Entertainment A renewed look at entertainment stocks Overweight (Maintain) Sector correction sparked by negative news is subsiding The combined market value of Korea’s three major entertainment firms – YG Industry Report Entertainment (122870 KQ/Buy/TP: W60,000/CP: W37,400); SM Entertainment ( 041510 April 24, 2019 KQ/Buy/TP: W59,000/CP: W41,300); and JYP Entertainment (035900 KQ /TP: W41,000/CP: W30,850) - hit a low of W2.5tr on March 15 th , which represented a roughly th 22% loss from the previous high of W3.2tr set on January 7 . This was primari ly due to several negative news events that took place all at once, including a series of celebrity Mirae Asset Daewoo Co., Ltd. scandals at YG Entertainment (February 26 th ) and SM Entertainment’s 4Q18 earnings shock (March 8 th ). [Media ] Since then, all three entertainment stocks have reboun ded. As of yesterday’s close, Jeong -yeob Park +822 -3774 -1652 their combined market value stood at W2.7tr, up 8% from the previous low. In the end,
[email protected] the three stocks managed to defend their post-2011 valuation lows. Their most recent trough was similar to the lows recorded during previous negative events (P/B of around 1.5x; EXO member departures in October 2014, YG Entertainment’s tax audit in August 2016, THAAD backlash in March 2017, and Big Bang’s military enlistment in May 2018). All three companies are heading into the 1Q19 earnin gs season (expected around May 14 th ) with their stocks in better places.