cj cgvasiaresearch.daiwacm.com/eg/cgi-bin/files/cj_cgv_151202.pdf · 3 cj cgv (079160 ks): 2...

See important disclosures, including any required research certifications, beginning on page 21

Korea Consumer Discretionary

Investment case: Box office revenue in China has been rising by over

50% a month this year, and the share price of Wanda Cinema Line

(Wanda) (002739 CH, not rated), China’s biggest movie theatre chain, is up

almost 12-fold since its A-share listing in Shanghai in January. Wanda is

trading currently at a 2016E PER of 62.2x, based on Bloomberg-consensus

forecasts. We see CJ CGV, one of the biggest movie theatre chains in

Korea, and with an expanding China footprint, as the sole Korean

beneficiary of the growth in China’s cinema market. Also, we think the stock

will appeal to international investors seeking exposure to the China growth

story. In our view, CJ CGV is relatively undervalued given its market

position in Korea and Vietnam, as well as the scope for continued growth in

China. Hence, we initiate coverage with a Buy (1) call.

Catalysts: In terms of revenue growth, CJ CGV is outpacing the China

movie market as a whole in 2015, driven by its aggressive site expansion.

We project CJ CGV to achieve a positive full-year operating profit in China

for the first time in 2016, despite its ongoing site expansion there.

Elsewhere, the domestic market serves as CJ CGV’s cash cow, while

another growing market for the company, Vietnam, should contribute more

earnings next year, on our forecasts.

Valuation: We initiate coverage of CJ CGV with a Buy (1) rating and 12-

month target price of KRW150,000. We use an SOTP methodology to

value the company’s Korea, China and Vietnam businesses, with a

resulting target PER for 2016E of 42.1x. We believe the stock has room for

a further rerating, given its domestic cash-cow business and overseas

earnings-growth drivers. Our target value for the China division and China

JV together is KRW2,250.6bn (China division: KRW1,720.1bn, China JV:

KRW530.6bn), which is around 12% of Wanda’s market cap. While CJ

CGV is weaker in terms of absolute revenue in China than Wanda, it

should outpace Wanda on earnings growth for 2015 and 2016; and we

think it makes for a sound base of comparison.

Risks: The biggest risk to our call is CJ CGV’s profitability being eroded

due to excessive spending on overseas expansion and severe competition

in China. We believe this risk is limited because: 1) after doing business in

China for over 10 years, the company has a proven ability to control costs,

and 2) its revenue growth in overseas markets such as China and Vietnam

should be steep (roughly 40% YoY and 15% YoY, respectively, for next

year, on our forecasts) and profitability in both markets is improving which

should lessen the possibility of profitability erosion.

2 December 2015

CJ CGV

Initiation: dominant in Korea, promising in China

Biggest Korean beneficiary of growth in the China movie market

China division should move into the black in 2016

Initiating with Buy (1) call and potential upside of 20.0%

Source: FactSet, Daiwa forecasts

CJ CGV (079160 KS)

Target price: KRW150,000

Share price (2 Dec): KRW125,000 | Up/downside: +20.0%

Kevin Jin(82) 2 787 9168

[email protected]

80

120

160

200

240

50,000

71,250

92,500

113,750

135,000

Dec-14 Mar-15 Jun-15 Sep-15 Dec-15

Share price performance

CJ CGV (LHS) Relative to KOSPI (RHS)

(KRW) (%)

12-month range 51,800-131,000

Market cap (USDbn) 2.28

3m avg daily turnover (USDm) 11.33

Shares outstanding (m) 21

Major shareholder CJ (39.0%)

Financial summary (KRW)

