SM Entertainment (041510 KQ) China Growth Story to Begin in 2014

SM Entertainment (041510 KQ) China growth story to begin in 2014

Entertainment 3Q and 4Q earnings to be in line; Strong momentum anticipated in 4Q Despite a sluggish 1H, we expect SM Entertainment’s 2013 revenue to grow 16.5% YoY Company Update to W281.5bn, and operating profit to remain broadly flat YoY at W60.7bn under consolidated K-IFRS. November 14, 2013 The 1H earnings weakness was attributable to: 1) sharp yen depreciation, 2) overseas concert royalty income being geared towards 2H (only 500,000 concertgoers were (Maintain) Buy reflected in 1H out of 2.32mn concertgoers in 2013F), and 3) a significant fall in album royalties from Japan (direct exports of Korean language albums, which had been a major earnings contributor in 2012). Target Price (12M, W) 60,000 We see strong earnings momentum in 4Q, as the company should recognize revenue Share Price (11/13/13, W) 38,400 from several directly operated concerts (which are more profitable), including the Korea- China-Japan SM Town tour. We estimate non-consolidated operating profit at W12bn in Expected Return 56% 3Q and over W18bn in 4Q.

2014 earnings catalysts: China, Exo, and additional revenue streams OP (13F, Wbn) 61 China should become a major market for SM in 2014. The entertainment firm is looking Consensus OP (13F, Wbn) 60 into joint ventures with local Chinese firms to establish a broad presence in the country across broadcasting, commercials, TV dramas, and films. The company is purportedly in EPS Growth (13F, %) 27.3 discussions with major Chinese entertainment and media firms over potential alliances. Market EPS Growth (13F, %) 15.0 P/E (13F, x) 15.1 The boy band Exo is scheduled to hold its first concert (as a headline act) in December Market P/E (13F, x) 11.0 and has been added to SM Entertainment’s 2014 concert lineup. Exo’s album is on track KOSDAQ 505.60 to break the 1mn sales mark, which would make it the first domestic album to do so in 13 years. The boy group, which includes four Chinese members, is gaining widespread Market Cap (Wbn) 793 popularity in China and Southeast Asia. Shares Outstanding (mn) 21 Free Float (%) 78.3 The company’s subsidiary SM C&C (048550 KQ) should display sharp earnings growth in Foreign Ownership (%) 10.3 2014, driven by: 1) earnings contributions from Woollim Entertainment (which Beta (12M) 1.09 represents the popular group Infinite) beginning in October 2013, and 2) secondary revenue streams, including broadcast productions, fan meet-and-greet tours and 52-Week Low (W) 29,100 merchandise stores. We estimate SM C&C’s 2014 revenue and operating profit at 52-Week High (W) 69,500 W111.2bn and W11.1bn, respectively. (%) 1M 6M 12M Maintain Buy and Lift TP to W60,000 Absolute 3.6 -1.9 -44.5 Relative 6.7 -2.7 -48.4 While major artists TVXQ, Super Junior, and Girls’ Generation continue to enjoy worldwide popularity, SM has expanded its lineup with the additions of Exo and Infinite. Share price On top of traditional album and concert sales, the company is introducing more profit 130 KOSDAQ 110 models, like fan package tours and merchandise stores. 90 We maintain Buy and lift our target price to W60,000 (from W46,000) after revising up 70 our 2014F earnings and changing our valuation base year and P/E target comparison. 50 We expect two straight quarters of solid earnings in 2H, which should help restore 30 11/12 3/13 7/13 11/13 investor confidence. In addition to the nine-day SM Town Week concert in December, the growing visibility of SM’s Chinese joint venture could also trigger upside to the stock.

Daewoo Securities Co., Ltd. FY (Dec.) 12/10 12/11 12/12 12/13F 12/14F 12/15F Revenue (Wbn) 97 143 241 281 357 393 Internet/Game/Entertainment OP (Wbn) 20 26 61 61 77 90 Chang-kwean Kim OP margin (%) 20.9 17.9 25.1 21.6 21.4 22.9 +822-768-4321 NP (Wbn) 17 23 40 52 64 76 [email protected] EPS (W) 942 1,235 1,994 2,539 3,114 3,675

ROE (%) 22.9 23.1 24.7 22.0 21.8 20.8 P/E (x) 16.0 33.0 22.8 15.1 12.3 10.5 P/B (x) 3.6 7.4 5.5 3.6 2.7 2.1 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

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

November 14, 2013 SM Entertainment

Investment points

Gaining Chinese market share on the back of competitive content

China’s service and entertainment markets are growing at a rapid pace . Huayi Brothers Media, a Chinese film studio and record label, is being traded on the Shenzhen Stock Exchange at respective 2013F and 2014F P/Es of 43x and 37x (market cap of at least W5tr).

The Beijing SM Town concert held in October drew over 70,000 fans. This resounding success is evidence of the massive popularity of Korean pop culture (especially SM artists) in China. Thanks to the rapid spread of mobile internet, there is almost no time lag between the production of music content in Korea, and consumption in China. SM has an excellent track record of developing globally popular pop groups (from H.O.T. in 1995 to Exo in 2013). Its global presence has been felt mainly in Japan over the past decade, but China will likely take center stage in the company’s overseas growth for the next 10 years.

