July 16, 2020 One-Asia Morning Focus

Today’s reports (253450 KQ/Buy/TP: W107,000) – Robust earnings and lineup, plus China potential Indonesia Poultry (Neutral) – Some cyclical bumps

Global performance monitor: Two-day change (%) Asia xJPN World EM World DM Korea Japan China Taiwan HK India Indonesia Singapore Thailand Index -0.79 -0.88 0.50 1.44 1.93 -2.22 0.14 0.02 0.50 -1.20 1.71 1.09 Growth -0.75 -1.59 -0.88 1.05 1.89 -3.58 0.00 -0.79 0.68 -1.69 1.59 0.57 Value -0.05 -0.03 1.60 1.88 1.96 -0.63 0.28 0.98 0.34 -0.70 1.83 1.56 Semicon. & equip. 2.79 2.85 0.04 0.53 0.74 -3.98 -0.17 -2.80 N/A N/A N/A N/A Tech hardware & equip. 1.10 1.12 1.10 1.94 1.60 -4.17 0.09 -0.82 4.96 N/A 1.38 N/A Comm. & prof. services 0.06 0.06 0.36 1.35 3.09 1.88 -0.66 N/A 2.26 -0.62 N/A N/A Software & services -0.94 -1.15 -2.19 -0.43 1.02 -1.39 0.49 -1.95 5.48 N/A -1.71 N/A Media & entertainment -3.54 -3.53 -1.76 -0.68 1.94 -3.45 -3.24 2.73 1.44 N/A N/A N/A Consumer goods -1.05 -1.18 0.49 3.82 2.26 -0.29 2.14 N/A -0.08 -1.55 N/A 0.73 Consumer services -0.12 -2.44 0.23 2.33 2.08 2.51 1.02 7.40 3.34 2.20 1.59 0.40 F&B & tobacco 2.39 0.87 0.93 -1.17 1.60 1.35 0.36 5.80 0.39 -2.02 2.44 2.85 Food & staples retailing -1.31 -0.67 0.82 0.22 2.71 3.68 -0.40 -3.09 -0.02 N/A 0.92 -0.43 Retailing -4.50 -4.24 -2.32 1.19 1.49 -1.14 2.76 0.23 -3.03 0.86 2.95 0.18 HH & personal products 1.44 0.62 0.82 0.63 2.30 3.56 -1.04 N/A 1.53 -1.25 N/A N/A Pharma & life sciences 1.94 0.95 1.43 -0.77 1.39 1.28 -5.59 20.87 0.93 -0.61 N/A N/A Autos & parts 1.28 1.29 1.20 4.72 2.60 -2.45 2.37 0.42 0.63 3.06 N/A N/A Transportation -1.57 -1.77 0.56 1.93 2.46 0.29 1.17 -1.63 -0.03 N/A 1.65 1.59 Capital goods 0.78 0.73 2.13 2.46 3.01 -1.65 3.89 0.78 0.42 N/A 1.73 0.18 Materials 0.50 0.95 1.96 2.06 2.32 -0.78 0.60 N/A 0.38 -1.47 N/A 1.16 Real estate -1.22 -1.63 -0.31 0.73 2.06 -2.13 1.17 -0.56 -1.64 N/A 1.94 0.91 Energy 0.39 -0.65 2.39 -1.21 2.58 -2.39 -0.82 N/A -3.05 -1.96 0.30 2.33 Banks -1.30 -1.25 0.22 2.08 0.81 -1.37 0.39 -0.53 0.55 -1.78 1.70 0.81 Diversified financials -1.10 -0.42 1.06 2.61 0.87 -2.38 0.26 -2.20 -1.01 N/A 1.15 2.83 Telecom services -0.30 -0.16 0.96 0.10 1.17 -5.44 -0.19 -0.87 -3.92 -0.73 1.09 0.26 Utilities -0.62 -0.66 0.79 -0.58 1.91 1.48 2.06 -1.46 -0.19 -1.79 N/A 0.79 Key thematic ETFs: Change (%) Market movers Mkt cap US dollar total returns (%) Robotics & AI (Global X) Name Ctry Sector (US$mn) 1D 1M 3M 6M 1Y 3Y Cloud Computing (Global X) Top seven performers Lithium & Battery (Global X) Wipro IN Information tech. 19,995 17.3 24.5 43.4 0.3 -7.3 17.1 Internet of Things (Global X) Hyundai Motor KR Consumer disc. 22,521 7.8 13.8 10.5 -8.7 -20.5 -27.4 Digitalisation (iShares) Infosys IN Information tech. 47,123 6.6 22.4 34.1 3.5 -0.2 61.3 FinTech (Global X) LG Electronics KR Consumer disc. 10,609 6.2 20.6 41.7 3.7 5.7 4.4 Genomics & Biotech (Global X) HCL Technologies IN Information tech. 22,215 4.5 7.5 30.7 -2.3 10.0 27.0 Health & Wellness (Global X) Aurobindo Pharma IN Healthcare 6,550 4.1 10.6 66.0 63.5 34.0 -2.0 Ageing Population (iShares) Samsung Electro-Mech. KR Information tech. 8,231 4.0 6.2 29.9 -6.2 40.0 21.1 EM Consum Growth (iShares) Bottom seven performers Clean Energy (iShares) Hartalega MY Healthcare 12,401 -8.1 34.0 109.2 173.5 195.4 369.0 Water Resources (Invesco) Netmarble KR Commun. services 9,040 -5.9 38.4 34.7 23.3 32.5 -17.8 Agribusiness (iShares) Top Glove MY Healthcare 13,799 -5.7 44.8 230.8 337.1 356.1 714.3 Global Infrastructure (iShares) Ayala Land PH Real estate 9,521 -4.3 -9.0 -3.7 -23.5 -37.5 -17.6 ESG US Leaders (iShares) URC PH Consumer staples 5,303 -4.2 -11.3 -5.9 -16.4 -27.9 -19.2 2D 10D Bharti Airtel IN Commun. services 40,955 -3.9 3.6 12.5 13.7 46.7 32.8 (3) 0 3 6 9 12 15 18

