Film Industry Drivers: Overseas Markets and Platforms

Home , Busan Tower, Cinema Service, CJ CGV, CJ Entertainment, Jay Park, Jin Goo

2H17 Outlook

Media Film industry drivers: Overseas markets and platforms

Jeong-yeob Park +822-3774-1652 [email protected]

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. Contents

[Summary] 3

I. 2016-1H17 review 5

II. Outlook 7

III. Key issues 26

IV. Valuation overview and investment strategy 31

V. Top picks 32 CJ CGV, J Contentree [Summary] Overseas theaters > overseas content > domestic theaters > domestic content

Key film market variables Market size Competition Overseas opportunities Cross-platform Movie Theater chain Distributors Distributors Ticket prices Ancillary rights (theater operation Theater operators attendance operators (investors) (content) vs. other) Three-year trends ↗ →↑ ↗ ↑→ ↑ ↑ Expected future trends ↗ → ↗ →↑↗ ↑ ↘↗ Impact on theater +-△△ +- +△ operators Impact on distributors +-+△ -+△△

- Shift in box office growth driver to prices from - Aggressive screen additions by some theater chain - Resumption of growth for China’s film quantity (attendance) operators (e.g., Megabox) have yet to lead to greater market likely to boost growth - Growing revenue contributions from premium market competition. prospects for global film markets screens and concessions - Key growth drivers: Premiumization of theaters in developed markets and - Global direct distributors’ full-fledged investments in Korea; attendance increases in emerging - Limited upside/downside to attendance continued strong box office of big-budget films markets Notes - Overall uptrend in production costs  market competition to heat up. - Ancillary rights alone are not a major factor affecting - Heightened uncertainties over China- theater operators’ growth, as their impact is largely bound content exports (co-production) limited to content businesses - Global OTT players’ original content expansion poses a - Dissipation of THAAD concerns is - Ancillary business growth is positive to distribution threat to global theater operators over the longer term amid unlikely in the near term; we advise (investment) firms, as it allows for diversification into shortening theatrical windows caution on distributors (investors) in low-budget films - Pre-production licensing agreements to help reduce risks the near term and boost revenue  positive for distributors (investors) - We arelonger positive term on distributors over the

Note: “+” is positive, “ᇞ” is neutral, and ”-“ is negative Source: Mirae Asset Daewoo Research

3| 2H17 Outlook [Media] Mirae Asset Daewoo Research [Summary] Overseas theaters > overseas content > domestic theaters > domestic content

Key to profit growth

(Wbn) 250 Domestic Domestic Domestic Domestic Domestic Domestic Domestic B0: +6.5% BO: +17.7% BO: +6.8% BO: +7.2% BO: +3.2% BO: +1.4% BO: +5.6% Attendance: Attendance: Attendance: Attendance: Attendance: Attendance: Attendance: +2.9% +7.4% +21.5% +9.9% +0.8% +1.0% +0.2% ATP: +2.6% ATP: -0.8% ATP: -3.2% ATP: +2.8% ATP: +6.3% ATP: +2.2% ATP: +1.6% Key factors (ex-domestic theaters) 200 CJ CGV CJ CGV CJ CGV CJ CGV CJ CGV CJ CGV CJ CGV Strong performance - CJ CGV: Overseas, 4DX growth Entry into Start of Screen X Management Absorption of Entry into Turkey in three major markets - J Contentree: Broadcasting, IP Vietnam consolidated launch of Blitz Blitz into the (acquisition of (Korea, China, Turkey); investments (acquisition of site (Indonesia) CGV Mars) improvement in parent Megastar) openings in China NEW brand profitability 150 4DX launch Start of ancillary J Contentree rights distribution J Contentree Liquidation of J Contentree (Contents Panda) Acquisition of magazine Keys to maximizing domestic Acquisition of remaining stake business theater earnings JoongAng M&B in Megabox J Contentree 100 Growing profit contribution from - CJ CGV: Cost controls multiplex business; - J Contentree: Site openings Showbox Start of IP investments Establishment NEW of Showbox Showbox, NEW Start of music China Delays to Showbox, NEW 50 business China-bound Improving investor sentiment Keys to content exports and overseas (Music & NEW) NEW content exports/ on expectations for China- Establishment of Chinese co- bound content exports and co-productions joint venture with productions co-productions - Showbox: Preserving domestic M/S + Huace Chinese co-productions 0 - NEW: Domestic business diversification + Chinese co-productions

CJ CGV parent + Megabox (domestic theaters) CJ CGV + J Contentree (theaters) * Combined operating profit -50 Showbox + NEW + CJ E&M (content) 11 12 13 14 15 16 17 18

Source: Company data, Mirae Asset Daewoo Research

4| 2H17 Outlook [Media] Mirae Asset Daewoo Research I. 2016-1H17: Stability in Korea, sluggishness in China

Stable domestic • W2.3tr (+7.6%) in total film revenue; box office of W1.7tr (-1.6%); 217mn admissions (-0.1%) operations vs. lowered • Domestic movie theaters: New site openings weighed on profitability. • Domestic content: Continuous outperformance by big-budget films; although only one film broke the 10mn expectations for China- admissions mark, total attendance remained stable. bound content exports • Overseas theaters: Dwindling box-office revenue in China and Turkey (amid political uncertainties) led to margin erosion and share price losses for CJ CGV. • Overseas content: Overseas content revenue hit a 10-year peak, on robust exports of Train to Busan, but share prices of relevant companies fell on deteriorating investor sentiment amid THAAD worries.

Relative share performances of Korea’s film-related companies Highest-grossing films of 2016 and audience share

CJ CGV (p) Release Revenue Attendance J Contentree Rank Title Distributors 160 Deteriorating sentiment on date (Wbn) (mn persons) (%) content players due to concerns over Showbox 1 Train to Busan NEW 7/20 93 11.6 5.3 THAAD backlash NEW 2 A Violent Prosecutor Showbox 2/03 77 9.7 4.4 140 3 Captain America: Civil War Walt Disney 4/27 73 8.7 4.2

4 The Age of Shadows Warner Bros. 907 61 7.5 3.5 120 5 Tunnel Showbox 8/10 58 7.1 3.3 Content exports 6 Operation Chromite CJ E&M 7/27 55 7.0 3.2 to China expected 7 Luck-Key Showbox 10/13 56 7.0 3.2 100 to rebound 8 The Wailing 20th Century Fox 5/12 56 6.9 3.2

80 CJ E&M 17% Lotte Ent. 60 Other 8% 53% NEW 9% Showbox 40 13% 1/16 3/16 5/16 7/16 9/16 11/16 1/17 3/17 5/17

Note: 1/1/16 = 100p Source: KOFIC, Mirae Asset Daewoo Research Source: Thomson Reuters, Mirae Asset Daewoo Research

5| 2H17 Outlook [Media] Mirae Asset Daewoo Research I. 2016-1H17: Stability in Korea, sluggishness in China

China’s film market • China’s film market slump in 2016 was attributable to: 1) disappointing box-office results for Hollywood movies; stumbled in 2016 and 2) subsidy cuts for online ticket booking. • In 2015-16, global revenue for the top-five Hollywood films dropped by a hefty 33.2%, due mainly to their sluggish box-office performances in China. • Subsidies for online ticket booking (nearly RMB5bn in 2015), which drove China’s box-office growth in 2015, ended in 2H16.

Sharp decline in China’s box-office growth in 2016 Changes in Chinese online ticketing sites’ M/S

(RMBbn) (%) Maoyan (Beijing Enlight, etc.) Nuomi (Baidu) WePiao (Tencent, etc.) Taobao (Alibaba, etc.) 80 China box office (L) 70 (%) Rebound expected in 2017 Dianping Other YoY (R) 1) Robust Hollywood lineup 100 4.3 70 2) Eased import quota 60 9.4 3) Growth in tier-3/4 cities 15.7 60 50 80 9.6 18.6 50 10.3 40 60 40 11.2 30 30.0 30 40

Sharp slowdown in growth in 2016 20 20 1) Decline in online ticket booking subsidies 50.1 2) Weak Hollywood lineup 20 32.9 10 10

0 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F2018F 2015 2016

Source: CBOO, ENT Group, Mirae Asset Daewoo Research Source: BigData-Research China, iMedia, Mirae Asset Daewoo Research

6| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 1) Sustained domestic market growth

Ample upside to ticket • For 2017, Korea’s ticket price growth is forecast to range from 2% (unadjusted) to 10% (adjusted), while prices; Solid attendance attendance growth is projected to be around 3%. • Korea ranks first in terms of annual admissions per capita; however, domestic movie attendance growth has lost levels steam over the past three years (+0.6% per year). • January-April 2017 cumulative attendance grow 6.8% YoY. • With a number of highly anticipated films slated for release in 2H, we are upbeat on Korea’s attendance growth in the near term.