We maintain our Buy call on SM and raise our target price from W46,000 to W60,000. As the end of the year is approaching, we have changed the base year of valuation from 2013 to 2014. And in deriving our target price for SM, we applied Cheil Industries’ 2014F P/E of 19.7x (the highest level among Korean entertainment and media firms). 2014F peer average P/E levels are 23.0x for global firms and 15.8x for domestic firms.

Figure 1. Foreign investments in China are shifting away from manufacturing to consumption and service sectors (%) FDI (3-year average growth) % of all FDI Reduced FDI in traditional 60 manufacturing/light Increased FDI in consumption-/environment-/finance-related industries industries

-20 Cu Fin Tr W Te Wa Ch El IC Re Sp Ph Lo Eq Ma Co Te Mi ltur an ans hole chn ter em ectr T al e eci arm dgi uip nuf mp xtil nin e ce por sal olo sup ica icity sta alty ac ng men act ute es g tatio e/re gy ply ls te equ euti t urin rs n tail ipm cals g ent

Note: Cumulative Jan.- Aug. 2013 data Source: CEIC, KDB Daewoo Securities Research

Figure 2. Earnings and share price of Huayi Brothers Media

(US$bn) (RMB) 140 8000 Revenue (L) 120 Operating profit (L) 7000 Share price (R) 100 6000

80 5000

60 4000

40 3000

20 2000

0 1000

-20 0 1/10 7/10 1/11 7/11 1/12 7/12 1/13 7/13

Source: Bloomberg, KDB Daewoo Securities Research

KDB Daewoo Securities Research 2 November 14, 2013 SM Entertainment

Figure 3. Relationship between Korea’s per-capita GDP & growth of culture/arts & service sectors

(US$) (%) 25,000 Culture/arts and service boomed as per- Real GDP per capita (L) 70 capita income increased from US$4,000 Culture/arts & service - YoY growth (R) to $10,000 60 20,000 50

15,000 40 30 10,000 20

10 5,000 0

0 -10 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

Note: Real GDP (base year of 2000) Source: World Bank, BOK, KDB Daewoo Securities Research

Figure 4. Gov’t expenditure on culture/arts & service in China Figure 5. Employment in culture/arts & service in China

(US$mn) (mn persons) 5 18

4 CAGR of 23.7% 17 between 2007 and 2013 CAGR of 3.1% between 2009 and 2013 3

16 2

15 1

0 14 1/07 7/07 1/08 7/08 1/09 7/09 1/10 7/10 1/11 7/11 1/12 7/12 1/13 7/13 9/05 3/06 9/06 3/07 9/07 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 9/12 3/13

Source: National Bureau of Statistics of China, KDB Daewoo Securities Research Source: National Bureau of Statistics of China, KDB Daewoo Securities Research

Figure 6. Service industry as a % of GDP

(% of GDP) 80 Great Britain France US

Spain Italy Japan Germany 70 Brazil India Taiwan Turkey Poland 60 Mexico Czech Russia

50 Malaysia Korea

Thailand China 40 Indonesia (US$'000) 30 0 102030405060

Source: Bloomberg, KDB Daewoo Securities Research

KDB Daewoo Securities Research 3 November 14, 2013 SM Entertainment

Table 1. Earnings forecasts for global media/entertainment companies (US$mn, %) Market Revenue Operating profit OP margin Net profit Net margin EPS

cap. 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F SM Entertainment 739 214 269 342 54 56 71 25.1 21.0 20.7 35 43 48 16.5 15.9 14.1 1.8 2.1 2.3 YG Entertainment 476 95 121 147 19 24 35 20.1 19.9 23.8 17 21 29 17.6 16.9 19.8 1.6 2.1 2.8 CJ CGV 962 692 901 1,076 49 67 90 7.1 7.4 8.4 48 40 65 6.9 4.4 6.1 2.3 2.0 3.1 Cheil Worldwide 2,684 2,101 2,594 3,075 112 139 169 5.3 5.3 5.5 83 104 128 4.0 4.0 4.2 0.8 1.0 1.2 CJ E&M 1,102 1,239 1,551 1,719 34 64 98 2.8 4.1 5.7 33 42 74 2.7 2.7 4.3 0.0 1.1 2.0 KT Skylife 1,184 503 584 631 58 94 103 11.6 16.2 16.3 50 82 91 9.9 14.0 14.5 1.0 1.7 1.9 Walt Disney 121,986 45,041 47,823 50,945 9,450 11,276 12,396 21.0 23.6 24.3 6,136 6,933 7,625 13.6 14.5 15.0 3.4 3.9 4.5 Time Warner 60,426 28,729 29,603 30,607 6,214 6,670 7,131 21.6 22.5 23.3 3,019 3,643 3,877 10.5 12.3 12.7 3.4 3.8 4.3 CBS 35,239 14,089 15,216 15,461 3,013 3,326 3,611 21.4 21.9 23.4 1,574 1,894 2,062 11.2 12.4 13.3 2.5 3.0 3.5 Discovery Holdings 30,041 4,487 5,553 6,207 1,861 2,075 2,415 41.5 37.4 38.9 943 1,119 1,371 21.0 20.1 22.1 2.5 3.1 4.0 Viacom 39,823 13,887 13,745 14,427 3,901 3,925 4,266 28.1 28.6 29.6 1,981 2,278 2,422 14.3 16.6 16.8 4.2 4.6 5.4 Liberty Interactive 14,037 10,054 10,261 10,738 1,200 1,175 1,306 11.9 11.4 12.2 1,530 501 617 15.2 4.9 5.7 -0.8 1.0 1.4 E.W. Scripps 999 903 817 920 90 23 93 9.9 2.8 10.2 40 - - 4.4 0.9 0.0 0.9 News Corp. 9,995 8,891 8,790 8,850 140 150 246 1.6 1.7 2.8 506 169 248 5.7 1.9 2.8 0.4 0.4 Clear Channel 569 6,247 6,197 6,345 1,108 - - 17.7 -424 - - -6.8 -3.2 -3.7 -3.0 RealNetworks 257 259 - - -42 - - -16.3 45 - - 17.3 -0.6 - - Pandora 5,426 427 649 898 -38 -30 18 -8.8 -4.6 2.0 -38 -36 14 -8.9 -5.5 1.6 -0.2 0.0 0.2 Avex 1,068 1,679 1,639 1,885 170 158 215 10.1 9.7 11.4 89 97 100 5.3 5.9 5.3 2.1 2.3 2.3 Amuse 174 373 320 332 50 37 39 13.3 11.5 11.6 30 23 24 8.0 7.1 7.1 3.4 2.6 2.7 Huayi Brothers Media 4,664 213 317 413 41 131 160 19.2 41.2 38.7 39 103 122 18.1 32.5 29.7 0.0 0.1 0.1 Average 12.9 14.1 15.9 8.9 9.3 10.3 Notes: Bloomberg consensus; Based on November 13th closing prices; EPS is based on US$. Source: Bloomberg, KDB Daewoo Securities Research

