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Regional Company Focus

CJ ENM Bloomberg: 035760 KS, Reuters: 035760.KS

Refer to important disclosures at the end of this report

DBS Group Research . Equity 9 Nov 2018

BUY, KRW219,000 KOSDAQ: 693.7 Strength in content business (Closing price as of 08/11/18) underpins earnings Price Target 12-mth: KRW300,000 • If not for IPTV commission hike, 3Q18 earnings would Reason for Report: 3Q18 earnings review have been a positive surprise Potential catalyst: Synergies between its digital channels and • To continue outperforming the market in terms of TV ad commerce business revenue growth Where we differ: We are more optimistic than the market for FY18F, but more conservative for FY19/20F • Commerce margins to recover in near term

Analyst • Retain BUY, keep our TP of KRW300,000 Regional Research Team [email protected] Media: Stronger than expected TV and digital ad revenue. CJ ENM’s media division posted its highest-ever quarterly OP of KRW37.2bn (+305% y-o-y) in 3Q18. With the airing of premium content such as Price Relative ‘Boyfriend’ and ‘Memories of the Alhambra’ and several other 350,000 130 popular shows in 4Q18, CJ ENM’s TV ad revenue outperformance 300,000 120 250,000 110 and digital ad revenue growth should persist. Sales to Chinese and 100 200,000 global over-the-top (OTT) service providers also seem likely. 90 150,000 80 Commerce: Temporary dent to margins. Gross merchandise sales 100,000 70 50,000 60 were solid at KRW935.9bn (+5% y-o-y) with KRW80.2bn from T 0 50 commerce (+36% y-o-y) and KRW267.5bn from mobile commerce Nov-14 Jun-15 Jan-16 Aug-16 Mar-17 Oct-17 May-18 Stock price(LHS,KRW) Rel. to KOSDAQ(RHS,pts) (+24% y-o-y). But due to a transmission commission hike by IPTVs

Forecasts and Valuation (+KRW13bn y-o-y), CJ ENM’s commerce margins eroded FY Dec (KRW bn) 2017A 2018F 2019F 2020F temporarily. Its margins should recover after 4Q18.

Revenue 2,260.0 3,358.8 4,559.7 4,965.8 Overseas expansion likely for movie division; more sub-label EBITDA 469.1 556.5 703.6 819.9 Operating profit 224.5 269.3 397.2 479.8 collaboration for music division. Despite cinema revenue growth, Pre-tax Profit 184.3 273.6 381.2 463.8 the movie unit posted 3Q18 operating losses of KRW2.3bn, Net Profit 143.4 211.6 304.9 371.0 suffering declines in film sales to the ancillary market, Net Pft (Pre Ex.) 143.4 211.6 304.9 371.0 musical/theatrical performance sales, and ‘other’ sales. The unit Net Pft Attributable to plans to expand its business overseas, rather than in Korea where its Controlling Interest 130.9 180.3 243.9 296.8 EPS (KRW) 21,054 15,623 11,124 13,536 earnings have been very volatile. The music unit recorded marked EPS Pre Ex. (KRW) 23,078 18,337 13,905 16,920 revenue growth in concerts (+27% y-o-y) and sub-record labels EPS Gth (%) 458.6 -25.8 -28.8 21.7 (+140% y-o-y). The unit is likely to maintain stable profits, EPS Gth Pre Ex (%) 340.2 -20.5 -24.2 21.7 broadening its collaboration with sub-labels like AOMG, Jellyfish, Diluted EPS (KRW) 21,054 15,623 11,124 13,536 and . Net DPS (KRW) 3,000 3,200 3,360 3,530 BV Per Share (KRW) 165,443 93,043 100,968 111,144 Top pick in media sector. Given its development of solid content PE (X) 11.0 14.0 19.7 16.2 line-ups, CJ ENM’s competitiveness should remain strong going PE Pre Ex. (X) 10.0 11.9 15.7 12.9 P/Cash Flow (X) 3.0 5.3 9.4 8.0 forward. Synergies between DIA TV, Dada Studio, digital channels EV/EBITDA (X) 4.1 7.8 6.2 5.3 and its commerce business are expected in 2019 onwards. The Net Div Yield (%) 1.3 1.5 1.5 1.6 possibility of the sale of its investment assets such as CJ Hello P/Book Value (X) 1.4 2.4 2.2 2.0 should be positive for CJ ENM’s short term share price. We retain Net Debt/Equity (X) 0.3 CASH CASH CASH ROE (%) 14.7 13.8 14.3 16.0 the stock as our top pick, and keep our SOTP-based TP of KRW300,000. Earnings Rev (%): (17.1) (14.8) (3.3) Consensus EPS (KRW): 13,096 14,109 15,640 At A Glance Other Broker Recs: B : 13 S : 0 H : 0 Issued Capital (m shrs) 21.93

