Beruflich Dokumente
Kultur Dokumente
(041510 KQ)
Entertainment
Company Update
Despite a sluggish 1H, we expect SM Entertainments 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.
Buy
(Maintain)
Target Price (12M, W)
60,000
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.
61
60
27.3
15.0
P/E (13F, x)
15.1
11.0
KOSDAQ
505.60
793
21
78.3
10.3
Beta (12M)
52-Week Low (W)
1.09
29,100
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 joint ventures with local Chinese firms to establish a broad presence in the country
across broadcasting, commercials, TV dramas, and films. The company is purportedly in
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 Entertainments 2014 concert lineup. Exos 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 members, is gaining widespread
popularity in China and Southeast Asia.
The companys 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&Cs 2014 revenue and operating profit at
W111.2bn and W11.1bn, respectively.
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
changkwean.kim@dwsec.com
NP (Wbn)
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 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.
SM Entertainment
Investment points
Gaining Chinese market share on the back of competitive content
Chinas service and entertainment markets are growing at a rapid pace <Figures 1-6>. 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 companys
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
% of all FDI
40
20
-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
(RMB)
8000
Revenue (L)
Operating profit (L)
7000
6000
80
5000
60
4000
40
3000
20
2000
1000
0
-20
1/10
7/10
1/11
7/11
1/12
7/12
1/13
7/13
SM Entertainment
Figure 3. Relationship between Koreas per-capita GDP & growth of culture/arts & service sectors
(US$)
(%)
Culture/arts and service boomed as percapita income increased from US$4,000
to $10,000
25,000
70
20,000
50
40
15,000
30
10,000
20
10
5,000
0
-10
0
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
CAGR of 23.7%
between 2007 and 2013
17
CAGR of 3.1% between 2009 and 2013
3
16
2
15
14
1/07 7/07 1/08 7/08 1/09 7/09 1/10 7/10 1/11 7/11 1/12 7/12 1/13 7/13
9/05 3/06 9/06 3/07 9/07 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 9/12 3/13
Brazil
70
India
Mexico
50
Japan
Poland
Czech
Russia
K orea
Malaysia
Thailand
Germany
Taiwan
Turkey
60
Italy
US
France
Great Britain
China
40
Indonesia
(US$'000)
30
0
10
20
30
40
50
60
SM Entertainment
(US$mn, %)
Operating profit
OP margin
Net profit
Net margin
EPS
12 13F 14F
12 13F 14F
Market
cap.
12
13F
14F
12
13F
14F
12 13F 14F
12
13F
SM Entertainment
739
214
269
342
54
56
71
35
43
1.8
2.1
2.3
YG Entertainment
476
95
121
147
19
24
35
17
21
1.6
2.1
2.8
CJ CGV
962
692
901
1,076
49
67
90
7.1
7.4
8.4
48
40
65
6.9
4.4
6.1
2.3
2.0
3.1
Cheil Worldwide
2,684
2,101
2,594
3,075
112
139
169
5.3
5.3
5.5
83
104
128
4.0
4.0
4.2
0.8
1.0
1.2
CJ E&M
1,102
1,239
1,551
1,719
34
64
98
2.8
4.1
5.7
33
42
74
2.7
2.7
4.3
0.0
1.1
2.0
KT Skylife
1,184
503
584
631
58
94
103
50
82
91
1.0
1.7
1.9
Walt Disney
3.4
3.9
4.5
Time Warner
6,670
7,131
3.4
3.8
4.3
CBS
3,326
3,611
2.5
3.0
3.5
Discovery Holdings
30,041
6,207 1,861
2,075
2,415
2.5
3.1
4.0
Viacom
3,925
4,266
4.2
4.6
5.4
Liberty Interactive
1,175
1,306
5.7 -0.8
1.0
1.4
0.9
0.0
0.9
0.4
0.4
E.W. Scripps
News Corp.