Table 2. Valuation comparison of global media/entertainment companies (US$mn, %) Market P/E P/B P/S EV/EBITDA ROE ROA

cap. 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F SM Entertainment 739 22.8 17.3 16.0 4.4 3.4 2.7 3.8 2.8 2.2 11.7 9.2 7.6 24.7 19.6 19.8 16.3 12.8 13.8 YG Entertainment 476 33.3 22.6 16.6 6.5 4.4 3.6 5.9 4.0 3.3 23.2 14.4 10.5 21.6 21.2 23.6 18.0 17.2 18.9 CJ CGV 962 12.2 22.8 14.6 1.9 2.6 2.3 0.9 1.1 0.9 7.3 11.2 8.8 16.6 11.7 16.3 5.6 4.5 6.4 Cheil Worldwide 2,684 24.9 24.5 19.7 3.3 3.7 3.1 1.0 1.0 0.9 12.1 15.4 12.6 13.5 15.5 17.1 4.9 5.7 6.1 CJ E&M 1,102 646.3 26.7 14.9 0.8 1.0 0.9 0.7 0.7 0.6 2.9 3.2 3.0 3.0 3.4 6.1 1.8 1.9 3.4 KT Skylife 1,184 28.5 14.6 13.1 4.6 3.1 2.6 2.8 2.0 1.9 12.1 8.0 7.5 17.7 22.9 21.3 9.5 13.1 12.8 Walt Disney 121,986 19.2 17.2 15.0 2.6 2.8 2.3 2.6 2.6 2.4 11.2 10.1 9.2 14.4 15.6 16.7 7.9 8.6 9.1 Time Warner 60,426 14.2 17.7 15.7 1.5 1.8 1.7 1.6 2.0 2.0 8.7 10.3 9.7 10.1 11.8 12.7 4.4 6.1 6.5 CBS 35,239 14.9 19.3 16.8 2.3 3.5 3.1 1.7 ]2.3 2.3 8.4 10.9 10.2 15.6 18.6 20.6 6.0 7.5 8.1 Discovery Holdings 30,041 25.2 27.4 21.3 3.1 4.9 4.8 5.3 5.4 4.8 11.8 15.0 13.2 14.7 18.0 22.4 7.6 8.9 10.0 Viacom 39,823 12.7 17.8 15.1 3.6 6.6 7.7 2.0 2.9 2.8 8.4 11.4 10.5 24.6 34.6 47.4 8.8 11.8 12.7 Liberty Interactive 14,037 - 26.9 20.3 1.4 2.2 2.1 1.1 1.4 1.3 10.3 12.1 11.3 21.8 7.3 8.9 7.0 4.2 4.8 E.W. Scripps 999 12.1 - 19.0 1.1 - - 0.7 1.2 1.1 4.0 15.9 6.8 7.3 0.0 8.9 4.0 0.0 4.7 News Corp. 9,995 - 48.6 40.7 - 0.9 0.9 - 1.1 1.1 9.6 10.7 9.4 4.7 - - 3.5 - - Clear Channel 569 ------0.0 0.1 0.1 11.0 11.6 10.8 - - - -2.6 - - Real Networks 257 - - - 0.8 - - 1.0 - - - - - 14.2 - - 10.8 - - Pandora 5,426 - - 115.7 20.1 52.3 35.7 4.5 8.4 6.0 - 370.1 85.9 -37.5 3.7 30.8 -19.2 1.7 15.4 Avex 1,068 15.1 10.4 10.4 2.4 2.1 1.9 0.8 0.7 0.6 7.0 5.6 4.2 18.2 19.0 18.9 7.0 8.2 9.1 Amuse 174 6.8 7.4 7.1 1.1 1.0 0.9 0.5 0.5 0.5 1.5 1.8 1.7 17.5 13.8 13.2 11.1 - - Huayi Brothers Media 4,664 36 43 37 4 8 7 6.4 14.7 11.3 30 37 33 12.8 21.8 21.0 7.4 15.3 15.1 Average 63.4 83.1 23.0 3.6 6.0 4.8 2.1 2.2 1.9 9.5 30.4 12.9 12.4 14.8 19.0 5.9 7.5 9.5 Notes: Bloomberg consensus; Based on November 13th closing prices. Source: Bloomberg, KDB Daewoo Securities Research

