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SM Entertainment (041510 KQ)
China growth story to begin in 2014
Entertainment
3Q and 4Q earnings to be in line; Strong momentum anticipated in 4Q
Company Update
Despite a sluggish 1H, we expect SM Entertainment’s 2013 revenue to grow 16.5% YoY to W281.5bn, and operating profit to remain broadly flat YoY at W60.7bn under consolidated K-IFRS.
November 14, 2013
Buy
(Maintain) Target Price (12M, W)
60,000
Share Price (11/13/13, W)
38,400 56%
Expected Return
The 1H earnings weakness was attributable to: 1) sharp yen depreciation, 2) overseas concert royalty income being geared towards 2H (only 500,000 concertgoers were reflected in 1H out of 2.32mn concertgoers in 2013F), and 3) a significant fall in album royalties from Japan (direct exports of Korean language albums, which had been a major earnings contributor in 2012). We see strong earnings momentum in 4Q, as the company should recognize revenue from several directly operated concerts (which are more profitable), including the KoreaChina-Japan SM Town tour. We estimate non-consolidated operating profit at W12bn in 3Q and over W18bn in 4Q.
2014 earnings catalysts: China, Exo, and additional revenue streams OP (13F, Wbn)
61
Consensus OP (13F, Wbn)
60
EPS Growth (13F, %)
27.3
Market EPS Growth (13F, %)
15.0
P/E (13F, x)
15.1
Market P/E (13F, x)
11.0
KOSDAQ
505.60
Market Cap (Wbn)
793
Shares Outstanding (mn)
21
Free Float (%)
78.3
Foreign Ownership (%)
10.3
Beta (12M) 52-Week Low (W)
1.09 29,100
52-Week High (W)
69,500
(%)
1M
6M
12M
Absolute
3.6
-1.9
-44.5
Relative
6.7
-2.7
-48.4
Share price 130
KOSDAQ
110 90 70 50 30 11/12
3/13
7/13
11/13
China should become a major market for SM in 2014. The entertainment firm is looking into t ventures with local Chinese firms to establish a broad presence in the country across broadcasting, commercials, TV dramas, and films. The company is purportedly in discussions with major Chinese entertainment and media firms over potential alliances. The boy band Exo is scheduled to hold its first concert (as a headline act) in December and has been added to SM Entertainment’s 2014 concert lineup. Exo’s album is on track to break the 1mn sales mark, which would make it the first domestic album to do so in 13 years. The boy group, which includes four Chinese , is gaining widespread popularity in China and Southeast Asia. The company’s subsidiary SM C&C (048550 KQ) should display sharp earnings growth in 2014, driven by: 1) earnings contributions from Woollim Entertainment (which represents the popular group Infinite) beginning in October 2013, and 2) secondary revenue streams, including broadcast productions, fan meet-and-greet tours and merchandise stores. We estimate SM C&C’s 2014 revenue and operating profit at W111.2bn and W11.1bn, respectively.
Maintain Buy and Lift TP to W60,000 While major artists TVXQ, Super Junior, and Girls’ Generation continue to enjoy worldwide popularity, SM has expanded its lineup with the additions of Exo and Infinite. On top of traditional album and concert sales, the company is introducing more profit models, like fan package tours and merchandise stores. We maintain Buy and lift our target price to W60,000 (from W46,000) after revi our 2014F earnings and changing our valuation base year and P/E target comparison. We expect two straight quarters of solid earnings in 2H, which should help restore investor confidence. In addition to the nine-day SM Town Week concert in December, the growing visibility of SM’s Chinese t venture could also trigger upside to the stock. 12/10
12/11
12/12
12/13F
12/14F
12/15F
Revenue (Wbn)
97
143
241
281
357
393
Internet/Game/Entertainment
OP (Wbn)
20
26
61
61
77
90
Chang-kwean Kim
OP margin (%)
20.9
17.9
25.1
21.6
21.4
22.9
+822-768-4321 [email protected]
NP (Wbn)
Daewoo Securities Co., Ltd.
FY (Dec.)
17
23
40
52
64
76
EPS (W)
942
1,235
1,994
2,539
3,114
3,675
ROE (%)
22.9
23.1
24.7
22.0
21.8
20.8
P/E (x)
16.0
33.0
22.8
15.1
12.3
10.5
P/B (x)
3.6
7.4
5.5
3.6
2.7
2.1
Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates Analysts who prepared this report are ed as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
November 14, 2013
SM Entertainment
Investment points Gaining Chinese market share on the back of competitive content China’s service and entertainment markets are growing at a rapid pace
. Huayi Brothers Media, a Chinese film studio and record label, is being traded on the Shenzhen Stock Exchange at respective 2013F and 2014F P/Es of 43x and 37x (market cap of at least W5tr). The Beijing SM Town concert held in October drew over 70,000 fans. This resounding success is evidence of the massive popularity of Korean pop culture (especially SM artists) in China. Thanks to the rapid spread of mobile internet, there is almost no time lag between the production of music content in Korea, and consumption in China. SM has an excellent track record of developing globally popular pop groups (from H.O.T. in 1995 to Exo in 2013). Its global presence has been felt mainly in Japan over the past decade, but China will likely take center stage in the company’s overseas growth for the next 10 years. We maintain our Buy call on SM and raise our target price from W46,000 to W60,000. As the end of the year is approaching, we have changed the base year of valuation from 2013 to 2014. And in deriving our target price for SM, we applied Cheil Industries’ 2014F P/E of 19.7x (the highest level among Korean entertainment and media firms). 2014F peer average P/E levels are 23.0x for global firms and 15.8x for domestic firms. Figure 1. Foreign investments in China are shifting away from manufacturing to consumption and service sectors (%) 60
FDI (3-year average growth)
% of all FDI
Increased FDI in consumption-/environment-/finance-related industries
Reduced FDI in traditional manufacturing/light industries
40
20
0
-20 Cu lt Fin a Tra n Wh o Te c Wa te Ch e E lec ICT ure n ce sp o l esa h no lo r su mi ca trici ty rta ti l e/r pp ly ls e ta il gy on
Re a S pe P ha L od E qu Ma n Co m Te x Min l e s cialt rma gin g ipme u fa c pu t til es in g ta te y eq ce u turi n ers nt ui pm tica ls g e nt
Note: Cumulative Jan.- Aug. 2013 data Source: CEIC, KDB Daewoo Securities Research
Figure 2. Earnings and share price of Huayi Brothers Media (US$bn) 140 120
(RMB) 8000
Revenue (L) Operating profit (L)
7000
Share price (R) 100
6000
80
5000
60
4000
40
3000
20
2000
0
1000 0
-20 1/10
7/10
1/11
7/11
1/12
7/12
1/13
7/13
Source: Bloomberg, KDB Daewoo Securities Research
KDB Daewoo Securities Research
2
November 14, 2013
SM Entertainment
Figure 3. Relationship between Korea’s per-capita GDP & growth of culture/arts & service sectors (US$)
(%) Culture/arts and service boomed as percapita income increased from US$4,000 to $10,000
25,000
Real GDP per capita (L)
70
Culture/arts & service - YoY growth (R) 60
20,000
50 40
15,000
30 10,000
20 10
5,000 0 -10
0 1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Note: Real GDP (base year of 2000) Source: World Bank, BOK, KDB Daewoo Securities Research
Figure 4. Gov’t expenditure on culture/arts & service in China (US$mn) 5
4
Figure 5. Employment in culture/arts & service in China (mn persons) 18
CAGR of 23.7% between 2007 and 2013
17 CAGR of 3.1% between 2009 and 2013
3 16 2 15
1
0
14 1/07 7/07 1/08 7/08 1/09 7/09 1/10 7/10 1/11 7/11 1/12 7/12 1/13 7/13
Source: National Bureau of Statistics of China, KDB Daewoo Securities Research
9/05 3/06 9/06 3/07 9/07 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 9/12 3/13
Source: National Bureau of Statistics of China, KDB Daewoo Securities Research
Figure 6. Service industry as a % of GDP (% of GDP) 80 Spain
Brazil
70
India
Mexico
50
Japan
Poland Czech Russia K orea
Malaysia Thailand
Taiwan Turkey
60
Italy
US
Great Britain
China
40 Indonesia (US$'000) 30 0
10
20
30
40
50
60
Source: Bloomberg, KDB Daewoo Securities Research
KDB Daewoo Securities Research
3
November 14, 2013
SM Entertainment
Table 1. Earnings forecasts for global media/entertainment companies Revenue
(US$mn, %)
Operating profit
OP margin
Net profit
Net margin
EPS
12 13F 14F
12 13F 14F
Market cap.
12
13F
14F
12
13F
14F
12 13F 14F
12
13F
SM Entertainment
739
214
269
342
54
56
71
25.1 21.0 20.7
35
43
48 16.5 15.9 14.1
1.8
2.1
2.3
YG Entertainment
476
95
121
147
19
24
35
20.1 19.9 23.8
17
21
29 17.6 16.9 19.8
1.6
2.1
2.8
CJ CGV
962
692
901
1,076
49
67
90
7.1
7.4
8.4
48
40
65
6.9
4.4
6.1
2.3
2.0
3.1
Cheil Worldwide
2,684
2,101
2,594
3,075
112
139
169
5.3
5.3
5.5
83
104
128
4.0
4.0
4.2
0.8
1.0
1.2
CJ E&M
1,102
1,239
1,551
1,719
34
64
98
2.8
4.1
5.7
33
42
74
2.7
2.7
4.3
0.0
1.1
2.0
KT Skylife
1,184
503
584
631
58
94
103
11.6 16.2 16.3
50
82
91
9.9 14.0 14.5
1.0
1.7
1.9
Walt Disney
21.0 23.6 24.3 6,136 6,933 7,625 13.6 14.5 15.0
3.4
3.9
4.5
Time Warner
60,426 28,729 29,603 30,607 6,214
6,670
7,131
21.6 22.5 23.3 3,019 3,643 3,877 10.5 12.3 12.7
3.4
3.8
4.3
CBS
35,239 14,089 15,216 15,461 3,013
3,326
3,611
21.4 21.9 23.4 1,574 1,894 2,062 11.2 12.4 13.3
2.5
3.0
3.5
Discovery Holdings
30,041
6,207 1,861
2,075
2,415
41.5 37.4 38.9
943 1,119 1,371 21.0 20.1 22.1
2.5
3.1
4.0
Viacom
39,823 13,887 13,745 14,427 3,901
3,925
4,266
28.1 28.6 29.6 1,981 2,278 2,422 14.3 16.6 16.8
4.2
4.6
5.4
Liberty Interactive
14,037 10,054 10,261 10,738 1,200
1,175
1,306
11.9 11.4 12.2 1,530
5.7 -0.8
1.0
1.4
0.9
0.0
0.9
0.4
0.4
E.W. Scripps News Corp. Clear Channel RealNetworks
121,986 45,041 47,823 50,945 9,450 11,276 12,396
14F
4,487
5,553
999
903
817
920
90
23
93
9.9
2.8 10.2
9,995
8,891
8,790
8,850
140
150
246
1.6
1.7
569
6,247
6,197
6,345 1,108
-
-
17.7
2.8
257
259
-
-
-42
-
Pandora
5,426
427
649
898
-38
-30
18
Avex
1,068
1,679
1,639
1,885
170
158
215
174
373
320
332
50
37
39
4,664
213
317
413
41
131
160
19.2 41.2 38.7
Amuse Huayi Brothers Media
- -16.3
Average
501
617 15.2
40
-
-
4.4
506
169
248
5.7
-424
-
45
-
-38
-36
9.7 11.4
89
97
100
5.3
13.3 11.5 11.6
30
23
24
8.0
39
103
10.1
1.9
2.8
- -6.8
2.0
-8.8 -4.6
4.9
-3.2 -3.7 -3.0
- 17.3
-0.6
-
-
1.6 -0.2
0.0
0.2
5.9
5.3
2.1
2.3
2.3
7.1
7.1
3.4
2.6
2.7
122 18.1 32.5 29.7
0.0
0.1
0.1
14 -8.9 -5.5
12.9 14.1 15.9
8.9
9.3 10.3
Notes: Bloomberg consensus; Based on November 13th closing prices; EPS is based on US$. Source: Bloomberg, KDB Daewoo Securities Research
Table 2. Valuation comparison of global media/entertainment companies P/E
P/B
(US$mn, %)
P/S
EV/EBITDA
ROE
ROA
Market cap.
