Media/Entertainment Fleeting vs. enduring changes
Overweight (Maintain) COVID-19 is accelerating changes in media consumption At its core, the media/entertainment industry hinges on how long and to what extent Industry Report its content can capture user interest ( quantitative exposure and engagement vs. willingness to pay). The costs paid by users can take a variety of forms (ad views, pay- March 23, 2020 per-view, subscription fees, product/ticket purchases, fan club membership fees, etc.), with the total outlay ultimately determ ined by the benefits or value provided by the content in question. COVID-19 has driven drastic lifestyle changes, leading people to avoid public places Mirae Asset Daewoo Co., Ltd. and large gatherings and spend more time at home. Media consumption is increasing, and barriers to new kinds of media experiences are decreasing. New media are no [Media ] longer the exclusive domain of early adopters. Against this backdrop , the value of content/specific formats has undergone rapid changes that would have otherwise Jeong -yeob Park taken place over a significant period of time. Against this backdrop, we believe it is +822 -3774 -1652 important to differentiate which of the unfolding changes in media consumption are [email protected] fleeting and which will endure after the outbreak is over.
Bottom line: Amid the accelerating rise of new media, the business environment for entertainment stocks with high valuations should improve further even after the outbreak subsides. We think stocks that have become more expensive t han peers during the current market dip—i.e., Studio Dragon (253450 KQ/Buy/TP: W112,000/CP: W75,800) and YG Entertainment (122870 KQ/Buy/TP: W40,000/CP: W21,350)—continue to merit attention. We expect dramas/webtoons to recover first, followed by performances and then ads/films. Transition from old to new media: Bad for broadcasting, good for OTTs LINE was launched in the immediate aftermath of Japan’s 2011 earthquake and quickly became the most popular messaging app in the country. In a similar way, we believe the global rise in new media consumption sparked by COVID-19 could serve as an inflection point for the media industry, especially broadcasting and OTTs. Nielsen Media Research forecasts TV viewing and OTT streaming to grow roughly 60% due to the COVID-19 outbreak. We view this as a reasonable projection, given the rise in TV viewership in the US during the country’s 2017 hurricane season (+56%; four-week average) and 2016 blizzard (+45%; one-week average). That said, broadcasting and OTTs are unlikely to benefit equally, as the groups have different income models and different consumption expansion prospects. For broadcasting program providers (PPs), the main source of income is ads. During normal times, businesses tend to expand their ad spending when ad exposure increases, as this typically improves advertising effects. But this time, the COVID-19 outbreak is having a dampening effect on consumption. With lower advertising efficiency, businesses are reluctant to increase their ad budgets. As such, higher ratings will likely fail to translate into higher ad pricing. For CJ ENM (035760 KQ/Trading Buy/TP: W195,000/CP: W90,700) and SBS (034120 KS/CP: W15,200), which depend on domestic ads as their primary source of income, we believe that even as ratings go up, any benefits in terms of earnings or long-term competitiveness will come only when the economy begins to recover. Premium OTTs, meanwhile, mainly generate their income from subscription fees. Their income model fundamental ly relies on a positive feedback loop, where better content leads to more subscribers/consumption , in turn enabling bigger budgets and more investments. OTTs tend to be less sensitive to economic conditions, and can achieve bigger economies of scale more q uickly because of their global reach. Given that OTTs in the long run align their budget allocation to their user bases, content production targeting countries outside of the US should increase. Furthermore, traditional media players are also entering the market, resulting in fiercer competition to attract subscribers. Overall, we think the environment for OTTs will be more favorable after the outbreak than before the outbreak. For domestic production companies with global capabilities, we believe such cha nges will lead to bigger content deals and also hasten the timing of such deals. Both Studio Dragon and J Contentree (036420 KS/Buy/TP: W52,000/CP: W23,500) inked deals with Netflix (NFLX US/CP: US$332.83) in November 2019 that guarantee a certain production/supply minimum (20 titles for a three-year period each). As platform competition intensifies, there is also a good chance that new partners will emerge. Season two of Kingdom (produced by AStory ), which recently premiered on Netflix, has received more positive reviews than season one of the series, highlighting the ability of K-dramas to adapt and venture into new genres. Looking ahead, we think expectations for major upcoming titles (such as Studio Dragon’s Sweet Home , a Netflix original based on a popular webtoon series coming out in 2H20) and additional deals (on top of quarterly tentpoles) could increase going forward.
March 23, 2020 Media/Entertainment
Figure 1. TV viewership (including streaming) increased Figure 2. Natural disasters appear to have led to US Netflix during previous natural disasters subscriber growth in the past
(%) (mn persons) Winter Storm Jonas 70 Average increase in US TV viewership 2.5 Netflix net subscriber increase 60 Hurricane Harvey 2.0 50
40 1.5
30 1.0 20 0.5 10 0.0 0 Winter Storm Jonas (Jan. Hurricane Harvey (Aug. COVID-19 (projected) 2016, US Midwest/East 2017, Houston) -0.5 Coast) 2Q15 1Q16 4Q16 3Q17 2Q18 1Q19 4Q19
Notes: One-week average for Winter Storm Jonas, four-week average for Hurricane Harvey Source: Nielsen Media Research, Mirae Asset Daewoo Research Source: Nielsen Media Research , Mirae Asset Daewoo Research
Figure 4. Content producers to be less affected by economic Figure 3. Higher ratings are unlikely to translate into higher conditions: Short-term VOD revenue growth, long-term ad spending global order expansion
(%) (Wbn) 2 Quarterly GDP growth consensus 300 Studio Dragon → Ex-Netflix sales Studio Dragon → Sales to Netflix (originals) 250 Studio Dragon → Sales to Netflix (simultaneous)
1 200
150
0 100
50
-1 0 1/18 7/18 1/19 7/19 1/20 2017 2018 2019 2020F
Source: Mirae Asset Daewoo Research, Quantiwise Source: Company data, Mirae Asset Daewoo Research
Figure 5. Kingdom season 2 has gotten a positive response; Figure 6. Sweet Home , a Netflix original drama, to be released
Content production targeting global viewers to increase in 2H20
(p) 9.5 Kingdom season 1 Kingdom season 2
9
8.5
8
7.5
7 Ep. 1 Ep. 2 Ep. 3 Ep. 4 Ep. 5 Ep. 6
Source: IMDb, Mirae Asset Daewoo Research Source: NAVER Webtoon, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 2 March 23, 2020 Media/Entertainment
Theaters: Negative outlook due to declines in attendance and releases Theater attendance has dropped sharply amid the COVID-19 outbreak, as people are avoiding public places and large gatherings and spending more time at home. YTD, box- office revenue is down 46% YoY in Korea, down 85% YoY in China, up 18% YoY in Turkey, and down 5% YoY in the US . Theaters in China have been closed since February, and theaters in many other regions find it nearly impossible to operate. Despite improvements in cost efficiency, most theater businesses are bound to incur massive losses due to their high exposure to fixed costs (e.g., lease and labor expenses).