KDB Daewoo Securities Research 4 November 14, 2013 SM Entertainment

Music market outlook

Asian music markets, especially China, to grow rapidly

China has become the second–largest movie market in the world, following the US, on the back of: 1) the easing of restrictions on movie imports by President Xi Jinping’s administration, 2) a bump in the quality of domestic releases, and 3) improved infrastructure (e.g., an increase in multiplexes). By contrast, the nation’s music market accounts for only a small fraction of the global total (1.4% based on 2013F data), according to PricewaterhouseCoopers. While concert ticket sales and CD sales are the respective drivers of the US and Japanese markets, digital music sales are the engine of the Chinese music market (as in Korea). Currently, digital music sales—mainly distributed by telecom operators—make up 72% of the nation’s music market. And it should be noted that revenue from these sales tends to barely cover related payment service and commission fees. Looking once more at the movie industry, we find that theater expansion in China accelerated market changes so rapidly that, now, high-end movie ticket sales (e.g., 3D, IMAX) represent more than 70% of the market. In our view, the proliferation of mobile internet could serve as a similar catalyst for change in the music space. Indeed, mobile internet is providing fans with greater access to music videos and other content, which is sparking a surge in fandom for idol bands. Considering Chinese-language copies accounted for half of the sales of Exo’s latest album (close to 1mn copies total), we believe that the Chinese music market has already begun to evolve.

Figure 7. Music market growth over the next five years by country; Growth is stronger in developing countries (%) 12

10 Five-country avg.: 7.7% 8

Four-country avg.: 1.1% 2

-2 China Thailand Vietnam Indonesia Singapore Korea Japan US Euope

Note: Total music market, including concerts, festivals, digital music, and CD albums. Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media

Figure 8. Breakdown of global music market by country

Korea China China holds only 1.4% of the global music market Other 1.6% 1.4% 16.9% Japan 13.1%

US 30.0% Europe 37.0%

Note: 2013F total music market, including concerts, festivals, digital music, and CD albums. Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media

KDB Daewoo Securities Research 5 November 14, 2013 SM Entertainment

Figure 9. Chinese music market Figure 10. Chinese music market growth

(US$mn) (%) 1,200 15 Concerts/festivals Digital CD Concerts/festivals Digital CD

900 5

0 600 -5

-10 300

-15

0 -20 2012 2013F 2014F 2015F 2016F 2017F 2012 2013F 2014F 2015F 2016F 2017F

Source: PwC, Recording Industry Association of America, Bundesverband Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media Musikindustrie, Informa Telecoms & Media

Figure 11. Chinese concert market per capita Figure 12. Chinese digital music market per capita

(US$) (US$) 0.15 Concert market size per capita 0.6 Digital market size per capita

0.145 0.5

0.14 0.4 0.135 0.3 0.13 0.2 0.125

0.12 0.1

0.115 0 2012 2013F 2014F 2015F 2016F 2017F 2012 2013F 2014F 2015F 2016F 2017F

Source: National Bureau of Statistics of China, PwC, Recording Industry Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media Media

Figure 13. Chinese CD album market per capita Figure 14. Chinese music market per capita

(US$) (US$) 0.02 CD market size per capita 0.8 Overall music market size per capita

0.018 0.7 0.016 0.6 0.014 0.5 0.012 0.01 0.4 0.008 0.3 0.006 0.2 0.004 0.1 0.002 0 0 2012 2013F 2014F 2015F 2016F 2017F 2012 2013F 2014F 2015F 2016F 2017F

KDB Daewoo Securities Research 6 November 14, 2013 SM Entertainment

Table 3. Korean music market breakdown and 2013-17 CAGR forecast (US$mn) 2008 2009 2010 2011 2012 2013F 2014F 2015F 2016F 2017F 2013-17 CAGR Concerts/festivals 357 371 376 394 415 432 449 468 484 498 3.6 Digital 139 169 194 238 253 261 268 276 282 287 2.4 Physical albums 114 105 112 118 123 123 123 123 122 120 -0.6 Total 610 645 682 750 791 816 840 867 888 905 2.6 YoY Concerts/festivals 3.9 1.3 4.8 5.3 4.1 3.9 4.2 3.4 2.9 Digital 21.6 14.8 22.7 6.3 3.2 2.7 3.0 2.2 1.8 Physical albums -7.9 6.7 5.4 4.2 0.0 0.0 0.0 -0.8 -1.6 Total 5.7 5.7 10.0 5.5 3.2 2.9 3.2 2.4 1.9 Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research

