2.9 7.3 7.8 KT Skylife 623 621 640 78 89 94 12.5 14.3 14.7 56 68 72 15.8 13.0 12.3 2.0 1.8 1.6 13.2 14.8 14.0 Hyundai HCN 306 298 299 57 56 57 18.5 18.8 18.9 44 46 47 11.9 10.7 10.4 0.9 0.8 0.8 7.9 8.1 7.8 Sky Perfect JSAT (japan) 1,581 1,766 1,859 190 248 253 12.0 14.0 13.6 131 154 159 15.9 13.7 12.3 1.1 1.0 0.9 7.1 - -Comcast (US) 72,443 79,040 84,814 15,699 17,654 19,032 21.7 22.3 22.4 8,827 9,153 10,003 19.2 17.7 15.5 2.8 2.7 2.5 16.6 15.4 15.8 Time Warner Cable 24,029 26,274 27,692 4,879 5,208 5,777 20.3 19.8 20.9 2,139 2,292 2,619 24.6 25.0 21.3 6.4 6.1 5.5 26.4 24.6 26.8 Liberty Global 19,221 20,152 21,238 2,347 3,075 3,817 12.2 15.3 18.0 -732 166 803 - 197.1 71.9 3.9 3.8 4.0 -9.4 0.8 4.5 Charter Communications 9,594 10,804 11,631 1,023 1,474 1,829 10.7 13.6 15.7 -193 138 478 - 185.0 44.4 261.5 90.8 - - 113.0 32.6 Cablevision 6,806 7,176 7,254 970 1,030 1,074 14.3 14.4 14.8 328 260 288 36.5 29.8 27.1 - - - - -4.4 -4.2 DirecTV (US) 35,034 37,737 39,218 5,401 5,969 6,236 15.4 15.8 15.9 2,903 3,256 3,439 15.7 15.5 14.5 - - 111.1 - -86.0 427.4 Dish Network 15,424 16,534 17,092 1,922 2,022 2,016 12.5 12.2 11.8 995 947 881 30.1 37.2 40.2 13.9 10.5 8.2 65.5 34.0 22.5 Shaw Communications (Canada) 5,116 4,922 5,014 1,405 1,330 1,381 27.5 27.0 27.5 836 730 783 15.1 15.9 14.9 2.7 2.5 2.3 17.3 17.0 16.5
British Sky (UK) 13,241 18,163 20,142 2,014 2,350 2,717 15.2 12.9 13.5 1,501 1,545 1,837 11.5 19.9 16.8 6.9 6.4 5.4 84.2 40.9 31.5 Beijing Gehua (China) 414 479 530 16 79 136 3.8 16.5 25.7 97 142 186 69.1 53.1 39.2 6.6 6.1 5.4 10.0 11.7 13.4 Average 14,650 16,089 17,055 2,579 2,908 3,183 14.6 16.2 17.4 1,211 1,355 1,548 24.7 46.3 25.3 25.8 11.1 12.4 22.0 15.2 47.4
CJ HelloVision's 12-month forward P/E band KT Skylife’s 12-month forward P/E band
2H15 Outlook 25
Media
Source: KDB Daewoo Securities Research
IV. Top pick and stocks to watch
Top pick
Buy
Buy
Trading Buy
[Content] CJ E&M
[Advertising] Cheil Worldwide, Nasmedia
[Platform] KT Skylife , CJ HelloVision , KTH
SBS Contents Hub, J Contentree
2H15 Outlook 26
Media
Taking a leap forward
Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests; based on May 27th closing priceSource: KDB Daewoo Securities Research
FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F
Revenue (Wbn) 1,395 1,246 1,233 1,306 1,370 1,429
OP (Wbn) 39 -9 -13 41 49 56
OP margin (%) 2.8 -0.7 -1.1 3.1 3.6 3.9
NP (Wbn) 37 5 225 111 66 78
EPS (W) 975 133 5,796 2,869 1,695 2,026
ROE (%) 3.1 0.4 16.4 7.1 4.0 4.5
P/E (x) 27.2 229.0 6.6 22.4 37.9 31.7
P/B (x) 0.8 1.0 1.0 1.5 1.5 1.4
(Maintain) Buy
Target Price (12M, W) 80,000
Share Price (5/27/15, W) 64,300
Expected Return 24%
OP (15F, Wbn) 41Consensus OP (15F, Wbn) 54
EPS Growth (15F, %) -50.5
Market EPS Growth (15F, %) 38.9
P/E (15F, x) 22.4
Market P/E (15F, x) 11.0KOSDAQ 699.19
Market Cap (Wbn) 2,490
Shares Outstanding (mn) 39
Free Float (%) 56.7
Foreign Ownership (%) 12.7
Beta (12M) 1.94
52-Week Low 32,30052-Week High 68,500
(%) 1M 6M 12M
Absolute 11.6 72.4 38.4Relative 11.7 34.6 8.5
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CJ E&M KOSDAQ
Investment points• Domestic: Profitability is strengthening on the back of competitive content.
• Overseas: Momentum is likely to pick up after Chinese and Vietnamese subsidiaries are established this year.
• Robust earnings growth of the mobile games subsidiary will serve as a reliable buttress amid the growing amount of risk-taking associated with business expansion.
• As each business segment has gained competitiveness, the firm’s diversified business portfolio has begun to reduce earnings volatility.
Risk factors• Difficulty estimating earnings due to the complex nature of the business
• Regulatory uncertainty in China and Vietnam
• Earnings volatility associated with commercial success of content
CJ E&M (130960 KQ)Top pick
2H15 Outlook 27
Media
Note: 2015-16 figures are our estimatesSource: CJ E&M, KDB Daewoo Securities Research
Mobile games to drive 2Q-3Q earningsBroadcasting operating profit on the rise
Notes: Release months clockwise from top left: 3/15, 4/15, 6/15, and 7/15Source: Netmarble Games, KDB Daewoo Securities Research
Higher growth in bothbroadcasting and games
• Broadcasting (parent): Operating profit to recover after two years of slowdown, aided by tightercost control (production and personnel) and enhanced content competitiveness.
• Games (subsidiary): Diversification in genres (from casual to RPG, etc.) and game publishing platforms (from KakaoTalk to NAVER), and the “Global One Build” strategy(i.e., releasing mobile games simultaneously worldwide in multiple languages
CJ E&M (130960 KQ)Top pick
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(Wbn)(Wbn) Broadcasting revenue (L)Broadcasting operating profit (R)
2H15 Outlook 28
Media
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91 94 97 00 03 06 09 12 15F
(US$)(US$bn)Viacom market cap (L)
Viacom EPS (R)2014Rise in revenue led by success of films in China
2005Separation from CBS;focused on cable PPand film businesses
1995Began entry into China;
Chinese MTV channel
1999-2000China CCTV-MTV
music show
2001Launch of Nickelodeonchannel in China;entered film business
Share price rose sharplyon pickup of localizedprogramming/operations
Overseas momentum imminent
• CJ E&M will establish subsidiaries in Vietnam and China this year.
• Since starting businesses in Vietnam and China in 2004, the company has accumulated project-oriented experience and relationships.
• JV negotiations are already underway; Eight movies with localized content are in the pipelinein Vietnam and China.
• Focus on case of Viacom: Shares soared as its Chinese operations took off.
Source: Viacom, Thomson Reuters, Yahoo Finance, KDB Daewoo Securities Research
Correlation between share performance and Chinese operations of US company Viacom
CJ E&M (130960 KQ)Top pick
Viacom- Music: MTV, etc.- Broadcast: Nickelodeon, etc.- Movies: Paramount Pictures
CJ E&M
- Music : Mnet, etc. - Broadcast: tvN, OCN, Tooniverse, etc.- Movies : CJ Entertainment
Viacom’s Chinese operations began with music, as the business required relatively small investments, before expanding to broadcast and then to movies.