Year to 31 Dec 15E 16E 17E

Revenue (bn) 1,196 1,348 1,537

Operating profit (bn) 73 97 124

Net profit (bn) 57 75 97

Core EPS (fully-diluted) 2,707 3,564 4,562

EPS change (%) 243.8 31.7 28.0

Daiwa vs Cons. EPS (%) 0.1 11.1 7.9

PER (x) 46.2 35.1 27.4

Dividend yield (%) 0.0 0.0 0.0

DPS 0 0 0

PBR (x) 5.9 5.1 4.3

EV/EBITDA (x) 20.0 16.8 13.8

ROE (%) 13.8 15.6 16.9

2

CJ CGV (079160 KS): 2 December 2015

Table of contents

China finally a land of opportunity .......................................................................... 6

An emerging growth driver for CJ CGV ..............................................................................6

Domestic market a cash cow ................................................................................... 9

CJ CGV is No.1 in Korea, with a market share of more than 40% ......................................9

Vietnam also seeing strong box-office growth .....................................................10

CJ CGV has more than a 50% market share in Vietnam .................................................. 10

Earnings outlook .....................................................................................................11

Stable earnings at home; turnaround expected in China; growth forecast for Vietnam ..... 11

Initiating with a Buy (1) call and 12-month TP of KRW150,000 ............................13

Only 12% of Wanda’s market cap .................................................................................... 13

Risks to our call ............................................................................................................... 16

Company background ...................................................................................................... 16

Appendix ..................................................................................................................18

3


How do we justify our view?

Growth outlook Valuation Earnings revisions

Growth outlook CJ CGV: earnings forecasts

We forecast CJ CGV’s revenue to rise by 13% YoY to

KRW1,348bn, its operating profit by 33.8% YoY to

KRW97.3bn (an operating margin of 7.2%), and EPS

by 31.7% YoY for 2016. The growth should be driven

mainly by a turnaround for the China division and robust

earnings growth for Vietnam, while the domestic market

serves as a cash cow. CJ CGV is planning to expand its

number of theatres in China from 64 now to 95 in 2016,

and its Vietnam theatres from 30 to 35 next year. It plans to

maintain its expansion strategy going forward. Also, we

believe its other divisions, such as 4DPlex, will start to

contribute meaningful earnings from 2017.

Source: Company, Daiwa forecasts

Valuation Comparison with Wanda Cinema Line

With the China movie market growing rapidly and Wanda’s

share price having surged since debuting in January 2015,

we contend that CJ CGV is the sole Korean beneficiary of

China’s market growth and major alternative to Wanda for

international investors. We use an SOTP methodology to

value CJ CGV’s Korea, China and Vietnam businesses,

with a resulting 2016E PER of 42.1x. Considering the

stock’s average 12-month-forward PER over the past 4

years is 43.6x, we believe our target multiple of 42.1x is not

too aggressive. Our high-looking PER reflects our view that

the China business will move into the black in 2016 (the

China division and China JV’s PERs are about 457.9x and

62.2x, respectively, for 2016E). We expect these numbers

to decrease rapidly as margins climb to a normalised level.

(USDm) Wanda CJ CGV CJ CGV CJ CGV

Cinema Line

China Division China JV

Market Cap 17,851 2,275 873 610

Revenue Growth 2015E 52% 14% 126% 39%

Revenue Growth 2016E 52% 15% 51% 35%

OP Growth 2015E 62% 40% RR 122%

OP Growth 2016E 57% 34% TB 58%

OPM 2015E 20% 6% -4% 19%

OPM 2016E 20% 7% 3% 22%

EPS Growth 2015E 36% 244%


Sites in China 1H15 191 47 34 13

Sites in China 2016E 260 95 77 18

PSR(x) 2015E 14.3 2.2 8.1 8.9

PSR(x) 2016E 9.4 1.9 5.4 6.6

PER(x) 2015E 93.5 46.2 76.8

PER(x) 2016E 62.2 35.0 62.2

Source: Bloomberg, CJ CGV, Daiwa forecasts

Note: RR is remaining red; TB is turning black

Earnings revisions CJ CGV: earnings revision trends

Our 2015-17E operating profit forecasts for CJ CGV are in

the range of the Fnguide market consensus forecasts

(1.7%, 2.0% and -0.7%). However, we see scope to revise

up our revenue and operating-profit forecasts in the future

as there is a possibility that growth in the China movie

market will exceed market expectations next year. Our

2016 forecast calls for China’s box office revenue to rise by

45% YoY; if it rises instead by 60% YoY, our 2016E EPS for

CJ CGV would be 4.8% higher than it is currently.