Table 4. Chinese music market breakdown and 2013-17 CAGR forecast (US$mn) 2008 2009 2010 2011 2012 2013F 2014F 2015F 2016F 2017F 2013-17 CAGR Concerts/festivals 131 143 152 160 172 178 183 188 194 200 3.0 Digital 369 397 419 438 457 516 570 627 688 747 9.7 Physical albums 59 46 36 29 24 22 19 17 15 13 -12.3 Total 559 586 607 627 653 716 772 832 897 960 7.6 YoY Concerts/festivals 9.2 6.3 5.3 7.5 3.5 2.8 2.7 3.2 3.1 Digital 7.6 5.5 4.5 4.3 12.9 10.5 10.0 9.7 8.6 Physical albums -22.0 -21.7 -19.4 -17.2 -8.3 -13.6 -10.5 -11.8 -13.3 Total 4.8 3.6 3.3 4.1 9.6 7.8 7.8 7.8 7.0 Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research

Table 5. Japanese music market breakdown and 2013-17 CAGR forecast (US$mn) 2008 2009 2010 2011 2012 2013F 2014F 2015F 2016F 2017F 2013-17 CAGR Concerts/festivals 1,511 1,534 1,564 1,547 1,557 1,574 1,592 1,610 1,625 1,641 1.0 Digital 1,288 1,225 1,141 998 840 813 803 795 785 774 -1.2 Physical albums 5,993 4,784 4,403 4,288 4,265 4,204 4,174 4,130 4,075 4,021 -1.1 Total 8,792 7,543 7,108 6,833 6,662 6,591 6,569 6,535 6,485 6,436 -0.6 YoY Concerts/festivals 1.5 2.0 -1.1 0.6 1.1 1.1 1.1 0.9 1.0 Digital -4.9 -6.9 -12.5 -15.8 -3.2 -1.2 -1.0 -1.3 -1.4 Physical albums -20.2 -8.0 -2.6 -0.5 -1.4 -0.7 -1.1 -1.3 -1.3 Total -14.2 -5.8 -3.9 -2.5 -1.1 -0.3 -0.5 -0.8 -0.8 Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research

Table 6. US music market breakdown and 2013-17 CAGR forecast (US$mn) 2008 2009 2010 2011 2012 2013F 2014F 2015F 2016F 2017F 2013-17 CAGR Concerts/festivals 8,150 8,631 8,039 8,441 8,611 8,905 9,216 9,442 9,695 9,984 2.9 Digital 2,910 2,873 2,893 3,264 3,591 3,846 4,065 4,256 4,439 4,598 4.6 Physical albums 5,767 4,602 3,664 3,381 2,822 2,375 2,062 1,795 1,578 1,403 -12.3 Total 16,827 16,106 14,596 15,086 15,024 15,126 15,343 15,493 15,712 15,985 1.4 YoY Concerts/festivals 5.9 -6.9 5.0 2.0 3.4 3.5 2.5 2.7 3.0 Digital -1.3 0.7 12.8 10.0 7.1 5.7 4.7 4.3 3.6 Physical albums -20.2 -20.4 -7.7 -16.5 -15.8 -13.2 -12.9 -12.1 -11.1 Total -4.3 -9.4 3.4 -0.4 0.7 1.4 1.0 1.4 1.7 Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research

KDB Daewoo Securities Research 7 November 14, 2013 SM Entertainment

Earnings outlook

More upside to earnings momentum to emerge in 2014

We expect SM Entertainment’s consolidated earnings to grow only marginally YoY this year, despite an improvement in indicators for earnings and qualitative growth, due to: 1) sharp yen depreciation and 2) a plunge in album royalties from overseas markets. An increased revenue contribution from SM C&C, for which profits and margins are not yet fully on track, is also partially responsible for the projected dip in OP margin.

In 2013, the company’s domestic CD sales are projected to grow 58.8% YoY to 1.68mn copies. CD sales in Japan, which stood at 1.7mn in October, are projected to come in at 2.4mn at end-2013, similar to the 2.45mn copies recorded last year. Meanwhile, the company is expected to attract a total audience of 1.72mn to its concerts in Japan this year, up 81.8% YoY. So far, concerts held in ex-Japan, ex-China markets have recorded a total attendance of 306,000, fewer than the 459,000 figure for full-year 2012. However, an SM Town concert (with a target audience of 100,000) is scheduled to be held in December in Korea, which should sharply push up the company’s ex-Japan concert sales.

For 2013, we estimate SM Entertainment’s revenue and operating profit at W281.2bn and W60.7bn, respectively, under consolidated K-IFRS. In 2014, consolidated revenue and operating profit are anticipated to improve to W357.4bn and W76.5bn, respectively. Of note, the company is expected to see its consolidated subsidiaries generate W10bn in operating profit in 2014.

Figure 15. Quarterly CD sales in Korea Figure 16. Annual CD sales in Korea

('000 copies) (mn copies)

600 Quarterly domestic sales 1.8 Annual domestic sales 1.7 500 500 470 1.5 425 389 400 1.2 1.1 326 282 300 0.9 0.8 200 0.6 200 154 0.6 0.5

100 0.3 0.2

0 0.0 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13F 2008 2009 2010 2011 2012 2013F

Source: Company data, Gaon, Hanteo Information System, KDB Daewoo Source: Company data, Gaon, Hanteo Information System, KDB Daewoo Securities Research Securities Research

Figure 17. Quarterly CD sales in Japan Figure 18. Annual CD sales in Japan

('000 copies) (mn copies) 900 Quarterly Japanese sales 3.5 Annual Japanese sales

800 765 2.9 720 3.0 689 700 2.5 2.4 610 2.5 600 541 477 500 2.0 390 400 1.5 300 194 1.0 200 0.5 100