Box-office growth driver has shifted from admissions to ticket prices

Annual admissions per capita (%) 25 Korea: 4.3, US: 3.9, Australia: 3.8, ATP YoY France: 3.1, the UK: 2.7, Admissions YoY Germany: 1.7 Japan: 1.3, China: Box office YoY 20 0.9, Turkey: 0.8

-5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

Source: KOFIC, Mirae Asset Daewoo Research

7| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 1) Sustained domestic market growth

Ample upside to ticket prices; Solid attendance levels

• We still see ample upside to ticket prices, in light of film market and ticket price trends in other countries. Ticket price vs. 2017 Big Mac Index

• Going forward, major theater operators are unlikely to engage in 14 (ATP, US$) competition; price hikes should materialize almost simultaneously. Denmark Sweden 12 UK Japan Australia 10 Netherlands Hong KongAustria Germany Canada US Average ticket price trend 8 Greece New Zealand Korea France 6 China (W) Polland Thailand 4 Russia Turkey 8,500 ATP Increased contribution Malaysia Indonesia from premium 2 India (Big Mac Index, US$) screens: +5.8% 0 1.522.533.544.555.5 8,000 Differential pricing: Source: The Economist, McDonald’s, Mirae Asset Daewoo Research +5.9% Additional growth Average ticket prices in major countries 7,500 potential if ticket prices are hiked (US$) Major multiplexes simultaneously hike prices 14 in 2009: +17.4% 12 7,000 10 8 6 4 6,500 2 0

6,000 8/04 12/09 2013-16 2017-18F Note: ATP growth is based on annual average prices Source: KOFIC, Mirae Asset Daewoo Research Source: KOFIC, Mirae Asset Daewoo Research

8| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 1) Sustained domestic market growth

Ample upside to ticket prices; solid attendance levels

Date Multiplex Details Jul. 2009 Cinus Weekday tickets for adults: W7,000 → W8,000; weekend tickets for adults: W8,000 → W9,000 Jul. 2009 Lotte Cinema W1,000↑ for adults; W500↑ for children Jul. 2009 CJ CGV, Megabox W1,000↑ across the board

Weekends: W9,000 → W10,000; weekdays: W8,000 → W9,000 Feb. 2013 CJ CGV Price cuts for late-night tickets: W8,000 → W6,000

Jul. 2013 Megabox Weekends: W9,000 → W10,000; W1,000-3,000↓ for non-peak showings implemented in four theaters in Seoul Jul. 2013 Lotte Cinema W1,000↑ (weekdays: W8,000 → W9,000; weekends: W9,000 → W10,000) at eight branches Feb. 2014 CJ CGV Further segmentation of pricing tiers; differential pricing by theater and weekday/weekend - Two-tier (morning/general) → four-tier (morning/daytime/general/late-night); across-the-board price hikes

- Increase in the number of branches raising 2D film ticket prices (W9,000 on weekdays/W10,000 on weekends); 3D ticket prices↓ (W13,000 → W12,000)

Mar. 2014 Lotte Cinema Flexible pricing policy (special format screens, regular screens↑); all branches - 2D: W9,000 on weekdays/W10,000 on weekends (W1,000↑) - 3D: W10,000 on weekdays/W12,000 on weekends (down from W13,000) - Charlotte premium theaters: W30,000 → W27,000 on weekdays; couple seats: W1,000↓on weekdays Mar. 2016 CJ CGV Further segmentation of weekday prices by screening time; three-tier pricing by seats Morning/weekdays/prime/late-night → morning/brunch/afternoon/prime/moonlight/night Economy zone: W1,000↓; standard/prime zone: W1,000↑ Apr. 2016 Lotte Cinema Further segmentation of prices by screening time (two-tier → four-tier); price adjustments for some weekday and weekend tickets Jun. 2016 Megabox Increased morning screening times and pricing schemes, including membership and children’s prices - Weekend regular: W10,000 → W11,000; late-night: W8,000 → W6,000~9,000; morning: W6,000 - Screening times: Four-tier (morning/daytime/general/late-night) → three-tier (morning/general/late-night)

Source: Company data, media reports, Mirae Asset Daewoo Research

9| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 1) Sustained domestic market growth

Ancillary market also has strong growth potential

Combined value of domestic/overseas film licensing/distribution Pay TV subscriber growth to slow down deals move largely in line with Korean films’ ROI (%) Rate of return on Korean film investments (L) (Wbn) (mn subscriptions) Number of pay TV subscriptions (L) (%) 20 Domestic/overseas film licensing/distribution (R) 600 32 IPTV % (R) 60 CATV % (R) 1) Demise of VHS market 30 0 2) Illegal internet downloads 400 50 28 -20 26 200 40 -40 VOD, export expansion 24

-60 0 22 30 05 06 07 08 09 10 11 12 13 14 15 16 2013 2014 2015 7/16 Source: KOFIC, Mirae Asset Daewoo Research Source: MSIP, Mirae Asset Daewoo Research

Film revenue breakdown in Korea and the US US subscription-based VOD users’ content preferences

(%) Domestic and overseas ancillary market Theatrical (%) 100 Domestic ancillary market 16% 90 Overseas 4% 80 Home video 22% TV 30% 60 60 Digital 9% MD and other 9% 30 40 80 0 20 30.7 0 Korea US

Source: KOFIC, SNL Kagan, Mirae Asset Daewoo Research Source: Gartner, Mirae Asset Daewoo Research

10| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 2) Chinese market to resume growth

China’s box-office • Box-office results for Hollywood films are likely to improve YoY in 2017. revenue slowed in 2016, • The negative impact of ticket subsidy cuts has been tapering off, with the effects of the high base of comparison likely to wear off from 2Q. but is highly likely to • Protectionist regulations are likely to be eased, a factor that could provide a boost to China’s box-office growth. rebound in 2017 • Films produced by China’s internet/media giants are set to be released from 2017 onwards.

China’s box-office growth is highly likely to rebound in 2017

(RMBbn) (%) 80 China box office (L) 70 YoY (R) 70 60

60 Sharp growth decline 50 Rebound expected 50 1) Robust Hollywood lineup 2) Eased import quota 40 3) Growth in tier-3/4 cities 40 30 30

20 20

10 10

0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

Source: CBOO, ENT Group, Mirae Asset Daewoo Research

11| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 2) Chinese market to resume growth

1) Content (Hollywood) Hollywood films’ performances in 2015 and 2016 (US$mn, %) • A better Hollywood lineup is expected to rejuvenate the Chinese market 2015 Worldwide Non-US Non-US in 2017. Title Distributor revenue revenue % • Sequels to Hollywood films that fared well in China are set to be Star Wars: The Force Awakens BV 2,068 1,132 54.7 released. Jurassic World Uni. 1,670 1,018 61 • The Fate of the Furious was a massive hit in April. Other films, including Furious 7 Uni. 1,516 1,163 76.7 Transformers: The Last Knight, are highly anticipated to perform well. Avengers: Age of Ultron BV 1,405 946 67.3 Minions Uni. 1,159 823 71 Top five Hollywood films’ global revenue in 2015 and 2016 Total 11,524 7,525 65.3 2016 (US$bn) Worldwide Non-US Non-US Title Distributor revenue revenue % 9 Non-US revenue Captain America: Civil War BV 1,153.30 745.2 64.6 US revenue Rogue One: A Star Wars Story BV 1,054.70 523.8 49.7 Finding Dory BV 1,028.30 542 52.7 Zootopia BV 1,023.80 682.5 66.7 -33.2% The Jungle Book (2016) BV 966.6 602.5 62.3 Total 9,316.70 5,565.00 59.7 6 Source: Box Office Mojo, Mirae Asset Daewoo Research

5.1 Major Hollywood films for the Chinese market

Title Month Notes 3.1 Previous installment recorded third-highest Fate of the Furious Apr. 3 admissions of all time in China Pirates of the Carribbean 5 May.

Wonder Woman Jun. DC Universe 2.7 Previous installment recorded the fourth- 2.1 Transformers: The Last Knight Jun. highest admissions of all time in China Thor: Ragnarok Nov. Marvel Universe 0 2015 2016 2017F Star Wars: The Last Jedi Dec.