Source: Fnguide, Daiwa forecasts

779 916

1,039

1,196 1,348

1,537

55 52 52 73 97 124 55 12 16 57 75 97

7%

6%

5%

6%

7%

8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0

300

600

900

1,200

1,500

1,800

2012 2013 2014 2015E 2016E 2017E

Sales OP NP OPM (RHS)

(KRWbn)

72.7

97.3

123.8

71.5

95.4

124.7

0

20

40

60

80

100

120

140

2015E 2016E 2017E

Daiwa OP Consensus OP

(KRWbn)

4


Financial summary

Key assumptions

Profit and loss (KRWbn)

Cash flow (KRWbn)


Year to 31 Dec 2010 2011 2012 2013 2014 2015E 2016E 2017E

Domestic audience(mn) 148 160 195 213 215 219 225 229

CJCGV audience(mn) 44 48 60 72 78 80 83 85

Average Ticket Price(KRW) 0 0 7,439 7,226 7,629 7,711 7,865 7,944

Year to 31 Dec 2010 2011 2012 2013 2014 2015E 2016E 2017E

Domestic 503 548 665 773 865 906 968 1,008

China 0 0 17 22 55 124 187 306

Other Revenue 47 81 98 121 120 166 193 223

Total Revenue 550 629 779 916 1,039 1,196 1,348 1,537

Other income 0 0 0 0 0 0 0 0

COGS (263) (304) (367) (448) (527) (592) (679) (786)

SG&A (223) (280) (357) (416) (460) (531) (571) (627)

Other op.expenses 0 0 0 0 0 0 0 0

Operating profit 63 45 55 52 52 73 97 124

Net-interest inc./(exp.) (12) (8) (13) (17) (17) (15) (16) (19)

Assoc/forex/extraord./others (5) (4) 36 (19) (1) 22 22 26

Pre-tax profit 46 33 78 15 35 80 103 131

Tax (14) (18) (23) (3) (19) (22) (27) (35)

Min. int./pref. div./others 0 0 0 0 0 0 0 0

Net profit (reported) 33 18 54 13 17 57 75 97

Net profit (adjusted) 32 18 54 13 17 57 75 97

EPS (reported)(KRW) 1,617 896 2,627 607 787 2,707 3,564 4,562

EPS (adjusted)(KRW) 1,569 896 2,627 607 787 2,707 3,564 4,562

EPS (adjusted fully-diluted)(KRW) 1,569 896 2,627 607 787 2,707 3,564 4,562

DPS (KRW) 0 0 0 0 0 0 0 0

EBIT 63 45 55 52 52 73 97 124

EBITDA 105 95 111 119 135 152 186 229

Year to 31 Dec 2010 2011 2012 2013 2014 2015E 2016E 2017E

Profit before tax 46 33 78 15 35 80 103 131

Depreciation and amortisation 42 50 56 67 82 100 113 131

Tax paid (14) (18) (23) (3) (19) (22) (27) (35)

Change in working capital (4) 25 2 (33) 22 5 (5) (7)

Other operational CF items 9 (22) 2 14 26 12 1 (1)

Cash flow from operations 79 68 116 59 147 174 185 218

Capex (68) (79) (81) (160) (146) (150) (170) (160)

Net (acquisitions)/disposals (25) (65) 115 (50) (43) (19) (48) (47)

Other investing CF items 0 0 0 0 0 0 0 0

Cash flow from investing (93) (144) 33 (209) (189) (169) (218) (207)