12
13F
14F
12
13F
14F
12
13F
14F
12
13F
14F
SM Entertainment
739
22.8
17.3
16.0
4.4
3.4
2.7
3.8
2.8
2.2 11.7
9.2
7.6 24.7 19.6 19.8 16.3 12.8 13.8
YG Entertainment
476
33.3
22.6
16.6
6.5
4.4
3.6
5.9
4.0
3.3 23.2
14.4 10.5 21.6 21.2 23.6 18.0 17.2 18.9
CJ CGV
962
12.2
22.8
14.6
1.9
2.6
2.3
0.9
1.1
0.9
11.2
Cheil Worldwide
2,684
24.9
24.5
19.7
3.3
3.7
3.1
1.0
1.0
0.9 12.1
CJ E&M
1,102 646.3
26.7
14.9
0.8
1.0
0.9
0.7
0.7
0.6
2.9
3.2
3.0
KT Skylife
1,184
28.5
14.6
13.1
4.6
3.1
2.6
2.8
2.0
1.9 12.1
8.0
7.5 17.7 22.9 21.3
9.5 13.1 12.8
Walt Disney
121,986
19.2
17.2
15.0
2.6
2.8
2.3
2.6
2.6
2.4 11.2
10.1
9.2 14.4 15.6 16.7
7.9
8.6
9.1
Time Warner
60,426
14.2
17.7
15.7
1.5
1.8
1.7
1.6
2.0
2.0
8.7
10.3
9.7 10.1 11.8 12.7
4.4
6.1
6.5
CBS
35,239
14.9
19.3
16.8
2.3
3.5
3.1
1.7
]2.3
2.3
8.4
10.9 10.2 15.6 18.6 20.6
6.0
7.5
8.1
Discovery Holdings
30,041
25.2
27.4
21.3
3.1
4.9
4.8
5.3
5.4
4.8 11.8
15.0 13.2 14.7 18.0 22.4
7.6
8.9 10.0
Viacom
39,823
12.7
17.8
15.1
3.6
6.6
7.7
2.0
2.9
2.8
11.4 10.5 24.6 34.6 47.4
8.8 11.8 12.7
Liberty Interactive
14,037
-
26.9
20.3
1.4
2.2
2.1
1.1
1.4
1.3 10.3
12.1 11.3 21.8
7.3
8.9
7.0
4.2
4.8
999
12.1
-
19.0
1.1
-
-
0.7
1.2
1.1
4.0
15.9
6.8
7.3
0.0
8.9
4.0
0.0
4.7
9,995
-
48.6
40.7
-
0.9
0.9
-
1.1
1.1
9.6
10.7
9.4
4.7
-
-
3.5
-
-
Clear Channel
569
-
-
-
-
-
-
0.0
0.1
0.1 11.0
11.6 10.8
-
-
-
-2.6
-
-
Real Networks
257
-
-
-
0.8
-
-
1.0
-
-
- 14.2
-
- 10.8
-
-
Pandora
5,426
-
- 115.7 20.1 52.3 35.7
4.5
8.4
6.0
Avex
1,068
15.1
10.4
10.4
2.4
2.1
1.9
0.8
0.7
0.6
7.0
5.6
4.2 18.2 19.0 18.9
7.0
8.2
9.1
174
6.8
7.4
7.1
1.1
1.0
0.9
0.5
0.5
0.5
1.5
1.8
1.7 17.5 13.8 13.2 11.1
-
-
37
33 12.8 21.8 21.0
E.W. Scripps News Corp.
Amuse Huayi Brothers Media
4,664
Average
36
43
37
4
8
7
63.4
83.1
23.0
3.6
6.0
4.8
7.3
8.4
-
30
2.1
9.5
1.9
13F
14F
12
13F
14F
8.8 16.6 11.7 16.3
5.6
4.5
6.4
15.4 12.6 13.5 15.5 17.1
4.9
5.7
6.1
1.8
1.9
3.4
-
3.0
- 370.1 85.9 -37.5
6.4 14.7 11.3 2.2
12
3.4
6.1
3.7 30.8 -19.2
30.4 12.9 12.4 14.8 19.0
1.7 15.4
7.4 15.3 15.1 5.9
7.5
9.5
Notes: Bloomberg consensus; Based on November 13th closing prices. Source: Bloomberg, KDB Daewoo Securities Research
KDB Daewoo Securities Research
4
November 14, 2013
SM Entertainment
Music market outlook Asian music markets, especially China, to grow rapidly China has become the second–largest movie market in the world, following the US, on the back of: 1) the easing of restrictions on movie imports by President Xi Jinping’s istration, 2) a bump in the quality of domestic releases, and 3) improved infrastructure (e.g., an increase in multiplexes). By contrast, the nation’s music market s for only a small fraction of the global total (1.4% based on 2013F data), according to PricewaterhouseCoopers. While concert ticket sales and CD sales are the respective drivers of the US and Japanese markets, digital music sales are the engine of the Chinese music market (as in Korea). Currently, digital music sales—mainly distributed by telecom operators—make up 72% of the nation’s music market. And it should be noted that revenue from these sales tends to barely cover related payment service and commission fees. Looking once more at the movie industry, we find that theater expansion in China accelerated market changes so rapidly that, now, high-end movie ticket sales (e.g., 3D, IMAX) represent more than 70% of the market. In our view, the proliferation of mobile internet could serve as a similar catalyst for change in the music space. Indeed, mobile internet is providing fans with greater access to music videos and other content, which is sparking a surge in fandom for idol bands. Considering Chinese-language copies ed for half of the sales of Exo’s latest album (close to 1mn copies total), we believe that the Chinese music market has already begun to evolve. Figure 7. Music market growth over the next five years by country; Growth is stronger in developing countries (%) 12 10 Five-country avg.: 7.7% 8 6 4 Four-country avg.: 1.1%
2 0 -2 China
Thailand
Vietnam
Indonesia
Singapore
Korea
Japan
US
Euope
Note: Total music market, including concerts, festivals, digital music, and CD albums. Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
Figure 8. Breakdown of global music market by country Other 16.9%
Korea China China holds only 1. 4% of t he global music market 1.6% 1.4% Japan 13.1%
US 30.0% Europe 37.0%
Note: 2013F total music market, including concerts, festivals, digital music, and CD albums. Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
KDB Daewoo Securities Research
5
November 14, 2013
SM Entertainment
Figure 9. Chinese music market (US$mn) 1,200
Concerts/festivals
Digital
Figure 10. Chinese music market growth (%) 15
CD
Concerts/festivals
Digital
CD
10
900
5 0
600 -5 -10
300
-15
0
-20
2012
2013F
2014F
2015F
2016F
2017F
2012
2013F
2014F
2015F
2016F
2017F
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
Figure 11. Chinese concert market per capita
Figure 12. Chinese digital music market per capita
(US$) 0.15
(US$) 0.6
Concert market size per capita
0.145
Digital market size per capita
0.5
0.14
0.4
0.135 0.3 0.13 0.2
0.125
0.1
0.12 0.115
0 2012
2013F
2014F
2015F
2016F
2017F
2012
2013F
2014F
2015F
2016F
2017F
Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
Figure 13. Chinese CD album market per capita
Figure 14. Chinese music market per capita
(US$) 0.02
(US$) 0.8
CD market size per capita
0.018
Overall music market size per capita
0.7
0.016
0.6
0.014 0.5
0.012
0.4
0.01 0.008
0.3
0.006
0.2
0.004 0.1
0.002 0
0 2012
2013F
2014F
2015F
2016F
2017F
Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
KDB Daewoo Securities Research
2012
2013F
2014F
2015F
2016F
2017F
Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
6
November 14, 2013
SM Entertainment
Table 3. Korean music market breakdown and 2013-17 CAGR forecast 2008
2009
2010
2011
2012
(US$mn)
2013F
2014F
2015F
2016F
2017F
2013-17 CAGR
Concerts/festivals
357
371
376
394
415
432
449
468
484
498
Digital
139
169
194
238
253
261
268
276
282
287
3.6 2.4
Physical albums
114
105
112
118
123
123
123
123
122
120
-0.6
Total
610
645
682
750
791
816
840
867
888
905
2.6
2.9
YoY Concerts/festivals
3.9
1.3
4.8
5.3
4.1
3.9
4.2
3.4
Digital
21.6
14.8
22.7
6.3
3.2
2.7
3.0
2.2
1.8
Physical albums
-7.9
6.7
5.4
4.2
0.0
0.0
0.0
-0.8
-1.6
Total
5.7
5.7
10.0
5.5
3.2
2.9
3.2
2.4
1.9
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research
Table 4. Chinese music market breakdown and 2013-17 CAGR forecast 2008
2009
2010
2011
2012
(US$mn)
2013F
2014F
2015F
2016F
2017F
2013-17 CAGR
Concerts/festivals
131
143
152
160
172
178
183
188
194
200
Digital
369
397
419
438
457
516
570
627
688
747
9.7
59
46
36
29
24
22
19
17
15
13
-12.3
559
586
607
627
653
716
772
832
897
960
7.6
Concerts/festivals
9.2
6.3
5.3
7.5
3.5
2.8
2.7
3.2
3.1
Digital
7.6
5.5
4.5
4.3
12.9
10.5
10.0
9.7
8.6
-22.0
-21.7
-19.4
-17.2
-8.3
-13.6
-10.5
-11.8
-13.3
4.8
3.6
3.3
4.1
9.6
7.8
7.8
7.8
7.0
Physical albums Total
3.0
YoY