Source: Box Office Mojo, Mirae Asset Daewoo Research Source: Box Office Mojo, Mirae Asset Daewoo Research

12| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 2) Chinese market to resume growth

1) Content (Hollywood): 2017F film lineup of major Hollywood studios

US US Date Title Distr. Date Title Distr. Date Title Distr. Date Title Distr. revenue revenue 1/13 Monster Trucks Par. 33.4 4/07 Smurfs: The Lost Village Sony 14.1 7/07 Patti Cake$ FoxS 10/27 2017 Cloverfield movie Par. 1/19 The Founder Wein. 12.8 4/07 Gifted FoxS 0.5 7/07 Spider-Man: Homecoming Sony 10/27 Saw: Legacy LGF 1/20 Split Uni. 137.5 4/07 Going in Style (2017) WB 7/14 War for the Planet of the Apes Fox 10/27 Thank You for Your Service (2017) Uni. 1/20 Triple X Par. 44.9 4/14 The Fate of the Furious Uni. 7/21 Dunkirk WB 11/03 Suburbicon Par. 1/27 A Dog's Purpose Uni. 63.9 4/21 Born in China BV 7/21 Girls Trip Uni. 11/03 Thor: Ragnarok BV 1/27 Gold Wein. 7.2 4/21 Unforgettable (2017) WB 7/28 Untitled Disney fairy tale (2017) [Live Action] BV 11/10 Daddy's Home 2 Par. 2/03 Rings Par. 27.8 5/05 3 Generations Wein. 8/04 The Dark Tower Sony 11/10 Red Sparrow Fox Journey to the West: 2/03 Sony 0.9 5/05 Guardians of the Galaxy Vol. 2 BV 8/04 Step (2017) FoxS 11/10 The Star Sony The Demons Strike Back 2/10 The LEGO Batman Movie WB 173.3 5/12 King Arthur: Legend of the Sword WB 8/04 Wind River Wein. 11/17 Justice League WB 2/10 Fifty Shades Darker Uni. 114.4 5/12 Snatched Fox 8/11 Annabelle: Creation WB 11/17 Wonder LGF 2/10 John Wick: Chapter Two LG/S 91.6 5/19 Alien: Covenant Fox 8/18 The Hitman's Bodyguard LG/S 11/22 Coco BV Murder on the Orient Express 2/10 A United Kingdom FoxS 3.8 5/19 Diary of a Wimpy Kid: The Long Haul Fox 8/25 All Saints Sony 11/22 Fox (2017) 2/17 The Great Wall Uni. 45.2 5/19 Everything, Everything WB 8/25 Tulip Fever Wein. 11/24 Mary Magdalene Wein. 2/17 A Cure for Wellness Fox 8.1 5/25 Baywatch Par. 9/08 It WB 12/15 Ferdinand Fox Pirates of the Caribbean: 2/24 Get Out Uni. 163.3 5/26 BV 9/15 American Assassin LGF 12/15 Star Wars: The Last Jedi BV Dead Men Tell No Tales 2/24 Rock Dog LG/S 9.4 6/02 3 Idiotas LGF 9/15 The Solutrean Sony 12/20 Jumanji: Welcome to the Jungle Sony 3/03 Logan Fox 218.4 6/02 Captain Underpants Fox 9/22 Battle of the Sexes FoxS 12/22 Bastards (2017) WB 3/03 The Shack LG/S 55.1 6/02 Wonder Woman WB 9/22 Granite Mountain LGF 12/22 The Current War Wein. 3/03 Table 19 FoxS 3.6 6/09 The Mummy (2017) Uni. 9/22 Ninjago WB 12/22 Downsizing Par. 3/10 Kong: Skull Island WB 156.8 6/09 My Cousin Rachel FoxS 9/29 American Made Uni. 12/22 Pitch Perfect 3 Uni. 3/17 Beauty and the Beast (2017) BV 433 6/16 All Eyez on Me LG/S 9/29 Kingsman: The Golden Circle Fox 12/25 The Greatest Showman on Earth Fox 3/24 Power Rangers (2017) LGF 75.7 6/16 Cars 3 BV 10/06 Blade Runner 2049 WB 3/24 Life (2017) Sony 27.2 6/16 Rough Night Sony 10/06 My Little Pony (2017) LGF 3/24 CHiPs WB 17.2 6/23 The Big Sick LGF 10/13 mother! Par. 3/24 Wilson FoxS 0.6 6/23 Transformers: The Last Knight Par. 10/13 The Snowman Uni. 3/31 The Boss Baby Fox 91.6 6/28 Baby Driver Sony 10/20 Geostorm WB 3/31 Ghost in the Shell (2017) Par. 32.3 6/30 Despicable Me 3 Uni. 10/20 Insidious: Chapter 4 Uni. 6/30 The House WB 10/20 The Mountain Between Us Fox

Source: Box Office Mojo, Mirae Asset Daewoo Research

13| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 2) Chinese market to resume growth

1) Content (local) • Rise of local films: Chinese internet firms’ film investments are expected to bear fruit starting in 2017. • Alibaba, Tencent, and Wanda are seeking to expand their reach from theaters and online film ticketing to film production. • Film market expansion will likely be driven by content investments. In particular, films based on game IP should boost the market. • In Korea, large companies' content investments played a significant role in domestic film market expansion after 2003; the surge in multiplexes pushed up large-scale investments in film production, which has enhanced the competitiveness of domestic films. As a result, Korean films maintain a stable market share of over 50%.

Homegrown movie M/S by country 2016 investments and business expansion by Chinese companies

(%) Company Details Month 65 Maintains high proportion Wanda Acquired Legendary Pictures for US$3.5bn Jan. of homegrown films via Alibaba Created an arts/media investment fund (RMB2bn). Aug. protectionist policies Acquired a 80% stake in Hangzhou Xingji (a Chinese theater chain) for RMB100mn May

55 Forged a strategic partnership with Hehe Pictures Dec.

Beijing Acquired a 57% stake in an online ticketing platform Enlight Media 45 Huayi Created the joint venture, Anthem and Song, with the Russo brothers Aug. Brothers

35 Jointly invested in STX Entertainment, a US film distributor, with Tencent Pictures Created a film industry investment fund (RMB2bn) via Nuomi (an online ticketing Baidu Oct. platform)

25 Tencent Announced a plan to invest in film production (RMB2bn) Nov. Jointly invested in STX Entertainment, a US film distributor, with Huayi Brothers Sept.

Huace Film Invested in Wanda Pictures (RMB200mn) 15 & TV

WePiao Invested in Vista Entertainment (a UK ticketing software firm) Aug. Established a film distribution company Oct.

Source: KOFIC, Mirae Asset Daewoo Research Source: Company materials, media reports, Mirae Asset Daewoo Research

14| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 2) Chinese market to resume growth

Big-budget (W10bn or greater) Korean film releases Status of major films being produced by Alibaba and Tencent

Year Film (production costs) Alibaba Release date Title Notes 1999 Yonggary (W10bn) Jan. 2017 Journey to the West: Conquering the Demons 2 Investment 2017 On Wings of Eagles Distribution 2002 Resurrection of the Little Match Girl (W11bn) 2017 Real Investment 2003 Taegukgi (W180bn), Wonderful Days (W12.6bn), Silmido (W11bn) 2017 Once Upon a Time Investment 2017 Ao Jiao Yu Pian Jian - 2004 Rikidozan (W11bn) 2018 Asura - 2005 Typhoon (W20bn), Blue Swallow (W12.9bn) 2018 Legend of the Ancient Sword - TBD Storming 30 Years - 2006 The Restless (W13bn), Hanbando (W12bn), The Host (W12bn) TBD Zhengtu - TBD No Other Love (Mei You Bie De Ai) - 2007 The War (W30bn), May 18 (W13bn) TBD Qi Huan Zhi Lv - 2008 The Good, the Bad, the Weird (W20bn), The Divine Weapon (10bn) TBD Qing He Male College - TBD The Flying Tigers Investment 2009 Haeundae (W16bn), Jeon Woo-chi (W15bn), Run-Off (W11bn) TBD Night at the Museum (remake) - 2010 The Last Godfather (W18bn), Into the Fire (W11.3bn) TBD The Heroic Age - TBD My Fair Princess Investment My Way (W35bn), The Front Line (W14bn), War of the Arrows (W12bn), TBD Warriors Investment 2011 Sector 7 (W11.6bn), Quick (W10bn) Tencent Release date Title Notes 2012 Tower (W16bn), R2B (W12bn), The Thieves (W12bn) Mar. 2017 Kong: Skull Island Investment 2018 The Tuzki 3D - 2013 Snowpiercer (W43.7bn), Mr. Go (W30bn) TBD 20,000 Miles Plan - 2014 The Admiral (W19bn), Kundo (W16.5bn), The Pirates (W16bn) TBD Aura - TBD The Game of Antiques - Assassination (W20bn), The Tiger (W17bn), The Himalayas (W12bn), Memories of the Sword TBD Koseison - 2015 (W10bn) TBD The Magic Blade (remake) - TBD The Treasure Map - The Age of Shadows (W17bn), The Handmaiden (W16bn), Pandora (W15bn), Operation TBD Pathfinder Comic IP 2016 Chromite (W14bn), The Map (W12bn), Asura (W12bn) TBD Tongzhizhe Comic IP TBD Cong Qian You Zuo Ling Jian Shan Comic IP Comic IP Battleship Island (W28bn), Real (W20bn), A Taxi Driver (W15bn), The King (W15bn), Steel TBD Full Metal Angel 2017 (Square Enix) Rain (W15bn), Fabricated City (W10bn) TBD WeFire Game IP (Tencent)

Source: KOFIC, media reports, Mirae Asset Daewoo Research Source: Company materials, media reports, Mirae Asset Daewoo Research

15| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 2) Chinese market to resume growth

2) Easing of restrictions • In China, local productions account for more than 50% of total films due to protectionist policies. on foreign film imports • Protectionism (film import quota and a minimum number of showings for local pictures) will likely ease in 2017. • In the short term, the dominance of Hollywood films will likely expand. • In the medium to long term, a moderate pace of deregulation is likely to help strengthen China’s local film production capabilities. • We think an increase in film imports will lead to market expansion and lower market volatility. In addition, deregulation would likely lead to quality improvement for local movies, thus boosting the Chinese film industry’s long-term growth potential and fundamentals.