Mkt. Cap (KRWbn/US$m) 4,802/4,299 ICB Industry: Retail – Discretionary ICB Sector: Consumer Discretionary Major Shareholders Principal Business: CJ ENM provides television shopping services. It CJ Corp and 5 others (%) 42.7 also produces movies, broadcasts, performances, music, and Free Float (%) 46.83 animation. Avg. Daily Vol.(‘000) 125

Source of all data: Company, DBS Bank, Bloomberg Finance L.P

ed: KK / sa: LEY, CS

Company Focus CJ ENM

Media: Stronger than expected TV and digital ad revenue. Against this backdrop, CJ ENM’s media division posted its 3Q18 TV ad revenue of KRW145.3bn (+24% y-o-y) highest-ever quarterly OP of KRW37.2bn (+305% y-o-y) in outpaced market growth. Broadcast of premium content 3Q18. With the airing of premium content such as such as ‘Mr. Sunshine’ boosted viewer ratings and ad ASP. ‘Boyfriend’ and ‘Memories of the Alhambra’ and several Platform in platform (PIP) traffic growth and digital-only other popular shows in 4Q18, CJ ENM’s TV ad revenue content traffic growth helped increase digital ad revenue by outperformance and digital ad revenue growth should 54% y-o-y. Content sales revenue, including overseas sales persist. Sales to Chinese and global over-the-top (OTT) of ‘Mr. Sunshine’, also posted strong growth of 59% y-o-y. service providers also seem likely.

Earnings review Unit: KRW bn, % Preliminary earnings Vs. our estimates y-o-y q-o-q Vs. consensus estimates ‘18.09P ‘18.09F Diff. (%) ‘17.09A Diff. (%) ‘18.06A Diff. (%) ‘18.09F Diff. (%) Revenue 1,096.3 1,033.7 6.1 540.7 102.8 585.2 87.3 1,050.6 4.4 OP 76.5 8.0 856.5 49.2 55.6 49.6 54.1 85.4 (10.4) NP 54.3 81.3 (33.2) 26.4 105.4 27.7 95.9 70.0 (22.5) Margin (%) OP margin 7.0 0.8 9.1 8.5 8.1 Net margin 5.0 7.9 4.9 4.7 6.7 Difference (ppts) OP margin 6.2 (2.1) (1.5) (1.1) Net margin (2.9) 0.1 0.2 (1.7)

Note 1: Based on consolidated K-IFRS Note 2: 2Q18 numbers are based on CJ O Shopping’s financial statements. CJ ENM’s (merged company) earnings were applied from 3Q18 Source: DBS Bank