Physical albums Total
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research
Table 5. Japanese music market breakdown and 2013-17 CAGR forecast 2008
2009
2010
2011
2012
(US$mn)
2013F
2014F
2015F
2016F
2017F
2013-17 CAGR
Concerts/festivals
1,511
1,534
1,564
1,547
1,557
1,574
1,592
1,610
1,625
1,641
1.0
Digital
1,288
1,225
1,141
998
840
813
803
795
785
774
-1.2
Physical albums
5,993
4,784
4,403
4,288
4,265
4,204
4,174
4,130
4,075
4,021
-1.1
Total
8,792
7,543
7,108
6,833
6,662
6,591
6,569
6,535
6,485
6,436
-0.6
YoY Concerts/festivals
1.5
2.0
-1.1
0.6
1.1
1.1
1.1
0.9
1.0
Digital
-4.9
-6.9
-12.5
-15.8
-3.2
-1.2
-1.0
-1.3
-1.4
Physical albums
-20.2
-8.0
-2.6
-0.5
-1.4
-0.7
-1.1
-1.3
-1.3
Total
-14.2
-5.8
-3.9
-2.5
-1.1
-0.3
-0.5
-0.8
-0.8
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research
Table 6. US music market breakdown and 2013-17 CAGR forecast 2008
2009
2010
2011
2012
(US$mn) 2013F
2014F
2015F
2016F
2017F
2013-17 CAGR
Concerts/festivals
8,150
8,631
8,039
8,441
8,611
8,905
9,216
9,442
9,695
9,984
Digital
2,910
2,873
2,893
3,264
3,591
3,846
4,065
4,256
4,439
4,598
4.6
Physical albums
5,767
4,602
3,664
3,381
2,822
2,375
2,062
1,795
1,578
1,403
-12.3
16,827
16,106
14,596
15,086
15,024
15,126
15,343
15,493
15,712
15,985
1.4
Concerts/festivals
5.9
-6.9
5.0
2.0
3.4
3.5
2.5
2.7
3.0
Digital
-1.3
0.7
12.8
10.0
7.1
5.7
4.7
4.3
3.6
-20.2
-20.4
-7.7
-16.5
-15.8
-13.2
-12.9
-12.1
-11.1
-4.3
-9.4
3.4
-0.4
0.7
1.4
1.0
1.4
1.7
Total
2.9
YoY
Physical albums Total
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research
KDB Daewoo Securities Research
7
November 14, 2013
SM Entertainment
Earnings outlook More upside to earnings momentum to emerge in 2014 We expect SM Entertainment’s consolidated earnings to grow only marginally YoY this year, despite an improvement in indicators for earnings and qualitative growth, due to: 1) sharp yen depreciation and 2) a plunge in album royalties from overseas markets. An increased revenue contribution from SM C&C, for which profits and margins are not yet fully on track, is also partially responsible for the projected dip in OP margin. In 2013, the company’s domestic CD sales are projected to grow 58.8% YoY to 1.68mn copies. CD sales in Japan, which stood at 1.7mn in October, are projected to come in at 2.4mn at end-2013, similar to the 2.45mn copies recorded last year. Meanwhile, the company is expected to attract a total audience of 1.72mn to its concerts in Japan this year, up 81.8% YoY. So far, concerts held in ex-Japan, ex-China markets have recorded a total attendance of 306,000, fewer than the 459,000 figure for full-year 2012. However, an SM Town concert (with a target audience of 100,000) is scheduled to be held in December in Korea, which should sharply push up the company’s ex-Japan concert sales. For 2013, we estimate SM Entertainment’s revenue and operating profit at W281.2bn and W60.7bn, respectively, under consolidated K-IFRS. In 2014, consolidated revenue and operating profit are anticipated to improve to W357.4bn and W76.5bn, respectively. Of note, the company is expected to see its consolidated subsidiaries generate W10bn in operating profit in 2014. Figure 15. Quarterly CD sales in Korea
Figure 16. Annual CD sales in Korea
('000 copies)
(mn copies)
600
1.8
Quarterly domestic sales
1.7
Annual domestic sales
500 470
500
1.5
425 389
400
1.2
1.1
326 282
300
0.9
0.8
200 200
0.6 0.6
154
100
0.3
0
0.5 0.2
0.0 1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13F
2008
2009
2010
2011
2012
2013F
Source: Company data, Gaon, Hanteo Information System, KDB Daewoo Securities Research
Source: Company data, Gaon, Hanteo Information System, KDB Daewoo Securities Research
Figure 17. Quarterly CD sales in Japan
Figure 18. Annual CD sales in Japan
('000 copies)
(mn copies)
900
Quarterly Japanese sales
800
765
3.5 720
689
700
610
600
2.9 2.5
2.4
2012
2013F
2.5
541 477
500
2.0 390
400
1.5
300 200
3.0
Annual Japanese sales
1.0
194
0.5
100 0
0.0 1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13F
Source: Company data, Oricon, Wikipedia, KDB Daewoo Securities Research
KDB Daewoo Securities Research
2011
Source: Company data, Oricon, Wikipedia, KDB Daewoo Securities Research
8
November 14, 2013
SM Entertainment
Figure 19. Concert ticket sales in Japan
Figure 20. Ex-Japan concert ticket sales ('000 tickets)
(mn tickets) 2.0
500
Concert ticket sales in Japan
Concert ticket sales ex-China Chinese concert ticket sales
1.6
400
1.2
300
0.8
200
0.4
100
0.0
0
2011
2012
2013F
Source: Company data, Wikipedia, KDB Daewoo Securities Research
2011
2012
Oct. 2013
Source: Company data, Wikipedia, KDB Daewoo Securities Research
Figure 21. Concerts in Japan: Large-venue (Dome) concerts vs. other (mn persons) 2
No. of other concertgoers
1.8
No of Dome concertgoers
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2011
2012
2013F
Source: Company data, Wikipedia, KDB Daewoo Securities Research
Figure 22. Cumulative sales of major artists in Korea ('000 copies) 2500 2000 1500 1000
-E xo 20 13
-T
-T urb o -V a ri ou sa rtis ts 20 01 20 -W 01 ax -L im Ch an gjun g 20 02 -B 20 oA 02 -B ro w nE ye s 20 02 -C 20 oy 02 ot e -L ee So oy ou 20 ng 02 -J un gN ar a 20 01
JD -D
20 00
OC
oo l -C
.d . 20 00
-g .o
20 00
20 00
20 00
-J
oS
un gm o
0
20 08
500
VX Q
Fewer than 500,000 copies sold (recession of the CD market)
Note: Figures are estimates, not official data Source: Wikipedia, Hanteo Information System, KDB Daewoo Securities Research
KDB Daewoo Securities Research
9
November 14, 2013
SM Entertainment
Table 7. SM Entertainment’s annual earnings
(Wbn, %)
2008
2009
2010
2011
2012
2013F
2014F
Revenue
40.1
61.8
86.4
143.0
241.3
281.2
357.4
CD
10.8
14.6
14.9
19.7
22.3
30.0
37.0
Digital
4.8
9.5
8.5
6.3
6.4
12.6
19.2
Overseas
8.6
15.8
36.8
81.1
128.7
127.5
143.1
36.3
16.0
Management
21.9 -
Other
26.2 -
35.9 -
-
51.7
61.8
47.7
59.5
96.4 10.3
Revenue breakdown CD
26.9
23.7
17.3
13.8
9.3
10.7
Digital
11.9
15.3
9.8
4.4
2.6
4.5
5.4
Overseas
21.4
25.5
42.6
56.7
53.3
45.3
40.0
Management
39.8
35.5
30.3
25.1
15.0
18.4
17.3
0.0
0.0
0.0
0.0
19.8
21.1
27.0
Operating profit
-1.9
9.3
20.2
25.6
60.5
60.7
76.5
OP margin
-4.7
15.1
23.4
17.9
25.1
21.6
21.4
4.3
4.5
15.9
21.8
37.3
52.3
64.1
10.7
7.3
18.4
15.2
15.5
18.6
17.9
27.9
54.1
39.9
65.6
68.7
16.5
27.1
21.3
35.7
2.1
32.0
13.3
34.3
23.2
Other
Net profit Net margin YoY growth Revenue CD Digital Overseas
8.9
98.1
-10.2
-26.2
1.2
97.6
52.6
52.0
84.1
133.1
120.6
58.6
-0.9
12.2
Management
28.4
37.3
19.6
37.2
0.9
42.6
19.6
Other
-
Operating profit Net profit
-
-
-
-
24.6
62.2
RR
TTB
117.2
26.7
136.3
0.3
26.0
TTB
4.7
253.3
37.1
71.1
40.2
22.6
Notes: Figures are based on K-GAAP through 2010; From 2011, figures are based on consolidated K-IFRS; TTB stands for “turn to black,” and RR stands for “remain red.” Source: Company data, KDB Daewoo Securities Research estimates
Table 8. Earnings forecast revisions
(Wbn, W, %, %p)
Previous
Revised
% chg.
