Regional Company Focus CJ ENM Bloomberg: 035760 KS, Reuters: 035760.KS Refer to important disclosures at the end of this report DBS Group Research . Equity 9 Nov 2018 BUY, KRW219,000 KOSDAQ: 693.7 Strength in content business (Closing price as of 08/11/18) underpins earnings Price Target 12-mth: KRW300,000 • If not for IPTV commission hike, 3Q18 earnings would Reason for Report: 3Q18 earnings review have been a positive surprise Potential catalyst: Synergies between its digital channels and • To continue outperforming the market in terms of TV ad commerce business revenue growth Where we differ: We are more optimistic than the market for FY18F, but more conservative for FY19/20F • Commerce margins to recover in near term Analyst • Retain BUY, keep our TP of KRW300,000 Regional Research Team
[email protected] Media: Stronger than expected TV and digital ad revenue. CJ ENM’s media division posted its highest-ever quarterly OP of KRW37.2bn (+305% y-o-y) in 3Q18. With the airing of premium content such as Price Relative ‘Boyfriend’ and ‘Memories of the Alhambra’ and several other 350,000 130 popular shows in 4Q18, CJ ENM’s TV ad revenue outperformance 300,000 120 250,000 110 and digital ad revenue growth should persist. Sales to Chinese and 100 200,000 global over-the-top (OTT) service providers also seem likely. 90 150,000 80 Commerce: Temporary dent to margins. Gross merchandise sales 100,000 70 50,000 60 were solid at KRW935.9bn (+5% y-o-y) with KRW80.2bn from T 0 50 commerce (+36% y-o-y) and KRW267.5bn from mobile commerce Nov-14 Jun-15 Jan-16 Aug-16 Mar-17 Oct-17 May-18 Stock price(LHS,KRW) Rel.