Change in debt 22 147 (43) 46 66 59 147 72

Net share issues/(repurchases) 0 2 0 26 0 0 0 0

Dividends paid 0 0 0 0 0 0 0 0

Other financing CF items (5) (8) (9) (19) (7) 5 5 5

Cash flow from financing 16 140 (52) 53 59 64 152 77

Forex effect/others 0 2 (1) (0) 6 (1) (1) (1)

Change in cash 2 65 96 (97) 23 69 118 87

Free cash flow 11 (12) 34 (100) 1 24 15 58

5


Financial summary continued …

Balance sheet (KRWbn)

Key ratios (%)


As at 31 Dec 2010 2011 2012 2013 2014 2015E 2016E 2017E

Cash & short-term investment 19 88 194 99 119 154 217 265

Inventory 2 6 3 12 11 13 12 12

Accounts receivable 38 70 71 104 141 140 151 159

Other current assets 5 37 19 25 35 35 35 30

Total current assets 64 201 288 239 305 342 415 466

Fixed assets 304 404 410 508 588 700 851 985

Goodwill & intangibles 21 98 101 107 101 99 101 105

Other non-current assets 261 230 209 245 261 251 260 250

Total assets 650 933 1,008 1,099 1,255 1,392 1,627 1,806

Short-term debt 44 95 86 214 161 150 160 150

Accounts payable 87 137 158 153 190 179 185 190

Other current liabilities 49 54 71 87 123 131 140 145

Total current liabilities 179 286 314 455 474 460 485 485

Long-term debt 201 297 260 184 313 385 515 595

Other non-current liabilities 6 43 86 82 77 75 82 84

Total liabilities 386 626 660 721 864 920 1,082 1,164

Share capital 10 10 10 11 11 11 11 11

Reserves/R.E./others 260 306 346 372 382 437 510 608

Shareholders' equity 260 306 346 372 382 447 521 618

Minority interests 5 2 2 6 9 24 24 24

Total equity & liabilities 650 933 1,008 1,099 1,255 1,392 1,627 1,806

EV 2,875 2,951 2,799 2,950 3,009 3,051 3,128 3,148

Net debt/(cash) 225 304 151 299 355 381 458 480

BVPS (KRW) 12,596 14,832 16,762 17,591 18,048 21,142 24,612 29,221

Year to 31 Dec 2010 2011 2012 2013 2014 2015E 2016E 2017E

Sales (YoY) 789.8 14.3 24.0 17.5 13.5 15.1 12.7 14.0

EBITDA (YoY) 784.3 (9.8) 17.7 6.5 13.4 13.3 22.3 22.8

Operating profit (YoY) 581.8 (29.0) 22.9 (6.6) 1.1 39.6 33.8 27.2

Net profit (YoY) 623.5 (42.9) 193.1 (76.6) 31.3 243.8 31.7 28.0

Core EPS (fully-diluted) (YoY) 464.2 (42.9) 193.1 (76.9) 29.7 243.8 31.7 28.0

Gross-profit margin 52.1 51.7 52.9 51.1 49.3 50.5 49.6 48.9

EBITDA margin 19.1 15.0 14.3 13.0 12.9 12.7 13.8 14.9

Operating-profit margin 11.5 7.1 7.1 5.6 5.0 6.1 7.2 8.1

Net profit margin 5.9 2.9 6.9 1.4 1.6 4.8 5.6 6.3

ROAE 20.0 6.5 16.6 3.5 4.4 13.8 15.6 16.9

ROAA 8.8 2.3 5.6 1.2 1.4 4.3 5.0 5.6

ROCE n.a. 7.4 7.9 7.0 6.3 7.8 8.7 9.5

ROIC n.a. 3.7 7.0 7.0 3.4 6.6 7.7 8.5

Net debt to equity 86.7 99.3 43.7 80.3 92.9 85.2 87.9 77.6

Effective tax rate 29.5 54.6 29.8 19.6 53.7 27.9 26.5 27.0

Accounts receivable (days) 14.8 31.5 33.0 34.7 42.9 42.8 39.4 36.8

Current ratio (x) 0.4 0.7 0.9 0.5 0.6 0.7 0.9 1.0

Net interest cover (x) 5.2 6.0 4.2 3.0 3.1 4.8 5.9 6.5

Net dividend payout 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Free cash flow yield 0.4 n.a. 1.3 n.a. 0.0 0.9 0.6 2.2

Company profile

The biggest movie theatre chain in Korea. The company also has movie theatres in China, Vietnam,

Indonesia, America, etc. As of 3Q15, the company derived 77% of its revenue from Korea, 11% from

China, and 5% from Vietnam.

