Entertainment Entertainment Firms Poised for Strong Overseas Growth

Entertainment Entertainment firms poised for strong overseas growth

Overseas expansion gathering pace CJ CGV, Korea’s largest multiplex chain, has been ramping up its presence in China and Vietnam. The company plans to have a total of 125 sites in China by 2017, with the aim of becoming the country’s third-largest player. In Vietnam, CJ CGV is planning to Overweight (Maintain) increase its site count to 52 by 2019.

Sector Update Meanwhile, YG Entertainment’s new partnership with its second-largest shareholder, LVMH, is expected to take shape in 2H. In addition, the company’s cosmetics brand April 29, 2015 Moonshot is set to hit the Chinese market in 2015, while its fashion joint venture with Cheil Industries, NONA9ON, is scheduled to make its debut in 2016.

Daewoo Securities CCCo.,Co., Ltd. SM Entertainment has been solidifying its dominant market positioning in Korea and Japan. And the company is now targeting the Chinese market, where it is getting ready [Internet/Game/Entertainment] to establish a regional headquarters—tentatively named SM China—in partnership with a major local firm. The new company, which will be launched in 2016, is expected to Chang-kwean Kim serve as a base for SM artists’ advance into China. +822-768-4321 [email protected] Earnings to be robust in 2015

Jeong-yeob Park We expect CJ CGV to display strong top-line growth in 2015, bolstered by the releases +822-768-4124 of Hollywood blockbusters (e.g., Furious 7, Avengers: Age of Ultron , Jurassic World , etc.) [email protected] and new theater openings in China and Vietnam. The Chinese business’s prospects for breaking even will likely become more visible as we approach the end of the year.

YG Entertainment should benefit from new album releases by established artists Big Bang and 2NE1 in 2015. We also expect increased activity from new artists, such as Winner and iKON. Big Bang is set to go on a world tour, performing more than 70 concerts in 15 countries. We expect the world tour to attract over 1.4mn attendees.

SM Entertainment’s leading group TVXQ has successfully completed its Japanese dome tour (750,000 attendees). In November, EXO is scheduled to embark on a dome tour (six concerts) in Japan (over 300,000 attendees expected). In 2015, t he company plans to increase album releases by more than 20% and raise the number of overseas concerts by more than 40%.

Buy CJ CGV, YG Entertainment, and SM Entertainment We remain Overweight on the entertainment sector . We do not expect any significant changes in current business plans regarding new site openings and overseas concerts for 2015. We maintain Buy on CJ CGV, YG Entertainment, and SM Entertainment. We raise our target prices to W100,000 (from W80,000) for CJ CGV and to W60,000 (from W56,000) for YG Entertainment. Meanwhile, we keep our target price for SM Entertainment at W46,000.

Earnings and valuation metrics (Wbn, %, x) 12/1212/1212/12 12/1312/1312/13 12/1412/1412/14 12/15F 12/16F CJ CGV Revenue 665 773 865 909 945 Operating profit 72 68 71 87 99

OP margin 8.8 8.2 9.6 10.5 11.3

Net profit 73 43 33 69 78

P/E 9.1 21.1 34.3 24.7 21.8 YG Entertainment Revenue 107 116 156 192 275 Operating profit 21 22 22 32 47

OP margin 19.6 19.0 14.1 16.7 17.1

Net profit 19 15 19 33 39

P/E 33.3 34.9 34.3 23.7 20.5 SM Entertainment. Revenue 241 269 287 312 342 Operating profit 61 41 34 47 55

OP margin 25.3 15.2 11.8 15.1 16.1

Net profit 40 19 2 43 48

P/E 22.8 48.4 365.5 14.8 13.3 Notes: CJ CGV data on K-IFRS non-consolidated basis; SME and YGE on K-IFRS consolidated basis Source: Company data, KDB Daewoo Securities Research

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURESDISCLOSURES & DISCLAIMDISCLAIMERSERS IN APPENDIX 1 AT THE END OF REPORT.

April 29, 2015 Entertainment

C O N T E N T S

Cultural content taking center stage 3 1. Earnings to expand in 2015-16 3 2. Music industry 4 3. Movie industry 5

Valuation overview 6 CJ CGV (079160 KS) 9 YG Entertainment (122870 KQ) 15 SM Entertainment (041510 KQ) 19

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Cultural content taking center stage

1. Earnings to expand in 2015-16

1) During the late 1990s and the 2000s, a number of Korean entertainment firms rose to prominence by 1) leveraging the growth of the music market, 2) advancing into Japan, and/or 3) satisfying expanding demand for movies by opening multiplex movie theaters.

2) From the late 2000s to 2014, SM Entertainment and YG Entertainment secured strong footholds in Japan, one of the world’s largest music markets. SM held 124 concerts in 2014, drawing 1.85mn attendees. In the same year, YG held 61 concerts (1.36mn).

CJ CGV opened its first Chinese multiplex in Shanghai in 2006 (via a joint venture). Since 2012, the company has been steadily expanding its presence in China following the establishment of a consolidated subsidiary in Hong Kong. As of February 2015, CJ CGV operated 43 sites in China and 23 in Vietnam.

3) In 2015, both YG and SM will likely enjoy solid growth in the Japanese concert market. Other markets are also projected to show robust growth, with Chinese and Southeast Asian audiences growing by 40% and 80%, respectively. As such, non-Japanese contributions to concert revenue is forecast to expand for both YG and SM.

YG Entertainment’s new partnership with its second-largest shareholder, LVMH, is expected to take shape in 2H. Moreover, expectations for the firm’s non-music businesses seem to be growing, as evidenced by the soaring stock price of consolidated subsidiary YG Plus.

SM is preparing to forge a partnership with a renowned Chinese company to establish SM China, which will provide support to Korean artists operating in China as well as Chinese artists debuting in the country.

Figure 111.1. Core trends of domestic entertainment industry

Source: KDB Daewoo Securities Research

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April 29, 2015 Entertainment

2. Music industry

We believe the Asian entertainment market will continue to grow over the next several decades. A country’s music industry tends to take off only after economic development reaches a certain level. The Asian music industry is anticipated to expand going forward in light of a steady rise in the region’s contribution to the global economy.

In most Asian countries (Japan being an obvious exception), the CD and digital music markets are only in their nascent stages, as income levels have not yet reached sufficient levels to facilitate regular music purchases. In spite of this, concerts in Asia have proven to be a major source of income for large domestic entertainment firms, as fans have thus far shown a willingness to spend heavily on concert tickets, given the relative infrequency of tours.

The Japanese concert market is roughly 3.3 times larger than Korea’s. The combined value of the Asian market excluding Korea and Japan is only 1.63 times larger than Korea’s level.

Over the next five years, the Japanese concert market is forecast to expand at a CAGR of 5.4%; meanwhile, the CAGRs for the Chinese and Taiwanese markets are estimated at 7.4% and 9%, respectively, over the same period. The concert markets in Thailand, Indonesia, and Vietnam are also projected to display robust growth, recording CAGRs of 6.2%, 8.0%, and 4.2%, respectively.

In Japan, YG and SM receive royalties from local partners for each ticket sold. In China, Thailand, and Taiwan, they receive fixed appearance fees. Due to yen depreciation, the gap between concert income in Japan and in other Asian countries (per concertgoer) has been narrowing. However, the Japanese market is still attractive for its advanced performance infrastructure and profitable merchandise market.

Figure 222.2. Live performanceperformances:s:s:s: FFFiveFiveiveive----yearyear CAGR forecasts

(%) 10 Avg. CAGR of key high-potential markets:6.5% Avg. CAGRof developed markets: 2.7%

0 Taiwan Indonesia China Thailand Vietnam Malaysia Japan US Singapore Korea Germany France

Source: PwC, KDB Daewoo Securities Research

Figure 333.3. Market size estimates bybyby country

(US$bn) 1.8 2015F 2018F

1.5

1.2

0.9

0.6

0.3

0.0 Korea Japan Other Asia

Source: PwC, KDB Daewoo Securities Research

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April 29, 2015 Entertainment

3. Movie industry

Although Japan is one of the world’s largest markets for music sales and concerts, the country’s movie market is just 1.5 times larger than Korea’s. In 2014, the number of movie theater visits per capita was 2.5 in Japan, compared to 4.4 in Korea.

For now, the most intriguing market for movies is China. Indeed, the Chinese movie market is quickly growing on the back of government support, the construction of mega-shopping malls, and the establishment of cutting-edge movie theaters. Last year, the number of theater visits per capita in China was 1.8, up from 0.7 in 2011. Movie theaters run by property developers and local multiplexes (including those run by state-owned film producers) are dominant in the country. Meanwhile, in Thailand and Singapore, the number of theater visits per capita is high compared to in most other Asian countries. However, it should be noted that entry into these markets is a difficult task, as they are dominated by major global players and local conglomerates.

CJ CGV, Korea’s leading multiplex chain, is quickly expanding its footholds in China and Vietnam. And the company’s aggressive efforts will likely continue through 2017. The company is also working to expand into other emerging markets such as Myanmar, Indonesia, and Cambodia.

We project that, when combined, the markets of China, Taiwan, Malaysia, Singapore, Philippines, Indonesia, and Vietnam will be 5.3 times larger than Korea’s in 2018. We estimate that the Chinese, Vietnamese, and Indonesian movie markets will displays CAGRs of 13.5%, 5.3%, and 5.2%, respectively, over the next five years.