2013F
2014F
2013F
2014F
2013F
2014F
281
335
281
357
0.1
6.8
Operating profit
62
74
61
77
-1.3
3.9
Pretax profit
75
88
69
85
-7.9
-3.9
Revenue
Net profit
51
61
52
63
1.6
3.8
2,500
3,003
2,539
3,114
1.6
3.7
OP margin
21.9
22.0
21.6
21.4
-0.3
-0.6
Net margin
18.1
18.3
18.3
17.7
0.3
-0.5
EPS(W)
Notes: All figures are based on consolidated K-IFRS; Net profit refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research
KDB Daewoo Securities Research
10
November 14, 2013
SM Entertainment
Table 9. SM Entertainment’s quarterly revenue breakdown
(Wbn, %)
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13 33.5
Revenue
Notes
38.5
32.4
51.5
46.2
33.2
CD
3.0
3.7
8.7
6.9
4.8
6.4 Cost-to-revenue ratio: Approx. 80%
Digital
1.6
1.4
1.7
1.7
1.1
1.5 Cost-to-revenue ratio: Approx. 20-30%
0.0
0.2
0.2
6.2
3.0
2.2
Domestic Royalties Management
Cost-to-revenue ratio of merchandise, etc.: Approx. 20-30%
7.1
7.4
9.0
6.1
7.2
11.8
12.8
19.6
20.8
16.2
CD
0.2
0.1
0.4
0.2
4.5
3.1 Direct exports of CDs produced in Korea
Digital
0.3
1.6
0.7
1.5
0.4
5.9
9.1
3.1
4.4
6.6
20.3
8.8
27.7
19.2
5.5
Subtotal
7.7 Cost-to-revenue ratio: Approx. 80% 17.6
26.7
19.6
31.9
25.4
17.1
0.4 Cost-to-revenue ratio: Approx. 20-30% Royalties mostly consist of income 4.4 received from the sales of DVDs and recorded music produced overseas Cost-to-revenue ratio: Approx. 20-30% Cost-to-revenue ratio of management 8.0 services: 80% Cost-to-revenue ratio of concerts (tickets + merchandise): 50-60% Revenue of W250-400mn (smaller venues), and W400-800mn (Domes) per 10,000 Japanese concertgoers Revenue of W1-3bn per SM Town concert in Southeast Asia and China 15.9
CD
7.8
11.4
16.9
14.9
14.5
19.0
Digital
4.2
4.3
3.3
3.7
3.3
4.3
-
0.6
0.4
13.4
9.1
6.4
18.4
22.8
17.5
13.2
21.5
22.9
CD
0.5
0.3
0.8
0.4
13.6
9.2
Digital
0.8
4.9
1.4
3.2
1.2
1.2
Royalties
15.3
28.1
6.0
9.5
20.0
13.2
Management
52.7
27.2
53.8
41.6
16.5
23.8
11.7
10.3
11.7
14.1
7.7
2.2
30.4
31.8
22.7
30.5
23.1
6.6
9.4
9.7
8.7
9.3
6.4
2.0
24.4
29.9
16.9
20.1
19.2
6.0
Royalties
Overseas
Management
Concert-related income: W12bn; Balance is from other services (e.g., commercials)
Subtotal
Concert-related income: W20bn; Balance is from other services (e.g., commercials)
Revenue breakdown
Domestic
Royalties Management
Overseas
Operating profit OP margin Net profit Net margin
Notes: K-IFRS non-consolidated basis; Figures are estimates, not official data Source: Company data, KDB Daewoo Securities Research
Table 10. SM C&C’s annual earnings
(Wbn)
2008
2009
2010
2011
2012
2013F
2014F
2015F
2016F
Revenue
9.5
11.2
12.5
12.4
19.6
52.8
111.2
120.6
138.1
Operating profit Profit from continuing operations Net profit
-2.0
2.5
2.4
2.0
-2.6
1.0
11.1
13.3
16.6
-14.1
-0.5
1.6
0.4
-12.9
1.0
11.1
13.3
16.6
-13.1
-0.5
1.9
0.8
-12.8
1.0
8.7
10.3
12.9
9.5
11.2
12.5
12.4
12.4
12.4
14.9
14.9
14.9
8.5
17.0
42.5
51.0
68.0
5.0
10.0
25.0
30.0
40.0
1.0
2.0
5.0
6.0
8.0
2.5
5.0
12.5
15.0
20.0
Revenue breakdown Tourism TV dramas Domestic broadcasting rights Product placement Overseas broadcasting rights Number of productions
2
5
6
8
Variety show programs
1
24
28
32
32
Revenue per program
0.06
0.07
0.08
0.08
2
3
4
6
21
51
52
52
Number of productions Other including Woolim.
1
Notes: K-IFRS non-consolidated basis; Figures are estimates, not official data Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
11
November 14, 2013
SM Entertainment
SM Entertainment (041510 KQ/Buy/TP: W60,000) Comprehensive Income Statement (Summarized) (Wbn)
Statement of Financial Condition (Summarized)
12/12 12/13F 12/14F 12/15F
(Wbn)
12/12 12/13F 12/14F 12/15F
Revenue
241
281
357
393
Current Assets
198
234
317
398
Cost of Sales
132
163
209
224
Cash and Cash Equivalents
100
136
202
275
Gross Profit
110
119
149
170
AR & Other Receivables
23
27
35
38
SG&A Expenses
49
58
72
80
Inventories
6
7
8
9
Operating Profit (Adj)
61
61
77
90
Other Current Assets
25
30
38
41
Operating Profit
61
61
77
90
Non-Current Assets
125
151
154
158
Non-Operating Profit
-4
9
8
10
Investments in Associates
2
7
7
7
Net Financial Income
-2
-2
-3
-5
Property, Plant and Equipment
39
48
47
46
Net Gain from Inv in Associates Pretax Profit
4
0
0
0
57
69
85
100
Intangible Assets Total Assets
43
45
37
34
323
385
471
556
Income Tax
20
18
21
25
Current Liabilities
74
86
109
120
Profit from Continuing Operations
37
52
63
75
AP & Other Payables
45
53
67
74
0
0
0
0
3
3
3
3
Net Profit
37
52
63
75
Other Current Liabilities
27
31
39
43
Controlling Interests
40
52
64
76
Non-Current Liabilities
10
8
8
8
Non-Controlling Interests
-3
-1
-1
-1
Long-Term Financial Liabilities
8
6
6
6
Total Comprehensive Profit
34
51
63
75
Other Non-Current Liabilities
Controlling Interests
37
52
64
75
Total Liabilities
Profit from Discontinued Operations
Non-Controlling Interests
-3
-1
-1
-1
EBITDA
70
80
105
113
2
38
65
70
FCF (Free Cash Flow)
Short-Term Financial Liabilities
Controlling Interests Capital Stock Capital Surplus
1
1
1
1
84
94
117
128
213
262
325
401
10
10
10
10
119
121
121
121 276
EBITDA Margin (%)
29.0
28.3
29.5
28.7
Retained Earnings
84
136
200
Operating Profit Margin (%)
25.1
21.6
21.4
22.9
Non-Controlling Interests
26
29
29
28
Net Profit Margin (%)
16.5
18.6
17.9
19.2
Stockholders' Equity
239
291
354
429
Cash Flows (Summarized) (Wbn)
Forecasts/Valuations (Summarized) 12/12 12/13F 12/14F 12/15F
12/12 12/13F 12/14F 12/15F
Cash Flows from Op Activities
46
63
82
87
P/E (x)
22.8
15.1
12.3
10.5
Net Profit
37
52
63
75
P/CF (x)
18.4
11.1
8.5
8.0
Non-Cash Income and Expense
34
29
42
38
P/B (x)
5.5
3.6
2.7
2.1
2
1
1
1
11.8
8.3
5.7
4.6
Amortization
7
18
28
22
EPS (W)
1,994
2,539
3,114
3,675
Others
-6
8
3
3
CFPS (W)
2,471
3,453
4,515
4,790 18,014
Depreciation
Chg in Working Capital
EV/EBITDA (x)
-4
-3
-3
-1
BPS (W)
8,305
10,729
14,233
Chg in AR & Other Receivables
-6
-4
-7
-4
DPS (W)
0
0
0
0
Chg in Inventories
-3
-1
-2
-1
Payout ratio (%)
0.0
0.0
0.0
0.0
15
6
14
7
Income Tax Paid
Chg in AP & Other Payables
-21
-16
-21
-25
Cash Flows from Inv Activities
-48
-19
-14
-12
Chg in PP&E
-23
-9
0
0
Chg in Intangible Assets
-19
-19
-19
-19
EPS Growth (%)
Chg in Financial Assets
-5
9
0
0
s Receivable Turnover (x)
Others
-2
0
5
7
Inventory Turnover (x)
58.3
Cash Flows from Fin Activities
75
-6
-1
-1
s Payable Turnover (x)
0
0
0
0
65
-4
0
0
0
0
9
-2
-1
66
36
66
Chg in Financial Liabilities Chg in Equity Dividends Paid Others Increase (Decrease) in Cash Beginning Balance Ending Balance
Dividend Yield (%)
0.0
0.0
0.0
0.0
68.8
16.5
27.1
10.0
EBITDA Growth (%)
116.7
13.5
32.4
7.3
Operating Profit Growth (%)
136.4
0.3
25.9
17.7
61.5
27.3
22.6
18.0
14.1
12.2
12.7
11.9
45.6
47.4
44.4
Revenue Growth (%)
7.7
6.6
6.8
6.4
ROA (%)
15.2
14.6
14.8
14.6
0
ROE (%)
24.7
22.0
21.8
20.8
0
ROIC (%)
65.3
48.9
57.8
71.6
-1
Liability to Equity Ratio (%)
35.1
32.4
33.0
29.8
73
Current Ratio (%)
266.4
270.9
290.9
332.7
34
100
136
202
Net Debt to Equity Ratio (%)
-55.8
-55.7
-64.4
-70.2
100
136
202
275
Interest Coverage Ratio (x)
51.3
35.5
54.3
63.9
Source: Company data, KDB Daewoo Securities Research estimates
KDB Daewoo Securities Research
12
November 14, 2013
SM Entertainment
APPENDIX 1 Important Disclosures & Disclaimers Disclosures
(W)
As of the publication date, Daewoo Securities Co., Ltd. has been acting as a financial advisor to SM Entertainment for its treasury stock trust, and other than this, Daewoo Securities has no other special interests in the companies covered in this report.
SM Entertainment
100,000 80,000 60,000 40,000 20,000 0 11/11
Stock Ratings
5/12
11/12
5/13
11/13
Industry Ratings
Buy
Relative performance of 20% or greater
Overweight
Fundamentals are favorable or improving
Trading Buy
Relative performance of 10% or greater, but with volatility
Neutral
Fundamentals are steady without any material changes
Hold
Relative performance of -10% and 10%
Underweight
Fundamentals are unfavorable or worsening
Sell
Relative performance of -10%
* Ratings and Target Price History (Share price (----), Target price (----), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions. Analyst Certification The research analysts who prepared this report (the “Analysts”) are ed with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither ed as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Daewoo Securities Co., Ltd. except as otherwise stated herein. Disclaimers This report is published by Daewoo Securities Co., Ltd. (“Daewoo”), a broker-dealer ed in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. Daewoo, its s and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and ing principles and no person whose receipt or use of this report would violate any laws and regulations or subject Daewoo and its s to registration or licensing requirements in any jurisdiction should receive or make any use hereof. Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. Daewoo, its s and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Daewoo and its s may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur.
KDB Daewoo Securities Research
13
November 14, 2013
SM Entertainment
Distribution United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: This report is distributed in the U.S. by Daewoo Securities (America) Inc., a member of FINRA/SIPC, and is only intended for major institutional investors as defined in Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934. All U.S. persons that receive this document by their acceptance thereof represent and warrant that they are a major institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Daewoo or its s. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should and place orders with Daewoo Securities (America) Inc., which accepts responsibility for the contents of this report in the U.S. The securities described in this report may not have been ed under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This document has been approved for distribution in Hong Kong by Daewoo Securities (Hong Kong) Ltd., which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should Daewoo or its s only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its s to any registration or licensing requirement within such jurisdiction.
KDB Daewoo Securities International Network Daewoo Securities Co. Ltd. (Seoul) Head Office 34-3 Yeouido-dong, Yeongdeungpo-gu Seoul 150-716 Korea Tel: 82-2-768-3026
Daewoo Securities (Hong Kong) Ltd. Two International Finance Centre Suites 2005-2012 8 Finance Street, Central Hong Kong Tel: 85-2-2514-1304
Daewoo Securities (America) Inc. 320 Park Avenue, 31st Fl. New York, NY 10022
Daewoo Securities (Europe) Ltd. Tower 42, Level 41 25 Old Broad Street London EC2N 1HQ United Kingdom Tel: 44-20-7982-8016
Daewoo Securities (Singapore) Pte. Ltd. 6 Battery Road, #11-01 Singapore, 049909
Tel: 65-6671-9845
Tokyo Representative Office 7th Floor, Yusen Building 2-3-2 Marunouchi, Chiyoda-ku Tokyo 100-0005 Japan Tel: 81-3- 3211-5511
Beijing Representative Office Suite 2602, Twin Towers (East) B-12 Jianguomenwai Avenue Chaoyang District, Beijing 100022 China Tel: 86-10-6567-9699
Shanghai Representative Office Unit 13, 28th Floor, Hang Seng Bank Tower 1000 Lujiazui Ring Road Pudong New Area, Shanghai 200120 China Tel: 86-21-5013-6392
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KDB Daewoo Securities Research
United States Tel: 1-212-407-1000
14
China growth story to begin in 2014
Entertainment
3Q and 4Q earnings to be in line; Strong momentum anticipated in 4Q
Company Update
Despite a sluggish 1H, we expect SM Entertainment’s 2013 revenue to grow 16.5% YoY to W281.5bn, and operating profit to remain broadly flat YoY at W60.7bn under consolidated K-IFRS.