Amid the proliferation of large-screen TVs and high-quality OTT content, video streaming services are emerging as an alternative to movie theater attendance. This trend threatens to hurt theaters’ earnings in the short term and slow down content supply in the long term. Due to the contraction of the box-office market, Disney (DIS US/CP: US$85.98) has decided to postpone the releases and production of some of its films, and is now considering going straight to streaming using its OTT platform (Disney Plus). We note that Korea’s box-office market relies heavily on Disney; Disney films captured around 15% of moviegoers annually over the past three years. Reduced supply from a major distributor like Disney would deal a major blow to the theater business, as margins are not particularly high even during good times (e.g., single-digit margins in 2019, a favorable year for the theater business).
Table 1. Box-office revenue by country (YTD)
Box-office revenue Attendance (mn people) Avg. ticket price (ATP)_ Korea China Turkey Vietnam China Turkey US (US$mn) Korea China Turkey Korea (W) (Wbn) (RMBmn) (TLmn) (US$’000) (RMB ) (TL) 2018 370 18,630 274 2,165 3,000 45.9 514.5 22.2 8,068 36.2 12.4 2019 425 17,664 235 1,732 8,891 50.0 449.0 16.3 8,489 39.3 14.4 2020 228 2,655 278 1,654 14,206 26.2 95.1 16.2 8,687 27.9 17.2 2018-19 YoY (%) 14.7 -5.2 -14.1 -20.0 196.4 9.0 -12.7 -26.5 5.2 8.6 16.9 2019-20 YoY (%) -46.4 -85.0 17.9 -4.5 59.8 -47.6 -78.8 -0.7 2.3 -29.0 18.7 Note: Based on first 11 weeks of the year Source: KOFIC, Mirae Asset Daewoo Research
Table 2. Movies increasingly opting for OTT releases, raising content supply concerns
Premiere Title Distributor (Platform) Director Genre 1/8/20 Underwater 20th Century Studios William Eubank Action/drama 1/25/20 Timmy Failure: Mistakes Were Made Disney Plus Thomas Joseph Drama/fantasy 2/21/20 The Call of the Wild 20th Century Studios Chris Sanders Adventure/family 3/6/20 Onward Walt Disney Studios Dan Scanlon Adventure/animation 3/13/20 Stargirl Disney Plus Julia Hart Drama 5/29/20 Artemis Fowl Walt Disney Studios Kenneth Branagh Adventure/family 6/9/20 Soul Walt Disney Studios Pete Docter Adventure/family 7/3/20 Free Guy 20th Century Studios Shawn Levy Action/adventure 7/17/20 Bob's Burgers: The Movie 20th Century Studios Loren Bouchard Animation/adventure 7/24/20 Jungle Cruise Walt Disney Studios Jaume Collet-Serra Action/adventure 8/14/20 The One and Only Ivan Walt Disney Studios Thea Sharrock Adventure/animation 9/18/20 The King’s Man 20th Century Studios Matthew Vaughn Action 10/9/20 Death on the Nile 20th Century Studios Kenneth Branagh Crime/drama 11/6/20 The Eternals Walt Disney Studios Chloé Zhao Action/adventure 11/25/20 Raya and the Last Dragon Walt Disney Studios Paul Briggs, Dean Wellins Adventure/animation 12/18/20 West Side Story 20th Century Studios Steven Spielberg Crime/musical Delayed Mulan Walt Disney Studios Niki Caro Action/adventure Undecided Black Widow Walt Disney Studios Cate Shortland Action/adventure Undecided The New Mutants 20th Century Studios Josh Boone Science Fiction Undecided Cruella Walt Disney Studios Craig Gillespie Comedy Source: Box Office M ojo , Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 3 March 23, 2020 Media/Entertainment
Figure 7. COVID-19 outbreak disrupting movie theater market
(%)
30 ATP YoY Attendance YoY Box office YoY
20
10
0
-10
-20
-30 2005 2007 2009 2011 2013 2015 2017 2019 2021F
Source: KOFIC, Mirae Asset Daewoo Research
Figure 8. Disney’s share of Korean movie market has averaged 15% over the past five years
(Wtr) (%) 2.0 Total box office Walt Disney M/S Non-Korean film M/S 60
50 1.8
40 1.6 30 1.4 20
1.2 10
1.0 0 2015 2016 2017 2018 2019
Source: KOFIC, Mirae Asset Daewoo Research
Figure 9. Box-office contraction to cause negative leverage effects
(%) 16 CJ CGV OP margin (consolidated) CJ CGV OP margin (parent) Megabox OP margin
12
8
4
0
-4 2015 2016 2017 2018 2019 2020F
Source: WISEfn, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 4 March 23, 2020 Media/Entertainment
Concerts: Neutral outlook; Entertainment companies should work on securing global fan bases until the concert business normalizes
Many sporting events and music festivals around the world are being canceled or put on hold. Based on Korea’s three major entertainment companies, the revenue mix of concerts, including related royalty income, is approximately 25%. Even assuming concerts are pushed back rather than canceled, earnings deterioration looks inevitable due to competition for event venues, as well as artist schedule and ticket sales constraints.
That said, we expect the concert market’s slowdown—unlike that of the theater market—to be temporary. Live concerts offer an experience that no technology can replicate. While the loss of concert revenue is inevitable until the COVID-19 outbreak subsides, entertainment companies should focus on maximizing revenue potential when the concert business normalizes, while defending other revenue sources (albums/digital/management) as much as possible.
We believe entertainment companies can weather the crisis by producing high-quality music and music video content, which will enable them to strengthen their global fan bases through digital channels. We have a positive view on companies with competitive artist lineups, a strong presence in digital media settings, and high global recognition. YG Entertainment is well positioned in light of its partnership with Interscope (US) and strong global recognition (as evidenced by its YouTube subscriber count). Meanwhile, JYP Entertainment’s (035900 KQ/Buy/TP: W31,000/CP: W17,700) NIZI project is helping the company build a global fan base through overseas digital platforms.