Figure 444.4. Movie marketmarket:::: FFFiveFiveiveive----yearyear CAGR estimates

(%) 15 13.5

6 5.3 5.2

3.4 3 2.4

0 China Vietnam Indonesia Philippines Singapore Thailand Korea US Taiwan Malaysia Japan

Notes: Figures include box office and in-theater advertising; DVD/online viewing sales are excluded Source: PwC, KDB Daewoo Securities Research

Figure 555.5. Market size estimates by country

(US$) 7 2015F 2018F

6 2018F China + other Asia = 5.3x Korean market 5

0 Korea Japan China Other Asia

Notes: Figures include box office and in-theater advertising; DVD/online viewing sales are excluded Source: PwC, KDB Daewoo Securities Research

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April 29, 2015 Entertainment

Valuation overview

Live Nation Entertainment, the world’s largest live entertainment company, and Wanda Cinemas, China’s leading multiplex chain, are currently the hottest global entertainment stocks. Shares of Live Nation Entertainment and Wanda Cinemas are trading at 2015F P/Es of 365x and 74x, respectively, based on Bloomberg consensus estimates.

Live Nation Entertainment is currently benefiting from rising global demand for concerts. In addition, the company owns highly valuable content produced by top-notch artists including Lady Gaga and Madonna. Meanwhile, Wanda Cinemas is enjoying a valuation premium in anticipation of the robust growth of the Chinese market.

Like these global leading entertainment firms, CJ CGV, YG Entertainment, and SM Entertainment are also advancing into growth markets and have robust content holdings. As such, we expect Korea’s leading entertainment firms to undergo re-ratings. CJ CGV will likely receive a premium for penetrating emerging markets, including China and Vietnam, which are expected to grow rapidly. With regard to YG Entertainment and SM Entertainment, we expect greater activity from new artists, such as Winner, iKON, Red Velvet, and SR15B. In addition, YG’s cosmetics business and SMTown Coex Artium operations appear to be taking root. In 2005-16, we expect Korean entertainment firms to take a leap forward in the global market.

Figure 666.6. Share price trends of major players in the Chinese movie market

(1/1/14=100) 350 CJ CGV Wanda Cinemas Huayi Brothers Zhejiang Huace Film & TV Shanghai New Culture Media 250

150

50 1/14 3/14 5/14 7/14 9/14 11/14 1/15 3/15

Source: Thomson Reuters, KDB Daewoo Securities Research

Figure 777.7. Share price trends of concert market players

(1/1/13=100) 300 SM Entertainment YG Entertainment Live Nation Entertainment

200

100

0 1/13 3/13 5/13 7/13 9/13 11/13 1/14 3/14 5/14 7/14 9/14 11/14 1/15 3/15

Source: Thomson Reuters, KDB Daewoo Securities Research

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April 29, 2015 Entertainment

Figure 888.8. New and upcoming artists

Source: Company data, KDB Daewoo Securities Research

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April 29, 2015 Entertainment

TablTablTableTabl e 111.1. Earnings andandand forecasts forforfor global entertainment companies (US$mn, %%)))) Market Revenue Operating profit OP margin Net profit NNNetNetetet margin EPSEPSEPS cap.cap.cap. 141414 15F15F15F 16F16F16F 141414 15F15F15F 16F16F16F 141414 15F15F15F 16F16F16F 141414 15F15F15F 16F16F16F 141414 15F15F15F 16F16F16F 141414 15F15F15F 16F16F16F SM Entertainment 597 273 304 335 33 47 55 12.0 15.5 16.3 6 37 42 2.1 12.2 12.5 0.4 1.8 2.0 YG Entertainment 671 149 182 212 21 30 36 14.0 16.5 16.9 18 26 30 12.3 14.3 14.4 1.3 1.6 1.9 CJ CGV 1,569 987 1,133 1,327 49 71 96 5.0 6.2 7.2 16 47 64 1.6 4.1 4.8 0.7 2.2 3.1 CJ E&M 2,105 1,171 1,249 1,358 -12 34 58 -1.0 2.8 4.3 213 40 61 18.2 3.2 4.5 -1.5 1.1 1.5 Live music/management/content production and distribution (US/Japan/China) Live Nation 5,157 6,867 7,177 7,673 7 138 184 0.1 1.9 2.4 -91 27 74 -1.3 0.4 1.0 0.0 0.1 0.3 Madison Square Garden 6,237 1,556 1,547 1,615 184 357 292 11.8 23.1 18.1 115 194 166 7.4 12.5 10.3 1.0 2.4 2.5 Walt Disney 698 1,350 1,396 1,453 58 78 84 4.3 5.6 5.8 44 41 42 3.2 3.0 2.9 1.0 1.0 1.0 Time Warner 248 297 311 - 30 32 - 10.2 10.3 19 20 - 6.4 6.4 2.2 2.3 - Discovery 6,651 386 488 609 138 198 257 35.9 40.6 42.2 146 165 202 37.8 33.7 33.1 0.1 0.1 0.2 Netflix 3,645 309 511 631 69 136 178 22.4 26.6 28.2 63 111 144 20.5 21.8 22.8 0.1 0.2 0.2 Pandora 2,195 100 285 356 24 68 84 24.2 23.7 23.7 20 51 64 19.6 18.0 17.9 0.1 0.2 0.3 Avex Group 187,224 48,813 52,398 55,962 11,369 13,513 14,861 23.3 25.8 26.6 7,501 8,288 9,230 15.4 15.8 16.5 4.5 4.9 5.6 Amuse 69,893 27,359 28,425 30,358 5,975 7,181 8,314 21.8 25.3 27.4 3,827 3,852 4,583 14.0 13.6 15.1 4.6 4.6 5.8 Huayi Brothers 20,623 6,265 6,570 6,966 2,061 2,060 2,244 32.9 31.4 32.2 1,139 1,117 1,258 18.2 17.0 18.1 1.8 1.9 2.2 Zhejiang Huace Film & 34,318 5,505 6,773 8,401 403 292 472 7.3 4.3 5.6 267 105 245 4.8 1.6 2.9 3.8 2.7 5.1 TV Shanghai New Culture 3,873 921 1,168 1,444 -30 41 132 -3.3 3.5 9.1 -30 -62 4 -3.3 -5.3 0.3 -0.2 0.2 0.5 Media Multiplex (China/US/Canada/Europe) Wanda 13,573 825 1,177 1,576 111 218 306 13.5 18.5 19.4 130 184 257 15.8 15.7 16.3 0.3 0.3 0.4 Cinemark 4,956 2,627 2,887 3,046 363 476 524 13.8 16.5 17.2 193 247 278 7.3 8.6 9.1 1.8 2.2 2.4 Regal Entertainment 3,494 2,990 3,157 3,216 306 374 397 10.2 11.8 12.3 106 170 182 3.5 5.4 5.7 0.9 1.2 1.2 Cineplex 2,545 1,118 1,084 1,173 105 426 459 9.4 39.3 39.1 69 - - 6.2 1.1 1.5 1.8 Kinepolis 1,031 349 306 321 67 71 79 19.3 23.1 24.5 47 44 50 13.4 14.4 15.6 1.8 1.6 1.8 Average 13.7 17.7 18.9 10.6 10.8 11.8 Note: Based on Bloomberg consensus as of April 28 th Source: Bloomberg, KDB Daewoo Securities Research