BDO Unibank PH Financials 7,932 -3.4 -7.9 -15.3 -39.8 -39.5 -23.8

This publication contains summaries of reports prepared by Mirae Asset Daewoo Co., Ltd. and/or its non-US affiliates (“Mirae Asset Daewoo”). Please review the compliance notices contained in the original reports. Information and opinions contained herein have been compiled in good faith from sources deemed to be reliable. However, the information has not been independently verified. Mirae Asset Daewoo makes no guarantee, representation, or warranty, express or implied, as to the fairness, accuracy, or completeness of the information and opinions contained in this document. Mirae Asset Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. This document is for informational purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments. This document may not be reproduced, further distributed, or published in whole or in part for any purpose.

July 16, 2020 One-Asia Morning Focus

MSCI valuations (DM, EM, Asia ex-JP)

17 12M forward P/E (x) 22 2.0 12M trailing P/B (x) 2.8 21 16 20 2.6 1.8 15 19 2.4 14 18 1.6 17 13 2.2 16 1.4 12 15 2.0 11 14 1.2 13 1.8 10 12 9 11 1.0 1.6 Jul-19 Oct-19 Jan-20 Apr-20 Jul-19 Oct-19 Jan-20 Apr-20 MSCI Asia ex-JP (L) MSCI World EM (L) MSCI World DM (R) MSCI Asia ex-JP (L) MSCI World EM (L) MSCI World DM (R)

MSCI 12M forward P/E (x) Currencies (vs. USD) Value Change(%) Korea Vietnam 1D 3M YTD

13 19 KRW 1,200.6 -0.41 -1.38 3.81 CNY 7.0 -0.42 -1.04 0.34 11 16 JPY 106.8 -0.39 -0.54 -1.69 IDR 14,587.5 0.95 -6.49 5.08 9 13 HKD 7.8 0.03 0.03 -0.50 TWD 29.4 -0.12 -1.86 -1.79 7 10 Jul-19 Oct-19 Jan-20 Apr-20 Jul-19 Oct-19 Jan-20 Apr-20 SGD 1.4 -0.30 -2.43 3.29 THB 31.5 -0.18 -3.45 5.20 Indonesia India 19 24 INR 75.2 -0.37 -1.68 5.28 22 PHP 49.5 -0.18 -2.28 -2.34 17 20 MYR 4.3 -0.19 -1.74 4.19 15 18 VND 23,184.0 0.01 -1.10 0.05 13 16 Commodities 11 14 Latest Change (%) 9 12 Jul-19 Oct-19 Jan-20 Apr-20 Jul-19 Oct-19 Jan-20 Apr-20 close 1D 3M YTD Crude oil (US$/bbl) 42.9 0.0 -16.4 -36.8