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Company Focus CJ ENM

CJ ENM: TP calculation 1) Operating value (KRW bn) FY19F revenue OP Post-tax OP Target Multiple Fair value Remarks Media (incl. movies) 1,797.9 152.5 122.0 22.5 2,745.6 30% premium over global media peers' average 2019F PE 10% premium over domestic home shopping peers' average Commerce 1,312.9 141.3 113.0 10.3 1,168.7 2019F PE 10% discount to domestic top 3 entertainment peers' average Music 243.4 21.6 17.2 24.5 422.6 2019F PE Sum of operating value (a) 4,336.8 2) Investment asset value (KRW bn) Fair value Stake Discount Stake value Remarks Games 10,230.7 22.0% 20.0% 1,800.6 Based on Netmarble Games' TP (KRW120,000) CJ Hello 941.3 53.9% 20.0% 405.9 30% premium over CJ Hello's current market cap (7 Nov) Life Insurance 18,380.0 0.5% 20.0% 73.5 Based on Samsung Life Insurance's current market cap (7 Nov) Sum of investment asset value (b) 2,280.0 Total (a) + (b) 6,616.9 No. of shares ('000 shares) 21,926 Fair price (KRW) 301,781 Target price (KRW) 300,000 Rounded off Current price (KRW) 219,000 Based on closing price as of 8 Nov Upside potential 37.0%

Source: DBS Bank CJ ENM: Earnings estimates on a consolidated basis (KRW bn) 1Q18 2Q18 3Q18F 4Q18F 1Q19F 2Q19F 3Q19F 4Q19F 2017 2018F 2019F Revenue 1,033.6 1,049.0 1,096.3 1,112.5 1,053.1 1,120.1 1,158.7 1,212.3 3,973.4 4,291.5 4,544.2 Media 332.5 361.9 406.8 385.1 333.9 407.7 425.1 434.4 1,261.9 1,486.3 1,601.1 Ad 119.6 141.9 145.3 150.8 122.5 145.6 142.4 155.6 495.7 557.7 566.2 TV licence fee revenue 50.2 50.1 49.6 54.9 50.7 50.6 50.1 55.4 203.8 204.8 206.9 Others 162.7 169.8 212.0 179.4 160.7 211.5 232.6 223.3 562.4 724.0 828.0 Movie 80.0 36.0 45.0 52.1 62.8 38.2 44.1 51.7 225.2 213.1 196.8 Cinema 41.5 12.4 28.1 22.2 37.6 13.0 27.0 21.4 111.2 104.1 99.1 Ancillary sales (VoD) 10.5 7.4 6.9 7.4 5.7 8.1 6.6 7.1 33.2 32.3 27.4 Performances 14.4 7.4 4.3 10.3 10.1 7.8 4.5 10.4 26.6 36.4 32.8 Others (exports) 13.6 8.8 5.7 12.2 9.5 9.2 6.0 12.8 54.2 40.3 37.5 Music 56.2 66.5 58.2 60.3 55.0 58.0 64.0 66.3 230.7 241.2 243.4 Albums/records 28.2 29.0 23.0 24.4 24.0 26.1 25.3 26.8 92.2 104.6 102.2 Others 28.0 37.5 35.2 35.9 31.0 31.9 38.7 39.5 138.6 136.6 141.1 Commerce 290.9 307.5 295.0 324.2 313.5 325.2 319.7 354.5 1,193.3 1,217.5 1,312.9 TV 154.1 154.1 145.3 164.1 151.7 153.6 148.3 166.1 645.8 617.7 619.8 Digital 96.4 105.5 99.2 107.2 112.5 113.9 110.0 123.2 385.7 408.3 459.6 Others 40.3 47.9 50.3 52.9 49.3 57.6 61.3 65.3 161.7 191.4 233.5 CJ Hello 274.1 277.2 291.4 290.8 287.8 291.0 305.9 305.3 1,062.3 1,133.4 1,190.1 OP 89.9 79.2 76.5 87.7 77.4 99.3 105.0 110.2 287.6 333.3 392.0 Media 24.6 29.2 37.2 27.4 26.7 38.6 44.1 42.3 61.8 118.4 151.7 Movie 7.2 -3.9 -2.3 2.6 0.2 2.0 -1.9 0.5 -10.4 3.6 0.8 Music 2.7 4.2 3.3 4.8 4.7 5.6 5.3 6.1 11.8 15.0 21.6 Commerce 42.3 33.9 17.8 32.4 31.4 35.8 35.2 39.0 151.6 126.5 141.3 CJ Hello 13.1 15.7 20.5 20.5 14.6 17.3 22.4 22.3 72.9 69.8 76.6 OPM 8.7% 7.5% 7.0% 7.9% 7.4% 8.9% 9.1% 9.1% 7.2% 7.8% 8.6% Media 7.4% 8.1% 9.1% 7.1% 8.0% 9.5% 10.4% 9.7% 4.9% 8.0% 9.5% Movie 9.0% -10.7% -5.1% 5.0% 0.3% 5.2% -4.2% 1.0% -4.6% 1.7% 0.4% Music 4.8% 6.3% 5.7% 7.9% 8.5% 9.6% 8.2% 9.2% 5.1% 6.2% 8.9% Commerce 14.6% 11.0% 6.0% 10.0% 10.0% 11.0% 11.0% 11.0% 12.7% 10.4% 10.8% CJ Hello 4.8% 5.7% 7.0% 7.0% 5.1% 6.0% 7.3% 7.3% 6.9% 6.2% 6.4% Pre-tax profit 122.1 97.8 72.5 83.7 73.4 95.3 101.0 106.2 776.6 376.1 376.0 Corporate tax 23.8 19.0 18.3 16.7 14.7 19.1 20.2 21.2 211.2 77.8 75.2 NP 98.4 78.8 54.2 66.9 58.8 76.2 80.8 85.0 565.4 298.3 300.8 NPM 9.5% 7.5% 4.9% 6.0% 5.6% 6.8% 7.0% 7.0% 14.2% 7.0% 6.6% Controlling-interest NP n.a. n.a. 43.4 53.6 47.0 61.0 64.7 68.0 n.a. n.a. 240.7