TablTablTableTabl e 222.2. Valuation comparison of global entertainment companies (((US$mn,(US$mn, x, %x, %)% ))) Market P/EP/EP/E P/BP/BP/B P/SP/SP/S EV/EBITDA ROEROEROE ROAROAROA cap.cap.cap. 141414 15F15F15F 16F16F16F 141414 15F15F15F 16F16F16F 141414 15F15F15F 16F16F16F 141414 15F15F15F 16F16F16F 141414 15F15F15F 16F16F16F 141414 15F15F15F 16F16F16F SM Entertainment 597 82.3 16.2 14.2 2.6 2.2 1.9 2.2 2.0 1.8 13.9 9.7 8.5 3.3 13.7 13.6 1.5 9.4 9.6 YG Entertainment 671 36.0 27.8 24.1 4.1 4.0 3.5 4.4 3.7 3.2 22.3 17.3 14.7 13.4 14.2 14.6 8.2 9.8 10.1 CJ CGV 1,569 100.9 33.3 24.0 4.4 4.0 3.5 1.6 1.4 1.2 11.2 12.1 9.9 4.4 11.8 14.3 1.4 3.8 4.8 CJ E&M 2,105 - 49.6 37.1 1.5 1.7 1.6 1.6 1.7 1.6 4.4 6.3 5.7 15.9 2.9 4.2 9.8 1.9 2.6 Live music/management/content production and distribution (US/Japan/China) Live Nation 5,157 - 365.4 80.7 4.0 4.1 3.8 0.7 0.7 0.7 16.8 10.6 9.5 -6.3 -1.4 3.1 -1.6 1.8 2.9 Madison Square Garden 6,237 80.8 33.7 32.1 3.5 3.9 5.2 3.9 4.0 3.9 10.7 14.9 13.7 11.9 8.5 12.8 6.6 5.6 7.2 Walt Disney 698 15.1 15.5 15.6 - - - 0.5 0.5 0.5 - - - 10.9 - - - - - Time Warner 248 11.9 11.4 - - - - 0.8 0.8 ------Discovery 6,651 53.1 41.3 33.6 6.9 6.5 5.6 14.7 13.6 10.9 - 34.5 25.1 15.2 16.6 17.0 8.2 9.7 10.7 Netflix 3,645 55.9 35.0 27.4 6.7 3.9 3.5 11.4 7.2 5.8 36.9 26.3 20.4 15.3 14.8 13.8 10.9 11.2 10.3 Pandora 2,195 70.6 42.0 33.4 10.3 5.7 5.3 13.9 7.7 6.2 32.4 - - 12.4 19.4 18.0 9.4 10.7 17.4 Avex Group 187,224 24.2 22.4 19.7 4.2 4.0 3.6 3.8 3.6 3.3 12.4 12.9 11.9 17.7 17.9 21.6 9.2 10.5 12.5 Amuse 69,893 18.4 18.3 14.7 2.9 2.6 2.4 2.6 2.5 2.3 13.8 11.3 9.9 14.1 15.8 19.5 5.8 6.2 7.4 Huayi Brothers 20,623 18.3 17.3 14.6 2.5 3.7 3.5 2.8 3.1 3.0 9.4 11.6 10.8 17.9 19.8 21.8 7.4 7.8 8.6 Zhejiang Huace Film & TV 34,318 147.4 207.9 112.0 18.0 16.9 14.9 5.9 5.1 4.1 53.8 69.2 52.8 14.0 5.7 12.9 3.1 2.1 3.0 Shanghai New Culture 3,873 - 91.6 40.1 6.9 6.3 5.6 4.0 3.3 2.7 - 43.2 23.8 -9.3 10.2 11.4 -7.0 5.5 3.8 Media Multiplex (China/US/Canada/Europe) Wanda 13,573 93.9 73.6 54.9 34.2 15.3 12.7 14.8 11.5 8.6 - - - 31.8 22.7 23.8 19.9 17.0 18.9 Cinemark 4,956 23.8 19.6 17.8 4.4 3.7 3.3 1.9 1.7 1.6 10.3 9.3 8.6 17.5 19.9 18.9 4.6 7.8 8.0 Regal Entertainment 3,494 23.6 18.9 18.0 - - - 1.2 1.1 1.1 10.8 9.1 8.8 - -22.1 -26 4.0 6.2 6.3 Cineplex 2,545 39.2 27.5 22.9 4.2 4.1 3.9 2.5 2.3 2.1 16.2 13.4 11.7 10.3 19.3 22.4 4.8 10.3 12.2 Kinepolis 1,031 26.0 23.8 20.7 9.1 7.6 6.5 3.5 3.3 3.2 14.4 13.0 12.2 33.6 31.7 31.2 10.7 - - Average 51.2 56.8 32.9 7.2 5.6 5.0 4.7 3.8 3.4 18.1 19.1 15.2 12.8 12.7 14.2 6.2 7.6 8.7 Note: Based on Bloomberg consensus as of April 28 th Source: Bloomberg, KDB Daewoo Securities Research

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April 29, 2015 Entertainment

CJ CGV (079160 KS) Going global

Entertainment 43 sites in China, vs. 185 for largest local rival

As of 2014, CJ CGV’s Chinese subsidiary held a 2% market share in China. And, beginning (Maintain) Buy this year, Chinese subsidiaries will likely make positive contributions to consolidated results for the first time. In addition, the number of Chinese sites reported on a Target Price (12M, W) 100,000 consolidated basis will increase to 53 this year, up from 15 in 2013 and 26 in 2014.

Recently, Wanda Cinemas, China’s largest multiplex chain, released its 1Q earnings, Share Price (4/28/15, W) 79,400 reporting revenue and net profit growth of 38.2% and 59.0%, respectively. As of end-1Q, Wanda Cinemas boasted 185 sites, 4.3 times more than CJ CGV’s 43. The firm’s market Expected Return 26% cap is now over W13tr.

OP (15F, Wbn) 87 Largest multiplex brand in Vietnam Consensus OP (15F, Wbn) 82 1) In Vietnam, CJ CGV is working to establish a robust presence early on through timely EPS Growth (15F, %) 106.9 and aggressive expansion. It has thus far endeavored to sign long-term (10-15 years) Market EPS Growth (15F, %) 38.4 leases and should continue to do so going forward. 2) CJ CGV’s dominant presence in P/E (15F, x) 24.4 content distribution has also helped strengthen its market power in the country. It is the Market P/E (15F, x) 11.1 exclusive distributor for four of the six major Hollywood studios. 3) Strong brand power KOSPI 2,147.67 is another positive, with shopping arcades/malls vying to bring in CJ CGV multiplexes. Market Cap (Wbn) 1,680 Raise TP from W80,000 to W100,000 Shares Outstanding (mn) 21 Free Float (%) 60.9 2015 will likely mark a major turning point for CJ CGV. Its Chinese operations could Foreign Ownership (%) 16.0 swing to profit for the first time, which would likely create prolonged earnings Beta (12M) 0.18 momentum. The Vietnamese business, although small in scale, is poised to lead OP 52-Week Low 43,200 margin growth once it enters a long-term growth cycle. 52-Week High 81,000 It should be noted that, historically, Chinese movie attendance has occasionally (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M exceeded Korea’s in April, as the month marks a slow season for the domestic market. Absolute 26.0 49.5 66.5 We believe that such outperformance could become more commonplace going forward; Relative 18.5 34.1 52.6 as such, in our view, it is high time for overseas momentum to begin to drive CJ CGV’s

170 CJ CGV KOSPI stock price. Indeed, the strong growth of the Chinese, Vietnamese, and other Southeast 150 Asian markets, combined with the steady expansion of domestic operations, should 130 allow the firm to enjoy a long-term growth story.

110 We maintain our Buy call and raise our target price from W80,000 to W100,000. In 90 deriving our target price, we summed the enterprise values of the domestic (W1.2tr), 70 Chinese (W731.4bn; market cap of Wanda Cinemas multiplied by Chinese subsidiaries’ 4.14 8.14 12.14 4.15 market share, discounted by 60%), and Vietnamese businesses (W178.5bn, 20x 2015F

net profit).

FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 665 773 865 909 945 990 OP (Wbn) 72 68 71 87 99 112 OP margin (%) 10.8 8.8 8.2 9.6 10.5 11.3 NP (Wbn) 73 43 33 69 78 87 EPS (W) 3,528 2,062 1,572 3,253 3,678 4,128 ROE (%) 20.4 10.3 7.2 13.7 13.7 13.6 P/E (x) 9.1 21.1 34.3 24.4 21.6 19.2 P/B (x) 1.7 2.0 2.4 3.1 2.8 2.5 Notes: All figures are based on non-consolidated K-IFRS Source: Company data, KDB Daewoo Securities Research estimates

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TablTablTableTabl e 333.3. Quarterly and annual earnings (Wbn, %) 1Q141Q141Q14 2Q142Q142Q14 3Q143Q143Q14 4Q144Q144Q14 1Q15F 2Q15F 3Q15F 4Q15F 201320132013 201420142014 2015F2015F2015F Revenue 210 180 266 208 202 196 289 222 773 865 909 Tickets 142 120 184 136 137 129 204 151 511 582 621 Concessions 36 29 47 35 35 32 50 37 137 147 154 Ads 17 20 23 22 22 22 22 22 78 81 86 Other 15.8 11.5 13.0 14.9 9.0 13.2 13.0 12.3 47.0 55.3 47.5 Revenue breakdown Tickets 67.3 66.5 69.1 65.6 67.8 65.8 70.5 68.0 66.1 67.3 68.3 Concessions 17.2 16.3 17.5 16.8 17.1 16.5 17.5 16.7 17.7 17.0 17.0 Ads 8.1 10.8 8.6 10.4 10.6 11.0 7.5 9.7 10.1 9.3 9.5 Other 7.5 6.4 4.9 7.2 4.5 6.7 4.5 5.5 6.1 6.4 5.2 Operating profit 18 7 38 8 13 15 46 13 69 71 87 OP margin 8.3 4.0 14.3 4.1 6.5 7.8 15.9 5.7 8.9 8.3 9.6 Net profit 12 4 27 -9 11 13 36 9 44 33 69 Net margin 5.6 2.1 10.1 -4.3 5.4 6.8 12.4 4.0 5.6 3.8 7.6 YoY growth Revenue 12.1 6.1 13.6 14.6 -3.8 8.9 8.5 6.7 16.3 11.8 5.2 Tickets 12.9 8.7 16.7 15.7 -3.1 7.8 10.7 10.6 15.9 13.8 6.7 Concessions 5.7 0.7 7.4 15.8 -4.1 10.3 8.4 6.0 19.7 7.4 5.1 Ads -1.0 1.2 13.9 -1.3 27.2 10.2 -4.7 0.3 12.2 3.3 7.0 Other 42.9 3.5 -2.4 30.3 -42.6 14.7 -0.3 -18.0 18.0 17.6 -14.0 Operating profit -27.8 -35.2 35.7 61.7 -24.5 111.0 20.5 49.7 -5.1 3.9 22.1 Net profit -29.4 196.3 20.6 TTR -6.8 258.9 33.4 TTB -40.2 -23.6 106.7 Note: Based on non-consolidated K-IFRS Source: Company data, KDB Daewoo Securities Research estimates