Chinese restrictions on film imports Chinese film industry showing signs of changing

Year Details (%) Local big-budget films Started to distribute imported films based on revenue sharing system 65 Audience share of domestic films 1994 to be rolled out in earnest (i.e., producers, distributors, and theaters share revenue)

Joined the WTO; increased the number of film imports under the revenue sharing syste 2001 m from 10 to 20 55 Increased the number of film imports under the revenue sharing system from 20 to 34 2012 - Agreed to screen US movies for the first time Level maintained - Imposed an annual film import quota of 34; agreed to adjust the quota in five years since 2003

Maintained the existing strict foreign film import quota. 45 Easing of 2014 - Although there were media reports that the Chinese government was considering the import quota easing of the quota system, decided not to do so.

The State Administration of Press, Publication, Radio, Film and Television began censoring foreign films and dramas in April 2015. 35 2015 - Four guiding principles: 1) foreign films/drama quota, 2) content restriction, 3) censors hip before broadcast, 4) registration of all episodes before broadcast

2016 Increased the annual film import quota from 34 to 39 Plans to renegotiate the 2012 agreement with the US 25 2017 (revenue sharing ratio and number of imports) 00 02 04 06 08 10 12 14 16 18

Source: KOTRA, KOFIC, SARFT, Mirae Asset Daewoo Research Source: SARFT, KOFIC, Mirae Asset Daewoo Research

16| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 2) Chinese market to resume growth

Normalization: Growth driven by third- and fourth-tier cities; Rising competition in first- and second-tier cities

No. of screens per one million people Box-office revenue by city tier

(No.) (RMBbn) 124.8 -0.2% 100 20 2015 2016 80 +1.2% 60 48.2 15 38.6 +12.2% 40 23 10 20 0 US France Australia UK Germany Korea Mexico Singapore (urban) China Turkey Japan (total) China Brazil India 5 +21.5%

0 Tier-1 cities Tier-2 cities Tier-3 cities Tier-4 cities Source: SARFT, KOFIC, Mirae Asset Daewoo Research Source: CCTime, KRCECN, Mirae Asset Daewoo Research

% of sites in third-/fourth-tier cities out of CJ CGV’s total CJ CGV’s Chinese revenue by city tier Consolidated Chinese sites (%) (Wbn) 50 600 Revenue in tier-3/4 cities Revenue in tier-1/2 cities

40 Expecting proportion of revenue 400 from tier-3/4 cities to increase

30 200

20 CJ CGV tier-3/4 out of Tier-3/4 contribution to total 0 total China sites China box office 2013 2014 2015 2016 2017F 2018F Source: Mirae Asset Daewoo Research Note: Based on the assumption 70-80% of newly opened sites will be located in third- and fourth- tier cities Source: Mirae Asset Daewoo Research 17| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 3) Increase in films based on existing IP

Reliance on existing IP is increasing across the content market • The tentpole strategy, which serves as the foundation of distributors’ long-term planning, can reduce uncertainties over box-office results. • Producers are increasingly turning to IP from non-movie media sources to facilitate steady content supply. Korean distributors’ lineups • Kakao and NAVER spun off their webtoon production units in September 2016 and May 2017, respectively. • The licensing business will likely grow full swing, as film/drama/merchandise productions based on existing IP should increase.

Hollywood superhero movie release schedule

Notes: Production costs for films in blue boxes are estimated to exceed W10bn; subject to change Source: Comicsalliance.com, Mirae Asset Daewoo Research Source: Company data, media reports, Mirae Asset Daewoo Research

18| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 3) Increase in films based on existing IP

Major tentpole films based on existing IP Admissions Year Rank Title Distributor Release date Original format Year (mn persons) Yet to be Along with the Gods Lotte Entertainment 3Q17 Webtoon Yet to be released Cheese in the Trap TBD TBD Webtoon released Steel Rain NEW 2H17 Webtoon Night of Seven Years CJ E&M 2H17 Novel South Fortress CJ E&M 2H17 Novel Cleaner K TBD TBD Webtoon 2016 3 Captain America: Civil War Walt Disney 4/27 8.7 Comics 2016 4 The Age of Shadows Warner Bros. 9/7 7.5 Novel 5 Tunnel Showbox 8/10 7.1 Novel 9 The Last Princess Lotte Entertainment 8/3 5.6 Novel 10 Doctor Strange Walt Disney 10/26 5.4 Comics 13 Fantastic Beasts and Where to Find Them Warner Bros. 11/16 4.7 Novel 15 The Handmaiden CJ E&M 6/1 4.3 Novel 18 Deadpool 20th Century Fox 2/17 3.3 Comics 21 X-Men: Apocalypse 20th Century Fox 5/25 2.9 Comics 30 Batman v Superman: Dawn of Justice Warner Bros. 3/24 2.3 Comics 36 Suicide Squad Warner Bros. 8/3 1.9 Comics 2015 3 The Avengers: Age of Ultron Walt Disney 4/23 10.5 Comics 2015 5 Inside Men Showbox 11/19 7.1 Webtoon 8 Kingsman: The Secret Agent 20th Century Fox 2/11 6.1 Comics 14 The Martian 20th Century Fox 10/8 4.9 Novel 22 Antman Walt Disney 9/3 2.8 Comics 24 Big Hero Walt Disney 1/21 2.8 Comics 25 Maze Runner: Scorch Trials 20th Century Fox 9/16 2.7 Novel 2014 11 X-Men: Days of the Future Past 20th Century Fox 5/22 4.3 Comics 2014 14 Tazza: The Hidden Card Lotte Ent., Sidus 9/3 4.0 Comics 15 Captain America: Winter Soldier Walt Disney 3/26 4.0 Comics 36 Thread of Lies Movie Collage (CJ CGV) 3/13 1.6 Novel 37 My Brilliant Life CJ E&M 9/3 1.6 Novel 40 Haemoo NEW 8/13 1.5 Play

Note: Subject to change Source: Company materials, media reports, Mirae Asset Daewoo Research

19| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 3) Increase in films based on existing IP

(%) (%) 60 20 Korean movie ROI ROI remains positive

10 40 Production costs ▲ → ROI ▲

0 20

-10 0 -20

-20 -30

-40 -40

-60 -50 Average Under W1bn W1-3bn W3-5bn W5-8bn W8-10bn Over W10bn 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: KOFIC, Mirae Asset Daewoo Research Source: KOFIC, Mirae Asset Daewoo Research

20| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 3) Increase in films based on existing IP

1) Deepening discrepancy • Big-budget movies have increasingly outperformed their smaller-budget counterparts at the box office. in box-office performance Investments in domestic films by global direct distributors have been expanding. • Big-budget movies are more likely to recover costs than smaller-budget movies and enjoy greater overall between big- and small- profitability: ROI for big-budget films averaged 53.9% (vs. the market average of 13.8%), while eight out of 10 big- budget movies; Increase budget films broke even (vs. the market average of 23%) in investments by global • ROI on Korean films has been positive since 2012. Additional investments are highly likely to be concentrated among big-budget movies. direct distributors No. of films by budget: Big-budget films are steadily Hollywood distributors’ investments in Korean films increasing Release Admi- (no.) (%) Distributor Title Director Starring Genre date ssions 25 Growth in no. of films with total production costs > W8bn (L) 12 Warner The Age of Kim Song Kang-ho, Action 9/7/16 7.5 No. of films with total production costs > W8bn (R) Bros. Shadows Jee-woon Gong Yoo, Han Ji-min Lee Lee Byung-hun, Gong Single Rider Mystery 2/22/17 0.4 Joo-young Gong Hyo-jin, Ahn So-hee 10 Park Jang Dong-gun, Lee Jong-suk, 20 Increasing no. of VIP Action 5/17 - big-budget films Hoon-jung Park Hee-soon Lee Lee Sun-kyun, Bad Lieutenant Jeong-beo Action 12/17 - 8 Lee Yoo-young m 15 The Wolf Kim Gang Dong-won Action 2018 - Brigade Jee-woon 20th Na Ha Jung-woo, Crime, 6 Yellow Sea 12/22/10 2.2 Century Fox Hong-jin Kim Yoon-seok thriller Jo Dong-o Shin Ha-kyun, 10 Running Man Action 4/4/13 1.4 h Oh Jung-se 4 Kim Cha Tae-hyun, Slow Video Drama 10/2/14 1.2 Young-tak Nam Sang-mi. Intimate Im Ryoo Seung-bum, Crime, 6/25/15 0.1 5 Enemies Sang-soo Go Joon-hee action 2 Na Kwak Do-won, The Wailing Thriller 5/12/16 6.9 Hong-jin Hwang Jung-min Warriors of Jeong Lee Jung-jae, Historical 9/17 - 0 0 The Dawn Yoon-cheol Yeo Jin-goo drama Bong Drama, 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Netflix Okja Tilda Swinton, Jake Gyllenhaal 6/17 - Joon-ho adventure

Source: KOFIC, Mirae Asset Daewoo Research Source: Media reports, Mirae Asset Daewoo Research

21| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 3) Increase in films based on existing IP

2) Decrease in the • Box-office divergence  production cost growth  fewer films produced per year. number of films • From 2012 through 2016, the number of big-budget film productions (costing over W8bn) rose from five to 20, while the number of films distributed by large-sized companies was halved from 104 to 52. contributing to earnings • Audience share of top films is on the rise. Dependence on a small number of big-budget movies is increasing.