Source: CJ ENM, DBS Bank Note: The 2017, 1Q18, and 2Q18 numbers, which were provided by CJ ENM, are based on CJ ENM’s (the merged company) financial statements (retroactively applied). In CJ ENM’s actual financial statements, only the earnings from 3Q18 are based on the merged company’s earnings.

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Company Focus CJ ENM

Revision to annual earnings forecasts

(KRW bn) Previous Revised Diff. (%, ppts) 2018F 2019F 2020F 2018F 2019F 2020F 2018F 2019F 2020F Revenue 3,281.1 4,414.6 4,643.5 3,358.8 4,559.7 4,965.8 2.4 3.3 6.9 Operating profit 273.9 372.6 405.0 269.3 397.2 479.8 (1.7) 6.6 18.5 OP margin (%) 8.3 8.4 8.7 8.0 8.7 9.7 (0.3) 0.3 0.9 Net profit 255.3 357.8 383.6 211.6 304.9 371.0 (17.1) (14.8) (3.3) NP margin (%) 7.8 8.1 8.3 6.3 6.7 7.5 (1.5) (1.4) (0.8)

Note: Based on consolidated K-IFRS Source: CJ ENM, DBS Bank Revision to quarterly earnings forecasts

(KRW bn) Previous Revised Diff. (%, ppts) 3Q18F 4Q18F 1Q19F 2Q19F 3Q18 4Q18F 1Q19F 2Q19F 3Q18 4Q18F 1Q19F 2Q19F Revenue 1,033.7 1,097.5 1,066.5 1,085.7 1,096.3 1,112.5 1,063.1 1,120.1 6.1 1.4 (0.3) 3.2 Operating profit 83.0 85.8 88.9 93.9 76.5 87.7 80.7 99.3 (7.8) 2.2 (9.2) 5.7 OP margin (%) 8.0 7.8 8.3 8.6 7.0 7.9 7.6 8.9 (1.0) 0.1 (0.7) 0.2 Net profit 81.3 83.5 86.1 90.0 54.3 66.9 61.4 76.2 (33.2) (19.8) (28.7) (15.3) NP margin (%) 7.9 7.6 8.1 8.3 5.0 6.0 5.8 6.8 (2.9) (1.6) (2.3) (1.5)