CJ E&M is following a similar path.
TIP
2H15 Outlook 29
Media
Note: Based on May 27th closing priceSource: Company data, KDB Daewoo Securities Research
Comprehensive Income Statement (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Revenue 1,233 1,306 1,370 1,429
Cost of Sales 977 1,019 1,069 1,115
Gross Profit 256 287 301 314
SG&A Expenses 268 246 253 259
Operating Prof it (Adj) - 13 41 49 56
Operating Prof it - 13 41 49 56
Non-Operat ing Prof it - 37 114 44 55
Net Financial Income -6 1 1 3
Net Gain from Inv in Associates 10 133 66 72
Pretax Profit -50 155 93 111
Income Tax 7 38 24 29
Profit from Continuing Operations -57 117 69 82
Profit from Discontinued Operation 290 0 0 0
Net Profit 233 117 69 82
Controlling Interests 225 111 66 78
Non-Controlling Interests 9 5 3 4
T otal Comprehensive Prof it 228 117 69 82
Controlling Interests 221 110 65 77
Non-Controlling Interests 8 7 4 5
EBITDA 290 325 341 354
FCF (Free Cash Flow) 176 202 306 299
EBITDA Margin (%) 23.5 24.9 24.9 24.8
Operating Profit Margin (%) -1.1 3.1 3.6 3.9
Net Profit Margin (%) 18.2 8.5 4.8 5.5
Statement of F inancial Condit ion (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Cur rent Assets 1,039 1,043 1,094 1,064
Cash and Cash Equivalents 34 49 50 68
AR & Other Receivables 368 419 439 457
Inventories 5 6 6 7
Other Current Assets 632 569 599 532
Non-Cur rent Assets 1,318 1,425 1,465 1,496
Investments in Associates 377 453 475 496
Property, Plant and Equipment 88 89 81 75
Intangible Assets 695 725 745 758
T otal Assets 2,357 2,468 2,558 2,560
Cur rent L iab ilit ies 581 571 591 510
AP & Other Payables 215 244 256 267
Short-Term Financial Liabilities 148 157 157 57
Other Current Liabilities 218 170 178 186
Non-Cur rent L iabilit ies 271 275 276 277
Long-Term Financial Liabilities 253 253 253 253
Other Non-Current Liabilities 18 22 23 24
T otal L iab ilit ies 852 846 867 787
Controlling Interests 1,510 1,620 1,686 1,765
Capital Stock 194 194 194 194
Capital Surplus 973 973 973 973
Retained Earnings 316 427 493 572
Non-Controlling In terests -4 2 5 9
Stockholders' Equity 1,506 1,622 1,691 1,774
F or ecasts/Valuat ions (Summar ized)
12/14 12/15F 12/16F 12/17F
P/E (x) 6.6 23.3 39.5 33.0
P/CF (x) 4.4 8.5 8.1 7.8
P/B (x) 1.0 1.6 1.5 1.5
EV/EBITDA (x) 4.7 7.8 7.3 6.9
EPS (W) 5,796 2,869 1,695 2,026
CFPS (W) 8,719 7,858 8,231 8,632
BPS (W) 39,100 41,969 43,665 45,691
DPS (W) 0 0 0 0
Payout ratio (%) 0.0 0.0 0.0 0.0
Dividend Yield (%) 0.0 0.0 0.0 0.0
Revenue Growth (%) -1.0 5.9 4.9 4.3
EBITDA Growth (%) -19.7 12.1 4.9 3.8
Operating Profit Growth (%) - - 19.5 14.3
EPS Growth (%) 4,257.9 -50.5 -40.9 19.5
Accounts Receivable Turnover (x) 3.3 3.5 3.3 3.3
Inventory Turnover (x) 209.5 232.9 224.1 223.4
Accounts Payable Turnover (x) 11.7 14.1 13.5 13.5
ROA (%) 10.2 4.8 2.7 3.2
ROE (%) 16.4 7.1 4.0 4.5
ROIC (%) -1.4 3.3 3.7 4.2
Liability to Equity Ratio (%) 56.6 52.1 51.3 44.4
Current Ratio (%) 178.9 182.6 184.9 208.5
Net Debt to Equity Ratio (%) -7.5 -4.4 -6.9 -9.2
Interest Coverage Ratio (x) -0.8 2.9 3.4 4.5
CJ E&M (130960 KQ)Top pick
2H15 Outlook 30
Media
Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests; based on May 27th closing priceSource: KDB Daewoo Securities Research
FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F
Revenue (Wbn) 2,365 2,709 2,666 2,673 2,863 3,071
OP (Wbn) 126 130 127 157 174 193
OP margin (%) 5.3 4.8 4.8 5.9 6.1 6.3
NP (Wbn) 94 99 102 123 135 149
EPS (W) 817 857 883 1,072 1,172 1,297
ROE (%) 13.6 14.7 13.2 13.1 12.6 12.3
P/E (x) 26.4 32.1 19.5 19.6 17.9 16.2
P/B (x) 3.1 3.5 2.0 2.1 1.9 1.7
(Maintain) Buy
Target Price (12M, W) 30,000
Share Price (5/27/15, W) 20,950
Expected Return 43%
OP (15F, Wbn) 157Consensus OP (15F, Wbn) 152
EPS Growth (15F, %) 21.3
Market EPS Growth (15F, %) 38.9
P/E (15F, x) 19.6
Market P/E (15F, x) 11.0KOSPI 2,107.50
Market Cap (Wbn) 2,410
Shares Outstanding (mn) 115
Free Float (%) 59.7
Foreign Ownership (%) 28.1
Beta (12M) 1.16
52-Week Low 15,60052-Week High 25,000
(%) 1M 6M 12M
Absolute -12.3 8.3 -13.6Relative -10.3 1.8 -18.1
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Cheil Worldwide KOSPI
Investment points
• Cheil Worldwide’s growth potential will likely pick up this year, driven by European and Chinese businesses.
• Positives: Recovery of domestic ad market, lifting of advertising ban on certain items
• Acquired overseas subsidiaries have performed well in taking orders from non-affiliates; Additional M&A deals likely.
• The value of Pengtai, a Chinese digital marketing subsidiary, could be reflected in Cheil’s enterprise value.
Risks
• Share volatility could increase due to changes in governance of major accounts (e.g., SEC and Samsung Group).
• Earnings visibility is weak due to heavy dependence on overseas revenue.
• IPO of Innocean, the second-largest ad agency in Korea, might affect share liquidity.
Growth engines secured
Cheil Worldwide (030000 KS)Stocksto watch
2H15 Outlook 31
Media
Note: For ad agencies, gross profits reflects top line better than revenue; 2015 data is our estimate. Source: Company data, KDB Daewoo Securities Research
Focus on the value of PengtaiTop-line and net profit to improve in 2015
Source: Company data, Pengtai, KDB Daewoo Securities Research
Enterprise value hinges on growth potential and China
• Cheil Worldwide’s top-line growth is likely to accelerate on the back of M&A deals.Net profit is also anticipated to grow thanks to limited SG&A growth.
• Pengtai, a Chinese digital marketing subsidiary, is the third-largest digital ad agency in China. Pay attention to partnerships with major Chinese internet companies and the value of large accounts.