Breakdown of films released by three major domestic Audience share of top films is on the rise distributors (CJ E&M, Showbox, and NEW) (No.) (%) (%) 80 Total number of distributed films (L) 60 57 Admissions % of top 10 films Proportion of major films (R) Admissions % of top 20 films y = 0.83x + 44.9 55 70 49

50 60

45 41

50 40 y = 0.6628x + 29.173 33 40 35

30 30 25 2010 2011 2012 2013 2014 2015 2016 2004 2006 2008 2010 2012 2014 2016

Source: Company data, KOFIC, Mirae Asset Daewoo Research Source: KOFIC, Mirae Asset Daewoo Research

22| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 3) Increase in films based on existing IP

Major distributors are • The success of projects based on existing IP depends on: 1) the establishment of a stable content sourcing likely to play a leading structure; 2) the ability to attract talent (such as IP holders, directors, actors, and staff); and 3) planning capabilities. role in the development • Players with industry-wide networks and solid box-office records play important intermediary roles. of projects based on existing IP

Major directors’ hit films

Release Admissions Release Admissions Director Distributor Film Director Distributor Film date (mn) date (mn) Cinema Service 12/24/04 Silmido 11.1 Showbox 5/29/14 A Hard Day 3.5 Kim Cinema Service 1/27/05 Public Enemy 2 3.9 Showbox 8/10/16 The Tunnel 7.1 Kang Seong-hun CJ Entertainment 7/13/06 Hanbando 3.9 CJ E&M 1/18/17 Confidential Assignment 7.8 Woo-suk CJ Entertainment 6/19/08 Public Enemy Returns 4.3 Showbox 9/4/03 Oh! Brothers 3.1 Kim CJ Entertainment 7/14/10 Moss 3.4 Showbox 12/14/06 200 Pounds Beauty 6.6 Yong-hwa CJ Entertainment 4/25/03 Memories of Murder 5.3 Showbox 7/29/09 Take Off 8.5 Bong Showbox 7/27/06 The Host 13 Chungeorahm Film 6/13/03 A Tale of Two Sisters 3.1 Kim Joon-ho CJ Entertainment 5/28/09 Mother 3 CJ Entertainment 7/17/08 The Good, the Bad, the Weird 6.7 Jee-woon CJ E&M 8/1/13 Snowpiercer 8.9 Warner Brothers Korea 9/7/16 The Age of Shadows 7.5

ShowEast, CJ Entertainment 9/28/06 Tazza: The High Rollers 6.8 2/11/03 Oldboy 3.3 Park CJ E&M Choi CJ Entertainment 12/23/09 Jeon Woo-chi: The Taoist Wizard 6.1Chan-wook CJ Entertainment 7/29/05 Lady Vengeance 3.7 Dong-hoon Showbox 7/25/12 The Thieves 13 CJ E&M 6/1/16 The Handmaiden 4.3 Showbox 7/22/15 Assassination 12.7 CJ Entertainment 7/22/09 Tidal Wave 11.5 Yoon Lotte Entertainment 12/3/2008 Scandal Makers 8.2Je-kyoon CJ E&M 12/17/14 Ode to My Father 14.2 Kang CJ E&M 5/4/2011 Sunny 7.3 CJ E&M 1/18/12 Dancing Queen 4.1 Hyeong-cheol Lee Lotte Entertainment, Sidus 9/3/2014 Tazza: The Hidden Card 4 Lotte Entertainment 8/6/14 The Pirates 8.6 Seok-hoon CJ E&M 12/16/15 The Himalayas 7.8

Source: Media reports, Mirae Asset Daewoo Research

23| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 3) Increase in films based on existing IP

Film production based on • Distributors are steadily expanding their footholds in the film industry: management/distribution  IP licensing: planning/production/distribution - Business benefits: Increase in a film’s prospects for success via greater involvement in content development 1) Strengthening grip on - Financial benefits: A higher share of profits projects • Lower risks and higher share of profits should boost distributors’ long-term fundamentals 2) Acquisition of project stake Long-term outlook for domestic film market players’ business Distributors’ production investments and ROI by admissions models (Wbn) 6 30% of (primary) investment + 20% of production 30% of (primary) investment only

-2

-4 (Admissions) 1mn 3mn 5mn 7mn 10mn

Note: Assuming total production costs of W10bn Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

24| 2H17 Outlook [Media] Mirae Asset Daewoo Research II. Outlook: 3) Increase in films based on existing IP

Film production based on • Distributors are steadily expanding their footholds in the film industry: management/distribution  IP licensing: planning/production/distribution 1) Strengthening grip on - Business benefits: Increase in a film’s prospects for success via greater involvement in content development projects - Financial benefits: A higher share of profits 2) Acquisition of project • Lower risks and higher share of profits should boost distributors’ long-term fundamentals stake Primary investor Secondary investor Profit sharing structure in the film industry - Strategic investment - Financial investment - Stakes of 20-30% - Low project stake and - Leading role in the entire involvement film production process Distribution agent

- Commissions for distribution 50% 50% only

Distributors are steadily expanding their footholds in the film 50% 50% industry

Allocation after deducting distribution fees (10%)

Distributor Screenplay Production Production Books 60% of total profit Books 40% of total profit Distributor/ Covers 100% of loss No responsibility for loss investor Director

Actors/crew Actors/crew Director

Screenplay

Source: Showbox, Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

25| 2H17 Outlook [Media] Mirae Asset Daewoo Research III. Key issues: 1) Aggressive domestic theater openings

Theater operators’ • Screen count growth has outpaced box-office growth since 2015, triggered by Megabox’s aggressive theater average margins should openings. • Based on major theater operators’ business plans, screen count growth will likely remain stronger than box-office trend down growth for the time being

Megabox to continue with aggressive site openings, while Screen count growth has outpaced box office growth CJ CGV and Lotte Cinema should slow down (%) (%) CJ CGV screen YoY 18 Box office YoY 18 Lotte Cinema screen YoY No. of screens YoY Megabox (inc. Cinus) screen YoY Megabox

14 14

10 10

6 6 Lotte Cinema

CJ CGV 2 2

-2 -2 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

Source: KOFIC, Mirae Asset Daewoo Research Source: KOFIC, Mirae Asset Daewoo Research

26| 2H17 Outlook [Media] Mirae Asset Daewoo Research III. Key issues: 1) Aggressive domestic theater openings

Cinema operators must • Strong box-office growth is expected for 2017. January-April admissions increased 6.8% YoY. focus on margin Admissions growth could accelerate further in 2H in light of a promising film lineup. protection • Megabox stands to benefit more from the strong short-term box-office outlook than CJ CGV (which focuses more on profitability), based on its aggressive theater opening strategy. • If screen count growth continues outpacing box-office growth, cinema operators’ profitability should trend down over the long term: CJ CGV looks more favorable.