Note: Based on consolidated K-IFRS Source: CJ ENM, DBS Bank

CJ ENM: Its market share in TV ad market to keep CJ ENM: Digital ad, VOD, and overseas revenue growth to increasing continue

(KRW bn) TV ad market (LHS) (%) (KRW bn) Digital ad, VOD, overseas revenue (LHS) (%) 5,000 CJ ENM's TV ad revenue (LHS) 20.0 YoY growth (RHS) CJ ENM's market share (RHS) 1,000.0 100.0 4,000 14.5 16.0 14.3 800.0 80.0 12.0 12.6 11.0 3,000 12.0 600.0 60.0

2,000 8.0 400.0 40.0

1,000 4.0 200.0 20.0

0 0.0 0.0 0.0 2015 2016 2017 2018F 2019F 2014 2015 2016 2017 2018F 2019F

Source: CJ ENM, DBS Bank Source: CJ ENM, DBS Bank CJ ENM: Music division’s earnings trend and outlook CJ ENM: Commerce division’s earnings trend and outlook : Margins to improve

Commerce revenue (LHS) Music revenue (LHS) Music OP (LHS) (KRW bn) (%) (KRW bn) (%) Commerce OP (LHS) OPM (RHS) 1,500 OPM (RHS) 14.0 300 10.0 250 8.0 1,200 12.0 6.0 200 900 10.0 4.0 150 2.0 600 8.0 100 0.0 50 -2.0 300 6.0 0 -4.0 0 4.0 -50 -6.0 2017 2018F 2019F 2013 2014 2015 2016 2017 2018F 2019F

Source: CJ ENM, DBS Bank Source: CJ ENM, DBS Bank

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Company Focus CJ ENM

Prime-time TV ad rate (22:00-23:00 Saturday) TV ad rates by day of the week: Further ad rate hike possible

(KRW'000)(천원) CJ ENM SBS KBS2 MBC (KRW'000)(천원) CJ ENM SBS KBS2 MBC

25,000 17,000

16,000 20,000 Additional추가적인 ad광고 rate단가 hike상승 possible가능 15,000 15,000 14,000

10,000 13,000 12,000 5,000 11,000

0 10,000 Jan-14 Aug-14 Mar-15 Oct-15 May-16 Dec-16 Jul-17 Feb-18 Sep-18 MON TUE WED THU FRI SAT SUN

Source: CJ ENM, KOBACO, MediaCreate, DBS Bank Source: CJ ENM, KOBACO, MediaCreate, DBS Bank

CJ ENM: Record labels under CJ ENM Company Stake Artists Related shows Stone Music 100% , SG Wannabe, , Roy , and more Idol School, Unpretty Rapstar 1LLIONAIRE RECORDS , Beenzino, The Quiett Show Me the Money AMBITION MUSIK , Kim Hyo0eun, Hash Swan Show Me the Money FeelGhood Music Tiger JK, Yoon Mi-rae, , Junoflo Show Me the Money VMC , Nucksal, Wutan and more Show Me the Money, High School Rapper Ghood Life Crew SUPERBEE, myunDo, Los, BLACK NINE Show Me the Money Jung Joon-young, , , and more Unpretty Rapstar RBW , , 60% Dynamic Duo (Choiza, ), Crush and more Show Me the Money, High School Rapper AOMG 51% , , Gray, , Woo Won-jae and more Show Me the Money, High School Rapper Hi-Lite Records 51% , YunB, , and more Show Me the Money, High School Rapper H1GHR MUSIC 51% , pH-1, Sik-K, Woodie Gochild Show Me the Money, High School Rapper 51% VIXX, and more series Swing Entertainment 51% Wanna Produce 101 series MMO Entertainment 71% , Yoon Ji-sung () and more Produce 101 series n.a. SEVENTEEN, NU'EST, , Produce 101 series BigHit JV Company 51% - Global audition programme