Figure 10. Steady rise in YouTube subscribers underscores importance of global fan base
(mn subscribers) 70 SM (SMTOWN) JYP (jypentertainment + TWICE) 60 YG (YG ENTERTAINMENT + BLACKPINK + iKON + WINNER) Big Hit (Big Hit Labels + BANGTANTV) 50
40
30
20
10
0 9/15 1/16 5/16 9/16 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19 1/20
Source: YouTube, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 5 March 23, 2020 Media/Entertainment
Table 3. Global sporting events and live concerts have been canceled or pushed back
Delay/cancellation decision Original dates/location Concerts Big Hit Entertainment BTS’s Seoul concerts canceled Seoul (Apr. 11-12, 2020 and Apr. 18-19, 2020) Big Bang’s Coachella Valley Music & Arts YG Entertainment US (Apr. 10-12, 2020 and Apr. 17-19, 2020) Festival concerts delayed AKMU’s Korea concert tour canceled Suwon, Ulsan, Cheonan, Cheongju, Chuncheon, Jeonju (from Feb. 22, 2020)
WINNER’s Singapore/Seoul concerts canceled Singapore (Feb. 8, 2020); Seoul (Feb. 14-15, 2020)
Sechs Kies’s Seoul concerts canceled Seoul (Mar. 6-8, 2020) Osaka (Mar. 21 -22, 2020); Madrid, Berlin, London, Brussels, Paris, and JYP Entertainment Stray Kids’ Japan/Europe concert tour canceled Moscow (May 2020) TWICE’s Japan/Seoul concerts canceled Tokyo (Mar. 4-5, 2020); Seoul (Mar. 7-8, 2020)
GOT7’s world tour delayed Macau (Feb. 7-8, 2020); Singapore (Feb. 15, 2020); Japan (Mar. 13-15, 2020)
SM Entertainment Red Velvet’s Japan concert tour delayed Yokohama (Mar. 7-8, 2020)
Super Junior’s Japan concerts delayed Saitama (Mar. 25-26, 2020)
Taeyeon’s Singapore concert delayed Singapore (Feb. 1, 2020)
Taemin’s Seoul concerts delayed Seoul (Mar. 13-15, 2020)
NCT Dream’s Japan concert tour delayed Tokyo (Mar. 13-15, 2020)
NCT’s Macau/Singapore concerts delayed Macau (Feb. 7-8, 2020); Singapore (Feb. 15, 2020)
Sports 2020 K-League, KBO 2020 seasons delayed K-League opening day (Mar. 1, 2020); KBO opening day (Mar. 28, 2020) Euro 2020 Postponed by one year until June 11, 2021 Jun. 12-Jul. 12, 2020
Suspension of matches (Mar. 13 -Apr. 30); 2019-20 Premier League Aug. 10, 2019-May 17, 2020 Premier League to end (Jun. 30) 2020 MLB MLB season delayed at least until May MLB opening day (Mar. 26, 2020)
2019-20 NBA Suspended until further notice Oct. 23, 2019-Apr. 2020 Source: Mirae Asset Daewoo Research
Webtoon: Positive outlook thanks to growth in global users
Since monetizing its global services in 4Q18, NAVER Webtoon has seen an increase in users, driven first by Korea and Japan and then by Southeast Asia, the US, and Europe. It is difficult to quantify the impact of the COVID-19 outbreak on the webtoon market, as it is still a niche market. That said, we see further room for growth, given that webtoons represent an emerging frontier in an entertainment space otherwise dominated by video and music.
In Korea, webtoons have expanded rapidly over the past five years, following monetization. Webtoon services are also attracting a growing number of users globally, with the audience share of those aged 24 or younger standing at 59% in Thailand, 71% in Indonesia, 61% in Taiwan, and 77% in the US. NAVER Webtoon’s transaction volume (excluding Japan) rose from W140bn in 2018 to W330bn in 2019, with overseas revenue mix increasing from 0% to 20% (as of 4Q19). Kakao is also making efforts to expand beyond Korea (KakaoPage) and Japan (Piccoma) to Indonesia, China, and Thailand (KakaoPage Global). As a result, Kakao’s webtoon transaction volume (including Piccoma) increased from W290bn in 2018 to W430bn in 2019.
Having gained popularity in the US, webtoons are also catching on in European countries such as France and Spain. Led by Korean companies, there has emerged a webtoon content ecosystem with a vast and rapidly growing pool of content. Thus, while webtoons remain somewhat niche, we expect them to eventually carve out a place in the global entertainment market, alongside music and video. We believe major platform operators such as NAVER (035420 KS/Buy/TP: W241,000/CP: W154,000) and Kakao (035720 KS/Buy/TP: W243,000/CP: W149,500) and content producers (DNC Media, Kidari Studio, Mrblue) stand to benefit over the long term.
Mirae Asset Daewoo Research 6 March 23, 2020 Media/Entertainment
Figure 11. Google queries for “webtoon”: Sharp rises in the US and France
(P) Global monetization of 120 Worldwide NAVER Webtoon US 100 France
80
60
40
20 NAVER Webtoon enters France and Spain 0 3/15 10/15 5/16 12/16 7/17 2/18 9/18 4/19 11/19
Source: Google, Mirae Asset Daewoo Research
Figure 12. Young people in the US have started to enjoy webtoons
(%) Other 25-34 24 or younger 100
80
60
40
20
0 Korea (NAVER Japan (LINE US (LINE Indonesia (LINE Thailand (LINE Taiwan (LINE Webtoon) Manga) Webtoon) Webtoon) Webtoon) Webtoon)
Source: NAVER, Mirae Asset Daewoo Research
Table 4. Annual earnings estimates for NAVER Webtoon (Wbn, mn people, %, W)
2017 2018 2019F 2020F 2021F Revenue 34 72 164 263 374 Content (NAVER Webtoon/Series) 46 132 224 330
Korea 46 94 127 152
US 0 22 64 122
Other 0 17 33 56
Advertising/IP/other 26 32 39 43
* LINE Manga (not included in above figures) 85 130 157 193
Operating expenses 72 126 206 285 331 Operating profit -38 -54 -42 -21 43 OP margin (%) -111.7 -75.4 -25.3 -8.1 11.5 Key assumptions Transaction volume 141 335 512 709 MAU 45.9 58.1 68.9 76.9 Paid user ratio 12.1 14.1 16.1 18.6 Monthly ARPPU 2,124 3,404 3,852 4,130 Transaction value growth (YoY) 137.1 52.8 38.4 Note: All figures excluding annual revenue and operating profit are based on our estimates. Source: NAVER, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 7 March 23, 2020 Media/Entertainment