Decline in new site openings  Depreciation and labor cost J Contentree is focusing on top-line growth, not profitability reductions

(%) CJ CGV M/S (L) (%) (%) Megabox M/S (L) (%) 50 Parent OP margin (R) 25 25 Multiplex division OP margin (R) 20 Focus on M/S expansion High margins relative to competitors 40 Slowdown in new site openings 20 20 15

Screen count growth 15 30 15 through 2021

10 Merged Cinus Deteriorating 10 20 profit margin Profitability 10 improvement Increased M/S but profitability deterioration

5 5 10 5 02 04 06 08 10 12 14 16 18F 02 04 06 08 10 12 14 16 18F Source: CJ CGV, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research

27| 2H17 Outlook [Media] Mirae Asset Daewoo Research III. Key issues: 2) Growing threats from new platforms Differentiation of theater experience is the key; Premiumization presents new opportunities • New platforms (Netflix, Amazon, etc.) are expanding investments in original content. Major studios’ average theatrical window is getting shorter • Release of in-house content exclusively via proprietary platforms  subscriber growth and lock-in (Days) Avg. theatrical - video release window • New media companies are broadening their investment focus from 140 Avg. theatrical release - video release announcement window shows to include films. • Theatrical windows are shortening. 110 CAGR -3.0% Netflix is increasing its production of original content

80 CAGR -3.4%

50 2007 2009 2011 2013 2015

Note: Includes data from Walt Disney, 20th Century Fox, Lionsgate, New Line, Paramount, Sony, Universal, and Warner Bros. Source: National Association of Theatre Owners, Mirae Asset Daewoo Research

(no.) Investment in film content begins in earnest Steady declines in video and VOD release windows 140 Original production projects 126 (Days) -40.8% 120 200 2000 2015 100 160 80 120 60 80 40 -56.5% 20 40

0 0 2012 2013 2014 2015 2016 Theater - video Theater - VOD

Source: Company data, Mirae Asset Daewoo Research Source: SNL Kagan, Mirae Asset Daewoo Research

28| 2H17 Outlook [Media] Mirae Asset Daewoo Research III. Key issues: 2) Growing threats from new platforms

Differentiation of theater experience is the key; Premiumization presents new opportunities

• With the narrowing of theatrical windows, theater operators are Theater operators’ capex has on the rise since 2013 in DMs seeking differentiation from the home entertainment experience. (US$mn) • Differentiation efforts are mainly focused on investments in 220 Regal Ent. (US) equipment. Carmike (US) 165 Cineworld (UK) Annual admissions per capita and changes in the US market 110 (No.) 3D films Commercialization (6G) 6.0 Dolby Digital of IMAX featured in 55 Dolby Batman Returns introduced Commercialization of Dolby 0 systems 2006 2008 2010 2012 2014 2016 5.0 Source: Company data, Mirae Asset Daewoo Research

US theater chains are sharply expanding premium offerings

(%) 4.0 TV penetration: 98% Netflix Introduction of Increasing proportion of premium tickets Color TV penetration: 78% DVDs streaming 70 AMC 63.0 Avatar begins 60 Regal Cinema Introduction Introduction Cinemark of VHS of Dolby 50 41.6 Pay TV First Netflix Home Theater 35.9 35.9 3.0 launched original series: 40 House of Cards 30 21.9 18.7 20 10 2.0 70 74 78 82 86 90 94 98 02 06 10 14 0 2015 2016 2017F 2018F Source: NATO, Box Office Mojo, MPAA, LEK, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research

29| 2H17 Outlook [Media] Mirae Asset Daewoo Research III. Key issues: 2) Growing threats from new platforms

Premium large format screens are on the rise

• With the narrowing of theatrical windows, theater operators are seeking differentiation from the home entertainment experience. % of premium screens by region • Differentiation efforts are mainly focused on investments in (screens) Latin America equipment. 2,500 Asia Pacific • This is favorable for CJ CGV’s 4DX brand. EMEA 231 2,000 North America 205 859 4D screen M/S breakdown 1,500 154 763 558 1,000 248 295 191 500 763 889 945 0 2014 2015 2016 Note: Premium screens encompass 3D, 4D, IMAX, and other large format screens Source: Company data, Mirae Asset Daewoo Research

No. of screens by type (premium)

(no.) Shuquee (China) E-Motion (China) 1,400 1% 1% 1,200 MX4D (US) 1,000 21% 800 600 400 4DX 77% 200 0 IMAX 4DX CFGS ScreenX Dolby Source: IHS, Mirae Asset Daewoo Research Source: Company data, media reports, Mirae Asset Daewoo Research

30| 2H17 Outlook [Media] Mirae Asset Daewoo Research IV. Valuation overview and investment strategy

Clear valuation • CJ CGV: Overseas earnings will determine valuation; box-office growth in overseas markets and competition in the domestic market are also important; box-office performances in major markets (i.e., Korea, China, and determinants for each Turkey) are projected to be strong in 2Q; robust growth will likely outweigh negatives from intensifying company competition. • J Contentree: Multiplex earnings growth as well as the emergence of a new revenue source (broadcast content investment) will likely boost valuation. • Showbox: Expectations for the establishment of a Chinese subsidiary (Showbox China)  expectations for co- productions  delays to releases of co-productions amid the THAAD issue  share price rebound ahead of the release of Beautiful Accident (co-production) on June 2nd. CJ CGV’s valuation is largely determined by overseas subsidiaries’ Showbox’s valuation has been linked with Chinese co-productions earnings (W) (W) 150,000 12,000

60x Showbox China established 10,000 120,000 43x

8,000 34x 90,000

33x 27x 6,000

60,000 20x 4,000 20x 30,000 Beautiful 2,000 Accident 7x release (6/2/17)

0 0 2006 2008 2010 2012 2014 2016 2018 1/12 1/13 1/14 1/15 1/16 1/17

Note: Based on year-end non-consolidated earnings Note: Based on 12-month forward data Source: WISEfn, Mirae Asset Daewoo Research Source: WISEfn, Mirae Asset Daewoo Research

31| 2H17 Outlook [Media] Mirae Asset Daewoo Research Top pick CJ CGV (079160 KS)

To benefit from growth of EM film markets

Investment points (Maintain) Buy • CJ CGV stands to benefit from its sizable exposure to high-growth overseas markets, such as Turkey, China, Vietnam, and Indonesia. Target Price (12M, W) 105,000 • The company is expected to record the strongest earnings growth among the top-five global players (by screen count), thanks to its greater exposure to high-growth markets relative to peers.

Share Price (5/18/17, W) 81,700 • Contributions from domestic/overseas (high-growth) markets: 1) 70%/30% for screen count, 2) 54%/46% for revenue, and 3) 61%/39% for operating profit • As the leader of the 4D market (with its 4DX brand), the company should enjoy a boost from the favorable Expected Return 29% market environment (premiumization) and its own earnings momentum (4DX earnings to turn to profit in 2Q17 based on greater economies of scale). OP (17F, Wbn) 88 • Major countries’ box office turnaround in 2Q: +11.9% YoY in Korea, +57.1% in China, +105.9% in Turkey (based Consensus OP (17F, Wbn) 91 on April results)

EPS Growth (17F, %) 186.2 • The contribution of Chinese third- and four-tier city sites to CJ CGV’s Chinese revenue (43%) is higher than the contribution of lower-tier cities to total nationwide box office (29%)  premium relative to local players. Market EPS Growth (17F, %) 36.4 P/E (17F, x) 49.0 Risk factors Market P/E (17F, x) 9.8 • Intensifying theater opening competition in Korea and China KOSPI 2,286.82 • Possibility of market weakness due to uncertainties related to content 130 Market Cap (Wbn) 1,729 CJ CGV FY (Dec.) 12/13 12/14 12/15 12/16 12/17F 12/18F Shares Outstanding (mn) 21 120 KOSPI Revenue (Wbn) 916 1,039 1,194 1,432 1,744 2,074

Free Float (%) 60.9 110 OP (Wbn) 52 52 67 70 88 148

Foreign Ownership (%) 25.4 100 OP margin (%) 5.7 5.0 5.6 4.9 5.0 7.1 Beta (12M) 0.93 NP (Wbn) 13 17 52 12 35 92 90 52-Week Low 58,500 EPS (W) 607 2,455 583 1,669 4,357 0 80 52-Week High 119,000 ROE (%) 3.5 4.4 12.9 3.1 9.1 20.8 70 (%) 1M 6M 12M P/E (x) 71.7 68.6 51.3 120.7 49.0 18.8 60 Absolute -5.3 27.5 -29.0 P/B (x) 2.5 3.0 6.3 4.0 4.3 3.6 50 Relative -11.1 10.1 -39.216.5 16.9 17.1 17.5 Div.Yield (%) 0.8 0.6 0.3 0.5 0.4 0.4 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: CJ CGV, Mirae Asset Daewoo Research estimates

32| 2H17 Outlook [Media] Mirae Asset Daewoo Research Top pick CJ CGV (079160 KS)

Golden opportunity for CJ 4DX (90.5% stake)

• 4DX theaters employ motion seats and equipment that emits air, light, mist, and scents in sync with the action on the screen. 4DX annual revenue trends • Business model includes: 1) equipment sales/rentals, 2) revenue sharing for revenue booked in excess of 3D revenue, and 3) content (Wbn) coding 200 Other • Revenue from ticket revenue sharing will likely surge in 2017 and Programming fees Revenue sharing beyond. 160 Maintenance Global 4DX screen and content trends Equipment sales 120 (no.) (no.) 1000 80 1,000 No. of screens (L) 150 No. of films (R) 40

0 800 120 2015 2016 2017F 2018F 700 Source: Mirae Asset Daewoo Research

600 90 Global 4DX screen M/S breakdown 510 US 2% China 400 60 UAE Others 32% 2% 24% Chile 2% 200 30 Thailand 2% UK Japan 3% 13% Russia 0 0 3% Mexico Korea 2013 2014 2015 2016 2017F 2018F 2019F 2020F 8% 9% Source: Company data, IHS, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research