November 14, 2013
Buy
(Maintain) Target Price (12M, W)
60,000
Share Price (11/13/13, W)
38,400 56%
Expected Return
The 1H earnings weakness was attributable to: 1) sharp yen depreciation, 2) overseas concert royalty income being geared towards 2H (only 500,000 concertgoers were reflected in 1H out of 2.32mn concertgoers in 2013F), and 3) a significant fall in album royalties from Japan (direct exports of Korean language albums, which had been a major earnings contributor in 2012). We see strong earnings momentum in 4Q, as the company should recognize revenue from several directly operated concerts (which are more profitable), including the KoreaChina-Japan SM Town tour. We estimate non-consolidated operating profit at W12bn in 3Q and over W18bn in 4Q.
2014 earnings catalysts: China, Exo, and additional revenue streams OP (13F, Wbn)
61
Consensus OP (13F, Wbn)
60
EPS Growth (13F, %)
27.3
Market EPS Growth (13F, %)
15.0
P/E (13F, x)
15.1
Market P/E (13F, x)
11.0
KOSDAQ
505.60
Market Cap (Wbn)
793
Shares Outstanding (mn)
21
Free Float (%)
78.3
Foreign Ownership (%)
10.3
Beta (12M) 52-Week Low (W)
1.09 29,100
52-Week High (W)
69,500
(%)
1M
6M
12M
Absolute
3.6
-1.9
-44.5
Relative
6.7
-2.7
-48.4
Share price 130
KOSDAQ
110 90 70 50 30 11/12
3/13
7/13
11/13
China should become a major market for SM in 2014. The entertainment firm is looking into t ventures with local Chinese firms to establish a broad presence in the country across broadcasting, commercials, TV dramas, and films. The company is purportedly in discussions with major Chinese entertainment and media firms over potential alliances. The boy band Exo is scheduled to hold its first concert (as a headline act) in December and has been added to SM Entertainment’s 2014 concert lineup. Exo’s album is on track to break the 1mn sales mark, which would make it the first domestic album to do so in 13 years. The boy group, which includes four Chinese , is gaining widespread popularity in China and Southeast Asia. The company’s subsidiary SM C&C (048550 KQ) should display sharp earnings growth in 2014, driven by: 1) earnings contributions from Woollim Entertainment (which represents the popular group Infinite) beginning in October 2013, and 2) secondary revenue streams, including broadcast productions, fan meet-and-greet tours and merchandise stores. We estimate SM C&C’s 2014 revenue and operating profit at W111.2bn and W11.1bn, respectively.
Maintain Buy and Lift TP to W60,000 While major artists TVXQ, Super Junior, and Girls’ Generation continue to enjoy worldwide popularity, SM has expanded its lineup with the additions of Exo and Infinite. On top of traditional album and concert sales, the company is introducing more profit models, like fan package tours and merchandise stores. We maintain Buy and lift our target price to W60,000 (from W46,000) after revi our 2014F earnings and changing our valuation base year and P/E target comparison. We expect two straight quarters of solid earnings in 2H, which should help restore investor confidence. In addition to the nine-day SM Town Week concert in December, the growing visibility of SM’s Chinese t venture could also trigger upside to the stock. 12/10
12/11
12/12
12/13F
12/14F
12/15F
Revenue (Wbn)
97
143
241
281
357
393
Internet/Game/Entertainment
OP (Wbn)
20
26
61
61
77
90
Chang-kwean Kim
OP margin (%)
20.9
17.9
25.1
21.6
21.4
22.9
+822-768-4321 [email protected]
NP (Wbn)
Daewoo Securities Co., Ltd.
FY (Dec.)
17
23
40
52
64
76
EPS (W)
942
1,235
1,994
2,539
3,114
3,675
ROE (%)
22.9
23.1
24.7
22.0
21.8
20.8
P/E (x)
16.0
33.0
22.8
15.1
12.3
10.5
P/B (x)
3.6
7.4
5.5
3.6
2.7
2.1
Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates Analysts who prepared this report are ed as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
November 14, 2013
SM Entertainment
Investment points Gaining Chinese market share on the back of competitive content China’s service and entertainment markets are growing at a rapid pace
FDI (3-year average growth)
% of all FDI
Increased FDI in consumption-/environment-/finance-related industries
Reduced FDI in traditional manufacturing/light industries
40
20
0
-20 Cu lt Fin a Tra n Wh o Te c Wa te Ch e E lec ICT ure n ce sp o l esa h no lo r su mi ca trici ty rta ti l e/r pp ly ls e ta il gy on
Re a S pe P ha L od E qu Ma n Co m Te x Min l e s cialt rma gin g ipme u fa c pu t til es in g ta te y eq ce u turi n ers nt ui pm tica ls g e nt
Note: Cumulative Jan.- Aug. 2013 data Source: CEIC, KDB Daewoo Securities Research
Figure 2. Earnings and share price of Huayi Brothers Media (US$bn) 140 120
(RMB) 8000
Revenue (L) Operating profit (L)
7000
Share price (R) 100
6000
80
5000
60
4000
40
3000
20
2000
0
1000 0
-20 1/10
7/10
1/11
7/11
1/12
7/12
1/13
7/13
Source: Bloomberg, KDB Daewoo Securities Research
KDB Daewoo Securities Research
2
November 14, 2013
SM Entertainment
Figure 3. Relationship between Korea’s per-capita GDP & growth of culture/arts & service sectors (US$)
(%) Culture/arts and service boomed as percapita income increased from US$4,000 to $10,000
25,000
Real GDP per capita (L)
70
Culture/arts & service - YoY growth (R) 60
20,000
50 40
15,000
30 10,000
20 10
5,000 0 -10
0 1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Note: Real GDP (base year of 2000) Source: World Bank, BOK, KDB Daewoo Securities Research
Figure 4. Gov’t expenditure on culture/arts & service in China (US$mn) 5
4
Figure 5. Employment in culture/arts & service in China (mn persons) 18
CAGR of 23.7% between 2007 and 2013
17 CAGR of 3.1% between 2009 and 2013
3 16 2 15
1
0
14 1/07 7/07 1/08 7/08 1/09 7/09 1/10 7/10 1/11 7/11 1/12 7/12 1/13 7/13
Source: National Bureau of Statistics of China, KDB Daewoo Securities Research
9/05 3/06 9/06 3/07 9/07 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 9/12 3/13
Source: National Bureau of Statistics of China, KDB Daewoo Securities Research
Figure 6. Service industry as a % of GDP (% of GDP) 80 Spain
Brazil
70
India
Mexico
50
Japan
Poland Czech Russia K orea
Malaysia Thailand
Taiwan Turkey
60
Italy
US
Great Britain
China
40 Indonesia (US$'000) 30 0
10
20
30
40
50
60
Source: Bloomberg, KDB Daewoo Securities Research
KDB Daewoo Securities Research
3
November 14, 2013
SM Entertainment
Table 1. Earnings forecasts for global media/entertainment companies Revenue
(US$mn, %)
Operating profit
OP margin
Net profit
Net margin
EPS
12 13F 14F
12 13F 14F
Market cap.
12
13F
14F
12
13F
14F
12 13F 14F
12
13F
SM Entertainment
739
214
269
342
54
56
71
25.1 21.0 20.7
35
43
48 16.5 15.9 14.1
1.8
2.1
2.3
YG Entertainment
476
95
121
147
19
24
35
20.1 19.9 23.8
17
21
29 17.6 16.9 19.8
1.6
2.1
2.8
CJ CGV
962
692
901
1,076
49
67
90
7.1
7.4
8.4
48
40
65
6.9
4.4
6.1
2.3
2.0
3.1
Cheil Worldwide
2,684
2,101
2,594
3,075
112
139
169
5.3
5.3
5.5
83
104
128
4.0
4.0
4.2
0.8
1.0
1.2
CJ E&M
1,102
1,239
1,551
1,719
34
64
98
2.8
4.1
5.7
33
42
74
2.7
2.7
4.3
0.0
1.1
2.0
KT Skylife
1,184
503
584
631
58
94
103
11.6 16.2 16.3
50
82
91
9.9 14.0 14.5
1.0
1.7
1.9
Walt Disney
21.0 23.6 24.3 6,136 6,933 7,625 13.6 14.5 15.0
3.4
3.9
4.5
Time Warner
60,426 28,729 29,603 30,607 6,214
6,670
7,131
21.6 22.5 23.3 3,019 3,643 3,877 10.5 12.3 12.7
3.4
3.8
4.3
CBS
35,239 14,089 15,216 15,461 3,013
3,326
3,611
21.4 21.9 23.4 1,574 1,894 2,062 11.2 12.4 13.3
2.5
3.0
3.5
Discovery Holdings
30,041
6,207 1,861
2,075
2,415
41.5 37.4 38.9
943 1,119 1,371 21.0 20.1 22.1
2.5
3.1
4.0
Viacom
39,823 13,887 13,745 14,427 3,901
3,925
4,266
28.1 28.6 29.6 1,981 2,278 2,422 14.3 16.6 16.8
4.2
4.6
5.4
Liberty Interactive
14,037 10,054 10,261 10,738 1,200
1,175
1,306
11.9 11.4 12.2 1,530
5.7 -0.8
1.0
1.4
0.9
0.0
0.9
0.4
0.4
E.W. Scripps News Corp. Clear Channel RealNetworks
121,986 45,041 47,823 50,945 9,450 11,276 12,396
14F
4,487
5,553
999
903
817
920
90
23
93
9.9
2.8 10.2
9,995
8,891
8,790
8,850
140
150
246
1.6
1.7
569
6,247
6,197
6,345 1,108
-
-
17.7
2.8
257
259
-
-
-42
-
Pandora
5,426
427
649
898
-38
-30
18
Avex
1,068
1,679
1,639
1,885
170
158
215
174
373
320
332
50
37
39
4,664
213
317
413
41
131
160
19.2 41.2 38.7
Amuse Huayi Brothers Media
- -16.3
Average
501
617 15.2
40
-
-
4.4
506
169
248
5.7
-424
-
45
-
-38
-36
9.7 11.4
89
97
100
5.3
13.3 11.5 11.6
30
23
24
8.0
39
103
10.1
1.9
2.8
- -6.8
2.0
-8.8 -4.6
4.9
-3.2 -3.7 -3.0
- 17.3
-0.6
-
-
1.6 -0.2
0.0
0.2
5.9
5.3
2.1
2.3
2.3
7.1
7.1
3.4
2.6
2.7
122 18.1 32.5 29.7
0.0
0.1
0.1
14 -8.9 -5.5
12.9 14.1 15.9
8.9
9.3 10.3
Notes: Bloomberg consensus; Based on November 13th closing prices; EPS is based on US$. Source: Bloomberg, KDB Daewoo Securities Research
Table 2. Valuation comparison of global media/entertainment companies P/E
P/B
(US$mn, %)
P/S
EV/EBITDA
ROE
ROA
Market cap.