Hong Kong China Thermal coal (US$/tonne) 52.2 0.0 -22.8 -22.1 17 16 Iron ore (US$/tonne) 107.5 0.5 19.2 17.4 15 Copper (US$/tonne) 6,489.5 -0.8 14.5 5.4 15 14 Nickel (US$/tonne) 13,518.0 0.3 5.6 -3.4 13 Tin (US$/tonne) 17,225.0 -0.9 1.3 2.2 13 12 Gold (US$/ozt) 1,810.6 -0.0 8.7 19.2 11 Palm oil (INR/tonne) 770.4 0.3 2.4 -11.5

11 10 Soybean oil (c/lb) 27.6 1.4 -6.4 -19.6 Jul-19 Oct-19 Jan-20 Apr-20 Jul-19 Oct-19 Jan-20 Apr-20 Corn (US$/bu) 3.3 -0.8 -16.7 -17.9 Wheat (US$/bu) 5.2 0.0 0.1 -6.1 Source: FactSet, Mirae Asset Daewoo Research (updated on 7/15/20 at 23:00 KST)

[Korea] Media

Studio Dragon Buy (253450 KQ) (Maintain)

Robust earnings and lineup, plus China potential TP: W107,000 Upside: 20.9%

Mirae Asset Daewoo Co., Ltd. Jeong-yeob Park [email protected]

Robust earnings expected for 2Q20 preview: Revenue of W122.5bn (-4.4% YoY) and OP of W16.8bn (+55.3% YoY) 2Q20  Our 2Q20 estimates remain unchanged. Our 2Q20 OP estimate is in line with the consensus (W15.9bn).  Despite YoY declines in the number and size of titles aired (vs. ), we believe operating profit increased, driven by strong licensing sales.  Strong licensing sales: 1) For titles sold simultaneously to domestic networks and global OTTs (The King: Eternal Monarch, Hi Bye Mama!, It's Okay to Not Be Okay, and Rugal), the number of episodes aired was 60% higher than usual.  Strong licensing sales: 2) Sales of profitable, older titles (Guardian and )—for which expense recognition has been completed—likely contributed to profits, helping to lift OP margin to 13.7% (+5.3%p YoY).

Popularity of K-dramas to Content power within Netflix: US no. 1, Korea no. 2 continue to grow  K-dramas still represent the majority of the top 10 most-viewed titles in many Asian countries.  The popularity of K-dramas is spreading geographically, irrespective of the domestic TV ratings of individual titles.  It’s Okay to Not Be Okay, produced by Studio Dragon, is the no. 1 show in eight Asian countries and among the top-ranking shows in Australia, Brazil, Chile, and Mexico.  Korea has the second highest share in Netflix’s top 50 titles (average no. of titles in the top 50: 21.7 for the US, 8.4 for Korea, 4.4 for Colombia, 2.5 for Spain, and 2.1 for Japan).  Upcoming lineup: Upcoming titles targeting the global audience include Stranger 2 (Aug.), Record of Youth (Aug.), and Sweet Home (Sep.).

Maintain Buy and TP of Robust earnings and China exposure suggest more upside than downside potential W107,000  Content supply/demand: The increasing popularity and power of K-dramas, combined with delays in foreign content production due to COVID-19, are continuing to create a favorable environment for domestic production companies.  As Chinese and other global OTTs expand their geographical footprint, we believe top-tier production companies will gain stronger negotiating power in the medium and long term.  The stock’s 2018 multiple expansion driven by increased negotiating power should play out again in 2H20. Key data Current price (7/15/20,W) 88,500 Market Cap (Wbn) 2,487 150 Studio Dragon KOSDAQ OP (20F, Wbn) 62 Shares Outstanding (mn) 28 130