33| 2H17 Outlook [Media] Mirae Asset Daewoo Research Top pick CJ CGV (079160 KS)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Forecasts/Valuations (Summarized)

(Wbn) 12/15 12/16 12/17F 12/18F (Wbn) 12/15 12/16 12/17F 12/18F 12/15 12/16 12/17F 12/18F

Revenue 1,194 1,432 1,744 2,074 Current Assets 355 514 469 538 P/E (x) 51.3 120.7 49.0 18.8

Cost of Sales 602 703 853 995 Cash and Cash Equivalents 139 200 150 213 P/CF (x) 13.5 6.9 6.8 4.9

Gross Profit 592 729 891 1,079 AR & Other Receivables 138 174 176 179 P/B (x) 6.3 4.0 4.3 3.6

SG&A Expenses 525 659 802 930 Inventories 14 17 17 17 EV/EBITDA (x) 17.6 14.1 12.4 9.3

Operating Profit (Adj) 67 70 88 148 Other Current Assets 64 123 126 129 EPS (W) 2,455 583 1,669 4,357

Operating Profit 67 70 88 148 Non-Current Assets 1,062 2,028 2,184 2,321 CFPS (W) 9,322 10,153 12,095 16,657

Non-Operating Profit 6 -52 -42 -25 Investments in Associates 77 48 50 52 BPS (W) 19,899 17,654 18,973 22,980

Net Financial Income -16 -32 -47 -47 Property, Plant and Equipment 676 913 1,108 1,278 DPS (W) 350 350 350 350

Net Gain from Inv in Associates 8 -6 -6 -6 Intangible Assets 115 893 851 815 Payout ratio (%) 14.2 131.7 20.1 7.9

Pretax Profit 73 18 46 123 Total Assets 1,418 2,542 2,652 2,859 Dividend Yield (%) 0.3 0.5 0.4 0.4

Income Tax 21 12 9 30 Current Liabilities 447 815 882 980 Revenue Growth (%) 14.9 19.9 21.8 18.9

Profit from Continuing Operations 52 6 37 94 AP & Other Payables 192 276 315 373 EBITDA Growth (%) 30.4 15.3 25.6 31.0

Profit from Discontinued Operations 0000Short-Term Financial Liabilities126367370373Operating Profit Growth (%)28.84.525.768.2

Net Profit 52 6 37 94 Other Current Liabilities 129 172 197 234 EPS Growth (%) 211.9 -76.3 186.3 161.1

Controlling Interests 52 12 35 92 Non-Current Liabilities 526 806 820 842 Accounts Receivable Turnover (x) 10.7 10.7 11.5 13.4

Non-Controlling Interests 0 -7 2 2 Long-Term Financial Liabilities 453 704 704 704 Inventory Turnover (x) 96.9 94.2 103.0 120.5

Total Comprehensive Profit 48 -133 37 94 Other Non-Current Liabilities 73 102 116 138 Accounts Payable Turnover (x) 6.9 7.0 6.8 6.8

Controlling Interests 48 -38 11 29 Total Liabilities 972 1,621 1,703 1,822 ROA (%) 3.9 0.3 1.4 3.4

Non-Controlling Interests 0 -95 25 65 Controlling Interests 421 373 402 486 ROE (%) 12.9 3.1 9.1 20.8

EBITDA 176 203 255 334 Capital Stock 11 11 11 11 ROIC (%) 6.9 1.8 4.0 6.6

FCF (Free Cash Flow) -40 -4 -42 71 Capital Surplus 90 90 90 90 Liability to Equity Ratio (%) 218.4 176.1 179.2 175.9

EBITDA Margin (%) 14.7 14.2 14.6 16.1 Retained Earnings 328 330 358 443 Current Ratio (%) 79.5 63.1 53.1 54.8

Operating Profit Margin (%) 5.6 4.9 5.0 7.1 Non-Controlling Interests 24 547 548 550 Net Debt to Equity Ratio (%) 92.3 89.8 92.5 79.0

Net Profit Margin (%) 4.4 0.8 2.0 4.4 Stockholders' Equity 445 920 950 1,036 Interest Coverage Ratio (x) 3.5 2.0 1.7 2.9

Source: CJ CGV, Mirae Asset Daewoo Research estimates

34| 2H17 Outlook [Media] Mirae Asset Daewoo Research Top pick J Contentree (036420 KQ)

Transforming into a robust media player

Investment points (Maintain) Buy • Earnings are improving markedly on the back of restructuring and increased investments in key businesses (broadcasting and multiplex). Target Price (12M, W) 5,000 • Multiplex: Market growth sharply reduces concerns over margin deterioration resulting from aggressive investments; the business should lay the groundwork for the expansion of the distribution business and long- term growth based on content investment. Share Price (5/18/17, W) 3,950 • Broadcast: JTBC’s increase in drama slots  growth in content production orders and distribution revenue. Content investment will likely generate synergies in the areas of production, distribution and Expected Return 27% platforms (theaters, TV channels, etc.) over the long term. • The booking of a new revenue item (broadcast content investment) starting in 2Q should further boost the OP (17F, Wbn) 43 company’s growth momentum. Consensus OP (17F, Wbn) 45 Risk factors EPS Growth (17F, %) 39.8 • A potential slowdown in the domestic film market could be a major drag. Market EPS Growth (17F, %) 36.4 • Earnings sensitivity to theater-opening expenses has increased. P/E (17F, x) 16.8

Market P/E (17F, x) 9.8 KOSDAQ 638.12

130 Market Cap (Wbn) 451 J Contentree FY (Dec.) 12/13 12/14 12/15 12/16 12/17F 12/18F

Shares Outstanding (mn) 114 KOSDAQ Revenue (Wbn) 380 369 306 335 404 514 120 Free Float (%) 66.5 OP (Wbn) 38 36 33 29 43 55

Foreign Ownership (%) 1.7 110 OP margin (%) 10.0 9.8 10.8 8.7 10.6 10.7 Beta (12M) 0.88 NP (Wbn) -10 0 11 19 27 33 100 52-Week Low 3,520 EPS (W) -139 128 169 236 287 0

52-Week High 4,820 90 ROE (%) -11.1 -0.1 15.0 26.3 27.6 25.7

(%) 1M 6M 12M80 P/E (x) - - 43.9 22.9 16.8 13.8 Absolute -1.4 2.1 -14.8 P/B (x) 2.8 2.3 9.5 5.0 3.9 3.0 70 Relative -1.9 -0.8 -8.716.5 16.9 17.1 17.5 Div.Yield (%) 0.0 0.0 0.0 0.0 0.0 0.0 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: J Contentree, Mirae Asset Daewoo Research estimates

35| 2H17 Outlook [Media] Mirae Asset Daewoo Research Top pick J Contentree (036420 KQ)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Forecasts/Valuations (Summarized)

(Wbn) 12/15 12/16 12/17F 12/18F (Wbn) 12/15 12/16 12/17F 12/18F 12/15 12/16 12/17F 12/18F

Revenue 306 335 404 514 Current Assets 98 136 217 255 P/E (x) 43.9 22.9 16.8 13.8

Cost of Sales 140 153 192 246 Cash and Cash Equivalents 33 55 55 82 P/CF (x) 8.6 11.4 10.4 8.5

Gross Profit 166 182 212 268 AR & Other Receivables 38 38 76 82 P/B (x) 9.5 5.0 3.9 3.0

SG&A Expenses 133 154 169 213 Inventories 14 23 46 50 EV/EBITDA (x) 17.6 16.9 11.5 9.2

Operating Profit (Adj) 33 29 43 55 Other Current Assets 13 20 40 41 EPS (W) 128 169 236 287

Operating Profit 33 29 43 55 Non-Current Assets 358 414 495 518 CFPS (W) 650 340 380 465

Non-Operating Profit -36-2-1Investments in Associates11111BPS (W) 5927801,0161,303

Net Financial Income -5 -1 11 16 Property, Plant and Equipment 137 213 228 241 DPS (W) 0000

Net Gain from Inv in Associates2700Intangible Assets 77767675Payout ratio (%) 0.00.00.00.0

Pretax Profit 30 35 41 54 Total Assets 456 550 712 773 Dividend Yield (%) 0.0 0.0 0.0 0.0

Income Tax 10 9 10 12 Current Liabilities 313 330 430 446 Revenue Growth (%) -17.1 9.5 20.6 27.2

Profit from Continuing Operations 20 26 31 41 AP & Other Payables 38 56 112 121 EBITDA Growth (%) -13.8 -14.0 48.8 23.4

Profit from Discontinued Operations 0 -3 0 0 Short-Term Financial Liabilities 222 235 241 242 Operating Profit Growth (%) -8.3 -12.1 48.3 27.9

Net Profit 20 22 31 41 Other Current Liabilities 53 39 77 83 EPS Growth (%) - 32.0 39.6 21.6