Among local Chinese advertisers, four are Fortune 100 companies; Solid relationships with 180 partners, including video content
providers, portals, and online shopping malls
Cheil Worldwide (030000 KS)Stocks to watch
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(Wbn)(Wbn)Gross profit (L)Net profit (R)
2H15 Outlook 32
Media
Note: Based on May 27th closing priceSource: Company data, KDB Daewoo Securities Research
Comprehensive Income Statement (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Revenue 2,666 2,673 2,863 3,071
Cost of Sales 1,873 1,711 1,832 1,965
Gross Profit 793 962 1,031 1,106
SG&A Expenses 666 805 857 913
Operating Prof it (Adj) 127 157 174 193
Operating Prof it 127 157 174 193
Non-Operat ing Prof it 13 14 13 14
Net Financial Income 3 9 11 14
Net Gain from Inv in Associates 0 0 0 0
Pretax Profit 140 171 187 207
Income Tax 38 47 51 57
Profit from Continuing Operations 102 124 136 150
Profit from Discontinued Operation 0 0 0 0
Net Profit 102 124 136 150
Controlling Interests 102 123 135 149
Non-Controlling Interests 0 1 1 1
T otal Comprehensive Prof it 92 124 136 150
Controlling Interests 91 125 136 151
Non-Controlling Interests 1 -1 -1 -1
EBITDA 160 186 204 223
FCF (Free Cash Flow) 17 153 139 152
EBITDA Margin (%) 6.0 7.0 7.1 7.3
Operating Profit Margin (%) 4.8 5.9 6.1 6.3
Net Profit Margin (%) 3.8 4.6 4.7 4.9
Statement of F inancial Condit ion (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Cur rent Assets 1,523 1,683 1,874 2,094
Cash and Cash Equivalents 317 468 573 699
AR & Other Receivables 899 905 969 1,039
Inventories 0 0 0 0
Other Current Assets 307 310 332 356
Non-Cur rent Assets 321 292 303 307
Investments in Associates 5 5 14 15
Property, Plant and Equipment 101 82 83 84
Intangible Assets 151 140 139 139
T otal Assets 1,844 1,974 2,177 2,401
Cur rent L iab ilit ies 905 911 974 1,044
AP & Other Payables 543 546 585 628
Short-Term Financial Liabilities 18 18 18 18
Other Current Liabilities 344 347 371 398
Non-Cur rent L iabilit ies 56 57 61 65
Long-Term Financial Liabilities 0 0 0 0
Other Non-Current Liabilities 56 57 61 65
T otal L iab ilit ies 961 967 1,035 1,109
Controlling Interests 879 1,002 1,136 1,285
Capital Stock 23 23 23 23
Capital Surplus 118 118 118 118
Retained Earnings 857 980 1,115 1,264
Non-Controlling In terests 4 5 6 7
Stockholders' Equity 883 1,007 1,142 1,292
F or ecasts/Valuat ions (Summar ized)
12/14 12/15F 12/16F 12/17F
P/E (x) 19.5 20.3 18.6 16.8
P/CF (x) 11.4 13.1 12.2 11.3
P/B (x) 2.0 2.2 2.0 1.8
EV/EBITDA (x) 9.5 10.2 8.7 7.4
EPS (W) 883 1,072 1,172 1,297
CFPS (W) 1,506 1,663 1,783 1,937
BPS (W) 8,704 9,776 10,948 12,245
DPS (W) 0 0 0 0
Payout ratio (%) 0.0 0.0 0.0 0.0
Dividend Yield (%) 0.0 0.0 0.0 0.0
Revenue Growth (%) -1.6 0.3 7.1 7.3
EBITDA Growth (%) 1.9 16.3 9.7 9.3
Operating Profit Growth (%) -2.3 23.6 10.8 10.9
EPS Growth (%) 3.0 21.4 9.3 10.7
Accounts Receivable Turnover (x) 3.0 3.0 3.1 3.1
Inventory Turnover (x) 0.0 0.0 0.0 0.0
Accounts Payable Turnover (x) 3.5 3.4 3.5 3.5
ROA (%) 5.8 6.5 6.5 6.6
ROE (%) 13.2 13.1 12.6 12.3
ROIC (%) 24.6 29.0 32.9 35.4
Liability to Equity Ratio (%) 108.9 96.1 90.6 85.8
Current Ratio (%) 168.3 184.7 192.4 200.7
Net Debt to Equity Ratio (%) -53.0 -61.6 -64.6 -67.8
Interest Coverage Ratio (x) 68.8 81.9 91.0 101.0
Cheil Worldwide (030000 KS)Stocks to watch
2H15 Outlook 33
Media
Notes: All figures are based on non-consolidated K-IFRS; NP refers to net profit attributable to controlling interests; based on May 27th closing priceSource: KDB Daewoo Securities Research
FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F
Revenue (Wbn) 23 25 30 40 47 55
OP (Wbn) 8 6 9 13 16 20
OP margin (%) 34.8 24.0 30.0 32.5 34.0 36.4
NP (Wbn) 6 6 8 11 14 16
EPS (W) 887 681 965 1,370 1,679 1,987
ROE (%) 15.7 11.2 13.4 16.9 17.9 18.2
P/E (x) - 16.6 24.7 30.6 25.0 21.1
P/B (x) - 1.7 3.1 4.8 4.2 3.6
(Maintain) Buy
Target Price (12M, W) 52,000
Share Price (5/27/15, W) 41,900
Expected Return 24%
OP (15F, Wbn) 13Consensus OP (15F, Wbn) 12
EPS Growth (15F, %) 42.0
Market EPS Growth (15F, %) 38.9
P/E (15F, x) 30.6
Market P/E (15F, x) 11.0KOSDAQ 699.19
Market Cap (Wbn) 346
Shares Outstanding (mn) 8
Free Float (%) 30.0
Foreign Ownership (%) 3.4
Beta (12M) 1.11
52-Week Low 14,90052-Week High 43,400
(%) 1M 6M 12M
Absolute 31.3 62.4 141.5Relative 31.4 26.8 89.3
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Nasmedia KOSDAQ
Investment points
• Well-positioned to benefit from growing demand for new media
• The company’s internet ad unit is being driven by growing mobile display/video ad market and account expansion.
• IPTV ad revenue is likely to double this year. The company is likely to see structural benefits from the digital conversion of the media market.
• Indeed, Verizon acquired AOL because of its digital advertising capabilities (including its patented technology for programmatic buying).
Risks
• Intensifying competition in the media representative market could drag down market share and margins.
• Steady investments are likely necessary to respond to the changing new media market.
• Personnel expenses are increasing.