0 0.0 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13F 2011 2012 2013F

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

KDB Daewoo Securities Research 8 November 14, 2013 SM Entertainment

Figure 19. Concert ticket sales in Japan Figure 20. Ex-Japan concert ticket sales

(mn tickets) ('000 tickets) 2.0 Concert ticket sales in Japan 500 Concert ticket sales ex-China Chinese concert ticket sales

1.6 400

1.2 300

0.8 200

0.4 100

0.0 0 2011 2012 2013F 2011 2012 Oct. 2013

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

Figure 21. Concerts in Japan: Large-venue (Dome) concerts vs. other

(mn persons) 2 No. of other concertgoers 1.8 No of Dome concertgoers

1.6 1.4

1.2 1 0.8

0.6 0.4

0.2 0 2011 2012 2013F

Source: Company data, Wikipedia, KDB Daewoo Securities Research

Figure 22. Cumulative sales of major artists in Korea

('000 copies) 2500

2000

1500

1000 Fewer than 500,000 copies sold 500 (recession of the CD market) 0

. l o o C o s x g e g a o o O ot un Q .o.d C rtist -jun y o Ex g - Turb a - Wa - BoA Eyes TVX - - s Co ng Nar - 00 DJ D - u 013 00 00 - iou 001 rown 08 2 20 20 0 2 2002 B - J 2 im Chang 2002 02 20 2000 - - Var L 2 - 2000 - Jo Sungm 0 20 01 - 20 2001 20 2002 - Lee Sooy

Note: Figures are estimates, not official data Source: Wikipedia, Hanteo Information System, KDB Daewoo Securities Research

KDB Daewoo Securities Research 9 November 14, 2013 SM Entertainment

Table 7. SM Entertainment’s annual earnings (Wbn, %) 2008 2009 2010 2011 2012 2013F 2014F Revenue 40.1 61.8 86.4 143.0 241.3 281.2 357.4 CD 10.8 14.6 14.9 19.7 22.3 30.0 37.0 Digital 4.8 9.5 8.5 6.3 6.4 12.6 19.2 Overseas 8.6 15.8 36.8 81.1 128.7 127.5 143.1 Management 16.0 21.9 26.2 35.9 36.3 51.7 61.8 Other - - - - 47.7 59.5 96.4 Revenue breakdown CD 26.9 23.7 17.3 13.8 9.3 10.7 10.3 Digital 11.9 15.3 9.8 4.4 2.6 4.5 5.4 Overseas 21.4 25.5 42.6 56.7 53.3 45.3 40.0 Management 39.8 35.5 30.3 25.1 15.0 18.4 17.3 Other 0.0 0.0 0.0 0.0 19.8 21.1 27.0 Operating profit -1.9 9.3 20.2 25.6 60.5 60.7 76.5 OP margin -4.7 15.1 23.4 17.9 25.1 21.6 21.4 Net profit 4.3 4.5 15.9 21.8 37.3 52.3 64.1 Net margin 10.7 7.3 18.4 15.2 15.5 18.6 17.9 YoY growth Revenue 27.9 54.1 39.9 65.6 68.7 16.5 27.1 CD 21.3 35.7 2.1 32.0 13.3 34.3 23.2 Digital 8.9 98.1 -10.2 -26.2 1.2 97.6 52.6 Overseas 52.0 84.1 133.1 120.6 58.6 -0.9 12.2 Management 28.4 37.3 19.6 37.2 0.9 42.6 19.6 Other - - - - - 24.6 62.2 Operating profit RR TTB 117.2 26.7 136.3 0.3 26.0 Net profit TTB 4.7 253.3 37.1 71.1 40.2 22.6 Notes: Figures are based on K-GAAP through 2010; From 2011, figures are based on consolidated K-IFRS; TTB stands for “turn to black,” and RR stands for “remain red.” Source: Company data, KDB Daewoo Securities Research estimates

Table 8. Earnings forecast revisions (Wbn, W, %, %p) Previous Revised % chg. 2013F 2014F 2013F 2014F 2013F 2014F Revenue 281 335 281 357 0.1 6.8 Operating profit 62 74 61 77 -1.3 3.9 Pretax profit 75 88 69 85 -7.9 -3.9 Net profit 51 61 52 63 1.6 3.8 EPS(W) 2,500 3,003 2,539 3,114 1.6 3.7 OP margin 21.9 22.0 21.6 21.4 -0.3 -0.6 Net margin 18.1 18.3 18.3 17.7 0.3 -0.5 Notes: All figures are based on consolidated K-IFRS; Net profit refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research

KDB Daewoo Securities Research 10 November 14, 2013 SM Entertainment

Table 9. SM Entertainment’s quarterly revenue breakdown (Wbn, %) 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Notes Revenue 38.5 32.4 51.5 46.2 33.2 33.5 CD 3.0 3.7 8.7 6.9 4.8 6.4 Cost-to-revenue ratio: Approx. 80% Digital 1.6 1.4 1.7 1.7 1.1 1.5 Cost-to-revenue ratio: Approx. 20-30% Cost-to-revenue ratio of merchandise, etc.: Domestic Royalties 0.0 0.2 0.2 6.2 3.0 2.2 Approx. 20-30% Management 7.1 7.4 9.0 6.1 7.2 7.7 Cost-to-revenue ratio: Approx. 80% Subtotal 11.8 12.8 19.6 20.8 16.2 17.6 CD 0.2 0.1 0.4 0.2 4.5 3.1 Direct exports of CDs produced in Korea Digital 0.3 1.6 0.7 1.5 0.4 0.4 Cost-to-revenue ratio: Approx. 20-30% Royalties mostly consist of income 5.9 9.1 3.1 4.4 6.6 4.4 received from the sales of DVDs and Royalties recorded music produced overseas Cost-to-revenue ratio: Approx. 20-30% Cost-to-revenue ratio of management 20.3 8.8 27.7 19.2 5.5 8.0 Overseas services: 80% Cost-to-revenue ratio of concerts (tickets +