6


China finally a land of opportunity

An emerging growth driver for CJ CGV

We forecast CJ CGV to move into the black in China in 2016 — the first time in 10 years

China’s movie market has finally started to deliver robust revenue growth, and as a result

we believe that CJ CGV is finally experiencing a favourable business environment in the

country. China’s movie industry recorded around USD1bn in box office revenue in 2009,

but by 2014 this number had surged to USD4.8bn, representing a CAGR of 30%. We

forecast China’s movie market revenue to increase by 51% YoY to USD7.2bn in 2015 (the

market already delivered 50% revenue growth from January to October this year), and to

continue at this pace throughout next year.

The largest movie market in the world today is the US, which posted revenue of

USD10.4bn in 2014, followed by the China market. But by 2017, we project the China

market to outstrip the US, on the back of:

1) A surge in demand for entertainment along with further economic growth: the

number of movies watched per person in a cinema in China was only 0.61 in 2014 (up

from 0.45 in 2013), compared with 4.0 in the US, 4.2 in Korea and 1.3 in Japan. As

such, we see ample room for this number to rise as China’s economy expands further.

2) Expansion of the customer base stemming from quality improvements in

domestic Chinese movies: in our view, age groups that formerly never went to the

cinema have started going, likely because the quality of domestically made movies

continues to improve.

3) Favourable government policies: the China government is planning for the cultural

industry to become a pillar of the national economy, and to that end it has

implemented a number of industry-friendly policies such as offering tax incentives and

subsidies to the domestic film industry.

China: box office trends and forecasts China: monthly movie market revenue growth in 2015

Source: Entgroup, Daiwa Research


1.6 2.1 2.7

3.5

4.8

7.2

10.4

60.3%

31.3%28.6% 29.6%

37.1%

49.7%

45.0%

0%

10%

20%

30%

40%

50%

60%

70%

0

2

4

6

8

10

12

2010 2011 2012 2013 2014 2015 2016E

Box Office YoY(RHS)

(USDbn)

35%

25%

75%

126%

43%

20%

50%

37%

82%

52%

0%

20%

40%

60%

80%

100%

120%

140%

01/15 02/15 03/15 04/15 05/15 06/15 07/15 08/15 09/15 10/15

China movie market

forecast to top the US

market by 2017

7


China: movie audience trends Global movie market: comparison

China: number of theatres and screens China: number of movies viewed per person



CJ CGV revenue growth in China seen to outstrip that of the China market

CJ CGV’s box office revenue is outstripping that of the broader China market, driven by the

operator’s aggressive site expansion strategy. The company’s China division posted

144.8% YoY revenue growth for 2014, while overall box office revenue in China rose by

37% YoY. We forecast revenue for CJ CGV’s China division to jump by 126.3% YoY this

year while the China market advances by 51% YoY. We believe the company has a

competitive edge in terms of its superior facilities and services, such as 4D screens,

motion chairs, and sophisticated interiors.

CJ CGV’s China operations posted positive operating profits for the first time in 2Q15 (ie,

net profits from subsidiaries and the JV in China combined). In 3Q15, its subsidiaries alone

achieved a positive operating profit for the first time. As sites running at a loss gradually

turn around and those in positive territory go on to expand their revenue bases, we project

CJ CGV’s China division to achieve a positive full-year operating profit for the first time

ever in 2016, even allowing for the costs incurred in its continuous site expansion next

year. CJ CGV is currently ranked No.7 in China, with a 2.3% market share in 1H15, and it

targets to be the No.3 player by 2017.