Well-positioned ad media rep
Nasmedia (089600 KQ)Stocks to watch
2H15 Outlook 34
Media
Note: Based on May 27th closing priceSource: Company data, KDB Daewoo Securities Research
Comprehensive Income Statement (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Revenue 30 40 47 55
Cost of Sales 0 0 0 0
Gross Profit 30 40 47 55
SG&A Expenses 21 27 31 35
Operating Prof it (Adj) 9 13 16 20
Operating Prof it 9 13 16 20
Non-Operat ing Prof it 1 2 2 1
Net Financial Income 1 1 1 1
Net Gain from Inv in Associates 0 0 0 0
Pretax Profit 10 15 18 21
Income Tax 2 3 4 5
Profit from Continuing Operations 8 11 14 16
Profit from Discontinued Operation 0 0 0 0
Net Profit 8 11 14 16
Controlling Interests 8 11 14 16
Non-Controlling Interests 0 0 0 0
T otal Comprehensive Prof it 8 11 14 16
Controlling Interests 8 11 14 16
Non-Controlling Interests 0 0 0 0
EBITDA 9 13 17 20
FCF (Free Cash Flow) 1 2 8 10
EBITDA Margin (%) 30.0 32.5 36.2 36.4
Operating Profit Margin (%) 30.0 32.5 34.0 36.4
Net Profit Margin (%) 26.7 27.5 29.8 29.1
Statement of F inancial Condit ion (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Cur rent Assets 90 111 131 154
Cash and Cash Equivalents 4 3 8 14
AR & Other Receivables 59 79 92 108
Inventories 0 0 0 0
Other Current Assets 27 29 31 32
Non-Cur rent Assets 7 7 7 7
Investments in Associates 0 0 0 0
Property, Plant and Equipment 0 0 0 0
Intangible Assets 1 1 1 1
T otal Assets 98 118 138 161
Cur rent L iab ilit ies 33 45 52 61
AP & Other Payables 31 42 49 57
Short-Term Financial Liabilities 0 0 0 0
Other Current Liabilities 2 3 3 4
Non-Cur rent L iabilit ies 2 2 2 3
Long-Term Financial Liabilities 0 0 0 0
Other Non-Current Liabilities 2 2 2 3
T otal L iab ilit ies 35 47 55 64
Controlling Interests 63 71 83 97
Capital Stock 4 4 4 4
Capital Surplus 22 22 22 22
Retained Earnings 36 45 57 71
Non-Controlling In terests 0 0 0 0
Stockholders' Equity 63 71 83 97
F or ecasts/Valuat ions (Summar ized)
12/14 12/15F 12/16F 12/17F
P/E (x) 24.7 30.6 25.0 21.1
P/CF (x) 18.3 25.1 20.2 17.0
P/B (x) 3.1 4.8 4.2 3.6
EV/EBITDA (x) 18.5 23.5 18.5 15.0
EPS (W) 965 1,370 1,679 1,987
CFPS (W) 1,304 1,671 2,071 2,472
BPS (W) 7,587 8,668 10,057 11,753
DPS (W) 290 290 290 290
Payout ratio (%) 30.1 21.2 17.3 14.6
Dividend Yield (%) 1.2 0.7 0.7 0.7
Revenue Growth (%) 20.0 33.3 17.5 17.0
EBITDA Growth (%) 50.0 44.4 30.8 17.6
Operating Profit Growth (%) 50.0 44.4 23.1 25.0
EPS Growth (%) 41.7 42.0 22.6 18.3
Accounts Receivable Turnover (x) 3.3 3.8 3.5 3.5
Inventory Turnover (x) 0.0 0.0 0.0 0.0
Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0
ROA (%) 8.2 10.5 10.8 11.0
ROE (%) 13.4 16.9 17.9 18.2
ROIC (%) 23.5 27.3 28.7 30.3
Liability to Equity Ratio (%) 55.8 65.5 66.2 66.2
Current Ratio (%) 269.9 248.2 249.3 251.4
Net Debt to Equity Ratio (%) -49.2 -44.1 -45.3 -46.6
Interest Coverage Ratio (x) 0.0 0.0 0.0 0.0
Nasmedia (089600 KQ)Stocks to watch
2H15 Outlook 35
Media
Notes: All figures are based on non-consolidated K-IFRS; NP refers to net profit attributable to controlling interests; based on May 27th closing price Source: KDB Daewoo Securities Research
FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F
Revenue (Wbn) 551 600 623 621 640 655
OP (Wbn) 67 102 78 89 94 96
OP margin (%) 12.2 17.0 12.5 14.3 14.7 14.7
NP (Wbn) 56 73 56 68 72 74
EPS (W) 1,178 1,526 1,162 1,428 1,503 1,545
ROE (%) 17.6 19.3 13.2 14.8 14.0 13.1
P/E (x) 28.4 19.4 15.8 12.9 12.3 11.9
P/B (x) 4.6 3.4 2.0 1.8 1.6 1.5
(Maintain) Buy
Target Price (12M, W) 24,000
Share Price (5/27/15, W) 18,450
Expected Return 30%
OP (15F, Wbn) 89Consensus OP (15F, Wbn) 95
EPS Growth (15F, %) 23.0
Market EPS Growth (15F, %) 38.9
P/E (15F, x) 12.9
Market P/E (15F, x) 11.0KOSPI 2,107.50
Market Cap (Wbn) 882
Shares Outstanding (mn) 48
Free Float (%) 49.3
Foreign Ownership (%) 13.7
Beta (12M) 0.46
52-Week Low 15,15052-Week High 27,400
(%) 1M 6M 12M
Absolute -1.6 -1.9 -21.5Relative 0.7 -7.7 -25.6
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KT Skylife KOSPI
Leader in UHD broadcasting
Investment points • Pay-TV operator capable of nationwide simultaneous UHD broadcasting; Subscriber numbers
will likely rise due to differentiated strategies.
• Incurred large one-off costs last year; Earnings to normalize this year
• Most aggressive in the pursuit of T-commerce channel programs; Such platform business is directly tied to profitability.
• Dividend yield of 2.3%, the highest level in the media sector
Risks • Volatility arising from changes in KT Group’s media strategies
• An increase in the cancellation of KT’s bundled products (OTS; Olleh TV Skylife) might lead to a decrease in subscribers.
• Limited increase in ARPU
KT Skylife (053210 KS)Stocks to watch
2H15 Outlook 36
Media
Note: Based on May 27th closing priceSource: Company data, KDB Daewoo Securities Research
Comprehensive Income Statement (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Revenue 623 621 640 655
Cost of Sales 0 0 0 0
Gross Profit 623 621 640 655
SG&A Expenses 545 532 546 559
Operating Prof it (Adj) 78 89 94 96
Operating Prof it 78 89 94 96
Non-Operat ing Prof it - 9 -3 -4 -4
Net Financial Income 1 2 5 8
Net Gain from Inv in Associates 0 0 0 0
Pretax Profit 69 86 90 92
Income Tax 14 17 18 18
Profit from Continuing Operations 56 68 72 74
Profit from Discontinued Operation 0 0 0 0
Net Profit 56 68 72 74
Controlling Interests 56 68 72 74
Non-Controlling Interests 0 0 0 0
T otal Comprehensive Prof it 52 68 72 74
Controlling Interests 52 68 72 74
Non-Controlling Interests 0 0 0 0
EBITDA 149 157 152 146
FCF (Free Cash Flow) 33 107 109 105
EBITDA Margin (%) 23.9 25.3 23.8 22.3
Operating Profit Margin (%) 12.5 14.3 14.7 14.7
Net Profit Margin (%) 9.0 11.0 11.3 11.3
Statement of F inancial Condit ion (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Cur rent Assets 249 343 353 435
Cash and Cash Equivalents 108 102 105 156
AR & Other Receivables 88 93 95 98
Inventories 3 3 3 4
Other Current Assets 50 145 150 177
Non-Cur rent Assets 421 386 353 327
Investments in Associates 25 26 27 28
Property, Plant and Equipment 309 273 238 211
Intangible Assets 39 39 39 39
T otal Assets 670 730 706 762