TablTablTableTabl e 444.4. Key earnings factors (mn persons, %, W) 1Q141Q141Q14 2Q142Q142Q14 3Q143Q143Q14 4Q144Q144Q14 1Q15F 2Q15F 3Q15F 4Q15F 201320132013 201420142014 2015F2015F2015F Nationwide attendance 55 42 69 49 50 45 72 51 213 215 219 CJ CGV attendance 26 20 34 24 25 23 36 26 99 104 109 Attendance at directly 19 15 25 18 18 17 26 19 72 78 80 operated sites Market share 48.0 48.4 48.5 49.4 49.5 49.7 49.8 49.9 46.2 48.6 49.7 Seat occupancy rate 30.2 23.1 36.8 26.4 26.8 24.4 38.7 27.7 29.4 29.1 29.4 (Directly operated) 33.4 25.6 39.6 29.2 28.7 26.8 41.8 30.7 33.1 32.0 32.0 (Franchise) 24.0 17.8 30.7 20.4 20.7 18.8 29.7 21.2 22.4 23.2 22.6 No. of directly operated 72 75 79 78 78 79 80 81 71 78 81 sites No. of franchise sites 45 43 44 47 47 48 48 49 45 47 49 No. of screens at directly 576 603 622 611 611 619 627 635 568 611 635 operated sites No. of screens at franchise 327 311 320 338 338 345 345 352 329 338 352 sites Avg. ticket price 7,468 7,938 7,542 7,569 7,634 7,693 7,770 7,836 7,199 7,569 7,733 Sales per patron 1,913 1,942 1,884 1,924 1,925 1,926 1,926 1,927 1,932 1,924 1,926 Source: Company data, KDB Daewoo Securities Research

TablTablTableTabl e 555.5. Earnings forecast revisions (Wbn, W, %, %p) Previous Revised % chg. 2015F2015F2015F 2016F2016F2016F 2015F2015F2015F 2016F2016F2016F 2015F2015F2015F 2016F2016F2016F Revenue 903 940 909 945 0.7 0.5 Operating profit 85 98 87 99 2.4 1.0 Pretax profit 84 95 91 105 8.3 10.5 Net profit 67 77 69 78 3.0 1.3 EPS 3,186 3,618 3,253 3,678 2.1 1.7 OP margin 9.4 10.4 9.6 10.5 0.2 0.1 Net margin 7.4 8.2 7.6 8.3 0.2 0.1 Notes: Based on non-consolidated K-IFRS Source: Company data, KDB Daewoo Securities Research estimates

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April 29, 2015 Entertainment

TablTablTableTabl e 666.6. Annual earnings and metrics of Chinese sites (((Wbn,(Wbn, %%)))) 201220122012 201320132013 201420142014 2015F2015F2015F 2016F2016F2016F 2017F2017F2017F Revenue 2 23 55 146 234 347 Operating profit -2 -5 -8 2 19 44 OP margin -66.3 -22.5 -15.5 1.2 8.1 12.8 Net profit -2 -6 -7 1 13 29 Net margin -66.7 -26.4 -12.2 0.5 5.5 8.4 YoY Revenue 822.9 138.7 166.7 60.2 48.3 Operating profit RR RR TTB 981.3 134.3 Net profit RR RR TTB 1,662.0 126.5 Key factors No. of sites 11 27 38 65 95 125 Joint venture 9 12 12 12 12 12 Consolidated subsidiaries 2 15 26 53 83 113 Cinema market 22 36 52 73 107 132 Market share 0.8 1.2 2.0 3.2 4.9 6.5 Note: Revenue and profit data only include sites operated by consolidated subsidiaries Source: Company data, KDB Daewoo Securities Research

Table 777.7. Annual earnings and metrics of Vietnamese sites (Wbn, %) 201220122012 201320132013 201420142014 2015F2015F2015F 2016F2016F2016F 2017F2017F2017F Revenue 45 57 71 105 136 185 Operating profit 7 7 5 11 15 23 OP margin 15.3 12.3 7.1 10.5 11.0 12.2 Net profit 6 6 4 9 12 19 Net margin 13.4 10.8 5.1 8.5 9.0 10.2 YoY Revenue 26.9 25.0 47.1 29.3 36.1 Operating profit 1.6 -27.7 117.2 35.5 50.9 Net profit 1.8 -40.4 143.0 36.9 54.2 Key factors No. of nationwide sites 25 34 49 61 72 83 No of CGV sites 10 11 20 29 37 45 Cinema market 49 65 94 114 141 170 Market share 43.0 51.9 54.3 61.7 Note: Assumed US$/W of 1,080 Source: Company data, KDB Daewoo Securities Research

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April 29, 2015 Entertainment

Figure 999.9. MMMovieMovie theater attendance and no. of screens by country

150 No. of screens per 1mn (L) 5 Theater visits per capita (R)

120 4

90 3

High upside potential 60 inChina and Vietnam 2

30 1

0 0 China Vietnam Malaysia Phillippines Singapore Thailand South Korea UK France US

Source: EntGroup, Company data, KDB Daewoo Securities Research

Figure 111111.11 . Chinese movie market estimates (((based(based on urban Figure 101010.10 . Chinese movie market estimates populationpopulation))))

('000) (Wtr) 60 No. of screens per 1mn (L) 3 50 No.of screens (L) 15 Theater visits per capita (R) 2.2 No. of sites (L) Box office CAGR:25% Box office (R) 50 2 40 12 1.9 40 30 9 1.5 2 30 1.1 20 6 1 20 0.7 10 3 1 10

0 0 0 0 2012 2014 2016F 2018F 2020F 2012 2014 2016F 2018F 2020F

Source: EntGroup, Company data, KDB Daewoo Securities Research Source: Ent Group, Company data, KDB Daewoo Securities Research

Figure 121212.12 . 201320132013-2013 ---1414 Chinese movie market growth Figure 131313.13 . Increase in CJ CGV locations in China (2013(2013----14)14)14)14)

Box office (L, Wtr) Box office (L) (Wbn) 2014attendance ATP (L, W'000) 2014 attendance: ATP (R, W) 120 15mn persons(+51% YoY) 16,000 8 Attendance (R, mn persons) 830mn persons (+35% YoY) 900 Attendance (R, '000 persons)

100

6 12,000 80 600 2014boxoffice: W102bn (+62% YoY) 2014boxoffice: 4 60 8,000 W5.2tr (+37% YoY)

300 40 2 4,000 20

0 0 0 0 2013 2014 2013 2014

Source: EntGroup, Company data, KDB Daewoo Securities Research Source: EntGroup, Company data, KDB Daewoo Securities Research

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April 29, 2015 Entertainment

Figure 141414.14 . CJ CGV sitessitessites in China

(sites) 40 Sites operated by consolidated subsidiaries Joint venture

Three years after establishment 20 of CGI Holdings, sites operated by consolidatedsubsidiaries of CJ CGV commenced operations

0 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 Source: Company data, KDB Daewoo Securities Research

Figure 151515.15 . Number of theater sites in Vietnam: CJ CGV vs. total Vietnamese market

(%) 100 No. of CJ CGV sites (L) 60 Total sites in Vietnam (L) 55 80 M/S of CJ CGV (R)

50 60 45 40 40

20 35

0 30 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Source: Company data, KDB Daewoo Securities Research

Figure 161616.16 . 201320132013-2013 ---1414 Vietnamese movie market growth Figure 171717.17 . Increase in CJ CGV locations in Vietnam (2013(2013----14)14)14)14)

(US$mn) (mnpersons) (US$mn) 100 Box office (L) 2014boxoffice: 30 60 Box office Attendance (R) US$87mn (+37% YoY) 50 80 2014 box office: US$55mn (+27.9% YoY) 20 40 60 2014 attendance: 30 21mn persons(+35% YoY) 40 10 20

20 10

0 0 0 2013 2014 2013 2014

Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research

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April 29, 2015 Entertainment

CJ CGV (079160 KS/Buy/TP: W100,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/14 12/15F 12/16F 12/17F (Wbn) 12/14 12/15F 12/16F 12/17F Revenue 865865865 909909909 945945945 990990990 Current Assets 189189189 199199199 306306306 415415415 Cost of Sales 424424424 457457457 470470470 493493493 Cash and Cash Equivalents 62 69 170 273 Gross Profit 441441441 452452452 475475475 497497497 AR & Other Receivables 97 99 103 108 SG&A Expenses 369369369 365365365 375375375 385385385 Inventories 3 4 4 4 Operating Profit (Adj) 717171 878787 999999 112112112 Other Current Assets 27 27 29 30 Operating Profit 717171 878787 999999 112112112 NonNonNon-Non ---CurrentCurrent Assets 961961961 934934934 910910910 899899899 NonNonNon-Non ---OperatingOperating Profit ---19 -191919 444 666 111111 Investments in Associates 382 402 418 438 Net Financial Income -15 -12 -7 -3 Property, Plant and Equipment 412 370 333 302 Net Gain from Inv in Associates 0 0 0 0 Intangible Assets 23 16 11 9 Pretax Profit 52 91 105 123 Total Assets 1,1501,1501,150 1,1331,1331,133 1,2171,2171,217 1,3131,3131,313 Income Tax 18 22 27 35 Current Liabilities 350350350 267267267 278278278 291291291 Profit from Continuing Operations 33 69 78 87 AP & Other Payables 147 154 160 168 Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 102 7 7 7 Net Profit 333333 696969 787878 878787 Other Current Liabilities 101 106 111 116 Controlling Interests 33 69 78 87 NonNonNon-Non ---CurrentCurrent Liabilities 327327327 331331331 334334334 338338338 Non-Controlling Interests 0 0 0 0 Long-Term Financial Liabilities 255 255 255 255 Total Comprehensive Profit 313131 696969 787878 878787 Other Non-Current Liabilities 72 76 79 83 Controlling Interests 31 69 78 87 Total Liabilities 677677677 598598598 612612612 629629629 Non-Controlling Interests 0 0 0 0 Controlling Interests 473473473 534534534 605605605 685685685 EBITDA 133 137 140 146 Capital Stock 11 11 11 11 FCF (Free Cash Flow) 76 132 127 132 Capital Surplus 89 89 89 89 EBITDA Margin (%) 15.4 15.1 14.8 14.7 Retained Earnings 378 439 510 589 Operating Profit Margin (%) 8.2 9.6 10.5 11.3 NonNonNon-Non ---ControllingControlling Interests 000 000 000 000 Net Profit Margin (%) 3.8 7.6 8.3 8.8 Stockholders' Equity 473473473 534534534 605605605 685685685

Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/1412/1412/14 12/15F 12/16F 12/17F 12/1412/1412/14 12/15F 12/16F 12/17F Cash Flows from Op Activities 146 132 127 132 P/E (x) 34.3 24.4 21.6 19.2 Net Profit 33 69 78 87 P/CF (x) 7.4 11.0 11.0 10.6 Non-Cash Income and Expense 121 83 75 71 P/B (x) 2.4 3.1 2.8 2.5 Depreciation 49 42 36 32 EV/EBITDA (x) 10.7 13.6 12.6 11.4 Amortization 13 8 4 3 EPS (W) 1,572 3,253 3,678 4,128 Others 59 33 35 36 CFPS (W) 7,300 7,197 7,201 7,479 Chg in Working Capital 10 13 8 11 BPS (W) 22,344 25,247 28,575 32,353 Chg in AR & Other Receivables -13 -4 -3 -4 DPS (W) 350 350 350 350 Chg in Inventories -1 0 0 0 Payout ratio (%) 22.3 10.8 9.5 8.5 Chg in AP & Other Payables 15 4 3 4 Dividend Yield (%) 0.6 0.4 0.4 0.4 Income Tax Paid ---9 -999 ---22-222222 ---27-272727 ---35-353535 Revenue Growth (%) 11.9 5.1 4.0 4.8 Cash Flows from Inv Activities -152 -3 -2 -3 EBITDA Growth (%) 10.8 3.0 2.2 4.3 Chg in PP&E -69 0 0 0 Operating Profit Growth (%) 4.4 22.5 13.8 13.1 Chg in Intangible Assets 0 0 0 0 EPS Growth (%) -23.8 106.9 13.1 12.2 Chg in Financial Assets 28 -3 -2 -3 Accounts Receivable Turnover (x) 12.5 11.8 11.7 11.7 Others ---111 -111111111 000 000 000 Inventory Turnover (x) Cash Flows from Fin Activities 22 -103 -7 -7 Accounts Payable Turnover (x) 6.5 6.2 6.1 6.1 Chg in Financial Liabilities 33 -96 0 0 ROA (%) 3.0 6.0 6.6 6.9 Chg in Equity 0 0 0 0 ROE (%) 7.2 13.7 13.7 13.6 Dividends Paid -7 -7 -7 -7 ROIC (%) 11.6 18.6 24.4 31.1 Others ---4 -444 000 000 000 Liability to Equity Ratio (%) 143.3 112.0 101.2 91.8 Increase (Decrease) in Cash 16 6 102 102 Current Ratio (%) 54.0 74.4 110.1 142.5 Beginning Balance 46 62 69 170 Net Debt to Equity Ratio (%) Ending Balance 626262 696969 170170170 273273273 Interest Coverage Ratio (x) Source: Company data, KDB Daewoo Securities Research estimates

KDB Daewoo Securities Research 14

April 29, 2015 Entertainment

YG Entertainment (122870 KQ) New businesses to drive growth

Entertainment New businesses are taking off

YG Plus, which became a consolidated subsidiary of YG Entertainment in December 2014 (Maintain) Buy (stake of 39.5%), is anticipated to record average quarterly operating losses of W1bn in 1H15. However, its profitability is expected to improve in 2H in line with the progress of Target Price (12M, W) 60,000 new businesses.

In our view, the most promising business operated by YG Plus is Codecosme (80% stake), Share Price (4/28/15, W) 47,750 which launched the Moonshot cosmetics brand and introduced part of its lineup in Singapore (in April) through Sephora, a LVMH-owned cosmetics retailer. Expected Return 26% Codecosme plans to supply Moonshot products manufactured in Korea to retail chains in OP (15F, Wbn) 32 China. To gain the upper hand in negotiations over supply contracts, the company is Consensus OP (15F, Wbn) 32 expected to ramp up marketing efforts.

EPS Growth (15F, %) 58.0 To benefit from strong popularity of artists and cosmetics business growth Market EPS Growth (15F, %) 38.4 P/E (15F, x) 23.4 Royalties from Big Bang’s 4Q Japanese dome tour, which attracted 680,000 visitors, will Market P/E (15F, x) 11.1 be mostly reflected in 1Q15 results. Meanwhile, a surge in advertising deals for KOSDAQ 696.79 actor/model Cha Seung-won (owing to his role in Three Meals a Day ) is believed to have boosted 1Q earnings. Market Cap (Wbn) 719 Shares Outstanding (mn) 16 We project YG Entertainment’s 1Q consolidated operating profit to come in at W8bn, Free Float (%) 63.8 similar to last year’s level. In addition, gains of W6bn on the valuation of Coson shares Foreign Ownership (%) 6.7 (2.92% stake) will be booked as non-operating income. Beta (12M) 1.23 52-Week Low 35,800 Big Bang embarked on a massive world tour last week. The music group is expected to 52-Week High 54,200 perform more than 70 concerts in 15 countries throughout 2015, attracting over 1.4mn attendees. Income from each non-Japanese concert will be recognized as royalty income (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M in the quarter in which it took place. Absolute 3.2 2.7 4.3 Relative -5.2 -17.1 -16.6 Raise TP to W60,000

140 YG Entertainment KOSDAQ Shares of YG Plus soared in April. We believe the launch of Moonshot cosmetics products 120 (manufactured by Coson) at Sephora triggered the surge. We expect additional momentum in 2H boosted by an increase in attendance at overseas concerts and pickups 100 in new businesses. We raise our target price to W60,000 from W56,000, as we revised 80 up our EPS estimate for 2015 by 8% after factoring in valuation gains on Coson shares.

60 We reiterate Buy on YG Entertainment. 4.14 8.14 12.14 4.15

FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 107 116 156 192 275 369 OP (Wbn) 21 22 22 32 47 74 OP margin (%) 19.6 19.0 14.1 16.7 17.1 20.1 NP (Wbn) 19 15 19 33 39 61 EPS (W) 1,381 1,116 1,290 2,039 2,354 3,732 ROE (%) 21.6 14.8 13.4 17.4 17.2 22.7 P/E (x) 33.3 34.9 34.3 23.4 20.3 12.8 P/B (x) 6.5 4.9 4.1 3.8 3.2 2.6 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

KDB Daewoo Securities Research 15

April 29, 2015 Entertainment

Table 888.8. Annual earnings and forecasts (Wbn, %) 200920092009 201020102010 201120112011 201220122012 201320132013 201420142014 2015F2015F2015F Revenue 36 45 78 107 116 156 192 CD/DVD 6.5 8.1 12.0 17.8 11.7 7.6 12.8 Digital 6.8 5.8 8.4 10.9 11.3 20.2 26.8 Other 3.1 3.4 6.8 6.3 6.8 8.3 9.6 Concerts 4.9 6.4 17.4 24.2 24.4 26.5 35.4 Product endorsements 6.9 10.5 11.9 11.9 12.6 19.8 20.6 Royalties 3.4 4.6 7.4 22.6 33.6 48.6 60.9 Broadcast appearances 2.0 3.0 7.4 6.3 7.2 11.4 11.5 Commissions 1.7 3.0 6.8 6.5 8.7 13.9 14.1 Revenue contribution CD/DVD 18.2 18.1 15.3 16.7 10.1 4.9 6.7 Digital 19.0 13.0 10.8 10.2 9.7 12.9 14.0 Other 8.7 7.5 8.7 5.9 5.8 5.3 5.0 Concerts 13.8 14.3 22.3 22.8 21.0 16.9 18.5 Product endorsements 19.4 23.4 15.3 11.2 10.9 12.7 10.8 Royalties 9.5 10.3 9.4 21.2 28.9 31.1 31.8 Broadcast appearances 5.6 6.6 9.4 5.9 6.2 7.3 6.0 Commissions 4.7 6.7 8.8 6.1 7.5 8.9 7.4 Operating profit 7 14 17 21 22 22 32 OP margin 20.7 30.4 22.2 19.6 19.0 14.1 16.7 Net profit 4 10 13 19 15 19 33 Net margin 11.7 21.4 16.5 17.6 12.9 11.7 16.9 YoYYoYYoY Revenue 92.7 25.4 74.5 36.4 9.1 34.4 22.6 CD/DVD 10.9 24.8 47.6 48.6 -33.9 -35.1 67.4 Digital 106.1 -14.3 45.0 29.8 3.3 79.4 32.3 Other 154.4 8.3 101.7 -7.9 8.4 22.9 14.6 Concert 237.0 29.9 173.1 39.2 0.5 8.6 33.8 Product endorsements 117.2 51.3 13.7 0.0 5.9 56.6 4.1 Royalties 943.3 36.7 59.5 206.5 48.6 44.5 25.3 Broadcast appearances - 47.1 149.6 -14.9 14.3 58.6 1.1 Commissions -40.5 79.4 127.2 -4.6 33.0 60.1 1.4 Notes: Figures are based on K-GAAP through 2010; from 2011, figures are based on consolidated K-IFRS Source: Company data, KDB Daewoo Securities Research estimates