12
13F
14F
12
13F
14F
12
13F
14F
12
13F
14F
SM Entertainment
739
22.8
17.3
16.0
4.4
3.4
2.7
3.8
2.8
2.2 11.7
9.2
7.6 24.7 19.6 19.8 16.3 12.8 13.8
YG Entertainment
476
33.3
22.6
16.6
6.5
4.4
3.6
5.9
4.0
3.3 23.2
14.4 10.5 21.6 21.2 23.6 18.0 17.2 18.9
CJ CGV
962
12.2
22.8
14.6
1.9
2.6
2.3
0.9
1.1
0.9
11.2
Cheil Worldwide
2,684
24.9
24.5
19.7
3.3
3.7
3.1
1.0
1.0
0.9 12.1
CJ E&M
1,102 646.3
26.7
14.9
0.8
1.0
0.9
0.7
0.7
0.6
2.9
3.2
3.0
KT Skylife
1,184
28.5
14.6
13.1
4.6
3.1
2.6
2.8
2.0
1.9 12.1
8.0
7.5 17.7 22.9 21.3
9.5 13.1 12.8
Walt Disney
121,986
19.2
17.2
15.0
2.6
2.8
2.3
2.6
2.6
2.4 11.2
10.1
9.2 14.4 15.6 16.7
7.9
8.6
9.1
Time Warner
60,426
14.2
17.7
15.7
1.5
1.8
1.7
1.6
2.0
2.0
8.7
10.3
9.7 10.1 11.8 12.7
4.4
6.1
6.5
CBS
35,239
14.9
19.3
16.8
2.3
3.5
3.1
1.7
]2.3
2.3
8.4
10.9 10.2 15.6 18.6 20.6
6.0
7.5
8.1
Discovery Holdings
30,041
25.2
27.4
21.3
3.1
4.9
4.8
5.3
5.4
4.8 11.8
15.0 13.2 14.7 18.0 22.4
7.6
8.9 10.0
Viacom
39,823
12.7
17.8
15.1
3.6
6.6
7.7
2.0
2.9
2.8
11.4 10.5 24.6 34.6 47.4
8.8 11.8 12.7
Liberty Interactive
14,037
-
26.9
20.3
1.4
2.2
2.1
1.1
1.4
1.3 10.3
12.1 11.3 21.8
7.3
8.9
7.0
4.2
4.8
999
12.1
-
19.0
1.1
-
-
0.7
1.2
1.1
4.0
15.9
6.8
7.3
0.0
8.9
4.0
0.0
4.7
9,995
-
48.6
40.7
-
0.9
0.9
-
1.1
1.1
9.6
10.7
9.4
4.7
-
-
3.5
-
-
Clear Channel
569
-
-
-
-
-
-
0.0
0.1
0.1 11.0
11.6 10.8
-
-
-
-2.6
-
-
Real Networks
257
-
-
-
0.8
-
-
1.0
-
-
- 14.2
-
- 10.8
-
-
Pandora
5,426
-
- 115.7 20.1 52.3 35.7
4.5
8.4
6.0
Avex
1,068
15.1
10.4
10.4
2.4
2.1
1.9
0.8
0.7
0.6
7.0
5.6
4.2 18.2 19.0 18.9
7.0
8.2
9.1
174
6.8
7.4
7.1
1.1
1.0
0.9
0.5
0.5
0.5
1.5
1.8
1.7 17.5 13.8 13.2 11.1
-
-
37
33 12.8 21.8 21.0
E.W. Scripps News Corp.
Amuse Huayi Brothers Media
4,664
Average
36
43
37
4
8
7
63.4
83.1
23.0
3.6
6.0
4.8
7.3
8.4
-
30
2.1
9.5
1.9
13F
14F
12
13F
14F
8.8 16.6 11.7 16.3
5.6
4.5
6.4
15.4 12.6 13.5 15.5 17.1
4.9
5.7
6.1
1.8
1.9
3.4
-
3.0
- 370.1 85.9 -37.5
6.4 14.7 11.3 2.2
12
3.4
6.1
3.7 30.8 -19.2
30.4 12.9 12.4 14.8 19.0
1.7 15.4
7.4 15.3 15.1 5.9
7.5
9.5
Notes: Bloomberg consensus; Based on November 13th closing prices. Source: Bloomberg, KDB Daewoo Securities Research
KDB Daewoo Securities Research
4
November 14, 2013
SM Entertainment
Music market outlook Asian music markets, especially China, to grow rapidly China has become the second–largest movie market in the world, following the US, on the back of: 1) the easing of restrictions on movie imports by President Xi Jinping’s istration, 2) a bump in the quality of domestic releases, and 3) improved infrastructure (e.g., an increase in multiplexes). By contrast, the nation’s music market s for only a small fraction of the global total (1.4% based on 2013F data), according to PricewaterhouseCoopers. While concert ticket sales and CD sales are the respective drivers of the US and Japanese markets, digital music sales are the engine of the Chinese music market (as in Korea). Currently, digital music sales—mainly distributed by telecom operators—make up 72% of the nation’s music market. And it should be noted that revenue from these sales tends to barely cover related payment service and commission fees. Looking once more at the movie industry, we find that theater expansion in China accelerated market changes so rapidly that, now, high-end movie ticket sales (e.g., 3D, IMAX) represent more than 70% of the market. In our view, the proliferation of mobile internet could serve as a similar catalyst for change in the music space. Indeed, mobile internet is providing fans with greater access to music videos and other content, which is sparking a surge in fandom for idol bands. Considering Chinese-language copies ed for half of the sales of Exo’s latest album (close to 1mn copies total), we believe that the Chinese music market has already begun to evolve. Figure 7. Music market growth over the next five years by country; Growth is stronger in developing countries (%) 12 10 Five-country avg.: 7.7% 8 6 4 Four-country avg.: 1.1%
2 0 -2 China
Thailand
Vietnam
Indonesia
Singapore
Korea
Japan
US
Euope
Note: Total music market, including concerts, festivals, digital music, and CD albums. Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
Figure 8. Breakdown of global music market by country Other 16.9%
Korea China China holds only 1. 4% of t he global music market 1.6% 1.4% Japan 13.1%
US 30.0% Europe 37.0%
Note: 2013F total music market, including concerts, festivals, digital music, and CD albums. Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
KDB Daewoo Securities Research
5
November 14, 2013
SM Entertainment
Figure 9. Chinese music market (US$mn) 1,200
Concerts/festivals
Digital
Figure 10. Chinese music market growth (%) 15
CD
Concerts/festivals
Digital
CD
10
900
5 0
600 -5 -10
300
-15
0
-20
2012
2013F
2014F
2015F
2016F
2017F
2012
2013F
2014F
2015F
2016F
2017F
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
Figure 11. Chinese concert market per capita
Figure 12. Chinese digital music market per capita
(US$) 0.15
(US$) 0.6
Concert market size per capita
0.145
Digital market size per capita
0.5
0.14
0.4
0.135 0.3 0.13 0.2
0.125
0.1
0.12 0.115
0 2012
2013F
2014F
2015F
2016F
2017F
2012
2013F
2014F
2015F
2016F
2017F
Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
Figure 13. Chinese CD album market per capita
Figure 14. Chinese music market per capita
(US$) 0.02
(US$) 0.8
CD market size per capita
0.018
Overall music market size per capita
0.7
0.016
0.6
0.014 0.5
0.012
0.4
0.01 0.008
0.3
0.006
0.2
0.004 0.1
0.002 0
0 2012
2013F
2014F
2015F
2016F
2017F
Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
KDB Daewoo Securities Research
2012
2013F
2014F
2015F
2016F
2017F
Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media
6
November 14, 2013
SM Entertainment
Table 3. Korean music market breakdown and 2013-17 CAGR forecast 2008
2009
2010
2011
2012
(US$mn)
2013F
2014F
2015F
2016F
2017F
2013-17 CAGR
Concerts/festivals
357
371
376
394
415
432
449
468
484
498
Digital
139
169
194
238
253
261
268
276
282
287
3.6 2.4
Physical albums
114
105
112
118
123
123
123
123
122
120
-0.6
Total
610
645
682
750
791
816
840
867
888
905
2.6
2.9
YoY Concerts/festivals
3.9
1.3
4.8
5.3
4.1
3.9
4.2
3.4
Digital
21.6
14.8
22.7
6.3
3.2
2.7
3.0
2.2
1.8
Physical albums
-7.9
6.7
5.4
4.2
0.0
0.0
0.0
-0.8
-1.6
Total
5.7
5.7
10.0
5.5
3.2
2.9
3.2
2.4
1.9
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research
Table 4. Chinese music market breakdown and 2013-17 CAGR forecast 2008
2009
2010
2011
2012
(US$mn)
2013F
2014F
2015F
2016F
2017F
2013-17 CAGR
Concerts/festivals
131
143
152
160
172
178
183
188
194
200
Digital
369
397
419
438
457
516
570
627
688
747
9.7
59
46
36
29
24
22
19
17
15
13
-12.3
559
586
607
627
653
716
772
832
897
960
7.6
Concerts/festivals
9.2
6.3
5.3
7.5
3.5
2.8
2.7
3.2
3.1
Digital
7.6
5.5
4.5
4.3
12.9
10.5
10.0
9.7
8.6
-22.0
-21.7
-19.4
-17.2
-8.3
-13.6
-10.5
-11.8
-13.3
4.8
3.6
3.3
4.1
9.6
7.8
7.8
7.8
7.0
Physical albums Total
3.0
YoY
Physical albums Total
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research
Table 5. Japanese music market breakdown and 2013-17 CAGR forecast 2008
2009
2010
2011
2012
(US$mn)
2013F
2014F
2015F
2016F
2017F
2013-17 CAGR
Concerts/festivals
1,511
1,534
1,564
1,547
1,557
1,574
1,592
1,610
1,625
1,641
1.0
Digital
1,288
1,225
1,141
998
840
813
803
795
785
774
-1.2
Physical albums
5,993
4,784
4,403
4,288
4,265
4,204
4,174
4,130
4,075
4,021
-1.1
Total
8,792
7,543
7,108
6,833
6,662
6,591
6,569
6,535
6,485
6,436
-0.6
YoY Concerts/festivals
1.5
2.0
-1.1
0.6
1.1
1.1
1.1
0.9
1.0
Digital
-4.9
-6.9
-12.5
-15.8
-3.2
-1.2
-1.0
-1.3
-1.4
Physical albums
-20.2
-8.0
-2.6
-0.5
-1.4
-0.7
-1.1
-1.3
-1.3
Total
-14.2
-5.8
-3.9
-2.5
-1.1
-0.3
-0.5
-0.8
-0.8
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research
Table 6. US music market breakdown and 2013-17 CAGR forecast 2008
2009
2010
2011
2012
(US$mn) 2013F
2014F
2015F
2016F
2017F
2013-17 CAGR
Concerts/festivals
8,150
8,631
8,039
8,441
8,611
8,905
9,216
9,442
9,695
9,984
Digital
2,910
2,873
2,893
3,264
3,591
3,846
4,065
4,256
4,439
4,598
4.6
Physical albums
5,767
4,602
3,664
3,381
2,822
2,375
2,062
1,795
1,578
1,403
-12.3
16,827
16,106
14,596
15,086
15,024
15,126
15,343
15,493
15,712
15,985
1.4
Concerts/festivals
5.9
-6.9
5.0
2.0
3.4
3.5
2.5
2.7
3.0
Digital
-1.3
0.7
12.8
10.0
7.1
5.7
4.7
4.3
3.6
-20.2
-20.4
-7.7
-16.5
-15.8
-13.2
-12.9
-12.1
-11.1
-4.3
-9.4
3.4
-0.4
0.7
1.4
1.0
1.4
1.7
Total
2.9
YoY
Physical albums Total
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research
KDB Daewoo Securities Research
7
November 14, 2013