Concert-related merchandise): 50-60% Concert-related income: Management income: W12bn; Revenue of W250-400mn (smaller W20bn; Balance is from Balance is from other venues), and W400-800mn (Domes) per other services (e.g., services (e.g., 10,000 Japanese concertgoers commercials) commercials) Revenue of W1-3bn per SM Town concert

in Southeast Asia and China Subtotal 26.7 19.6 31.9 25.4 17.1 15.9 Revenue breakdown CD 7.8 11.4 16.9 14.9 14.5 19.0 Digital 4.2 4.3 3.3 3.7 3.3 4.3 Domestic Royalties - 0.6 0.4 13.4 9.1 6.4 Management 18.4 22.8 17.5 13.2 21.5 22.9 CD 0.5 0.3 0.8 0.4 13.6 9.2 Digital 0.8 4.9 1.4 3.2 1.2 1.2 Overseas Royalties 15.3 28.1 6.0 9.5 20.0 13.2 Management 52.7 27.2 53.8 41.6 16.5 23.8 Operating profit 11.7 10.3 11.7 14.1 7.7 2.2 OP margin 30.4 31.8 22.7 30.5 23.1 6.6 Net profit 9.4 9.7 8.7 9.3 6.4 2.0 Net margin 24.4 29.9 16.9 20.1 19.2 6.0 Notes: K-IFRS non-consolidated basis; Figures are estimates, not official data Source: Company data, KDB Daewoo Securities Research

Table 10. SM C&C’s annual earnings (Wbn) 2008 2009 2010 2011 2012 2013F 2014F 2015F 2016F Revenue 9.5 11.2 12.5 12.4 19.6 52.8 111.2 120.6 138.1 Operating profit -2.0 2.5 2.4 2.0 -2.6 1.0 11.1 13.3 16.6 Profit from continuing -14.1 -0.5 1.6 0.4 -12.9 1.0 11.1 13.3 16.6 operations Net profit -13.1 -0.5 1.9 0.8 -12.8 1.0 8.7 10.3 12.9 Revenue breakdown Tourism 9.5 11.2 12.5 12.4 12.4 12.4 14.9 14.9 14.9 TV dramas 8.5 17.0 42.5 51.0 68.0 Domestic broadcasting 5.0 10.0 25.0 30.0 40.0 rights Product placement 1.0 2.0 5.0 6.0 8.0 Overseas broadcasting 2.5 5.0 12.5 15.0 20.0 rights Number of productions 1 2 5 6 8 Variety show programs 24 28 32 32 Revenue per program 0.06 0.07 0.08 0.08 Number of productions 2 3 4 6 Other including Woolim. 1 21 51 52 52 Notes: K-IFRS non-consolidated basis; Figures are estimates, not official data Source: Company data, KDB Daewoo Securities Research

KDB Daewoo Securities Research 11 November 14, 2013 SM Entertainment

SM Entertainment (041510 KQ/Buy/TP: W60,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/12 12/13F 12/14F12/15F (Wbn) 12/12 12/13F 12/14F 12/15F Revenue 241 281 357393 Current Assets 198 234 317 398 Cost of Sales 132 163 209 224 Cash and Cash Equivalents 100 136 202 275 Gross Profit 110 119 149 170 AR & Other Receivables 23 27 35 38 SG&A Expenses 49 58 72 80 Inventories 6 7 8 9 Operating Profit (Adj) 61 61 77 90 Other Current Assets 25 30 38 41 Operating Profit 61 61 77 90 Non-Current Assets 125 151 154 158 Non-Operating Profit -4 9 8 10 Investments in Associates 2 7 7 7 Net Financial Income -2 -2 -3 -5 Property, Plant and Equipment 39 48 47 46 Net Gain from Inv in Associates 4 0 0 0 Intangible Assets 43 45 37 34 Pretax Profit 57 69 85 100 Total Assets 323 385 471 556 Income Tax 20 18 21 25 Current Liabilities 74 86 109 120 Profit from Continuing Operations 37 52 63 75 AP & Other Payables 45 53 67 74 Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 3 3 3 3 Net Profit 37 52 63 75 Other Current Liabilities 27 31 39 43 Controlling Interests 40 52 64 76 Non-Current Liabilities 10 8 8 8 Non-Controlling Interests -3 -1 -1 -1 Long-Term Financial Liabilities 8 6 6 6 Total Comprehensive Profit 34 51 63 75 Other Non-Current Liabilities 1 1 1 1 Controlling Interests 37 52 64 75 Total Liabilities 84 94 117 128 Non-Controlling Interests -3 -1 -1 -1 Controlling Interests 213 262 325 401 EBITDA 70 80 105113 Capital Stock 10 10 10 10 FCF (Free Cash Flow) 2 38 65 70 Capital Surplus 119 121 121 121 EBITDA Margin (%) 29.0 28.3 29.5 28.7 Retained Earnings 84 136 200 276 Operating Profit Margin (%) 25.1 21.6 21.4 22.9 Non-Controlling Interests 26 29 29 28 Net Profit Margin (%) 16.5 18.6 17.9 19.2 Stockholders' Equity 239 291 354 429

Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/12 12/13F 12/14F12/15F 12/12 12/13F 12/14F 12/15F Cash Flows from Op Activities 46 63 82 87 P/E (x) 22.8 15.1 12.3 10.5 Net Profit 37 52 63 75 P/CF (x) 18.4 11.1 8.5 8.0 Non-Cash Income and Expense 34 29 42 38 P/B (x) 5.5 3.6 2.7 2.1 Depreciation 2 1 1 1 EV/EBITDA (x) 11.8 8.3 5.7 4.6 Amortization 7 18 28 22 EPS (W) 1,994 2,539 3,114 3,675 Others -6 8 3 3 CFPS (W) 2,471 3,453 4,515 4,790 Chg in Working Capital -4 -3 -3 -1 BPS (W) 8,305 10,729 14,233 18,014 Chg in AR & Other Receivables -6 -4 -7 -4 DPS (W) 0 0 0 0 Chg in Inventories -3 -1 -2 -1 Payout ratio (%) 0.0 0.0 0.0 0.0 Chg in AP & Other Payables 15 6 14 7 Dividend Yield (%) 0.0 0.0 0.0 0.0 Income Tax Paid -21 -16 -21 -25 Revenue Growth (%) 68.8 16.5 27.1 10.0 Cash Flows from Inv Activities -48 -19 -14 -12 EBITDA Growth (%) 116.7 13.5 32.4 7.3 Chg in PP&E -23 -9 0 0 Operating Profit Growth (%) 136.4 0.3 25.9 17.7 Chg in Intangible Assets -19 -19 -19 -19 EPS Growth (%) 61.5 27.3 22.6 18.0 Chg in Financial Assets -5 9 0 0 Accounts Receivable Turnover (x) 14.1 12.2 12.7 11.9 Others -2 0 5 7 Inventory Turnover (x) 58.3 45.6 47.4 44.4 Cash Flows from Fin Activities 75 -6 -1 -1 Accounts Payable Turnover (x) 7.7 6.6 6.8 6.4 Chg in Financial Liabilities 0 0 0 0 ROA (%) 15.2 14.6 14.8 14.6 Chg in Equity 65 -4 0 0 ROE (%) 24.7 22.0 21.8 20.8 Dividends Paid 0 0 0 0 ROIC (%) 65.3 48.9 57.8 71.6 Others 9 -2 -1 -1 Liability to Equity Ratio (%) 35.1 32.4 33.0 29.8 Increase (Decrease) in Cash 66 36 66 73 Current Ratio (%) 266.4 270.9 290.9 332.7 Beginning Balance 34 100 136 202 Net Debt to Equity Ratio (%) -55.8 -55.7 -64.4 -70.2 Ending Balance 100 136 202 275 Interest Coverage Ratio (x) 51.3 35.5 54.3 63.9 Source: Company data, KDB Daewoo Securities Research estimates

KDB Daewoo Securities Research 12 November 14, 2013 SM Entertainment

APPENDIX 1

Important Disclosures & Disclaimers Disclosures (W) SM Entertainment As of the publication date, Daewoo Securities Co., Ltd. has been acting as a financial advisor to SM 100,000 Entertainment for its treasury stock trust, and other than this, Daewoo Securities has no other special interests in the companies covered in this report. 80,000 60,000

40,000 20,000

0 11/11 5/12 11/12 5/13 11/13

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.

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 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.

KDB Daewoo Securities Research 13 November 14, 2013 SM Entertainment

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, 31st Fl. 34-3 Yeouido-dong, Yeongdeungpo-gu Suites 2005-2012 New York, NY 10022 Seoul 150-716 8 Finance Street, Central Korea Hong Kong United States Tel: 82-2-768-3026 Tel: 85-2-2514-1304 Tel: 1-212-407-1000

Daewoo Securities (Europe) Ltd. Daewoo Securities (Singapore) Pte. Ltd. Tokyo Representative Office Tower 42, Level 41 6 Battery Road, #11-01 7th Floor, Yusen Building 25 Old Broad Street Singapore, 049909 2-3-2 Marunouchi, Chiyoda-ku London EC2N 1HQ Tokyo 100-0005 United Kingdom Japan Tel: 44-20-7982-8016 Tel: 65-6671-9845 Tel: 81-3- 3211-5511

Beijing Representative Office Shanghai Representative Office Ho Chi Minh Representative Office Suite 2602, Twin Towers (East) Unit 13, 28th Floor, Hang Seng Bank Tower Centec Tower B-12 Jianguomenwai Avenue 1000 Lujiazui Ring Road 72-74 Nguyen Thi Minh Khai Street Chaoyang District, Beijing 100022 Pudong New Area, Shanghai 200120 Ward 6, District 3, Ho Chi Minh City China China Vietnam Tel: 86-10-6567-9699 Tel: 86-21-5013-6392 Tel: 84-8-3910-6000

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