Table 5. Annual earnings estimates for KakaoPage (Wbn, mn people, %, W)
2017 2018 2019F 2020F 2021F Revenue (incl. DAUM Webtoon, advertising) 118 188 248 306 354 Domestic platform 110 168 198 246 288 Global IP distribution 8 20 28 34 38 Ads/other 10 21 22 25 29 * Piccoma (not included in above figures) 19 51 125 197 286 KakaoPage’s operating profit 3 13 33 42 52 OP margin (%) 2.8 6.7 13.3 13.8 14.8 Content transaction volume (Piccoma included) 160 290 429 578 732 Note: All figures excluding annual revenue and operating profit are based on our estimates. Source: Kakao, Mirae Asset Daewoo Research estimates
Figure 14. Kakao content transaction volume (KakaoPage, Figure 13. NAVER Webtoon transaction volume Daum Webtoon, and Piccoma)
(Wbn) (%) (Wbn) (%)
800 NAVER Webtoon transaction volume (L) 50 800 Kakako content transaction volume (L) 50 Overseas % (R) Piccoma % (R) 40 40 600 600
30 30 400 400 20 20
200 200 10 10
0 0 0 0 2018 2019 2020F 2021F 2018 2019 2020F 2021F
Note: LINE Manga is excluded. Source: Mirae Asset Daewoo Research estimates Source: Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 8 March 23, 2020 Media/Entertainment
Studio Dragon (253450 KQ) Turning crisis into opportunity
Media Reaffirm Buy and TP of W112,000 We reaffirm our Buy rating and target price of W112,000 on Studio Dragon. We believe (Maintain) Buy the growth of content sales to global customers (originally a long-term call) will materialize a bit earlier than previously expected due in part to the COVID-19 outbreak. Target Price (12M, W) 112,000 We expect business conditions to improve after the outbreak subsides, which is why we are keeping our target P/E. Even during the recent market sell-off, Studio Dragon has held up well, falling just 6.3% YTD (vs. -30.6% for the KOSDAQ). Looking ahead, we expect Share Price (03/20/20, W) 75,800 the stock to continue to deliver a positive relative performance, regardless of the overall market direction. We believe the company is relatively free from earnings risks (unlike Expected Return 48% most domestic companies) and will benefit from positive shifts in global demand. Customer shift to global OTTs is accelerating OP (19, Wbn) 29 In our view, 2020 will mark an inflection point in the company’s customer mix. We expect Consensus OP (19F, Wbn) 40 a rapid shift away from domestic captive customers/broadcast networks toward more overseas OTTs. We have long seen this transition as unavoidable, given the structural EPS Growth (19, %) -26.3 imbalance between the ad market, which has limited potential for growth, and Market EPS Growth (19, %) -35.2 production costs, which are continuing to increase. The recent virus outbreak has just P/E (19, x) 85.9 accelerated that shift. Market P/E (19, x) 11.1 Up until 2019, this shift was actually a headwind to margins, as the rise in prices for non- KOSDAQ 467.75 captive customers (OTTs and foreign networks) had slowed, while the recoup rate of tentpole titles from captive customers had quickly fallen (70% for Misaeng in 2014 ‰ Market Cap (Wbn) 2,130 60% for Goblin in 2016 ‰ 50% for Mr. Sunshine in 2018 ‰ 40% for Arthdal Chronicles in Shares Outstanding (mn) 28 2019). Free Float (%) 30.3 But we believe this same shift will serve as an opportunity for Studio Dragon in 2020. The Foreign Ownership (%) 8.7 company has been guaranteed the production of 21 titles over a three-year period for Beta (12M) 0.56 Netflix through its stake sale and production deals with the streaming service, and both 52-Week Low 54,000 budgets and pricing are likely to be higher than before. And due to the parent company’s focus on margins, Studio Dragon has already secured several major title deals with non- 52-Week High 97,300 captive customers. As such, we see limited risks of further declines in the recoup rate in the near term. (%) 1M 6M 12M Absolute -7.7 6.8 -16.3 Media consumption increases (+50%) during previous natural disasters suggest that Relative 34.5 48.1 34.1 premium OTTs are likely to see increased subscribers amid the virus outbreak. For Studio Dragon, this will naturally lead to an expanded end-market. The contrasting
130 Studio Dragon KOSDAQ trends of Netflix (stable earnings estimates; stock down 7% since February) and Disney (earnings downgraded; stock down 39%) should also ignite competition among new 110 platforms. 90 Earnings risks are limited
70 For 1Q20, we forecast revenue of W125.5bn (+12.2% YoY) and operating profit of W12bn
50 (+8.4%). Our operating profit forecast is in line with the current consensus. While content 3.19 7.19 11.19 3.20 consumption has only limited direct effects on the company’s earnings (mostly through VODs), we believe earnings have strong downside support in the near term and expect global demand to grow in the long term. In our view, Studio Dragon is well-positioned to withstand the current crisis.
메일 @ miraeasset.com FY (Dec.) 12/16 12/17 12/18 12/19 12/20F 12/21F Revenue (Wbn) - 287 380 469 564 664 OP (Wbn) - 33 40 29 64 92 OP Margin (%) - 11.5 10.5 6.2 11.3 13.9 NP (Wbn) - 24 36 26 52 71 EPS (W) - 1,050 1,278 941 1,851 2,515 ROE (%) - 12.9 9.3 6.4 11.5 13.7 P/E (x) - 61.9 72.3 85.9 40.9 30.1 P/B (x) - 4.9 6.5 5.3 4.4 3.9 Dividend Yield (%) - 0.0 0.0 0.0 0.0 0.0 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests. Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 9 March 23, 2020 Media/Entertainment
Figure 15. Valuation expansion for production studios to resume
4Q18 (W) Share price (adj.) 94x Big-budget flops earnings release 65x 150,000 Sale of Mr. Sunshine to Netflix Lineup void Onset of licensing sales to Netflix Margin slowdown (Strange r, Man to Man ) 120,000 50x
90,000 38x