110 Consensus OP (20F, Wbn) 56 Free Float (%) 38.3

90 EPS Growth (20F, %) 88.9 Foreign Ownership (%) 8.8

70 P/E (20F, x) 49.8 Beta (12M) 0.38

50 Market P/E (20F, x) 15.3 52-Week Low 54,000 7.19 11.19 3.20 7.20 KOSDAQ 781.29 52-Week High 92,500

Share performance Earnings and valuation metrics (%) 1M 6M 12M FY (Dec.) 12/16 12/17 12/18 12/19 12/20F 12/21F Absolute 14.9 2.4 25.7 Revenue (Wbn) 0 287 380 469 524 625 Relative 2.0 -11.0 8.6 OP (Wbn) 0 33 40 29 62 84 OP Margin (%) - 11.5 10.5 6.2 11.8 13.4 NP (Wbn) 0 24 36 26 50 60 EPS (W) 0 1,050 1,278 941 1,779 2,143 ROE (%) 0.0 12.9 9.3 6.4 11.0 11.9 P/E (x) - 61.9 72.3 85.9 49.8 41.3 P/B (x) - 4.9 6.5 5.3 5.2 4.6 Dividend Yield (%) - 0.0 0.0 0.0 0.0 0.0 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Poultry

Some cyclical bumps

We are seeing a near-term downside risk, which is partly due to seasonality. However, as PSBB is gradually relaxed, more distribution channels start to re-open, hence bringing back the demand to absorb the supply, though unlikely to be back to pre-COVID-19 level. Neutral (Maintain) Even if the PSBB is tightened again, we envision low risk of another demand shock ahead. Thus, broiler price volatility should be limited from here. However, considering that the share prices of poultry companies are highly linked to broiler price movement, near-term Industry Report downside risk from share prices is in sight. We still prefer JPFA as its valuation is far below July 15, 2020 that of peers.

Broiler price continued strengthening in June PT. Mirae Asset Sekuritas Indonesia Broiler prices at farmer level in West Java, Central Java, East Java increased by 16.0% MoM, Basic Industry 14.0% MoM, and 16.2% MoM to IDR21,800k/kg, IDR21,100k/kg, and IDR21,800/kg, respectively. This price level is quite strong, continuing the uptrend in broiler prices that Emma A. Fauni +62-21-5088-7000 (ext.: 169) had started in mid-May. [email protected] Entering July, broiler price softened

Entering July, broiler prices saw a downward trend. Within the past 4 days, broiler prices at farmer level in most of Java area touched IDR16,000-17,000/kg, likely entering operating

loss level, subsiding from its peak level of IDR23,000-IDR24,000/kg in the first week of the month. This is due to increased chick-in activities in May and June, as indicated by the strong rebound in DOC prices, possibly driven by strong recovery in broiler prices. This trend has been stable for the past two weeks.

Thus far still largely in line with our expectation

We think this situation still largely corresponds to our expectation. As we noted in our previous report, the notion that broiler prices will stay at such a strong level (June peak at above IDR22,000/kg) seems too good to be true. We expect prices to normalize from its peak level in June since: 1) supply gradually recovers as farmers are incentivized to increase chick-in activities due to broiler price recovery; and, 2) PSBB relaxation should bring demand back on track though unlikely to exceed the pre-COVID-19 level amid tough macro backdrop like this. Apart from this, reduced spending in sura month, which will fall in August 20th-September 20th this year, is likely to present seasonal downward pressure on broiler price.

Improvement in demand to prevent volatile movement in broiler price

For the time being, we do not expect broiler price movement to be as volatile as what we saw in April-mid May, as we see low risk of another demand shock ahead. We believe that after the enactment of large-scale social restrictions (PSBB) in April, consumers had started to adapt to changes in accessing fresh staple foods while limiting going out. We witness increased traffic in staple food purchases in online platforms, but, of course, this could not fully replace the entire offline channel sales, given the shipping costs that have to be borne by consumers, which are only reasonable for people residing near a carcass chicken supplier and having plenty access to online transportation/delivery services.

Short-term downside risk from share price is in sight

Though such a consistent move in broiler prices does not necessarily impact poultry companies' earnings significantly, investors tend to react quickly on the share price. We think this should pose a risk of sell-off in poultry companies’ share prices in the near term as share prices are highly correlated with broiler price movement.

Maintain Neutral We maintain our Neutral view on poultry sector as we consider the upcoming downside risk to broiler prices to be short-term. All in all, we expect the improvement in demand will prevent broiler prices from moving too volatile going forward. JPFA remains our top pick as it’s highly undervalued compared to peers.

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.