SM Entertainment
Earnings outlook More upside to earnings momentum to emerge in 2014 We expect SM Entertainment’s consolidated earnings to grow only marginally YoY this year, despite an improvement in indicators for earnings and qualitative growth, due to: 1) sharp yen depreciation and 2) a plunge in album royalties from overseas markets. An increased revenue contribution from SM C&C, for which profits and margins are not yet fully on track, is also partially responsible for the projected dip in OP margin. In 2013, the company’s domestic CD sales are projected to grow 58.8% YoY to 1.68mn copies. CD sales in Japan, which stood at 1.7mn in October, are projected to come in at 2.4mn at end-2013, similar to the 2.45mn copies recorded last year. Meanwhile, the company is expected to attract a total audience of 1.72mn to its concerts in Japan this year, up 81.8% YoY. So far, concerts held in ex-Japan, ex-China markets have recorded a total attendance of 306,000, fewer than the 459,000 figure for full-year 2012. However, an SM Town concert (with a target audience of 100,000) is scheduled to be held in December in Korea, which should sharply push up the company’s ex-Japan concert sales. For 2013, we estimate SM Entertainment’s revenue and operating profit at W281.2bn and W60.7bn, respectively, under consolidated K-IFRS. In 2014, consolidated revenue and operating profit are anticipated to improve to W357.4bn and W76.5bn, respectively. Of note, the company is expected to see its consolidated subsidiaries generate W10bn in operating profit in 2014. Figure 15. Quarterly CD sales in Korea
Figure 16. Annual CD sales in Korea
('000 copies)
(mn copies)
600
1.8
Quarterly domestic sales
1.7
Annual domestic sales
500 470
500
1.5
425 389
400
1.2
1.1
326 282
300
0.9
0.8
200 200
0.6 0.6
154
100
0.3
0
0.5 0.2
0.0 1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13F
2008
2009
2010
2011
2012
2013F
Source: Company data, Gaon, Hanteo Information System, KDB Daewoo Securities Research
Source: Company data, Gaon, Hanteo Information System, KDB Daewoo Securities Research
Figure 17. Quarterly CD sales in Japan
Figure 18. Annual CD sales in Japan
('000 copies)
(mn copies)
900
Quarterly Japanese sales
800
765
3.5 720
689
700
610
600
2.9 2.5
2.4
2012
2013F
2.5
541 477
500
2.0 390
400
1.5
300 200
3.0
Annual Japanese sales
1.0
194
0.5
100 0
0.0 1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13F
Source: Company data, Oricon, Wikipedia, KDB Daewoo Securities Research
KDB Daewoo Securities Research
2011
Source: Company data, Oricon, Wikipedia, KDB Daewoo Securities Research
8
November 14, 2013
SM Entertainment
Figure 19. Concert ticket sales in Japan
Figure 20. Ex-Japan concert ticket sales ('000 tickets)
(mn tickets) 2.0
500
Concert ticket sales in Japan
Concert ticket sales ex-China Chinese concert ticket sales
1.6
400
1.2
300
0.8
200
0.4
100
0.0
0
2011
2012
2013F
Source: Company data, Wikipedia, KDB Daewoo Securities Research
2011
2012
Oct. 2013
Source: Company data, Wikipedia, KDB Daewoo Securities Research
Figure 21. Concerts in Japan: Large-venue (Dome) concerts vs. other (mn persons) 2
No. of other concertgoers
1.8
No of Dome concertgoers
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2011
2012
2013F
Source: Company data, Wikipedia, KDB Daewoo Securities Research
Figure 22. Cumulative sales of major artists in Korea ('000 copies) 2500 2000 1500 1000
-E xo 20 13
-T
-T urb o -V a ri ou sa rtis ts 20 01 20 -W 01 ax -L im Ch an gjun g 20 02 -B 20 oA 02 -B ro w nE ye s 20 02 -C 20 oy 02 ot e -L ee So oy ou 20 ng 02 -J un gN ar a 20 01
JD -D
20 00
OC
oo l -C
.d . 20 00
-g .o
20 00
20 00
20 00
-J
oS
un gm o
0
20 08
500
VX Q
Fewer than 500,000 copies sold (recession of the CD market)
Note: Figures are estimates, not official data Source: Wikipedia, Hanteo Information System, KDB Daewoo Securities Research
KDB Daewoo Securities Research
9
November 14, 2013
SM Entertainment
Table 7. SM Entertainment’s annual earnings
(Wbn, %)
2008
2009
2010
2011
2012
2013F
2014F
Revenue
40.1
61.8
86.4
143.0
241.3
281.2
357.4
CD
10.8
14.6
14.9
19.7
22.3
30.0
37.0
Digital
4.8
9.5
8.5
6.3
6.4
12.6
19.2
Overseas
8.6
15.8
36.8
81.1
128.7
127.5
143.1
36.3
16.0
Management
21.9 -
Other
26.2 -
35.9 -
-
51.7
61.8
47.7
59.5
96.4 10.3
Revenue breakdown CD
26.9
23.7
17.3
13.8
9.3
10.7
Digital
11.9
15.3
9.8
4.4
2.6
4.5
5.4
Overseas
21.4
25.5
42.6
56.7
53.3
45.3
40.0
Management
39.8
35.5
30.3
25.1
15.0
18.4
17.3
0.0
0.0
0.0
0.0
19.8
21.1
27.0
Operating profit
-1.9
9.3
20.2
25.6
60.5
60.7
76.5
OP margin
-4.7
15.1
23.4
17.9
25.1
21.6
21.4
4.3
4.5
15.9
21.8
37.3
52.3
64.1
10.7
7.3
18.4
15.2
15.5
18.6
17.9
27.9
54.1
39.9
65.6
68.7
16.5
27.1
21.3
35.7
2.1
32.0
13.3
34.3
23.2
Other
Net profit Net margin YoY growth Revenue CD Digital Overseas
8.9
98.1
-10.2
-26.2
1.2
97.6
52.6
52.0
84.1
133.1
120.6
58.6
-0.9
12.2
Management
28.4
37.3
19.6
37.2
0.9
42.6
19.6
Other
-
Operating profit Net profit
-
-
-
-
24.6
62.2
RR
TTB
117.2
26.7
136.3
0.3
26.0
TTB
4.7
253.3
37.1
71.1
40.2
22.6
Notes: Figures are based on K-GAAP through 2010; From 2011, figures are based on consolidated K-IFRS; TTB stands for “turn to black,” and RR stands for “remain red.” Source: Company data, KDB Daewoo Securities Research estimates
Table 8. Earnings forecast revisions
(Wbn, W, %, %p)
Previous
Revised
% chg.
2013F
2014F
2013F
2014F
2013F
2014F
281
335
281
357
0.1
6.8
Operating profit
62
74
61
77
-1.3
3.9
Pretax profit
75
88
69
85
-7.9
-3.9
Revenue
Net profit
51
61
52
63
1.6
3.8
2,500
3,003
2,539
3,114
1.6
3.7
OP margin
21.9
22.0
21.6
21.4
-0.3
-0.6
Net margin
18.1
18.3
18.3
17.7
0.3
-0.5
EPS(W)
Notes: All figures are based on consolidated K-IFRS; Net profit refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research
KDB Daewoo Securities Research
10
November 14, 2013
SM Entertainment
Table 9. SM Entertainment’s quarterly revenue breakdown
(Wbn, %)
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13 33.5
Revenue
Notes
38.5
32.4
51.5
46.2
33.2
CD
3.0
3.7
8.7
6.9
4.8
6.4 Cost-to-revenue ratio: Approx. 80%
Digital
1.6
1.4
1.7
1.7
1.1
1.5 Cost-to-revenue ratio: Approx. 20-30%
0.0
0.2
0.2
6.2
3.0
2.2
Domestic Royalties Management
Cost-to-revenue ratio of merchandise, etc.: Approx. 20-30%
7.1
7.4
9.0
6.1
7.2
11.8
12.8
19.6
20.8
16.2
CD
0.2
0.1
0.4
0.2
4.5
3.1 Direct exports of CDs produced in Korea
Digital
0.3
1.6
0.7
1.5
0.4
5.9
9.1
3.1
4.4
6.6
20.3
8.8
27.7
19.2
5.5
Subtotal
7.7 Cost-to-revenue ratio: Approx. 80% 17.6
26.7
19.6
31.9
25.4
17.1
0.4 Cost-to-revenue ratio: Approx. 20-30% Royalties mostly consist of income 4.4 received from the sales of DVDs and recorded music produced overseas Cost-to-revenue ratio: Approx. 20-30% Cost-to-revenue ratio of management 8.0 services: 80% Cost-to-revenue ratio of concerts (tickets + merchandise): 50-60% Revenue of W250-400mn (smaller venues), and W400-800mn (Domes) per 10,000 Japanese concertgoers Revenue of W1-3bn per SM Town concert in Southeast Asia and China 15.9
CD
7.8
11.4
16.9
14.9
14.5
19.0
Digital
4.2
4.3
3.3
3.7
3.3
4.3
-
0.6
0.4
13.4
9.1
6.4
18.4
22.8
17.5
13.2
21.5
22.9
CD
0.5
0.3
0.8
0.4
13.6
9.2
Digital
0.8
4.9
1.4
3.2
1.2
1.2
Royalties
15.3
28.1
6.0
9.5
20.0
13.2
Management
52.7
27.2
53.8
41.6
16.5
23.8
11.7
10.3
11.7
14.1
7.7
2.2
30.4
31.8
22.7
30.5
23.1
6.6
9.4
9.7
8.7
9.3
6.4
2.0
24.4
29.9
16.9
20.1
19.2
6.0
Royalties
Overseas
Management
Concert-related income: W12bn; Balance is from other services (e.g., commercials)
Subtotal
Concert-related income: W20bn; Balance is from other services (e.g., commercials)
Revenue breakdown
Domestic
Royalties Management
Overseas
Operating profit OP margin Net profit Net margin
Notes: K-IFRS non-consolidated basis; Figures are estimates, not official data Source: Company data, KDB Daewoo Securities Research
Table 10. SM C&C’s annual earnings
(Wbn)
2008
2009
2010
2011
2012
2013F
2014F
2015F
2016F
Revenue
9.5
11.2
12.5
12.4
19.6
52.8
111.2
120.6
138.1
Operating profit Profit from continuing operations Net profit
-2.0
2.5
2.4
2.0
-2.6
1.0
11.1
13.3
16.6
-14.1
-0.5
1.6
0.4
-12.9
1.0
11.1
13.3
16.6
-13.1
-0.5
1.9
0.8
-12.8
1.0
8.7
10.3
12.9
9.5
11.2
12.5
12.4
12.4
12.4
14.9
14.9
14.9
8.5
17.0
42.5
51.0
68.0
5.0
10.0
25.0
30.0
40.0
1.0
2.0
5.0
6.0
8.0
2.5
5.0
12.5
15.0
20.0
Revenue breakdown Tourism TV dramas Domestic broadcasting rights Product placement Overseas broadcasting rights Number of productions
2
5
6
8
Variety show programs
1
24
28
32
32
Revenue per program
0.06
0.07
0.08
0.08
2
3
4
6
21
51
52
52
Number of productions Other including Woolim.