60,000 Studio Dragon signs three-year supply contract with Netflix; Netflix to acquire 5% stake in Studio Dragon 30,000
0 1/17 7/17 1/18 7/18 1/19 7/19 1/20 7/20
Source: Mirae Asset Daewoo Research
Table 6. Earnings and forecasts (Wbn, % )
1Q19 2Q19 3Q19 4Q19 1Q20F 2Q20F 3Q20F 4Q20F 2018 2019 2020F
Revenue 112 128 131 97 125 125 139 175 380 469 564 Programming 44 58 61 46 47 55 59 57 178 209 219 Licensing 56 60 60 43 68 59 67 108 162 219 302 Other 12 10 10 9 10 11 12 11 39 41 44 Costs 97 113 116 95 109 103 118 150 324 421 480 Production costs (excl. 49 65 71 49 50 59 64 61 186 233 234 originals) Commission fees 15 10 10 9 14 12 13 22 37 44 60 Depreciation/amortization 27 32 28 28 25 26 27 27 75 116 105 (estimates ) Other 6 6 6 10 6 6 6 7 27 28 25 Production costs for 0 0 8 0 14 0 0 25 0 8 39 originals (Netflix) SG&A 4 5 4 6 4 5 4 7 16 19 21 EBITDA 38 43 40 25 38 43 44 46 115 146 171 Operating profit 11 11 11 -4 12 17 16 18 40 29 64 OP margin 9.9 8.4 8.3 -4.2 9.5 13.8 11.9 10.3 10.5 6.1 11.3 Pretax profit 13 12 13 -5 13 18 17 19 46 33 67 Net profit 9 7 12 -2 10 14 13 15 36 26 52 Net margin 8.2 5.7 8.8 -1.7 7.8 11.2 9.7 8.4 9.4 5.6 9.2 YoY Revenue 40.0 72.5 6.0 -4.3 12.2 -2.5 5.7 79.9 32.4 23.4 20.4 Programming 8.4 70.5 24.4 -16.1 7.0 -4.5 -2.3 24.6 35.7 17.2 4.9 Licensing 75.1 109.2 -5.4 13.3 20.8 -2.5 12.3 151.3 44.9 35.3 37.5 Other 63.1 -14.1 -9.0 -6.7 -10.0 10.0 15.0 20.0 -9.8 3.0 7.8 EBITDA 34.7 182.5 -11.5 -7.4 -1.0 0.0 10.7 86.4 54.7 26.7 17.2 Operating profit 3.5 48.8 -49.3 TTR 8.4 59.4 50.7 TTB 20.3 -28.0 122.4 Net profit 16.1 -17.8 -33.1 TTR 7.4 91.7 16.0 TTB 49.6 -26.1 97.3 Major assumptions No. of titles aired 6.5 7.5 7.0 6.5 6.5 7.0 7.5 7.5 25.5 27.5 28.5 No. of titles licensed to Netflix 1.5 2.5 1.5 0.4 1.5 2.0 2.0 2.0 4.5 5.9 7.5 Note: Based on consolidated K-IFRS Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 10 March 23, 2020 Media/Entertainment
Figure 16. Limited downside to broadcasting fees; Margin squeeze is almost over
Ex-CJ ENM revenue (L) (Wbn) (%) CJ ENM broadcasting fee (L) 60 75 CJ ENM % (R)
50 65 40
30 55
20 45 10
0 35 Misaeng (2014) Goblin (2016) Mr. Sunshine (2018) Arthdal Chronicles (2019)
Source: Company data, Mirae Asset Daewoo Research
Figure 17. Competition among OTTs to intensify; Netflix’s Figure 18. Competition among OTTs to intensify; Disney has earnings and shares remain solid seen earnings downgrades and a sharp plunge in shares
(US$) (US$) (US$) (US$) 400 Share price (L) 2020F EPS (R) 8 160 Share price (L) 2020F EPS (R) 6
360 7 140 5 320 -7% since Feb. 6 120 280 4 5 100 240 -39% since Feb. 200 4 80 3 10/19 11/19 12/19 1/20 2/20 3/20 10/19 11/19 12/19 1/20 2/20 3/20
Source: Bloomberg, Mirae Asset Daewoo Research Source: Bloomberg, Mirae Asset Daewoo Research
Figure 19. TV viewership (including streaming) has increased Figure 20. Natural disasters appear to have led to US Netflix during previous natural disasters subscriber growth in the past
(%) (mn persons) Winter Storm Jonas 70 Average increase in US TV viewership 2.5 Netflix net subscriber increase 60 Hurricane Harvey 2.0 50
40 1.5
30 1.0 20 0.5 10 0.0 0 Winter Storm Jonas (Jan. Hurricane Harvey (Aug. COVID-19 (projected) 2016, US Midwest/East 2017, Houston) -0.5 Coast) 2Q15 1Q16 4Q16 3Q17 2Q18 1Q19 4Q19
Notes: One-week average for Winter Storm Jonas, four-week average for Hurricane Source: Nielsen Media Research, Mirae Asset Daewoo Research Harvey Source: Nielsen Media Research, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 11 March 23, 2020 Media/Entertainment
Studio Dragon (253450 KQ/Buy/TP: W112,000)
Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/18 12/19F 12/20F 12/21F (Wbn) 12/18 12/19F 12/20F 12/21F Revenue 380 469 564 664 Current Assets 247 225 466 596 Cost of Sales 324 421 480 551 Cash and Cash Equivalents 153 128 301 405 Gross Profit 56 48 84 113 AR & Other Receivables 69 66 118 139 SG&A Expenses 16 19 21 21 Inventories 1 1 1 1 Operating Profit (Adj) 40 29 64 92 Other Current Assets 24 30 46 51 Operating Profit 40 29 64 92 Non-Current Assets 265 314 209 182 Non-Operating Profit 6 4 3 -1 Investments in Associates 0 0 0 0 Net Financial Income 3 3 5 9 Property, Plant and Equipment 1 1 0 0 Net Gain from Inv in Associates 0 0 0 0 Intangible Assets 199 221 114 87 Pretax Profit 46 33 67 91 Total Assets 512 539 675 778 Income Tax 10 7 15 20 Current Liabilities 108 104 186 219 Profit from Continuing Operations 36 26 52 71 AP & Other Payables 55 53 95 112 Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 0 0 0 0 Net Profit 36 26 52 71 Other Current Liabilities 53 51 91 107 Controlling Interests 36 26 52 71 Non-Current Liabilities 3 8 8 8 Non-Controlling Interests 0 0 0 0 Long-Term Financial Liabilities 2 7 7 7 Total Comprehensive Profit 35 26 52 71 Other Non-Current Liabilities 1 1 1 1 Controlling Interests 35 26 52 71 Total Liabilities 111 111 195 228 Non-Controlling Interests 0 0 0 0 Controlling Interests 401 428 480 551 EBITDA 115 145 172 119 Capital Stock 14 14 14 14 FCF (Free Cash Flow) -29 81 171 96 Capital Surplus 320 322 322 322 EBITDA Margin (%) 30.3 30.9 30.5 17.9 Retained Earnings 68 94 146 217 Operating Profit Margin (%) 10.5 6.2 11.3 13.9 Non-Controlling Interests 0 0 0 0 Net Profit Margin (%) 9.5 5.5 9.2 10.7 Stockholders' Equity 401 428 480 551
Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/18 12/19F 12/20F 12/21F 12/18 12/19F 12/20F 12/21F Cash Flows from Op Activities -29 82 171 96 P/E (x) 72.3 85.9 40.9 30.1 Net Profit 36 26 52 71 P/CF (x) 23.5 15.3 12.6 19.5 Non-Cash Income and Expense 74 122 117 38 P/B (x) 6.5 5.3 4.4 3.9 Depreciation 0 1 1 0 EV/EBITDA (x) 21.1 14.7 10.6 14.5 Amortization 75 115 107 27 EPS (W) 1,278 941 1,851 2,515 Others -1 6 9 11 CFPS (W) 3,930 5,280 6,023 3,883 Chg in Working Capital -139 -52 16 7 BPS (W) 14,305 15,236 17,088 19,603 Chg in AR & Other Receivables -27 -6 -53 -21 DPS (W) 0 0 0 0 Chg in Inventories 0 0 0 0 Payout ratio (%) 0.0 0.0 0.0 0.0 Chg in AP & Other Payables 26 17 15 6 Dividend Yield (%) 0.0 0.0 0.0 0.0 Income Tax Paid -10 -15 -15 -20 Revenue Growth (%) 32.4 23.4 20.3 17.7 Cash Flows from Inv Activities 141 -49 3 8 EBITDA Growth (%) 55.4 26.1 18.6 -30.8 Chg in PP&E 0 -1 0 0 Operating Profit Growth (%) 21.2 -27.5 120.7 43.8 Chg in Intangible Assets 0 -20 0 0 EPS Growth (%) 21.7 -26.4 96.7 35.9 Chg in Financial Assets 139 3 -3 -1 Accounts Receivable Turnover (x) 6.1 7.0 6.1 5.2 Others 2 -31 6 9 Inventory Turnover (x) 405.4 828.0 728.4 612.5 Cash Flows from Fin Activities -10 -58 0 0 Accounts Payable Turnover (x) 25.3 22.0 18.3 15.0 Chg in Financial Liabilities -8 5 0 0 ROA (%) 7.4 5.0 8.6 9.7 Chg in Equity 1 2 0 0 ROE (%) 9.3 6.4 11.5 13.7 Dividends Paid 0 0 0 0 ROIC (%) 15.2 7.2 23.4 53.4 Others -3 -65 0 0 Liability to Equity Ratio (%) 27.7 26.0 40.5 41.3 Increase (Decrease) in Cash 102 -25 174 103 Current Ratio (%) 228.4 217.6 250.1 272.0 Beginning Balance 51 153 128 301 Net Debt to Equity Ratio (%) -39.3 -31.4 -64.2 -74.8 Ending Balance 153 128 301 405 Interest Coverage Ratio (x) 343.0 69.6 157.2 225.8 Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 12 March 23, 2020 Media/Entertainment
CJ CGV (079160 KS) Into the unknown
Media Downgrading earnings estimates For 1Q20, we forecast CJ CGV to deliver consolidated revenue of W297.4bn (-36.0% YoY) and an operating loss of W54.2bn (turning to loss YoY). We expect the operating loss to (Maintain) Hold be larger than our previous estimate due to the slump in theater attendance, and see further downside risks to the consensus (operating loss of W3.3bn). Target Price (12M, W) - YTD, box-office revenue is down 46% YoY in Korea, down 85% YoY in China, up 18% YoY in Turkey, and down 5% YoY in the US. Theaters in China have been closed since Share Price (03/20/20, W) 15,650 February, and theaters in Korea also have been unable to operate normally. And we cannot rule out the possibility of the virus spreading more widely in Vietnam and Turkey, Expected Return - where there are still relatively few cases. While rent reductions and compensation are being discussed, earnings visibility should worsen as revenue plunges. For now, we
OP (19, Wbn) 123 believe a conservative view on earnings should be taken for all regions. Consensus OP (19F, Wbn) 111 Potential changes in content distribution EPS Growth (19, %) - The best-case scenario would be a swift industry normalization, following short-term Market EPS Growth (19, %) -35.2 earnings deterioration. It should be noted, however, that the virus outbreak appears P/E (19, x) - likely to accelerate the shift from old media (theaters/cable networks) to new media Market P/E (19, x) 11.1 (OTTs). The hegemony of multiplex theaters in the film industry could also come under KOSPI 1,566.15 threat, depending on the course of action of global distributors.
Market Cap (Wbn) 331 The COVID-19 outbreak has fueled an increase in home media consumption around the world. Netflix, a pure OTT service, and Disney, which still has high exposure to old media, Shares Outstanding (mn) 21 have rapidly decoupled in terms of both earnings estimates and share prices. Looking Free Float (%) 60.9 ahead, Disney is likely to make more aggressive moves in the OTT space, as it views its Foreign Ownership (%) 7.0 OTT platform as its future growth engine. The media giant has decided to postpone the Beta (12M) 1.47 releases and production of some of its films, and is now considering going straight to 52-Week Low 14,200 streaming. In Korea, Disney films represent 15% of overall theater attendance. Disney’s 52-Week High 47,450 share has been increasing alongside the fan bases of its key franchises. If film distribution also becomes more reliant on OTTs, multiplex operators will need to come (%) 1M 6M 12M up with ways to differentiate themselves to survive. Absolute -40.8 -54.5 -67.0 Relative -17.1 -39.2 -54.2 Maintain Hold We maintain our Hold rating on CJ CGV. The multiplex market is on track to shrink in 120 CJ CGV KOSPI 2020 for the first time in 12 years. There had already been worries about earnings due to 100 an unfavorable comparison, but the direct impact of the COVID-19 outbreak has now 80 emerged as a bigger concern. We expect negative leverage effects, given the company’s high fixed-cost burden. Another area of concern is the company’s interest expenses, 60 which are likely to be at least W100bn. We plan to review our rating after gaining more 40 clarity on the pace of box-office normalization in key markets, the potential defection of 20 content producers from theater chains, and the company’s additional plans for balance 3.19 7.19 11.19 3.20 sheet improvement.
메일 @ miraeasset.com FY (Dec.) 12/16 12/17 12/18 12/19 12/20F 12/21F Revenue (Wbn) 1,432 1,714 1,769 1,942 1,714 2,150 OP (Wbn) 70 86 78 123 -1 121 OP Margin (%) 4.9 5.0 4.4 6.3 -0.1 5.6 NP (Wbn) 12 -1 -141 -153 -51 -3 EPS (W) 583 -66 -6,647 -7,213 -2,418 -143 ROE (%) 3.1 -0.4 -67.0 -137.6 -62.2 -5.9 P/E (x) 120.7 - - - - - P/B (x) 4.0 5.1 7.8 6.6 6.1 7.0 Dividend Yield (%) 0.5 0.5 0.5 0.6 1.3 1.3 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 13 March 23, 2020 Media/Entertainment
Figure 21. Box office to shrink for the first time in 12 years
(%)
30 ATP YoY Attendance YoY Box office YoY
20
10
0
-10
-20
-30 2005 2007 2009 2011 2013 2015 2017 2019 2021F
Source: KOFIC, Mirae Asset Daewoo Research