Cur rent L iab ilit ies 221 168 93 96
AP & Other Payables 0 0 0 0
Short-Term Financial Liabilities 80 20 -60 -60
Other Current Liabilities 141 148 153 156
Non-Cur rent L iabilit ies 13 74 74 75
Long-Term Financial Liabilities 0 60 60 60
Other Non-Current Liabilities 13 14 14 15
T otal L iab ilit ies 235 242 167 171
Controlling Interests 436 487 539 591
Capital Stock 120 120 120 120
Capital Surplus 161 161 161 161
Retained Earnings 161 213 264 317
Non-Controlling In terests 0 0 0 0
Stockholders' Equity 436 487 539 591
F or ecasts/Valuat ions (Summar ized)
12/14 12/15F 12/16F 12/17F
P/E (x) 15.8 13.0 12.3 12.0
P/CF (x) 5.6 5.8 6.2 6.6
P/B (x) 2.0 1.8 1.6 1.5
EV/EBITDA (x) 5.4 4.7 4.2 3.9
EPS (W) 1,162 1,428 1,503 1,545
CFPS (W) 3,287 3,172 2,988 2,817
BPS (W) 9,266 10,346 11,421 12,519
DPS (W) 350 430 450 470
Payout ratio (%) 30.0 29.9 29.8 30.2
Dividend Yield (%) 1.9 2.3 2.4 2.5
Revenue Growth (%) 3.8 -0.3 3.1 2.3
EBITDA Growth (%) -9.7 5.4 -3.2 -3.9
Operating Profit Growth (%) -23.5 14.1 5.6 2.1
EPS Growth (%) -23.9 22.9 5.3 2.8
Accounts Receivable Turnover (x) 6.6 6.9 6.8 6.8
Inventory Turnover (x) 159.3 189.4 187.7 187.1
Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0
ROA (%) 8.3 9.8 10.0 10.1
ROE (%) 13.2 14.8 14.0 13.1
ROIC (%) 20.6 23.5 28.1 32.4
Liability to Equity Ratio (%) 53.9 49.7 31.0 28.9
Current Ratio (%) 112.6 203.8 380.3 451.8
Net Debt to Equity Ratio (%) -16.8 -32.4 -45.0 -54.3
Interest Coverage Ratio (x) 21.0 23.6 49.9 0.0
KT Skylife (053210 KS)Stocks to watch
2H15 Outlook 37
Media
Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests; as of closing price at 5/27/2015 Source: KDB Daewoo Securities Research
FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F
Revenue (Wbn) 891 1,160 1,270 1,279 1,350 1,405
OP (Wbn) 149 116 102 126 140 153
OP margin (%) 16.7 10.0 8.0 9.9 10.4 10.9
NP (Wbn) 104 77 26 68 79 87
EPS (W) 1,347 994 332 879 1,014 1,126
ROE (%) 15.5 9.6 2.9 7.3 7.8 8.1
P/E (x) 10.4 19.3 29.3 15.1 13.1 11.8
P/B (x) 1.5 1.7 0.8 1.1 1.0 0.9
(Maintain) Buy
Target Price (12M, W) 16,000
Share Price (5/27/15, W) 13,250
Expected Return 21%
OP (15F, Wbn) 126Consensus OP (15F, Wbn) 116
EPS Growth (15F, %) 164.7
Market EPS Growth (15F, %) 38.9
P/E (15F, x) 15.1
Market P/E (15F, x) 11.0KOSPI 2,107.50
Market Cap (Wbn) 1,026
Shares Outstanding (mn) 77
Free Float (%) 45.2
Foreign Ownership (%) 9.8
Beta (12M) 0.74
52-Week Low 8,64052-Week High 15,450
(%) 1M 6M 12M
Absolute 9.1 26.8 -13.4Relative 11.6 19.2 -17.9
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CJ Hellovision KOSPI
On the cusp of a turnaround
Investment points
• Leading cable SO and MVNO; Share price moves closely in line with regulatory issues (and is particularly sensitive to favorable changes).
• Broadcasting business to enjoy positive policy momentum, including regulations on excessive discounts on bundled plans, amid accelerating digital conversion
• MVNO losses to narrow thanks to the government’s cut to network wholesale prices
• Earnings to improve sharply this year thanks to the low base of comparison(due to one-off costs, including an asset charge, recorded in 2014)
Risks
• Continued competition in the pay-TV and mobile telecom market
• Average revenue per subscriber (ARPS) for the broadcasting business is recovering slowly following plunge
• Losses from new businesses (MVNO and Tving)
CJ HelloVision (037560 KS)Stocks to watch
2H15 Outlook 38
Media
Note: As of closing price at 5/27/2015 Source: Company data, KDB Daewoo Securities Research
Comprehensive Income Statement (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Revenue 1,270 1,279 1,350 1,405
Cost of Sales 809 815 860 895
Gross Profit 461 464 490 510
SG&A Expenses 359 339 350 357
Operating Prof it (Adj) 102 126 140 153
Operating Prof it 102 126 140 153
Non-Operat ing Prof it - 66 -33 -32 -33
Net Financial Income -25 -21 -20 -17
Net Gain from Inv in Associates -1 0 0 0
Pretax Profit 36 93 108 120
Income Tax 10 24 28 31
Profit from Continuing Operations 26 69 80 89
Profit from Discontinued Operation 0 0 0 0
Net Profit 26 69 80 89
Controlling Interests 26 68 79 87
Non-Controlling Interests 0 1 2 2
T otal Comprehensive Prof it 24 69 80 89
Controlling Interests 24 68 79 87
Non-Controlling Interests 0 1 1 2
EBITDA 387 423 456 483
FCF (Free Cash Flow) 142 164 144 217
EBITDA Margin (%) 30.5 33.1 33.8 34.4
Operating Profit Margin (%) 8.0 9.9 10.4 10.9
Net Profit Margin (%) 2.0 5.3 5.9 6.2
Statement of F inancial Condit ion (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Cur rent Assets 413 508 401 535
Cash and Cash Equivalents 96 172 47 167
AR & Other Receivables 271 286 302 314
Inventories 19 20 22 22
Other Current Assets 27 30 30 32
Non-Cur rent Assets 1,757 1,741 1,756 1,717
Investments in Associates 4 4 4 4
Property, Plant and Equipment 782 801 850 840
Intangible Assets 849 813 778 748
T otal Assets 2,170 2,249 2,157 2,252
Cur rent L iab ilit ies 510 524 357 367
AP & Other Payables 164 173 182 190
Short-Term Financial Liabilities 274 274 93 93
Other Current Liabilities 72 77 82 84
Non-Cur rent L iabilit ies 757 758 759 761
Long-Term Financial Liabilities 732 732 732 732
Other Non-Current Liabilities 25 26 27 29
T otal L iab ilit ies 1,267 1,282 1,116 1,128
Controlling Interests 903 965 1,037 1,118
Capital Stock 194 194 194 194
Capital Surplus 193 193 193 193
Retained Earnings 518 580 653 734
Non-Controlling In terests 1 2 4 6
Stockholders' Equity 904 967 1,041 1,124
F or ecasts/Valuat ions (Summar ized)
12/14 12/15F 12/16F 12/17F
P/E (x) 29.3 15.1 13.1 11.8
P/CF (x) 1.8 2.5 2.3 2.2
P/B (x) 0.8 1.1 1.0 0.9
EV/EBITDA (x) 4.3 4.4 3.9 3.5
EPS (W) 332 879 1,014 1,126
CFPS (W) 5,289 5,318 5,733 6,030
BPS (W) 11,653 12,457 13,395 14,447
DPS (W) 75 75 75 75
Payout ratio (%) 22.6 8.4 7.3 6.5
Dividend Yield (%) 0.8 0.6 0.6 0.6
Revenue Growth (%) 9.5 0.7 5.6 4.1
EBITDA Growth (%) 13.2 9.3 7.8 5.9
Operating Profit Growth (%) -12.1 23.5 11.1 9.3
EPS Growth (%) -66.6 164.8 15.4 11.0
Accounts Receivable Turnover (x) 4.9 4.8 4.8 4.8
Inventory Turnover (x) 59.4 64.3 64.3 63.8
Accounts Payable Turnover (x) 28.2 31.3 31.3 31.1
ROA (%) 1.2 3.1 3.6 4.0
ROE (%) 2.9 7.3 7.8 8.1