182 237

345

462

612

830

1,130

0

200

400

600

800

1,000

1,200

2009 2010 2011 2012 2013 2014 2015F

(m)

10.4

4.7

2 1.5 1.5 1.7 1.5 1.3

27.7%

12.5%

5.3%4.0% 4.0% 4.5% 4.3% 3.5%

0%

5%

10%

15%

20%

25%

30%

0

2

4

6

8

10

12

USA China Japan Korea India UK France Germany

B/O Revenues Proportion(RHS)

(USDbn)

2,000 2,800 3,680 4,583 5,813 6,256

9,286

13,118

18,398

24,317

0

5,000

10,000

15,000

20,000

25,000

30,000

2010 2011 2012 2013 2014

# of Theaters # of Screens

0.09

0.2

0.31

0.61

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

We forecast CJ CGV to

see double the China

market’s revenue growth

this year

8


CJ CGV: China division earnings CJ CGV: revenue growth comparison with China box office and CJ CGV’s China division revenue

Source: Company, Daiwa forecasts Source: Company, Daiwa forecasts

It has been almost 10 years since CJ CGV entered the China market. The first cinema it

set up in China was in Shanghai in 2006, through the establishment of a JV with Shanghai

Film Group. CJ CGV had more than 50 sites in China in 3Q15 and plans to expand this

number to 64 by year-end, and to 95 by end-2016.

According to Entgroup, there were 47 urban theatre chains and 252 rural theatre chains in

China as of 2014. We anticipate that urban theatre chains in China will eventually go

through integration and M&A, and there will only be a limited number of theatre chains left

in the market, just as in the Korean market today. In our view, CJ CGV is highly likely to be

one of the few survivors in China in the future.

CJ CGV: theatre sites in China CJ CGV: market position in China

TARGET M/S 6.5% IN 2017E

Rank1 Rank2 Rank3 Rank4 Rank5 Rank6 Rank7 Rank10

2014

WANDA JINYI DADI CFG HENGDIAN XINGMEI

SFG UME CGV

-14.30% -5.50% -4.60% -4.00% -3.40% -2.70% -2.40% -2.00%

2015E

WANDA JINYI CFG DADI HENGDIAN UME CGV

-15.00% -6.40% -5.40% -4.50% -3.70% -3.20% -3.20%

2016E

WANDA JINYI CFG CGV DADI

-15.30% -6.70% -6.00% -4.90% -4.50%

2017E

WANDA JINYI CGV CFG DADI

-15.40% -7.00% -6.50% -6.30% -4.50%


Source: Company, Daiwa Research Note: CFG: China Film Group, UME: UME International Cineplex, SFG: Shanghai Film Group

16.5 22.454.7

123.9

187.2

305.7

-15.0 -19.0 -11.4 -3.6

5.4 19.9-90.9% -85.0%

-20.8%

-2.9%2.9% 6.5%

(100%)

(80%)

(60%)

(40%)

(20%)

0%

20%

(50)

0

50

100

150

200

250

300

350

Sales OP OPM

(USDm)

31.9%38.3%

51.1%45.0%

35.5%

144.8%

126.3%

51.1%

0%

20%

40%

60%

80%

100%

120%

140%

160%

2013 2014 2015E 2016E

China BO YoY CJ CGV Revenues YoY

27

40

64

95

0

20

40

60

80

100

2013 2014 2015E 2016E

9


Domestic market a cash cow

CJ CGV is No.1 in Korea, with a market share of more than 40%

As we see it, while CJ CGV is poised to benefit from the robust growth in box office

revenue in the China market, it also has a cash-cow business in its domestic market. CJ

CGV has a dominant position in Korea, with a domestic market share of over 40%.