Controlling Interests 11 19 27 33 Non-Current Liabilities 65 96 125 130 Accounts Receivable Turnover (x) 7.1 10.2 8.6 7.9

Non-Controlling Interests8358Long-Term Financial Liabilities37666666Inventory Turnover (x)28.317.811.610.6

Total Comprehensive Profit 31 25 31 41 Other Non-Current Liabilities 28 30 59 64 Accounts Payable Turnover (x) 9.1 14.6 12.3 11.4

Controlling Interests 23 22 32 42 Total Liabilities 378 425 555 576 ROA (%) 4.2 4.5 5.0 5.5

Non-Controlling Interests8300Controlling Interests6284110144ROE (%) 15.026.327.625.7

EBITDA 50 43 64 79 Capital Stock 57 57 57 57 ROIC (%) 10.1 8.2 10.9 14.5

FCF (Free Cash Flow) 7 -73 63 36 Capital Surplus -51 -51 -51 -51 Liability to Equity Ratio (%) 482.9 340.1 355.0 291.2

EBITDA Margin (%) 16.3 12.8 15.8 15.4 Retained Earnings 49 69 96 128 Current Ratio (%) 31.4 41.4 50.4 57.3

Operating Profit Margin (%) 10.8 8.7 10.6 10.7 Non-Controlling Interests 16 41 46 54 Net Debt to Equity Ratio (%) 283.9 193.6 157.0 111.2

Net Profit Margin (%) 3.6 5.7 6.7 6.4 Stockholders' Equity 78 125 156 198 Interest Coverage Ratio (x) 3.4 3.1 6.0 7.6

Source: J Contentree, Mirae Asset Daewoo Research estimates

36| 2H17 Outlook [Media] Mirae Asset Daewoo Research Next Entertainment World (160550 KQ)

Steady business expansion

Investment points (Maintain) Not Rated • Business diversification into drama production, theaters, and sports management should lead to a structural decrease in earnings volatility. Target Price (12M, W) - • The company’s businesses span the entire value chain of the content industry (investment, production, distribution, screening, and licensing); the steady expansion of business scope could generate earnings leverage. Share Price (5/18/17, W) 9,410 • Momentum could emerge in 2H based on: 1) a promising tentpole film, Steel Rain; 2) increasing drama productions for JTBC and terrestrial TV channels; and 3) revenue from the distribution of Okja. Expected Return - • The company established a joint venture in China  could provide a further boost once content co- productions resume.

OP (17F, Wbn) - Risk factors

Consensus OP (17F, Wbn) 8 • Heavy investments relative to operating cash flow EPS Growth (17F, %) - Market EPS Growth (17F, %) 36.1

P/E (17F, x) - Market P/E (17F, x) 10.1 KOSDAQ 666.46

120 Market Cap (Wbn) 255 Next Entertainment World FY (Dec.) 12/13 12/14 12/15 12/16 12/17F 12/18F

Shares Outstanding (mn) 27 110 KOSDAQ Revenue (Wbn) 126 62 83 126 - - Free Float (%) 62.2 OP (Wbn) 19 6 -3 7 - - 100 Foreign Ownership (%) 13.9 OP margin (%) 15.1 9.7 -3.6 5.6 - - 90 Beta (12M) 1.54 NP (Wbn)19314 - - 52-Week Low 7,960 80 EPS (W) 1,125 153 50 160 - -

52-Week High 15,500 70 ROE (%)89.33.81.13.3- - (%) 1M 6M 12M P/E (x) - 59.2 208.2 69.6 - - 60 Absolute 6.8 -20.8 -24.3 P/B (x) - 1.9 2.2 2.3 - - 50 Relative 1.7 -31.2 -20.016.6 16.10 17.2 17.6 Div.Yield (%) - 0.0 0.0 0.0 - - Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Next Entertainment World, Mirae Asset Daewoo Research estimates

37| 2H17 Outlook [Media] Mirae Asset Daewoo Research Next Entertainment World (160550 KQ)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Forecasts/Valuations (Summarized)

(Wbn) 12/15 12/16 12/17F 12/18F (Wbn) 12/15 12/16 12/17F 12/18F 12/15 12/16 12/17F 12/18F

Revenue 83 126 - - Current Assets 168 151 - - P/E (x) 208.2 69.6 - -

Cost of Sales 74 100 - - Cash and Cash Equivalents 77 58 - - P/CF (x) - 35.8 - -

Gross Profit 9 26 - - AR & Other Receivables 12 30 - - P/B (x) 2.2 2.3 - -

SG&A Expenses 11 19 - - Inventories 0 0 - - EV/EBITDA (x) - 34.2 - -

Operating Profit (Adj) -3 7 - - Other Current Assets 79 63 - - EPS (W) 50 160 - -

Operating Profit -3 7 - - Non-Current Assets 33 79 - - CFPS (W) -61 312 - -

Non-Operating Profit 2 2 - - Investments in Associates 10 14 - - BPS (W) 4,783 4,940 - -

Net Financial Income 1 1 - - Property, Plant and Equipment 1 42 - - DPS (W) 0 0 - -

Net Gain from Inv in Associates -1 3 - - Intangible Assets 1 2 - - Payout ratio (%) 0.0 0.0 - -

Pretax Profit -1 9 - - Total Assets 200 231 - - Dividend Yield (%) 0.0 0.0 - -

Income Tax -2 6 - - Current Liabilities 58 55 - - Revenue Growth (%) 33.9 51.8 - -

Profit from Continuing Operations 1 4 - - AP & Other Payables 15 13 - - EBITDA Growth (%) - - - -

Profit from Discontinued Operations 0 0 - - Short-Term Financial Liabilities 11 6 - - Operating Profit Growth (%) - - - -

Net Profit 1 4 - - Other Current Liabilities 32 36 - - EPS Growth (%) -67.3 220.0 - -

Controlling Interests 1 4 - - Non-Current Liabilities 10 39 - - Accounts Receivable Turnover (x) 9.8 6.6 - -

Non-Controlling Interests 0 -1 - - Long-Term Financial Liabilities 9 18 - - Inventory Turnover (x) 0.0 0.0 - -

Total Comprehensive Profit 1 3 - - Other Non-Current Liabilities 1 21 - - Accounts Payable Turnover (x) 37.8 23.6 - -

Controlling Interests 1 4 - - Total Liabilities 67 94 - - ROA (%) 0.5 1.7 - -

Non-Controlling Interests 0 -1 - - Controlling Interests 131 136 - - ROE (%) 1.1 3.3 - -

EBITDA -2 8 - - Capital Stock 14 14 - - ROIC (%) 10.6 5.0 - -

FCF (Free Cash Flow) -19 -18 - - Capital Surplus 86 86 - - Liability to Equity Ratio (%) 50.8 68.7 - -

EBITDA Margin (%) -2.4 6.3 - - Retained Earnings 31 36 - - Current Ratio (%) 289.6 274.0 - -

Operating Profit Margin (%) -3.6 5.6 - - Non-Controlling Interests 2 1 - - Net Debt to Equity Ratio (%) -54.0 -36.4 - -

Net Profit Margin (%) 1.2 3.2 - - Stockholders' Equity 133 137 - - Interest Coverage Ratio (x) -5.5 14.7 - -

Source: Next Entertainment World, Mirae Asset Daewoo Research estimates

38| 2H17 Outlook [Media] Mirae Asset Daewoo Research APPENDIX 1

Important Disclosures & Disclaimers 2-Year Rating and Target Price History

Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price CJ CGV(079160) 05/14/2017 Buy 105,000 No Coverage 04/17/2017 Buy 120,000 11/14/2016 Buy 5,000 No Coverage 08/17/2016 Buy 4,900 11/09/2016 Buy 95,000 05/17/2016 Buy 6,200 08/04/2016 Buy 105,000 03/23/2016 Buy 6,000 07/16/2015 Buy 150,000 08/18/2015 Buy 7,000 05/26/2015 Buy 180,000 07/26/2015 Buy 6,000 05/11/2015 Buy 112,000 05/28/2015 Trading Buy 4,700 J Contentree(036420) 04/17/2017 Buy 5,000 11/26/2014 Buy 4,700

(W) CJ CGV (W) J Contentree

200,000 8,000

150,000 6,000

100,000 4,000

50,000 2,000

0 0 May 15 May 16May May 15 17 May 16 May 17

Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight: Fundamentals are unfavorable or worsening Sell : Relative performance of -10% Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.

Equity Ratings Distribution Buy Trading Buy Hold Sell 72.86% 15.58% 11.56% 0.00% * Based on recommendations in the last 12-months (as of March 31, 2017)

39| 2H17 Outlook [Media] Mirae Asset Daewoo Research APPENDIX 1

Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding.

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. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. 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 Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein.

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40| 2H17 Outlook [Media] Mirae Asset Daewoo Research APPENDIX 1

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41| 2H17 Outlook [Media] Mirae Asset Daewoo Research APPENDIX 1

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42| 2H17 Outlook [Media] Mirae Asset Daewoo Research