Clear Channel
RealNetworks
14F
4,487
5,553
999
903
817
920
90
23
93
9.9
2.8 10.2
9,995
8,891
8,790
8,850
140
150
246
1.6
1.7
569
6,247
6,197
6,345 1,108
17.7
2.8
257
259
-42
Pandora
5,426
427
649
898
-38
-30
18
Avex
1,068
1,679
1,639
1,885
170
158
215
174
373
320
332
50
37
39
4,664
213
317
413
41
131
160
Amuse
Huayi Brothers Media
- -16.3
Average
501
617 15.2
40
4.4
506
169
248
5.7
-424
45
-38
-36
9.7 11.4
89
97
100
5.3
30
23
24
8.0
39
103
10.1
1.9
2.8
- -6.8
2.0
-8.8 -4.6
4.9
- 17.3
-0.6
1.6 -0.2
0.0
0.2
5.9
5.3
2.1
2.3
2.3
7.1
7.1
3.4
2.6
2.7
0.0
0.1
0.1
14 -8.9 -5.5
8.9
9.3 10.3
Notes: Bloomberg consensus; Based on November 13th closing prices; EPS is based on US$.
Source: Bloomberg, KDB Daewoo Securities Research
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
YG Entertainment
476
33.3
22.6
16.6
6.5
4.4
3.6
5.9
4.0
3.3 23.2
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
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
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
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
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
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
Liberty Interactive
14,037
26.9
20.3
1.4
2.2
2.1
1.1
1.4
1.3 10.3
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
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
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
37
E.W. Scripps
News Corp.
Amuse
Huayi Brothers Media
4,664
Average
36
43
37
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
5.6
4.5
6.4
4.9
5.7
6.1
1.8
1.9
3.4
3.0
12
3.4
6.1
1.7 15.4
7.5
9.5
SM Entertainment
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
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
SM Entertainment
Concerts/festivals
Digital
CD
Concerts/festivals
Digital
CD
10
900
5
0
600
-5
-10
300
-15
-20
2012
2013F
2014F
2015F
2016F
2017F
2012
2013F
2014F
2015F
2016F
2017F
(US$)
0.15
(US$)
0.6
0.145
0.5
0.14
0.4
0.135
0.3
0.13
0.2
0.125
0.1
0.12
0.115
0
2012
2013F
2014F
2015F
2016F
2017F
2012
2013F
2014F
2015F
2016F
2017F
(US$)
0.02
(US$)
0.8
0.018
0.7
0.016
0.6
0.014
0.5
0.012
0.4
0.01
0.008
0.3
0.006
0.2
0.004
0.1
0.002
0
0
2012
2013F
2014F
2015F
2016F
2017F
2012
2013F
2014F
2015F
2016F
2017F
SM Entertainment
2009
2010
2011
2012
(US$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
2009
2010
2011
2012
(US$mn)
2013F
2014F
2015F
2016F
2017F
2013-17 CAGR
Concerts/festivals
131
143
152
160
172
178
183
188
194
200
Digital
369
397
419
438
457
516
570
627
688
747
9.7
59
46
36
29
24
22
19
17
15
13
-12.3
559
586
607
627
653
716
772
832
897
960
7.6
Concerts/festivals
9.2
6.3
5.3
7.5
3.5
2.8
2.7
3.2
3.1
Digital
7.6
5.5
4.5
4.3
12.9
10.5
10.0
9.7
8.6
-22.0
-21.7
-19.4
-17.2
-8.3
-13.6
-10.5
-11.8
-13.3
4.8
3.6
3.3
4.1
9.6
7.8
7.8
7.8
7.0
Physical albums
Total
3.0
YoY
Physical albums
Total
Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, KDB Daewoo Securities Research
2009
2010
2011
2012
(US$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
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
SM Entertainment
Earnings outlook
More upside to earnings momentum to emerge in 2014
We expect SM Entertainments 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 companys 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 companys ex-Japan
concert sales.
For 2013, we estimate SM Entertainments 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
('000 copies)
(mn copies)
600
1.8
1.7
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
0.5
0.2
0.0
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13F
2008
2009
2010
2011
2012
2013F
('000 copies)
(mn copies)
900
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
1.0
194
0.5
100
0
0.0
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13F
2011
SM Entertainment
(mn tickets)
2.0
500
1.6
400
1.2
300
0.8
200
0.4
100
0.0
2011
2012
2013F
2011
2012
Oct. 2013
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
-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
20
08
500
VX
Q
SM Entertainment
(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
(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
10
SM Entertainment
(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
Digital
1.6
1.4
1.7
1.7
1.1
0.0
0.2
0.2
6.2
3.0
2.2
Domestic Royalties
Management
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
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
26.7
19.6
31.9
25.4
17.1
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
(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
24
28
32
32
0.06
0.07
0.08
0.08
21
51
52
52
Number of productions
Other including Woolim.