Figure 181818.18 . Annual cconcertoncert attendance by artist Figure 191919.19 . Quarterly concert attendance by artist

(mn persons) ('000 persons) 2.0 Akdong Musician Epik High 1,000 Akdong musician Epik High Winner Psy Winner Psy Daesung Taeyang Daesung Taeyang G-Dragon 2NE1 800 1.5 G-Dragon 2NE1 Big Bang YG Family Big Bang YG Family 600 1.0 400

0.5 200

0.0 0 2012 2013 2014 2015 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15

Note: Only completed concerts are included in 2015 data Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research

KDB Daewoo Securities Research 16

April 29, 2015 Entertainment

Figure 202020.20 . Shareholding structure of YG PlusPlusPlus

YG Entertainment

39.54%

YG Plus

100% 80%

G-Ad Codecosme

- Golf marketing/management - Cosmeticscompany (Hong Kong) - Acquired on Mar, 2, 2015. - Acquired onNov. 28, 2014

Source: Company data, KDB Daewoo Securities Research

Table 999.9. Details ooffff YG PlusPlusPlus subsidiaries CodeCodeCodecCode cccosmeosmeosmeosme GGG-G---AAAAdddd

CEO Yoo Hae-min Kang Young-hwan Establishment 12/24/13 2/1/07 HQ Hong Kong Seoul, Korea Pro golfer management, Business areas Cosmetics golf academy operation Employees 29 8 Capital US$9,508,020 W300mn (face value: W5,000) Ownership YG Plus: 80%/Coson: 20% YG Plus (100%) Source: Company data, KDB Daewoo Securities Research

Figure 222222.22 . NONA9ON: FFashionashion brand established in Figure 212121.21 . Moonshot cosmetic brand partnership with Cheil Industries

Source: Moonshot, KDB Daewoo Securities Research Source: Instagram, KDB Daewoo Securities Research

KDB Daewoo Securities Research 17

April 29, 2015 Entertainment

YG Entertainment (122870 KQ/Buy/TP: W60,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/14 12/15F 12/16F 12/17F (Wbn) 12/14 12/15F 12/16F 12/17F Revenue 156156156 192192192 275275275 369369369 Current Assets 252252252 282282282 316316316 371371371 Cost of Sales 103103103 125125125 188188188 253253253 Cash and Cash Equivalents 142 150 127 117 Gross Profit 535353 676767 878787 116116116 AR & Other Receivables 14 15 21 28 SG&A Expenses 323232 353535 404040 424242 Inventories 11 13 19 25 Operating Profit (Adj) 222222 323232 474747 747474 Other Current Assets 85 104 149 201 Operating Profit 222222 323232 474747 747474 NonNonNon-Non ---CurrentCurrent Assets 888888 949494 111111111 131131131 NonNonNon-Non ---OperatingOperating Profit 555 121212 555 999 Investments in Associates 12 15 21 28 Net Financial Income 2 3 4 4 Property, Plant and Equipment 28 27 26 25 Net Gain from Inv in Associates 0 0 0 0 Intangible Assets 21 19 18 17 Pretax Profit 27 44 52 83 Total Assets 340340340 376376376 427427427 501501501 Income Tax 9 12 15 25 Current Liabilities 323232 404040 575757 777777 Profit from Continuing Operations 18 32 37 58 AP & Other Payables 16 19 28 37 Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 0 0 0 0 Net Profit 181818 323232 373737 585858 Other Current Liabilities 16 21 29 40 Controlling Interests 19 33 39 61 NonNonNon-Non ---CurrentCurrent Liabilities 626262 626262 636363 646464 Non-Controlling Interests -1 -2 -2 -3 Long-Term Financial Liabilities 60 60 60 60 Total Comprehensive Profit 171717 323232 373737 585858 Other Non-Current Liabilities 2 2 3 4 Controlling Interests 18 34 39 62 Total Liabilities 949494 102102102 120120120 140140140 Non-Controlling Interests -1 -2 -2 -3 Controlling Interests 177177177 207207207 242242242 299299299 EBITDA 26 35 49 76 Capital Stock 8 8 8 8 FCF (Free Cash Flow) 18 39 42 63 Capital Surplus 96 96 96 96 EBITDA Margin (%) 16.7 18.2 17.8 20.6 Retained Earnings 73 102 137 195 Operating Profit Margin (%) 14.1 16.7 17.1 20.1 NonNonNon-Non ---ControllingControlling Interests 696969 676767 656565 626262 Net Profit Margin (%) 12.2 17.2 14.2 16.5 Stockholders' Equity 246246246 274274274 307307307 361361361

Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/1412/1412/14 12/15F 12/16F 12/17F 12/1412/1412/14 12/15F 12/16F 12/17F Cash Flows from Op Activities 34 39 42 63 P/E (x) 34.3 23.4 20.3 12.8 Net Profit 18 32 37 58 P/CF (x) 33.3 17.9 15.5 9.7 Non-Cash Income and Expense 2 12 14 23 P/B (x) 4.1 3.8 3.2 2.6 Depreciation 2 1 1 1 EV/EBITDA (x) 22.3 17.3 11.7 7.1 Amortization 2 2 1 1 EPS (W) 1,290 2,039 2,354 3,732 Others -2 9 12 21 CFPS (W) 1,327 2,669 3,081 4,937 Chg in Working Capital 13 3 2 2 BPS (W) 10,830 12,619 14,744 18,246 Chg in AR & Other Receivables 10 -2 -5 -6 DPS (W) 250 250 250 250 Chg in Inventories -1 -2 -6 -6 Payout ratio (%) 20.6 11.8 10.3 6.5 Chg in AP & Other Payables 1 1 3 3 Dividend Yield (%) 0.6 0.5 0.5 0.5 Income Tax Paid ---9 -999 ---12-121212 ---15-151515 ---25-252525 Revenue Growth (%) 34.5 23.1 43.2 34.2 Cash Flows from Inv Activities -21 -23 -55 -62 EBITDA Growth (%) 4.0 34.6 40.0 55.1 Chg in PP&E -17 0 0 0 Operating Profit Growth (%) 0.0 45.5 46.9 57.4 Chg in Intangible Assets -3 0 0 0 EPS Growth (%) 15.6 58.1 15.4 58.5 Chg in Financial Assets -49 -23 -55 -62 Accounts Receivable Turnover (x) 12.6 18.2 19.5 19.0 Others 484848 000 000 000 Inventory Turnover (x) Cash Flows from Fin Activities 105 -5 -4 -4 Accounts Payable Turnover (x) 19.7 21.3 24.0 23.4 Chg in Financial Liabilities 60 0 0 0 ROA (%) 7.7 8.9 9.1 12.5 Chg in Equity 51 0 0 0 ROE (%) 13.4 17.4 17.2 22.7 Dividends Paid -3 -4 -4 -4 ROIC (%) 35.9 49.7 81.3 139.6 Others ---3 -333 ---1-111 000 000 Liability to Equity Ratio (%) 38.3 37.2 39.1 38.9 Increase (Decrease) in Cash 120 8 -23 -10 Current Ratio (%) 777.8 710.4 555.0 484.2 Beginning Balance 22 142 150 127 Net Debt to Equity Ratio (%) Ending Balance 142142142 150150150 127127127 117117117 Interest Coverage Ratio (x) Source: Company data, KDB Daewoo Securities Research estimates

KDB Daewoo Securities Research 18

April 29, 2015 Entertainment

SM Entertainment (041510 KQ) SMTown Coex Artium drawing crowds

Entertainment Album releases and overseas concerts to grow 20% and 40% in 2015 We project new domestic album releases by SM Entertainment to grow 20% YoY in (Maintain) Buy 2015. New artists—including Red Velvet (girl group) and SR15B (boy band)—are scheduled to make their debuts. And album sales are likely to pick up after shrinking last year in the wake of the Sewol ferry tragedy. Target Price (12M, W) 46,000 The number of overseas concerts outside of Japan is forecast to jump 40% YoY in 2015. Share Price (4/28/15, W) 30,950 In 2014, SM Entertainment acts attracted 1.83mn people to concerts in Japan. TVXQ, Girls’ Generation, and SHINee have already held successful dome tours this year. Overall, we expect the company’s robust 2014 performance in Japan (in terms of album sales Expected Return 49% and concerts) to carry over to 2015.

OP (15F, Wbn) 47 Recently, we have been seeing long lines in front of the SMTown Coex Artium even on Consensus OP (15F, Wbn) 49 weekdays. The average number of daily visitors to the multipurpose entertainment space soared to 2,800 on weekdays and 4,500 on weekends in April, up from 1,000 and EPS Growth (15F, %) 2,145.1 1,500 in February. The company began selling package products targeting Chinese and Market EPS Growth (15F, %) 38.4 Japanese group tourists at end-March. And it has increased the number of hologram P/E (15F, x) 14.8 concert showings per day from one to three. Market P/E (15F, x) 11.1 KOSDAQ 696.79 Earnings momentum to emerge in 2015 for the first time in three years.