1
Notes: K-IFRS non-consolidated basis; Figures are estimates, not official data Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
11
November 14, 2013
SM Entertainment
SM Entertainment (041510 KQ/Buy/TP: W60,000) Comprehensive Income Statement (Summarized) (Wbn)
Statement of Financial Condition (Summarized)
12/12 12/13F 12/14F 12/15F
(Wbn)
12/12 12/13F 12/14F 12/15F
Revenue
241
281
357
393
Current Assets
198
234
317
398
Cost of Sales
132
163
209
224
Cash and Cash Equivalents
100
136
202
275
Gross Profit
110
119
149
170
AR & Other Receivables
23
27
35
38
SG&A Expenses
49
58
72
80
Inventories
6
7
8
9
Operating Profit (Adj)
61
61
77
90
Other Current Assets
25
30
38
41
Operating Profit
61
61
77
90
Non-Current Assets
125
151
154
158
Non-Operating Profit
-4
9
8
10
Investments in Associates
2
7
7
7
Net Financial Income
-2
-2
-3
-5
Property, Plant and Equipment
39
48
47
46
Net Gain from Inv in Associates Pretax Profit
4
0
0
0
57
69
85
100
Intangible Assets Total Assets
43
45
37
34
323
385
471
556
Income Tax
20
18
21
25
Current Liabilities
74
86
109
120
Profit from Continuing Operations
37
52
63
75
AP & Other Payables
45
53
67
74
0
0
0
0
3
3
3
3
Net Profit
37
52
63
75
Other Current Liabilities
27
31
39
43
Controlling Interests
40
52
64
76
Non-Current Liabilities
10
8
8
8
Non-Controlling Interests
-3
-1
-1
-1
Long-Term Financial Liabilities
8
6
6
6
Total Comprehensive Profit
34
51
63
75
Other Non-Current Liabilities
Controlling Interests
37
52
64
75
Total Liabilities
Profit from Discontinued Operations
Non-Controlling Interests
-3
-1
-1
-1
EBITDA
70
80
105
113
2
38
65
70
FCF (Free Cash Flow)
Short-Term Financial Liabilities
Controlling Interests Capital Stock Capital Surplus
1
1
1
1
84
94
117
128
213
262
325
401
10
10
10
10
119
121
121
121 276
EBITDA Margin (%)
29.0
28.3
29.5
28.7
Retained Earnings
84
136
200
Operating Profit Margin (%)
25.1
21.6
21.4
22.9
Non-Controlling Interests
26
29
29
28
Net Profit Margin (%)
16.5
18.6
17.9
19.2
Stockholders' Equity
239
291
354
429
Cash Flows (Summarized) (Wbn)
Forecasts/Valuations (Summarized) 12/12 12/13F 12/14F 12/15F
12/12 12/13F 12/14F 12/15F
Cash Flows from Op Activities
46
63
82
87
P/E (x)
22.8
15.1
12.3
10.5
Net Profit
37
52
63
75
P/CF (x)
18.4
11.1
8.5
8.0
Non-Cash Income and Expense
34
29
42
38
P/B (x)
5.5
3.6
2.7
2.1
2
1
1
1
11.8
8.3
5.7
4.6
Amortization
7
18
28
22
EPS (W)
1,994
2,539
3,114
3,675
Others
-6
8
3
3
CFPS (W)
2,471
3,453
4,515
4,790 18,014
Depreciation
Chg in Working Capital
EV/EBITDA (x)
-4
-3
-3
-1
BPS (W)
8,305
10,729
14,233
Chg in AR & Other Receivables
-6
-4
-7
-4
DPS (W)
0
0
0
0
Chg in Inventories
-3
-1
-2
-1
Payout ratio (%)
0.0
0.0
0.0
0.0
15
6
14
7
Income Tax Paid
Chg in AP & Other Payables
-21
-16
-21
-25
Cash Flows from Inv Activities
-48
-19
-14
-12
Chg in PP&E
-23
-9
0
0
Chg in Intangible Assets
-19
-19
-19
-19
EPS Growth (%)
Chg in Financial Assets
-5
9
0
0
s Receivable Turnover (x)
Others
-2
0
5
7
Inventory Turnover (x)
58.3
Cash Flows from Fin Activities
75
-6
-1
-1
s Payable Turnover (x)
0
0
0
0
65
-4
0
0
0
0
9
-2
-1
66
36
66
Chg in Financial Liabilities Chg in Equity Dividends Paid Others Increase (Decrease) in Cash Beginning Balance Ending Balance
Dividend Yield (%)
0.0
0.0
0.0
0.0
68.8
16.5
27.1
10.0
EBITDA Growth (%)
116.7
13.5
32.4
7.3
Operating Profit Growth (%)
136.4
0.3
25.9
17.7
61.5
27.3
22.6
18.0
14.1
12.2
12.7
11.9
45.6
47.4
44.4
Revenue Growth (%)
7.7
6.6
6.8
6.4
ROA (%)
15.2
14.6
14.8
14.6
0
ROE (%)
24.7
22.0
21.8
20.8
0
ROIC (%)
65.3
48.9
57.8
71.6
-1
Liability to Equity Ratio (%)
35.1
32.4
33.0
29.8
73
Current Ratio (%)
266.4
270.9
290.9
332.7
34
100
136
202
Net Debt to Equity Ratio (%)
-55.8
-55.7
-64.4
-70.2
100
136
202
275
Interest Coverage Ratio (x)
51.3
35.5
54.3
63.9
Source: Company data, KDB Daewoo Securities Research estimates
KDB Daewoo Securities Research
12
November 14, 2013
SM Entertainment
APPENDIX 1 Important Disclosures & Disclaimers Disclosures
(W)
As of the publication date, Daewoo Securities Co., Ltd. has been acting as a financial advisor to SM Entertainment for its treasury stock trust, and other than this, Daewoo Securities has no other special interests in the companies covered in this report.
SM Entertainment
100,000 80,000 60,000 40,000 20,000 0 11/11
Stock Ratings
5/12
11/12
5/13
11/13
Industry Ratings
Buy
Relative performance of 20% or greater
Overweight
Fundamentals are favorable or improving
Trading Buy
Relative performance of 10% or greater, but with volatility
Neutral
Fundamentals are steady without any material changes
Hold
Relative performance of -10% and 10%
Underweight
Fundamentals are unfavorable or worsening
Sell
Relative performance of -10%
* Ratings and Target Price History (Share price (----), Target price (----), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions. Analyst Certification The research analysts who prepared this report (the “Analysts”) are ed with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither ed as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Daewoo Securities Co., Ltd. except as otherwise stated herein. Disclaimers This report is published by Daewoo Securities Co., Ltd. (“Daewoo”), a broker-dealer ed in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. Daewoo, its s and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and ing principles and no person whose receipt or use of this report would violate any laws and regulations or subject Daewoo and its s to registration or licensing requirements in any jurisdiction should receive or make any use hereof. Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. Daewoo, its s and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Daewoo and its s may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur.
KDB Daewoo Securities Research
13
November 14, 2013
SM Entertainment
Distribution United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: This report is distributed in the U.S. by Daewoo Securities (America) Inc., a member of FINRA/SIPC, and is only intended for major institutional investors as defined in Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934. All U.S. persons that receive this document by their acceptance thereof represent and warrant that they are a major institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Daewoo or its s. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should and place orders with Daewoo Securities (America) Inc., which accepts responsibility for the contents of this report in the U.S. The securities described in this report may not have been ed under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This document has been approved for distribution in Hong Kong by Daewoo Securities (Hong Kong) Ltd., which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should Daewoo or its s only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its s to any registration or licensing requirement within such jurisdiction.
KDB Daewoo Securities International Network Daewoo Securities Co. Ltd. (Seoul) Head Office 34-3 Yeouido-dong, Yeongdeungpo-gu Seoul 150-716 Korea Tel: 82-2-768-3026
Daewoo Securities (Hong Kong) Ltd. Two International Finance Centre Suites 2005-2012 8 Finance Street, Central Hong Kong Tel: 85-2-2514-1304
Daewoo Securities (America) Inc. 320 Park Avenue, 31st Fl. New York, NY 10022
Daewoo Securities (Europe) Ltd. Tower 42, Level 41 25 Old Broad Street London EC2N 1HQ United Kingdom Tel: 44-20-7982-8016
Daewoo Securities (Singapore) Pte. Ltd. 6 Battery Road, #11-01 Singapore, 049909
Tel: 65-6671-9845
Tokyo Representative Office 7th Floor, Yusen Building 2-3-2 Marunouchi, Chiyoda-ku Tokyo 100-0005 Japan Tel: 81-3- 3211-5511
Beijing Representative Office Suite 2602, Twin Towers (East) B-12 Jianguomenwai Avenue Chaoyang District, Beijing 100022 China Tel: 86-10-6567-9699
Shanghai Representative Office Unit 13, 28th Floor, Hang Seng Bank Tower 1000 Lujiazui Ring Road Pudong New Area, Shanghai 200120 China Tel: 86-21-5013-6392
Ho Chi Minh Representative Office Centec Tower 72-74 Nguyen Thi Minh Khai Street Ward 6, District 3, Ho Chi Minh City Vietnam Tel: 84-8-3910-6000
KDB Daewoo Securities Research
United States Tel: 1-212-407-1000
14
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