ROIC (%) 4.2 5.3 5.9 6.5
Liability to Equity Ratio (%) 140.2 132.5 107.2 100.3
Current Ratio (%) 81.0 97.0 112.6 145.8
Net Debt to Equity Ratio (%) 99.8 85.3 73.7 57.6
Interest Coverage Ratio (x) 3.0 3.6 4.4 5.3
CJ HelloVision (037560 KS)Stocks to watch
2H15 Outlook 39
Media
Notes: All figures are based on non-consolidated K-IFRS; NP refers to net profit attributable to controlling interests; based on May 27th closing priceSource: KDB Daewoo Securities Research
FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F
Revenue (Wbn) 127 130 136 159 179 197
OP (Wbn) -7 2 7 10 18 23
OP margin (%) -5.5 1.5 5.1 6.3 10.1 11.7
NP (Wbn) -11 2 12 11 17 22
EPS (W) -306 64 341 302 479 617
ROE (%) -6.4 1.4 6.5 5.4 7.9 9.4
P/E (x) - 121.1 22.4 33.6 21.2 16.4
P/B (x) 1.8 1.6 1.4 1.8 1.6 1.5
(Maintain) Buy
Target Price (12M, W) 17,000
Share Price (5/27/15, W) 10,150
Expected Return 67%
OP (15F, Wbn) 10Consensus OP (15F, Wbn) 13
EPS Growth (15F, %) -11.4
Market EPS Growth (15F, %) 38.9
P/E (15F, x) 33.6
Market P/E (15F, x) 11.0KOSDAQ 699.19
Market Cap (Wbn) 363
Shares Outstanding (mn) 36
Free Float (%) 32.9
Foreign Ownership (%) 3.5
Beta (12M) 0.69
52-Week Low 7,10052-Week High 14,800
(%) 1M 6M 12M
Absolute -23.4 19.1 31.3Relative -23.4 -7.0 2.9
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KTH KOSDAQ
Leader in the T-commerce market
Investment points• Content and commerce Greatest contributors to the pay-TV business
• Robust medium- to long-term growth potential of the T-commerce business on the back of favorable policy environment and KT Group’s media strategy
• Efforts to expand T-commerce channel coverage likely to widen the user base
• Content revenue to grow YoY thanks to expanded film VOD lineup
Risks• Uncertainties at the early stages of new businesses
• Downward pressure on margins due to increased costs from carrying out T-commerce business
• Intensifying competition in the T-commerce and VOD markets
KTH (036030 KQ)Stocks to watch
2H15 Outlook 40
Media
Note: As of closing price at 5/27/2015 Source: Company data, KDB Daewoo Securities Research
Comprehensive Income Statement (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Revenue 136 159 179 197
Cost of Sales 120 138 150 165
Gross Profit 16 21 29 32
SG&A Expenses 9 11 11 9
Operating Prof it (Adj) 7 10 18 23
Operating Prof it 7 10 18 23
Non-Operat ing Prof it 5 2 1 2
Net Financial Income 0 0 0 0
Net Gain from Inv in Associates 0 0 0 0
Pretax Profit 12 12 19 25
Income Tax 0 1 2 2
Profit from Continuing Operations 12 11 17 22
Profit from Discontinued Operation 0 0 0 0
Net Profit 12 11 17 22
Controlling Interests 12 11 17 22
Non-Controlling Interests 0 0 0 0
T otal Comprehensive Prof it 12 11 17 22
Controlling Interests 12 11 17 22
Non-Controlling Interests 0 0 0 0
EBITDA 23 26 34 39
FCF (Free Cash Flow) 38 16 26 32
EBITDA Margin (%) 16.9 16.4 19.0 19.8
Operating Profit Margin (%) 5.1 6.3 10.1 11.7
Net Profit Margin (%) 8.8 6.9 9.5 11.2
Statement of F inancial Condit ion (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Cur rent Assets 120 123 136 154
Cash and Cash Equivalents 32 19 19 25
AR & Other Receivables 25 29 32 36
Inventories 1 1 1 1
Other Current Assets 62 74 84 92
Non-Cur rent Assets 107 120 129 137
Investments in Associates 1 1 1 2
Property, Plant and Equipment 17 19 17 16
Intangible Assets 25 26 26 27
T otal Assets 227 243 265 291
Cur rent L iab ilit ies 30 35 39 43
AP & Other Payables 23 27 30 33
Short-Term Financial Liabilities 0 0 0 0
Other Current Liabilities 7 8 9 10
Non-Cur rent L iabilit ies 1 2 2 2
Long-Term Financial Liabilities 0 0 0 0
Other Non-Current Liabilities 1 2 2 2
T otal L iab ilit ies 31 36 41 45
Controlling Interests 196 207 224 246
Capital Stock 36 36 36 36
Capital Surplus 214 214 214 214
Retained Earnings -69 -58 -41 -19
Non-Controlling In terests 0 0 0 0
Stockholders' Equity 196 207 224 246
F or ecasts/Valuat ions (Summar ized)
12/14 12/15F 12/16F 12/17F
P/E (x) 22.4 33.6 21.2 16.4
P/CF (x) 19.3 14.3 11.2 9.6
P/B (x) 1.4 1.8 1.6 1.5
EV/EBITDA (x) 9.4 12.0 9.1 7.7
EPS (W) 341 302 479 617
CFPS (W) 396 708 904 1,058
BPS (W) 5,487 5,790 6,268 6,886
DPS (W) 0 0 0 0
Payout ratio (%) 0.0 0.0 0.0 0.0
Dividend Yield (%) 0.0 0.0 0.0 0.0
Revenue Growth (%) 4.6 16.9 12.6 10.1
EBITDA Growth (%) 21.1 13.0 30.8 14.7
Operating Profit Growth (%) 250.0 42.9 80.0 27.8
EPS Growth (%) 432.8 -11.4 58.6 28.8
Accounts Receivable Turnover (x) 4.6 6.1 6.0 5.9
Inventory Turnover (x) 393.8 244.3 240.1 237.5
Accounts Payable Turnover (x) 7.0 5.6 5.3 5.2
ROA (%) 5.6 4.6 6.7 7.9
ROE (%) 6.5 5.4 7.9 9.4
ROIC (%) 8.2 10.9 18.1 22.0
Liability to Equity Ratio (%) 15.9 17.6 18.3 18.3
Current Ratio (%) 405.4 354.3 347.1 357.5
Net Debt to Equity Ratio (%) -27.9 -22.3 -21.9 -23.8
Interest Coverage Ratio (x) 0.0 0.0 0.0 0.0
KTH (036030 KQ)Stocks to watch
2H15 Outlook 41
Media
Notes: All figures are based on non-consolidated K-IFRS; NP refers to net profit attributable to controlling interests; based on May 27th closing priceSource: KDB Daewoo Securities Research
FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F
Revenue (Wbn) 193 196 198 229 256 276
OP (Wbn) 28 28 13 16 18 19
OP margin (%) 14.5 14.3 6.6 7.0 7.0 6.9
NP (Wbn) 22 25 9 11 12 13
EPS (W) 1,009 1,156 412 500 554 622
ROE (%) 18.2 17.7 5.8 6.8 7.2 7.8
P/E (x) 12.9 13.5 35.2 34.0 30.7 27.4
P/B (x) 2.2 2.2 2.0 2.3 2.2 2.1
(Maintain) Trading Buy
Target Price (12M, W) 20,000
Share Price (5/27/15, W) 17,000
Expected Return 18%
OP (15F, Wbn) 16Consensus OP (15F, Wbn) 0
EPS Growth (15F, %) 21.4
Market EPS Growth (15F, %) 38.9
P/E (15F, x) 34.0
Market P/E (15F, x) 11.0KOSDAQ 699.19
Market Cap (Wbn) 365
Shares Outstanding (mn) 21
Free Float (%) 35.0
Foreign Ownership (%) 5.0
Beta (12M) 1.77
52-Week Low 11,50052-Week High 20,050
(%) 1M 6M 12M
Absolute -0.9 2.1 -12.4Relative -0.8 -20.3 -31.3
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SBS Contents Hub KOSDAQ
Pay attention to Chinese business strategy
Investment points
• Distributes content of SBS Media Group and plays a major role in the group’s profitability
• Stock is sensitive to structural momentum related to the content environment.