Market Cap (Wbn) 639 We expect SM’s earnings to improve in 2015, backed by 1) a low base effect associated Shares Outstanding (mn) 21 with depressed consumer sentiment following the Sewol ferry disaster, 2) increasing Free Float (%) 78.4 album sales and concerts, and 3) margin improvement at SM C&C (a subsidiary). For 1Q, Foreign Ownership (%) 10.0 we estimate that top-line growth was healthy on the back of EXO’s album sales and Beta (12M) 1.74 domestic concerts as well as the recognition of royalty income from Girls’ Generation 52-Week Low 24,450 and SHINee concerts in Japan. 52-Week High 51,000 We estimate that expenses related to SMTown Coex Artium (including hologram show- (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M related costs) will be reflected in 1Q results. We project the company to report a Absolute -15.4 7.8 -36.5 consolidated operating profit of W5bn for 1Q (flat YoY). For 2015, we forecast Relative -22.3 -13.0 -49.3 operating profit to jump 37.3% to W47.1bn. The company’s operating profit is forecast to bottom in 1Q and rise continuously thereafter.

140 SM Entertainment KOSDAQ 120 Maintain Buy with TP of W46,000 100 SM Entertainment’s valuation appears attractive, as it is trading at a discount to other 80 domestic and overseas entertainment/media plays. The company was hurt by the exits

60 of several artists and a substantial corporate tax burden. Operating profit deteriorated in 2013 and 2014 due to the weak yen and sluggish performances by subsidiaries. 40 4.14 8.14 12.14 4.15 The company is currently discussing possible joint ventures with Chinese

entertainment/media firms. We expect its Chinese subsidiary will generate revenue full swing starting in 2016. We retain our Buy rating with a target price of W46,000.

FY (Dec.) 12/11 12/12 12/13 12/14 12/15F 12/16F Revenue (Wbn) 143 241 269 287 312 342 OP (Wbn) 26 61 41 34 47 55 OP margin (%) 18.2 25.3 15.2 11.8 15.1 16.1 NP (Wbn) 23 40 19 2 43 48 EPS (W) 1,228 1,994 913 93 2,088 2,328 ROE (%) 20.6 24.7 8.5 0.8 17.0 16.1 P/E (x) 33.2 22.8 48.4 365.5 14.8 13.3 P/B (x) 6.9 4.4 3.9 3.0 2.3 1.9 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

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Table 101010.10 . Annual earnings and forecasts (Wbn, %) 200820082008 200920092009 201020102010 201120112011 201220122012 201320132013 2012012014201 444 2015F2015F2015F Revenue 40.1 61.8 86.4 143.0 241.3 268.7 287.0 312.4 CD 10.8 14.6 14.9 19.7 22.3 26.6 26.7 29.4 Digital 4.8 9.5 8.5 6.3 6.4 6.1 6.6 7.3 Overseas 8.6 15.8 36.8 81.1 128.7 127.5 118.9 123.8 Management 16.0 21.9 26.2 35.9 36.3 46.0 60.5 66.6 Other subsidiaries 47.7 62.5 74.3 85.4 Revenue breakdown CD 26.9 23.7 17.3 13.8 9.3 9.9 9.3 9.4 Digital 11.9 15.3 9.8 4.4 2.6 2.3 2.3 2.3 Overseas 21.4 25.5 42.6 56.7 53.3 47.4 41.4 39.6 Management 39.8 35.5 30.3 25.1 15.0 17.1 21.1 21.3 Other subsidiaries 0.0 0.0 0.0 0.0 19.8 23.3 25.9 27.3 Operating profit -1.9 9.3 20.2 26.0 60.5 40.5 34.3 47.1 OP margin -4.7 15.1 23.4 18.2 25.1 15.1 12.0 15.1 Net profit 4.3 4.5 15.9 22.8 39.9 18.0 1.8 41.3 Net margin 10.7 7.3 18.4 15.9 16.5 6.7 0.6 13.2 YoY growth Revenue 27.9 54.1 39.9 65.6 68.8 11.3 6.8 16.3 CD 21.3 35.7 2.1 32.0 13.3 19.1 0.4 10.5 Digital 8.9 98.1 -10.2 -26.2 1.2 -4.0 8.2 19.1 Overseas 52.0 84.1 133.1 120.6 58.6 -0.9 -6.7 -2.9 Management 28.4 37.3 19.6 37.2 0.9 26.9 31.5 44.8 Other subsidiaries 31.0 18.8 36.6 Operating profit RR TTB 117.2 28.9 136.4 -33.0 -15.3 16.3 Net profit TTB 4.7 253.3 43.2 75.3 -54.9 -89.8 129.4 Notes: Figures are based on K-GAAP through 2011, and consolidated K-IFRS from 2012; other subsidiaries includes DreamMaker and SM C&C Source: Company data, KDB Daewoo Securities Research estimates

Figure 232323.23 . Annual concconcertert attendance by artist Figure 242424.24 . Quarterly concert attendance by artist

(mntickets) (mntickets) 2.5 SMTown 1.0 SMTown BoA BoA Donghae & Eunhyuk Donghae & Eunhyuk 2.0 Super Junior 0.8 SHINee Super Junior Girls' Generation SHINee 1.5 EXO 0.6 Girls' Generation TVXQ EXO TVXQ 1.0 0.4

0.5 0.2

0.0 0.0 2011 2012 2013 2014 2015 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 Note: Only completed concerts are included in 2015 data Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research

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Table 111111.11 ... Key metrics for SMTown Coex Artium Jan.Jan.Jan. Feb.Feb.Feb. Mar.Mar.Mar. Apr.Apr.Apr.

Weekday avg. visitors Opening 1,000 1,500 2,800 Weekday seat occupancy for hologram shows 15% 25-30% Weekend avg. visitors 1,500 2,000 4,500 Weekend seat occupancy for hologram showsl 30% 50% 50% Source: Company data, KDB Daewoo Securities Research

Table 121212.12 . SSSMTownSMTown Coex Artium show details Ticket price (W) SeatSeatSeatingSeat inginging capacity (persons) Musical 77,000 387 Concert A 44,000 167 Concert B 44,000 167 Source: Company data, KDB Daewoo Securities Research estimates

Table 131313.13 . Earnings estimateestimatessss forforfor SMTown Coex Artium and SUM (gift shop) (Wmn) Occupancy rate 100%100%100% 70%70%70% 50%50%50% 30%30%30% Daily avg. attendance (persons) 1,082 757 541 324 Performance 721 505 361 216 Musical 387 271 194 116 Concert A 167 117 84 50 Concert B 167 117 84 50 Other 361 252 180 108 Daily revenue 72.5 50.7 36.2 21.7 Performance 40.0 28.0 20.0 12.0 Musical 26.8 18.8 13.4 8.0 Concert A 6.6 4.6 3.3 2.0 Concert B 6.6 4.6 3.3 2.0 Merchandise 32.4 22.7 16.2 9.7 Monthly revenue 2,174.7 1,522.3 1,087.4 652.4 Performance 1,201.4 841.0 600.7 360.4 Goods 973.4 681.3 486.7 292.0 Monthly expenses 851.9 848.0 845.4 842.8 Fixed costs 838.9 Depreciation from content development 138.9 Depreciation from facility investments 333.3 Rent 166.7 Operating expenses 200 Variable costs 13.0 9.1 6.5 3.9 Cost of goods sold 13.0 9.1 6.5 3.9 Monthly gross profit 1,322.8 670.4 235.5 -199.5 Annual revenue 26,097 18,268 13,048 7,829 Performance 14,416 10,092 7,208 4,325 Merchandise 11,680 8,176 5,840 3,504 Annual expenses 10,222 10,176 10,145 10,113 Annual gross profit 15,874 8,092 2,904 -2,284 Notes: Seating capacity is based on reservations website data on Jan. 15 th ; assumed W20bn in facility investment (five-year depreciation), W5bn in content production investment (three-year depreciation), W2bn in annual rent, and W2bn in monthly operating costs; based on a COGS ratio of 40% Source: KDB Daewoo Securities Research