Source: CJ ENM, DBS Bank

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Company Focus CJ ENM

BALANCE SHEET INCOME STATEMENT

(Unit:KRWbn) 2016 2017 2018F 2019F 2020F (Unit:KRWbn) 2016 2017 2018F 2019F 2020F Current Assets 689 664 1,935 1,956 2,033 Revenue 2,209 2,260 3,359 4,560 4,966 Cash & Short-term 252 195 1,383 1,375 1,420 Growth (%) (4.3) 2.3 48.6 35.8 8.9 investment Accounts Receivable 354 372 379 395 411 Operating Profit 179 224 269 397 480 Inventories 62 76 151 165 181 Growth (%) (14.7) 25.5 20.0 47.5 20.8 Fixed assets 2,065 2,138 2,310 2,490 2,670 EBITDA 446 469 557 704 820 Non-operating Investment Assets 316 372 345 359 373 (117) (40) 4 (16) (16) Gains/Losses Tangible Assets 815 816 921 1,074 1,227 Net Interest Income (16) (12) (11) (22) (22) Intangible Assets 934 950 1,043 1,057 1,070 Foreign Currency Gains 0 (0) 0 0 0 Total Assets 2,754 2,802 4,245 4,446 4,703 Equity Method Gains (11) 6 26 44 44 Current Liabilities 1,017 732 954 988 1,028 Pre-tax Profit 62 184 274 381 464 Accounts Payable 232 216 340 371 407 Net Profit 33 143 212 305 371 Net profit attributable to Short-term Debts 425 174 269 269 269 23 131 180 244 297 controlling interest Non-current Liabilities 373 586 771 765 759 Growth (%) (70.9) 340.2 47.5 44.1 21.7 Long-term Debts 301 512 678 668 658 NOPLAT 94 175 208 318 384 Total Liabilities 1,391 1,318 1,725 1,753 1,787 (+) Dep 267 245 287 306 340 Capital Stock 31 31 111 111 111 (-) Wc (24) 66 (45) (5) (8) Capital Surplus 85 80 1,051 1,051 1,051 (-) Capex 128 183 296 370 403 Earned Surplus 812 924 1,091 1,265 1,488 OpFCF 257 170 245 259 329 Capital Adjustment (10) (7) (212) (212) (212) 3 Yr CAGR & Margins Treasury Stock (12) (12) (190) (190) (190) Revenue growth(3Yr) (4.2) (4.6) 13.3 27.3 30.0 Total Equity 1,363 1,484 2,519 2,693 2,916 OP growth(3Yr) (11.5) (1.4) 8.7 30.5 28.8 Invested capital 1,604 1,739 1,869 2,032 2,191 EBITDA growth(3Yr) (3.7) (4.4) 3.7 16.4 20.5 Net debt / (cash) 475 492 (437) (439) (493) NP growth(3Yr) (41.9) 10.7 23.6 110.7 37.3 ROA 1.1 5.2 6.0 7.0 8.1 OP margin (%) 8.1 9.9 8.0 8.7 9.7 ROE 3.6 14.7 13.8 14.3 16.0 EBITDA margin (%) 20.2 20.8 16.6 15.4 16.5 ROIC 5.5 10.5 11.5 16.3 18.2 NP margin (%) 1.5 6.3 6.3 6.7 7.5