• Domestic VOD rate hikes and rise in exports of dramas and entertainment show formats to China are positive.
• In 2H, mid- to long-term projects, including the establishment of a subsidiary and expansion into the e-commerce business in China, will likely take shape.
Risks
• Content fee paid to SBS has been hiked, putting downward pressure on earnings
• Increase in in-house content investments/production likely to raise costs in the short term
• Uncertainties from overseas content regulations, particularly in China and Japan
SBS Contents Hub (046140 KQ)Stocks to watch
2H15 Outlook 42
Media
Note: Based on May 27th closing priceSource: Company data, KDB Daewoo Securities Research
Comprehensive Income Statement (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Revenue 198 229 256 276
Cost of Sales 178 205 229 247
Gross Profit 20 24 27 29
SG&A Expenses 7 8 9 10
Operating Prof it (Adj) 13 16 18 19
Operating Prof it 13 16 18 19
Non-Operat ing Prof it 4 3 3 4
Net Financial Income 3 0 0 0
Net Gain from Inv in Associates 0 0 0 0
Pretax Profit 17 19 21 23
Income Tax 8 8 9 10
Profit from Continuing Operations 9 11 12 13
Profit from Discontinued Operation 0 0 0 0
Net Profit 9 11 12 13
Controlling Interests 9 11 12 13
Non-Controlling Interests 0 0 0 0
T otal Comprehensive Prof it 9 11 12 13
Controlling Interests 9 11 12 13
Non-Controlling Interests 0 0 0 0
EBITDA 16 18 21 22
FCF (Free Cash Flow) 34 17 17 18
EBITDA Margin (%) 8.1 7.9 8.2 8.0
Operating Profit Margin (%) 6.6 7.0 7.0 6.9
Net Profit Margin (%) 4.5 4.8 4.7 4.7
Statement of F inancial Condit ion (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Cur rent Assets 167 185 202 219
Cash and Cash Equivalents 77 80 85 93
AR & Other Receivables 34 39 44 48
Inventories 0 0 0 0
Other Current Assets 56 66 73 78
Non-Cur rent Assets 53 52 50 47
Investments in Associates 4 5 5 6
Property, Plant and Equipment 30 28 26 24
Intangible Assets 3 2 1 0
T otal Assets 221 236 252 266
Cur rent L iab ilit ies 63 73 81 88
AP & Other Payables 34 39 44 48
Short-Term Financial Liabilities 0 0 0 0
Other Current Liabilities 29 34 37 40
Non-Cur rent L iabilit ies 2 3 3 3
Long-Term Financial Liabilities 0 0 0 0
Other Non-Current Liabilities 2 3 3 3
T otal L iab ilit ies 65 75 84 91
Controlling Interests 156 161 168 176
Capital Stock 11 11 11 11
Capital Surplus 26 26 26 26
Retained Earnings 116 122 128 136
Non-Controlling In terests 0 0 0 0
Stockholders' Equity 156 161 168 176
F or ecasts/Valuat ions (Summar ized)
12/14 12/15F 12/16F 12/17F
P/E (x) 35.2 34.0 30.7 27.4
P/CF (x) 17.5 17.2 15.7 14.2
P/B (x) 2.0 2.3 2.2 2.1
EV/EBITDA (x) 11.5 12.5 10.4 9.3
EPS (W) 412 500 554 622
CFPS (W) 830 987 1,080 1,197
BPS (W) 7,253 7,503 7,807 8,179
DPS (W) 250 250 250 250
Payout ratio (%) 60.7 50.0 45.1 40.2
Dividend Yield (%) 1.7 1.5 1.5 1.5
Revenue Growth (%) 1.0 15.7 11.8 7.8
EBITDA Growth (%) -48.4 12.5 16.7 4.8
Operating Profit Growth (%) -53.6 23.1 12.5 5.6
EPS Growth (%) -64.4 21.4 10.8 12.3
Accounts Receivable Turnover (x) 7.5 7.1 7.0 6.9
Inventory Turnover (x) 0.0 0.0 0.0 0.0
Accounts Payable Turnover (x) 8.2 6.3 6.2 6.1
ROA (%) 4.2 4.7 4.9 5.1
ROE (%) 5.8 6.8 7.2 7.8
ROIC (%) 19.5 40.7 65.0 103.5
Liability to Equity Ratio (%) 41.8 46.7 50.2 51.7
Current Ratio (%) 266.1 254.4 248.6 249.6
Net Debt to Equity Ratio (%) -81.7 -85.8 -89.6 -92.7
Interest Coverage Ratio (x) 0.0 0.0 0.0 0.0
SBS Contents Hub (046140 KQ)Stocks to watch
2H15 Outlook 43
Media
Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests; based on May 27th closing priceSource: KDB Daewoo Securities Research
FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F
Revenue (Wbn) 393 380 394 398 411 423
OP (Wbn) 43 38 35 39 45 48
OP margin (%) 10.9 10.0 8.9 9.8 10.9 11.3
NP (Wbn) 12 -10 0 12 13 13
EPS (W) 177 -152 -1 178 196 204
ROE (%) 13.2 -11.1 -0.1 12.3 12.0 11.1
P/E (x) 21.9 - - 23.9 21.8 20.9
P/B (x) 2.6 3.0 2.4 2.6 2.4 2.1
(Maintain) Trading Buy
Target Price (12M, W) 4,700
Share Price (5/27/15, W) 4,265
Expected Return 10%
OP (15F, Wbn) 39Consensus OP (15F, Wbn) 41
EPS Growth (15F, %) -
Market EPS Growth (15F, %) 38.9
P/E (15F, x) 23.9
Market P/E (15F, x) 11.0KOSDAQ 699.19
Market Cap (Wbn) 282
Shares Outstanding (mn) 66
Free Float (%) 64.0
Foreign Ownership (%) 3.8
Beta (12M) 0.73
52-Week Low 3,22052-Week High 4,325
(%) 1M 6M 12M
Absolute 21.0 21.9 12.2Relative 21.0 -4.8 -12.0
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14.5 14.9 15.1 15.5
Jcontentree KOSDAQ
Acquisition of Megabox finalized
Investment points
• Uncertainties arising from Megabox to dissipate due to the company’s decision to acquire the multiplex theater; Net profit attributable to controlling interests to increase
• The company produces and distributes content for JTBC; Its value deserves attention in light of JTBC’s rising content competiveness.