Notes: K-IFRS non-consolidated basis; Figures are estimates, not official data
Source: Company data, KDB Daewoo Securities Research
11
SM Entertainment
(Wbn)
Revenue
241
281
357
393
Current Assets
198
234
317
398
Cost of Sales
132
163
209
224
100
136
202
275
Gross Profit
110
119
149
170
23
27
35
38
SG&A Expenses
49
58
72
80
Inventories
61
61
77
90
25
30
38
41
Operating Profit
61
61
77
90
Non-Current Assets
125
151
154
158
Non-Operating Profit
-4
10
Investments in Associates
-2
-2
-3
-5
39
48
47
46
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
37
52
63
75
45
53
67
74
Net Profit
37
52
63
75
27
31
39
43
Controlling Interests
40
52
64
76
Non-Current Liabilities
10
Non-Controlling Interests
-3
-1
-1
-1
34
51
63
75
Controlling Interests
37
52
64
75
Total Liabilities
Non-Controlling Interests
-3
-1
-1
-1
EBITDA
70
80
105
113
38
65
70
Controlling Interests
Capital Stock
Capital Surplus
84
94
117
128
213
262
325
401
10
10
10
10
119
121
121
121
276
29.0
28.3
29.5
28.7
Retained Earnings
84
136
200
25.1
21.6
21.4
22.9
Non-Controlling Interests
26
29
29
28
16.5
18.6
17.9
19.2
Stockholders' Equity
239
291
354
429
Forecasts/Valuations (Summarized)
12/12 12/13F 12/14F 12/15F
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
34
29
42
38
P/B (x)
5.5
3.6
2.7
2.1
11.8
8.3
5.7
4.6
Amortization
18
28
22
EPS (W)
1,994
2,539
3,114
3,675
Others
-6
CFPS (W)
2,471
3,453
4,515
4,790
18,014
Depreciation
EV/EBITDA (x)
-4
-3
-3
-1
BPS (W)
8,305
10,729
14,233
-6
-4
-7
-4
DPS (W)
Chg in Inventories
-3
-1
-2
-1
0.0
0.0
0.0
0.0
15
14
-21
-16
-21
-25
-48
-19
-14
-12
Chg in PP&E
-23
-9
-19
-19
-19
-19
-5
Others
-2
58.3
75
-6
-1
-1
65
-4
-2
-1
66
36
66
0.0
0.0
0.0
0.0
68.8
16.5
27.1
10.0
116.7
13.5
32.4
7.3
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
7.7
6.6
6.8
6.4
ROA (%)
15.2
14.6
14.8
14.6
ROE (%)
24.7
22.0
21.8
20.8
ROIC (%)
65.3
48.9
57.8
71.6
-1
35.1
32.4
33.0
29.8
73
266.4
270.9
290.9
332.7
34
100
136
202
-55.8
-55.7
-64.4
-70.2
100
136
202
275
51.3
35.5
54.3
63.9
12
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
Overweight
Trading Buy
Neutral
Hold
Underweight
Sell
* 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 analysts estimate of
future earnings.
The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic
conditions.
Analyst Certification
The research analysts who prepared this report (the Analysts) are registered with the Korea Financial Investment Association and are subject to Korean
securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions
expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this
report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and members of their households from owning securities of any company in the Analysts
area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified
herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been
promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific
recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted by
overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and
private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of
the Analyst or Daewoo Securities Co., Ltd. except as otherwise stated herein.
Disclaimers
This report is published by Daewoo Securities Co., Ltd. (Daewoo), a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange.
Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been
independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or
correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English
translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this
report. Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This
report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any
securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of
the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any
laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof.
Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or
form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. Daewoo, its affiliates and their directors, officers,
employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a
purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or
agents. Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment
banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to
in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to
future performance. Future returns are not guaranteed, and a loss of original capital may occur.
13
SM Entertainment
Distribution
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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
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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
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distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws
of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person.
All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Daewoo or
its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its
affiliates to any registration or licensing requirement within such jurisdiction.
Tel: 65-6671-9845
United States
Tel: 1-212-407-1000
14