CASH FLOW KEY INDICATOR

(Unit:KRWbn) 2016 2017 2018F 2019F 2020F (Unit:KRW,x,%) 2016 2017 2018F 2019F 2020F Operating cash flow 388 374 502 515 605 Per share Data (w) Net Profit 33 143 212 305 371 EPS 3,769 21,054 15,623 11,124 13,536 Depr. & Amort. 267 245 287 306 340 BPS 147,596 165,443 93,043 100,968 111,144 Chg in Working Capital (12) (50) 61 5 8 DPS 2,500 3,000 3,200 3,360 3,530 Chg in Accounts (11) (9) (16) (15) (16) Valuation (x,%) Receivable Chg in inventories 6 (10) (74) (14) (16) PER 43.2 11.0 14.0 19.7 16.2 Chg in Accounts Payable (3) (6) 166 30 37 PBR 1.1 1.4 2.4 2.2 2.0 Investing cash flow (335) (256) (361) (445) (478) EV/EBITDA 3.3 4.1 7.8 6.2 5.3 Chg in Short-term (130) 74 46 (2) (2) Dividend yield 1.5 1.3 1.5 1.5 1.6 Investments Chg in Long-term 8 (7) 32 35 35 PCR 2.2 3.0 5.3 9.4 8.0 Investment Securities Capex (128) (183) (296) (370) (403) PSR 0.5 0.6 0.8 1.1 1.0 Disposal of Tangible & (55) (80) (111) (103) (103) Stabilities (%) Intangible Assets Financing cash flow (264) (106) 1,084 (80) (84) Liabilities Ratio 102.0 88.8 68.5 65.1 61.3 Chg in debt (246) (89) 244 (10) (10) Net debt/Equity 34.8 33.1 CASH CASH CASH Chg in Equity (18) (18) 1,032 (70) (74) Net debt/EBITDA 106.5 104.8 CASH CASH CASH Dividend Payout 18 18 18 70 74 Current ratio 67.7 90.8 202.8 197.9 197.7 Chg in Cash (211) 11 1,225 (10) 43 Interest coverage ratio 11.0 18.3 24.5 18.1 21.8 Gross cash flow 457 475 477 511 597 Interest/revenue 1.2 0.9 0.9 1.4 1.3 (-) Chg in WC (24) 66 (45) (5) (8) Asset Structure (-) Capex 128 183 296 370 403 IC 73.9 75.4 52.0 54.0 55.0 (+) Disposal of Assets (55) (80) (111) (103) (103) Cash + IC(%) 26.1 24.6 48.0 46.0 45.0 Free Cash Flow 298 145 115 43 99 Capital Structure (-) Other Investments (8) 7 (32) (35) (35) Debt/Asset 34.8 31.6 27.3 25.8 24.1 Free Cash 306 139 147 78 134 Equity/Asset 65.2 68.4 72.7 74.2 75.9 Source:Source: KTBDBS InvestmentBank & Securities *Asset = Equity + Debt, P/E is derived by using diluted EPS. Note:Note: Results areare consolidatedconsolidated This report has been prepared for informational purposes only, and does not constitute an offer or solicitation of a contract for trading. Opinions in this report reflect professional judgment at this date based on information and data obtained from sources we consider reliable. However, KTB Investment & Securities does not warrant or guarantee the accuracy or completeness *Assetof this document = Equity and + has Debt, no liability P/E is for de itsrived content. by Theusing investment diluted should EPS. be made based on each client's own judgment, and we expressly disclaim all liability for any investment decisions and any results thereof. This report is a copyrighted material of KTB Investment & Securities Co. and thus, it may not be reproduced, distributed or modified without the prior consent of ThisKTB Investmentreport has & Securitiesbeen prepared Co. for informational purposes only, and does not constitute an offer or solicitation of a contract for trading. Opinions in this report reflect professional judgment at this date based on information and data obtained from sources we consider reliable. However, DBS Bank does not warrant or guarantee the accuracy or completeness of this document and has no liability for its content. The investment should be made based on each client's own judgment, and we expressly disclaim all liability for any investment decisions and any results thereof. This report is a copyrighted material of DBS Bank and thus, it may not be reproduced, distributed or modified without the prior consent of DBS Bank.