• Restructuring of magazine and other less profitable businesses being pursued
• Serves as a core part of the JoongAng Media Network’s governance structure
Risks
• Rights offering and convertible bond issuance
• Rights offering: Aimed at acquiring the remaining stake in Megabox: 43mn new shares to be listed on August 11th, 2015
• Convertible bonds: Issued in October 2013; Number of shares that can be converted stood at 4.68mn as of May 2015, before rights offering
J Contentree (036420 KQ)Stocks to watch
2H15 Outlook 44
Media
Note: Based on May 27th closing priceSource: Company data, KDB Daewoo Securities Research
Comprehensive Income Statement (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Revenue 394 398 411 423
Cost of Sales 206 209 215 222
Gross Profit 188 189 196 201
SG&A Expenses 153 150 151 153
Operating Prof it (Adj) 35 39 45 48
Operating Prof it 35 39 45 48
Non-Operat ing Prof it - 12 -1 -3 -5
Net Financial Income -4 0 0 0
Net Gain from Inv in Associates 2 0 0 0
Pretax Profit 23 38 42 43
Income Tax 8 13 15 15
Profit from Continuing Operations 15 25 27 28
Profit from Discontinued Operation -1 0 0 0
Net Profit 15 25 27 28
Controlling Interests 0 12 13 13
Non-Controlling Interests 15 13 14 15
T otal Comprehensive Prof it 15 25 27 28
Controlling Interests 0 0 0 0
Non-Controlling Interests 15 24 27 28
EBITDA 57 61 67 70
FCF (Free Cash Flow) 30 42 44 45
EBITDA Margin (%) 14.5 15.3 16.3 16.5
Operating Profit Margin (%) 8.9 9.8 10.9 11.3
Net Profit Margin (%) 0.0 3.0 3.2 3.1
Statement of F inancial Condit ion (Summar ized)
(Wbn) 12/14 12/15F 12/16F 12/17F
Cur rent Assets 160 192 227 263
Cash and Cash Equivalents 51 82 113 146
AR & Other Receivables 55 55 57 59
Inventories 7 7 8 8
Other Current Assets 47 48 49 50
Non-Cur rent Assets 321 315 311 306
Investments in Associates 11 11 12 12
Property, Plant and Equipment 120 114 108 101
Intangible Assets 82 81 81 80
T otal Assets 481 507 538 570
Cur rent L iab ilit ies 217 219 222 225
AP & Other Payables 48 49 50 52
Short-Term Financial Liabilities 112 112 112 112
Other Current Liabilities 57 58 60 61
Non-Cur rent L iabilit ies 98 99 99 100
Long-Term Financial Liabilities 78 78 78 78
Other Non-Current Liabilities 20 21 21 22
T otal L iab ilit ies 316 317 321 325
Controlling Interests 90 102 115 128
Capital Stock 33 33 33 33
Capital Surplus 48 48 48 48
Retained Earnings 14 25 38 52
Non-Controlling In terests 75 88 102 117
Stockholders' Equity 165 190 217 245
F or ecasts/Valuat ions (Summar ized)
12/14 12/15F 12/16F 12/17F
P/E (x) - 23.9 21.8 20.9
P/CF (x) 3.4 4.8 4.5 4.4
P/B (x) 2.4 2.6 2.4 2.1
EV/EBITDA (x) 7.6 7.6 6.8 6.1
EPS (W) -1 178 196 204
CFPS (W) 1,002 882 938 964
BPS (W) 1,438 1,617 1,812 2,016
DPS (W) 0 0 0 0
Payout ratio (%) 0.0 0.0 0.0 0.0
Dividend Yield (%) 0.0 0.0 0.0 0.0
Revenue Growth (%) 3.7 1.0 3.3 2.9
EBITDA Growth (%) -6.6 7.0 9.8 4.5
Operating Profit Growth (%) -7.9 11.4 15.4 6.7
EPS Growth (%) - - 10.1 4.1
Accounts Receivable Turnover (x) 6.9 7.7 7.8 7.8
Inventory Turnover (x) 60.3 53.7 54.2 54.2
Accounts Payable Turnover (x) 9.3 10.1 10.3 10.2
ROA (%) 2.9 5.0 5.2 5.1
ROE (%) -0.1 12.3 12.0 11.1
ROIC (%) 10.0 11.4 13.4 15.0
Liability to Equity Ratio (%) 191.3 167.2 148.3 132.8
Current Ratio (%) 73.6 87.8 102.3 117.0
Net Debt to Equity Ratio (%) 78.7 52.2 31.0 13.9
Interest Coverage Ratio (x) 3.3 0.0 0.0 0.0
J Contentree (036420 KQ)Stocks to watch
2H15 Outlook 45
Media
Media sector to take a big jump forward
Source: KDB Daewoo Securities Research
[Conclusion] Not just recovering, but leaping forward
Top pick:
CJ E&M: A content firm that will take a leap forward via global expansion and rising domestic
profitability
Stocks to watch:
1) Ad market recovery and growth:Cheil Worldwide, Nasmedia
2) Changing pay-TV market:KT Skylife, CJ HelloVision
3) New markets: KTH
4) Dissipation of uncertainties: J Contentree , SBS Contents Hub
Underperformers
Those that have not set a clear strategy yet
Important Disclosures & Disclaimers 2-Year Rating and Target Price History
Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price
CJ E&M(130960) 05/11/2015 Buy 80,000 10/30/2014 Trading Buy 23,000
03/29/2015 Buy 70,000 10/05/2014 Trading Buy 25,000
02/06/2015 Buy 51,000 07/28/2014 Buy 29,000
11/26/2014 Buy 48,000 04/29/2014 Buy 30,000
No Coverage 10/29/2013 Trading Buy 34,000
03/19/2013 Buy 42,000 10/02/2013 Trading Buy 32,000
SBS(034120) 05/17/2015 Buy 55,000 07/30/2013 Buy 41,000
04/26/2015 Buy 51,000 07/22/2013 Buy 45,000
02/22/2015 Buy 42,000 05/03/2013 Buy 50,000
07/25/2014 Buy 34,000 CJ HelloVision(037560) 05/28/2015 Buy 16,000
06/01/2014 Buy 40,000 05/07/2015 Buy 15,000
10/02/2013 Buy 50,000 04/24/2015 Buy 16,000
08/29/2013 Buy 56,000 11/06/2014 Buy 13,000
04/19/2013 Buy 58,000 08/12/2014 Buy 20,000
Cheil Worldwide(030000) 04/24/2015 Buy 30,000 11/08/2013 Buy 22,000
10/24/2014 Buy 27,000 07/22/2013 Buy 23,000
10/13/2014 Buy 31,000 KTH(036030) 04/24/2015 Buy 17,000
04/21/2014 Buy 32,000 03/10/2015 Trading Buy 14,000
04/29/2013 Buy 34,000 11/26/2014 Trading Buy 10,000
Nasmedia(089600) 05/28/2015 Buy 52,000 No Coverage
05/17/2015 Buy 44,000 SBS Contents Hub(046140) 05/28/2015 Trading Buy 20,000
04/24/2015 Buy 40,000 11/26/2014 Buy 20,000
11/26/2014 Buy 33,000 No Coverage
KT Skylife(053210) 04/24/2015 Buy 24,000 Jcontentree(036420) 05/28/2015 Trading Buy 4,700
01/28/2015 Trading Buy 20,000 11/26/2014 Buy 4,700
Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of Daewoo Securities, the
Stock Ratings Industry Ratings
Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving
Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes
Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening
Sell : Relative performance of -10%
Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.
Disclosures As of the publication date, Daewoo Securities Co., Ltd. has been acting as a financial advisor to Cheil Worldwide for its treasury share buyback program, and other than this, Daewoo Securities has no other special interests in the companies covered in this report.
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Analysts receive compensation that is impacted by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Daewoo Securities Co., Ltd. except as otherwise stated herein. Disclaimers This report is published by Daewoo Securities Co., Ltd. (“Daewoo”), a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof. Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. 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KDB Daewoo Securities International Network
Daewoo Securities Co. Ltd. (Seoul) Daewoo Securities (Hong Kong) Ltd. Daewoo Securities (America) Inc. Head Office 34-3 Yeouido-dong, Yeongdeungpo-gu Seoul 150-716 Korea
Two International Finance Centre Suites 2005-2012 8 Finance Street, Central Hong Kong, China
320 Park Avenue 31st Floor New York, NY 10022 United States
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