Table 7. Parent earnings and forecasts (Wbn, %, mn, %p) 1Q19 2Q19 3Q19 4Q19 1Q20F 2Q20F 3Q20F 4Q20F 2018 2019 2020F Revenue 249 266 282 257 131 193 261 239 975 1,054 824 Box office 169 172 185 166 82 121 168 149 649 691 520 Concessions 44 48 52 47 23 35 48 44 165 191 150 Screen ads 19 28 29 28 18 26 31 31 100 104 107 Other 17 19 16 16 7 11 14 16 60 68 48 Operating profit 7 9 26 25 -34 -7 20 18 36 68 -3 OP margin 2.9 3.5 9.4 9.9 -25.6 -3.4 7.6 7.4 3.7 6.5 -0.3 Pretax profit -2 1 15 -72 -42 -15 12 10 -358 -58 -35 Net profit -2 0 13 -77 -32 -11 9 7 -324 -66 -26 Net margin -0.8 0.0 4.6 -30.0 -24.1 -5.7 3.5 3.1 -33.2 -6.2 -3.2 YoY Revenue 13.0 20.3 0.0 2.2 -47.3 -27.4 -7.5 -6.8 4.6 8.1 -21.8 Box office 13.5 16.7 -2.8 1.7 -51.4 -29.6 -9.3 -9.9 6.6 6.5 -24.7 Concessions 18.3 29.7 4.7 13.8 -47.9 -27.1 -6.2 -6.7 4.4 15.7 -21.3 Screen ads -11.7 19.7 4.6 1.2 -0.6 -4.6 6.1 7.4 0.6 3.7 2.4 Other 32.7 34.1 12.7 -17.4 -56.0 -42.3 -15.9 -1.4 -7.8 12.3 -29.9 Operating profit 551.8 TTB 3.5 139.1 TTR TTR -25.0 -30.5 -17.8 89.5 TTR Net profit TTR TTB TTB TTR TTR TTR -31.1 TTB TTR TTR TTR Key assumptions Domestic attendance 55 54 61 56 28 38 55 50 216 227 171 CGV attendance 26 26 29 26 13 18 26 24 102 107 81 CGV share 47.5 47.2 47.0 47.0 47.5 47.2 47.0 47.0 47.1 47.2 47.1 YoY Domestic attendance 7.4 20.4 -8.0 5.2 -50.0 -30.0 -10.0 -10.0 -1.6 4.8 -24.5 CGV attendance 6.5 18.8 -6.2 5.0 -50.0 -30.0 -10.0 -10.0 -1.8 4.9 -24.6 CGV share -0.4 -0.6 0.9 -0.1 0.0 0.0 0.0 0.0 -0.1 0.1 0.0 Note: Market share figures are based on averages. Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 14 March 23, 2020 Media/Entertainment
Table 8. Consolidated earnings and forecasts (Wbn, %, mn, %p )
1Q19 2Q19 3Q19 4Q19 1Q20F 2Q20F 3Q20F 4Q20F 2018 2019 2020F Revenue 465 482 497 498 297 396 493 528 1,769 1,942 1,714 Parent 249 266 282 257 131 193 261 239 975 1,054 824 Subsidiaries 216 216 215 242 166 202 232 289 795 888 889 China (consolidated) 97 85 93 89 7 45 91 92 319 363 235 Turkey 39 26 26 55 52 35 32 81 168 146 200 Vietnam 46 53 45 42 71 72 58 58 138 186 258 4DPLEX 21 32 28 32 21 32 30 32 123 113 115 Operating profit 23.5 23.5 31.0 45.2 -54.2 -13.1 29.3 36.9 78 123 -1 OP margin 5.1 4.9 6.2 9.1 -18.2 -3.3 5.9 7.0 4.4 6.3 -0.1 Parent 7.3 9.3 26.5 25.4 -33.6 -6.6 19.9 17.6 36 68 -3 Subsidiaries 16.3 14.2 4.5 19.8 -20.6 -6.6 9.4 19.2 42 55 1 China (consolidated) 9.2 1.9 3.4 3.6 -32.5 -19.4 4.8 4.2 13 18 -43 Turkey (excluding PPA) 2.3 -2.9 -5.0 12.2 3.9 -1.3 -6.3 11.9 13 7 8 Vietnam 7.2 6.4 4.1 2.5 7.5 8.0 4.6 3.7 8 20 24 4DPLEX -0.5 4.6 1.6 -4.4 -1.6 3.9 4.1 -2.6 14 1 4 Pretax profit -9.1 -8.6 -3.2 -207.7 -86.2 -45.6 -2.2 5.9 -210 -229 -128 Net profit -8.6 -9.8 -7.1 -213.5 -83.6 -44.2 -2.1 5.7 -189 -239 -124 Net margin -1.8 -2.0 -1.4 -42.9 -28.1 -11.2 -0.4 1.1 -10.7 -12.3 -7.2 Net profit (controlling interests) -6.9 -8.8 1.8 -138.7 -5.5 -46.8 -2.8 4.0 -140.7 -152.6 -51.2 YoY Revenue 5.3 19.1 5.2 10.6 -36.0 -17.9 -0.9 5.9 3.2 9.8 -11.8 Parent 13.0 20.3 0.0 2.2 -47.3 -27.4 -7.5 -6.8 4.6 8.1 -21.8 Subsidiaries -2.3 17.6 12.8 21.3 -22.9 -6.1 7.7 19.5 1.6 11.8 0.1 China (consolidated) 5.4 22.2 6.0 25.9 -92.5 -46.7 -1.2 3.4 13.6 13.7 -35.2 Turkey -38.3 -17.0 20.8 5.6 35.4 33.9 23.6 46.8 -20.5 -13.2 37.3 Vietnam 42.8 32.5 30.7 36.0 54.5 34.4 29.0 38.0 5.4 35.2 38.8 4DPLEX -4.1 8.5 -24.3 -6.2 0.3 -0.1 5.0 1.5 6.2 -7.8 1.7 Operating profit 22.6 8,719.9 -5.1 76.6 TTR TTR -5.4 -18.4 -9.9 58.5 TTR Net profit TTR TTR TTR TTR TTR TTR TTR TTB TTR TTR TTR Key assumptions China attendance 480 329 473 437 48 165 425 394 1,717 1,719 1,032 CGV share 2.3 2.6 2.4 2.5 2.5 2.5 2.5 2.6 2.5 2.4 2.5 Turkey attendance 19 10 8 23 21 11 10 26 69 59 68 CGV share 40.0 43.4 42.4 39.8 40.0 43.4 42.4 39.8 42.9 40.8 40.8 Note: Market share figures are based on averages. Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 15 March 23, 2020 Media/Entertainment
CJ CGV (079160 KS/Hold)
Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/18 12/19F 12/20F 12/21F (Wbn) 12/18 12/19F 12/20F 12/21F Revenue 1,769 1,942 1,714 2,150 Current Assets 497 430 675 813 Cost of Sales 857 1,157 999 1,216 Cash and Cash Equivalents 185 85 310 356 Gross Profit 912 785 715 934 AR & Other Receivables 190 210 222 278 SG&A Expenses 835 662 716 812 Inventories 19 21 22 28 Operating Profit (Adj) 78 123 -1 121 Other Current Assets 103 114 121 151 Operating Profit 78 123 -1 121 Non-Current Assets 1,737 3,674 3,335 3,050 Non-Operating Profit -288 -352 -127 -125 Investments in Associates 50 55 59 74 Net Financial Income -42 0 0 0 Property, Plant and Equipment 900 2,894 2,593 2,324 Net Gain from Inv in Associates 5 5 5 5 Intangible Assets 460 470 426 386 Pretax Profit -210 -229 -128 -4 Total Assets 2,234 4,103 4,009 3,863 Income Tax -22 11 -4 0 Current Liabilities 863 1,040 1,068 901 Profit from Continuing Operations -189 -239 -124 -3 AP & Other Payables 259 286 303 380 Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 435 566 566 272 Net Profit -189 -239 -124 -3 Other Current Liabilities 169 188 199 249 Controlling Interests -141 -153 -51 -3 Non-Current Liabilities 821 2,745 2,751 2,779 Non-Controlling Interests -48 -86 -73 0 Long-Term Financial Liabilities 726 2,639 2,639 2,639 Total Comprehensive Profit -360 -222 -124 -3 Other Non-Current Liabilities 95 106 112 140 Controlling Interests -200 -98 -55 -2 Total Liabilities 1,684 3,785 3,819 3,681 Non-Controlling Interests -161 -124 -69 -2 Controlling Interests 112 110 54 48 EBITDA 237 494 343 431 Capital Stock 11 11 11 11 FCF (Free Cash Flow) -137 10 234 372 Capital Surplus 90 90 90 90 EBITDA Margin (%) 13.4 25.4 20.0 20.0 Retained Earnings 182 21 -34 -42 Operating Profit Margin (%) 4.4 6.3 -0.1 5.6 Non-Controlling Interests 438 209 136 135 Net Profit Margin (%) -8.0 -7.9 -3.0 -0.1 Stockholders' Equity 550 319 190 183
Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/18 12/19F 12/20F 12/21F 12/18 12/19F 12/20F 12/21F Cash Flows from Op Activities 109 144 234 372 P/E (x) - - - - Net Profit -189 -239 -124 -3 P/CF (x) 3.4 2.9 1.5 1.1 Non-Cash Income and Expense 447 494 341 309 P/B (x) 7.8 6.6 6.1 7.0 Depreciation 139 323 301 269 EV/EBITDA (x) 9.6 8.2 9.8 7.0 Amortization 21 48 44 40 EPS (W) -6,647 -7,213 -2,418 -143 Others 287 123 -4 0 CFPS (W) 12,220 12,029 10,221 14,439 Chg in Working Capital -104 25 14 66 BPS (W) 5,284 5,199 2,581 2,238 Chg in AR & Other Receivables -4 -15 -11 -49 DPS (W) 200 200 200 200 Chg in Inventories 5 -3 -1 -6 Payout ratio (%) -2.2 -1.8 -3.4 -124.3 Chg in AP & Other Payables -72 33 8 36 Dividend Yield (%) 0.5 0.6 1.3 1.3 Income Tax Paid -15 -34 4 0 Revenue Growth (%) 3.2 9.8 -11.7 25.4 Cash Flows from Inv Activities -43 -106 -2 -11 EBITDA Growth (%) -7.4 108.4 -30.6 25.7 Chg in PP&E -35 -134 0 0 Operating Profit Growth (%) -9.3 57.7 - - Chg in Intangible Assets -9 -14 0 0 EPS Growth (%) - - - - Chg in Financial Assets 22 -4 -2 -11 Accounts Receivable Turnover (x) 10.5 11.1 9.1 9.8 Others -21 46 0 0 Inventory Turnover (x) 96.5 98.2 80.1 86.7 Cash Flows from Fin Activities -6 -139 -4 -299 Accounts Payable Turnover (x) 7.2 9.0 7.2 7.6 Chg in Financial Liabilities 41 2,045 0 -295 ROA (%) -8.0 -7.5 -3.1 -0.1 Chg in Equity 0 0 0 0 ROE (%) -67.0 -137.6 -62.2 -5.9 Dividends Paid -12 -11 -4 -4 ROIC (%) 4.5 5.5 0.0 4.5 Others -35 -2,173 0 0 Liability to Equity Ratio (%) 306.0 1,187.5 2,007.6 2,015.6 Increase (Decrease) in Cash 53 -101 225 47 Current Ratio (%) 57.6 41.3 63.2 90.3 Beginning Balance 133 185 85 310 Net Debt to Equity Ratio (%) 176.2 977.3 1,519.0 1,394.7 Ending Balance 185 85 310 356 Interest Coverage Ratio (x) 1.6 0.0 0.0 0.0 Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 16 March 23, 2020 Media/Entertainment
APPENDIX 1
Important Disclosures & Disclaimers 2-Year Rating and Target Price History
Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price Studio Dragon (253450) 07/16/2019 Buy 172,000 11/22/2019 Buy 112,000 01/23/2019 Buy 176,000 07/21/2019 Buy 87,000 11/26/2018 Buy 141,000 02/15/2019 Buy 130,000 08/27/2018 No Coverage 11/08/2018 Buy 153,000 04/26/2018 Buy 200,000 06/22/2018 Buy 150,000 10/26/2017 Buy 240,000 03/06/2018 Buy 110,000 Kakao(035720) CJ CGV(079160) 02/13/2020 Buy 243,000 02/12/2020 Hold - 01/13/2020 Buy 205,000 08/09/2019 Buy 53,000 11/07/2019 Buy 185,000 05/13/2019 Buy 52,000 07/16/2019 Buy 177,000 11/09/2018 Buy 56,000 05/01/2019 Buy 170,000 08/10/2018 Buy 80,000 11/26/2018 Buy 130,000 06/07/2018 Buy 89,000 08/27/2018 No Coverage 04/02/2018 Buy 98,000 08/10/2018 Buy 150,000 02/08/2018 Buy 97,000 05/11/2018 Trading Buy 130,000 NAVER(035420) 02/08/2018 Trading Buy 150,000 11/26/2019 Buy 241,000 09/17/2019 Buy 230,000 08/11/2019 Buy 181,000
(W) Studio Dragon (W) CJ CGV (W) NAVER (W) Kakao 200,000 120,000 300,000 300,000
100,000 250,000 250,000 150,000 80,000 200,000 200,000
100,000 60,000 150,000 150,000
40,000 100,000 100,000 50,000 20,000 50,000 50,000
0 0 0 0 Mar 18 Mar 19 Mar 20 Mar 18 Mar 19 Mar 20 Mar 18 Mar 19 Mar 20 Mar 18 Mar 19 Mar 20
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 Mirae Asset Daewoo Co., Ltd., 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.
Equity Ratings Distribution & Investment Banking Services Buy Trading Buy Hold Sell Equity Ratings Distribution 84.05% 9.82% 6.13% 0.00% Investment Banking Services 76.67% 13.33% 10.00% 0.00% * Based on recommendations in the last 12-months (as of December 31, 2019)
Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates own 1% or more of NAVER`s shares outstanding. As of the publication date, Mirae Asset Daewoo Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of NAVER, Kakao as an underlying asset; other than this, Mirae Asset Daewoo has no other special interests in the covered companies. As of the publication date, Mirae Asset Daewoo Co., Ltd. is acting as a financial advisor to Mr. Blue for its treasury share buyback and cancellation.
Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean
Mirae Asset Daewoo Research 17 March 23, 2020 Media/Entertainment
securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) 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. Like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined 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 Mirae Asset Daewoo except as otherwise stated herein.
Disclaimers This report was prepared by Mirae Asset 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 in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset 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. In case of 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. 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 or regulations or subject Mirae Asset Daewoo or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and it is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person and such person shall not be treated as a client of Mirae Asset Daewoo by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Daewoo may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views and analytical methods of the analysts who prepared them. Mirae Asset Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset 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. Mirae Asset 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. 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 Mirae Asset Daewoo.
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Mirae Asset Daewoo Research 18 March 23, 2020 Media/Entertainment
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