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SM Entertainment (041510 KQ/Buy/TP: W46,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/13 12/14F 12/15F 12/16F (Wbn) 12/13 12/14F 12/15F 12/16F Revenue 269269269 287287287 312312312 342342342 Current Assets 245245245 259259259 315315315 375375375 Cost of Sales 170170170 190190190 198198198 213213213 Cash and Cash Equivalents 106 111 153 198 Gross Profit 999999 979797 114114114 129129129 AR & Other Receivables 47 50 54 60 SG&A Expenses 585858 636363 676767 747474 Inventories 7 8 9 9 Operating Profit (Adj) 414141 343434 474747 555555 Other Current Assets 85 90 99 108 Operating Profit 414141 343434 474747 555555 NonNonNon-Non ---CurrentCurrent Assets 148148148 142142142 139139139 137137137 NonNonNon-Non ---OperatingOperating Profit 111 ---5-555 555 555 Investments in Associates 2 2 2 2 Net Financial Income 2 2 3 3 Property, Plant and Equipment 54 51 49 47 Net Gain from Inv in Associates -1 0 0 0 Intangible Assets 50 44 40 36 Pretax Profit 42 29 52 60 Total Assets 392392392 401401401 453453453 512512512 Income Tax 24 27 11 14 Current Liabilities 113113113 120120120 130130130 142142142 Profit from Continuing Operations 18 2 41 46 AP & Other Payables 71 76 82 90 Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 3 2 2 2 Net Profit 181818 222 414141 464646 Other Current Liabilities 39 42 46 50 Controlling Interests 19 2 43 48 NonNonNon-Non ---CurrentCurrent Liabilities 131313 131313 131313 141414 Non-Controlling Interests -1 0 -2 -2 Long-Term Financial Liabilities 11 11 11 11 Total Comprehensive Profit 141414 222 414141 464646 Other Non-Current Liabilities 2 2 2 3 Controlling Interests 15 2 44 49 Total Liabilities 126126126 133133133 144144144 156156156 Non-Controlling Interests -1 0 -2 -3 Controlling Interests 230230230 232232232 274274274 323323323 EBITDA 50 42 54 61 Capital Stock 10 10 10 10 FCF (Free Cash Flow) 11 11 49 53 Capital Surplus 121 121 121 121 EBITDA Margin (%) 18.6 14.6 17.3 17.8 Retained Earnings 102 104 147 196 Operating Profit Margin (%) 15.2 11.8 15.1 16.1 NonNonNon-Non ---ControllingControlling Interests 363636 363636 353535 333333 Net Profit Margin (%) 7.1 0.7 13.8 14.0 Stockholders' Equity 266266266 268268268 309309309 356356356

Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/1312/1312/13 12/14F 12/15F 12/16F 12/1312/1312/13 12/14F 12/15F 12/16F Cash Flows from Op Activities 30 11 49 53 P/E (x) 48.4 365.5 14.8 13.3 Net Profit 18 2 41 46 P/CF (x) 17.1 19.4 11.3 10.2 Non-Cash Income and Expense 35 34 15 16 P/B (x) 3.9 3.0 2.3 1.9 Depreciation 3 3 2 2 EV/EBITDA (x) 16.4 14.2 9.1 7.2 Amortization 6 5 4 4 EPS (W) 913 93 2,088 2,328 Others 26 26 9 10 CFPS (W) 2,588 1,750 2,738 3,026 Chg in Working Capital -8 1 1 1 BPS (W) 11,376 11,469 13,558 15,886 Chg in AR & Other Receivables -23 -3 -4 -5 DPS (W) 0 0 0 0 Chg in Inventories -2 -1 -1 -1 Payout ratio (%) 0.0 0.0 0.0 0.0 Chg in AP & Other Payables 24 4 6 7 Dividend Yield (%) 0.0 0.0 0.0 0.0 Income Tax Paid ---16 -161616 ---27-272727 ---11-111111 ---14-141414 Revenue Growth (%) 11.6 6.7 8.7 9.6 Cash Flows from Inv Activities -22 -6 -7 -8 EBITDA Growth (%) -28.6 -16.0 28.6 13.0 Chg in PP&E -19 0 0 0 Operating Profit Growth (%) -32.8 -17.1 38.2 17.0 Chg in Intangible Assets -4 0 0 0 EPS Growth (%) -54.2 -89.8 2,145.2 11.5 Chg in Financial Assets -1 -5 -7 -8 Accounts Receivable Turnover (x) 8.1 6.2 6.3 6.3 Others 222 ---1-111 000 000 Inventory Turnover (x) Cash Flows from Fin Activities 7 0 0 0 Accounts Payable Turnover (x) 3.3 3.0 2.9 2.8 Chg in Financial Liabilities 3 0 0 0 ROA (%) 5.0 0.5 9.7 9.5 Chg in Equity 2 0 0 0 ROE (%) 8.5 0.8 17.0 16.1 Dividends Paid 0 0 0 0 ROIC (%) 20.3 2.2 41.7 51.8 Others 222 000 000 000 Liability to Equity Ratio (%) 47.3 49.6 46.4 43.9 Increase (Decrease) in Cash 6 5 42 45 Current Ratio (%) 216.7 216.2 241.4 263.1 Beginning Balance 100 106 111 153 Net Debt to Equity Ratio (%) Ending Balance 106106106 111111111 153153153 198198198 Interest Coverage Ratio (x) Source: Company data, KDB Daewoo Securities Research estimates

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APPENDIX 1

Important Disclosures & Disclaimers 222-2---YearYear Rating and Target Price History

Company (((Code)(Code)Code)Code) DateDateDate RatingRatingRating Target Price Company (((Code)(Code)Code)Code) DateDateDate RatingRatingRating Target Price CJ CGV (079160) 04/28/2015 Buy 100,000 09/29/2013 Buy 66,200 02/05/2015 Buy 80,000 08/30/2013 Buy 59,500 11/14/2014 Buy 59,000 05/14/2013 Buy 85,000 08/07/2014 Buy 56,000 04/15/2013 Buy 94,000 05/11/2014 Buy 57,000 SM Entertainment (041510) 03/04/2015 Buy 46,000 08/11/2013 Buy 63,000 01/15/2015 Buy 50,000 05/12/2013 Buy 70,000 11/23/2014 Buy 46,000 04/23/2013 Buy 48,000 09/01/2014 Buy 53,000 YG Entertainment (122870) 04/28/2015 Buy 60,000 03/03/2014 Buy 58,000 03/01/2015 Buy 56,000 11/13/2013 Buy 60,000 11/14/2014 Buy 52,000 08/30/2013 Buy 46,000 05/18/2014 Buy 58,000 05/30/2013 Buy 58,000 03/03/2014 Buy 70,000 04/15/2013 Buy 72,000 12/01/2013 Buy 57,000

(W) CJ CGV (W) YG Entertainment (W) SM Entertainment 120,000 100,000 80,000

100,000 80,000 60,000 80,000 60,000 60,000 40,000 40,000 40,000 20,000 20,000 20,000

0 0 0 Apr 13 Apr 14 Apr 15 Apr 13 Apr 14 Apr 15 Apr 13 Apr 14 Apr 15

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 Daewoo Securities Co., Ltd.`s analyst attended the IR meeting held by CJ CGV within recent one month. Expenses related to the meeting were covered by CJ CGV. As of the publication date, Daewoo Securities Co., Ltd. has been acting as a financial advisor to SM Entertainment for its treasury stock trust, and other than this, Daewoo Securities has no other special interests in the companies covered in this report. 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 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

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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. Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur.

Distribution United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: This report is distributed in the U.S. by Daewoo Securities (America) Inc., a member of FINRA/SIPC, and is only intended for major institutional investors as defined in Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934. All U.S. persons that receive this document by their acceptance thereof represent and warrant that they are a major institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Daewoo Securities (America) Inc., which accepts responsibility for the contents of this report in the U.S. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This document has been approved for distribution in Hong Kong by Daewoo Securities (Hong Kong) Ltd., which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Daewoo or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its affiliates to any registration or licensing requirement within such jurisdiction.

KDB Daewoo Securities International Network

Daewoo Securities Co. Ltd. (Seoul) Daewoo Securities (Hong Kong) Ltd. Daewoo Securities (America) Inc. Head Office Two International Finance Centre 320 Park Avenue 34-3 Yeouido-dong, Yeongdeungpo-gu Suites 2005-2012 31st Floor

Seoul 150-716 8 Finance Street, Central New York, NY 10022 Korea Hong Kong, China United States Tel: 82-2-768-3026 Tel: 85-2-2845-6332 Tel: 1-212-407-1000

Daewoo Securities (Europe) Ltd. Daewoo Securities (Singapore) Pte. Ltd. Tokyo Branch 41st Floor, Tower 42 Six Battery Road #11-01 7th Floor, Yusen Building 25 Old Broad St. Singapore, 049909 2-3-2 Marunouchi, Chiyoda-ku London EC2N 1HQ Tokyo 100-0005 United Kingdom Japan Tel: 44-20-7982-8000 Tel: 65-6671-9845 Tel: 81-3- 3211-5511 Beijing Representative Office Shanghai Representative Office Ho Chi Minh Representative Office 2401A, 24th Floor, East Tower, Twin Towers Room 38T31, 38F SWFC Suite 2103, Saigon Trade Center B-12 Jianguomenwai Avenue 100 Century Avenue 37 Ton Duc Thang St,

Chaoyang District, Beijing 100022 Pudong New Area, Shanghai 200120 Dist. 1, Ho Chi Minh City, China China Vietnam Tel: 86-10-6567-9299 Tel: 86-21-5013-6392 Tel: 84-8-3910-6000 Daewoo Investment Advisory (Beijing) Co., Ltd. Daewoo Securities (Mongolia) LLC PT. Daewoo Securities Indonesia 2401B, 24th Floor, East Tower, Twin Towers #406, Blue Sky Tower, Peace Avenue 17 Equity Tower Building Lt.50 B-12 Jianguomenwai Avenue, 1 Khoroo, Sukhbaatar District Sudirman Central Business District Jl.

Chaoyang District, Beijing 100022 Ulaanbaatar 14240 Jendral Sudirman Kav. 52-53, Jakarta Selatan China Mongolia Indonesia 12190 Tel: 86-10-6567-9699 Tel: 976-7011-0807 Tel: 62-21-515-1140

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