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Company Focus CJ ENM

Stock Ratings

The stock investment opinion below is based on the expected return of the recommended stock over the next 12 months relative to the closing price of the day it is recommended.

STRONG BUY: Expected to produce a return of at least 50% from the closing price of the day the stock is recommended BUY: Expected to produce a return between 15% and 50% from the closing price of the day the stock is recommended HOLD: Expected to produce a return between -5% and 15% from the closing price of the day the stock is recommended REDUCE: Expected to produce a return of less than -5% from the closing price of the day the stock is recommended RATING UNDER REVIEW: Temporary suspension of recommendation when there is material uncertainty in corporate value. TP is not provided.

The investment opinion presented in this report is based on the industry’s outperformance relative to the market, and may differ from that of an individual stock. Overweight: The industry’s return is expected to outperform the average total return of the KOSPI over the next 12 months. Neutral: The industry’s return is expected to be in line with the average total return of KOSPI, over the next 12 months. Underweight: The industry’s return is expected to underperform the average total return of KOSPI, over the next 12 months.

Notes) The industry’s return is on a risk-adjusted basis

Recent 2yr. Rating and TP Change

CJ ENM (035760 KS) Date 2017.01.19 2017.05.12 2017.06.22 2017.08.10 2017.10.18 2017.11.09 Rating BUY BUY BUY BUY BUY BUY TP 120,000 110,000 100,000 85,000 95,000 100,000 Date 2018.01.02 2018.03.26 2018.10.29 Rating BUY BUY Coverage BUY TP 110,000 120,000 reinstated 300,000 Source: DBS Bank Analyst Name: Regional Research Team

Recent 2yr. TP Change

CJ ENM (035760 KS) (KRW) Stock price Target price 500,000

400,000 Coverage reinstated 300,000

200,000

100,000

0 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 Jul-18 Nov-18 Source: DBS Bank Analyst Name: Regional Research Team

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Company Focus CJ ENM

COMPLETED DATE: 9 NOV 2018 11:42:30 (HKT) DISSEMINATION DATE: 9 NOV 2018 13:16:45 (HKT)

Sources for all charts and tables are DBS Bank unless otherwise specified

GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Please contact the analyst for valuation methodologies and assumptions associated with the covered companies or price targets.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

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ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or 2 his associate does not have financial interests in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd., DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”) or their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 30 Sep 2018.

2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

Compensation for investment banking services: 3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”). DBS holds Australian Financial Services Licence no. 475946.

DBSVS is exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. DBSVS is regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws.

Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by an entity which is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited, a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

For any query regarding the materials herein, please contact Carol Wu (Reg No. AH 8283) at [email protected].

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

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United This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. Kingdom This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608-610, 6th Floor, Gate International Precinct Building 5, PO Box 506538, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Financial Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for Centre professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as defined Emirates in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.

United States This report was prepared by DBS Bank Limited. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Bank Ltd. 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888 e-mail: [email protected] Company Regn. No. 196800306E

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DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE DBS Bank (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 11th Floor The Centre 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 99 Queen’s Road Central Capital Square, Marina Bay Financial Centre Tower 3 Central, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 852 3668 4181 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 Fax: 852 2521 1812 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] e-mail: [email protected] Company Regn. No. 196800306E

INDONESIA THAILAND PT DBS Vickers Sekuritas (Indonesia) DBS Vickers Securities (Thailand) Co Ltd Contact: Maynard Priajaya Arif Contact: Chanpen Sirithanarattanakul DBS Bank Tower 989 Siam Piwat Tower Building, Ciputra World 1, 32/F 9th, 14th-15th Floor Jl. Prof. Dr. Satrio Kav. 3-5 Rama 1 Road, Pathumwan, Jakarta 12940, Indonesia Thailand 10330 Tel: 62 21 3003 4900 Tel. 66 2 857 7831 Fax: 6221 3003 4943 Fax: 66 2 658 1269 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

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