The Korean movie market is maturing. The size of the market totalled USD1.6bn in 2014,

positioning it in line with the UK and Germany. Korea has an annual movie-going audience

of about 210m, and the average movie-goer goes to the cinema 4.2 times a year (almost

on a par with other developed markets). However, we still expect slight revenue growth

going forward, mainly because ticket prices are still relatively low.

Reflecting an increase in the proportion of premium tickets (3D/4D and IMAX) sold, CJ

CGV’s average ticket price in Korea rose from KRW7,629 (USD6.6) in 2014 to KRW7,885

(USD6.8) in 1H15. We forecast revenue generated by the broader Korean movie market to

grow by a low single-digit percentage YoY in 2016, given: 1) the average ticket price is

gradually increasing as the proportion of premium screens (ie, IMAX and 4D) is expanding,

and 2) we expect a low base effect from the MERS outbreak in 2015.

We forecast CJ CGV to record operating profits of KRW74.8bn (+3.0% YoY) and

KRW77.8bn (+7.7% YoY) for its Korea business in 2015 and 2016, respectively.

Korea: box office trends Global movie market comparison (2014)

Market

(USDbn) Annual viewers

(per person) No. of screens

US 10.4 4.0 47,800

China 4.8 0.6 24,317

Japan 2 1.3 3,364

India 1.7 1.5 11,081

Korea 1.6 4.2 2,281

Source: KOFIC, Daiwa Source: Company, Daiwa

CJ CGV: domestic operating profit trends and forecasts

CJ CGV: domestic market share and average ticket price

Source: Company, Daiwa forecasts Source: Company, Daiwa forecasts

1,157 1,236

1,455 1,551

1,664

6.8% 6.8%

17.7%

6.6% 7.3%

0%

5%

10%

15%

20%

0

500

1,000

1,500

2,000

2010 2011 2012 2013 2014

KBO sales YoY (RHS)

(KRWbn)

68.1 71.4

74.8 77.8 83.2

8.8% 8.3% 8.3% 8.0% 8.3%

-5.7%

4.8% 4.7% 4.0%7.0%

-10%

0%

10%

20%

30%

40%

50%

0

10

20

30

40

50

60

70

80

90

2013 2014 2015E 2016E 2017E

OP OPM (RHS) YoY (RHS)

(KRWbn)

7,226

7,629 7,711

7,865 7,944

33.7%

36.2%36.3%

36.6%37.2%

30%

32%

34%

36%

38%

6,800

7,000

7,200

7,400

7,600

7,800

8,000

2013 2014 2015E 2016E 2017E

ATP MS (RHS)

(KRW)

We expect Korean movie

ticket sales to see low-

single-digit YoY growth

in 2016

10


Vietnam also seeing strong box-office growth

CJ CGV has more than a 50% market share in Vietnam

The Vietnam movie market is another rapidly growing market where CJ CGV has a

dominant share of more than 50%. The size of the Vietnam movie market is around only

USD90m currently, but CJ CGV expects the market to reach USD200m by 2020 (a CAGR

of 15%), backed by increasing audience numbers and higher average ticket prices.

From the most recent figure of 25 sites in Vietnam, CJ CGV plans to have further 5 sites by

the end of this year. We forecast the company to record an operating profit for the Vietnam

business of KRW10.4bn (+36.8% YoY) and KRW15.8bn (+51.5% YoY) for 2015 and 2016,

respectively.

CJ CGV: Vietnam movie market trends and forecasts CJ CGV: sites in Vietnam (as at 3Q15)

Source: Company, KOTRA, Daiwa forecasts Source: Company, Daiwa

CJ CGV: operating profit trends for Vietnam CJ CGV: audience and average ticket price (ATP) trends in Vietnam

Source: Company, Daiwa forecasts Source: Company, Daiwa

7

3040

55

80

100

200

0

50

100

150

200

250

2008 2011 2012 2013 2014 2015E 2020E

(USDm)

8.2 7.6 10.4 15.8 19.5

14.1%10.9% 11.3%

13.0% 13.7%17.1%

-7.3%

36.8%

51.5%

24.0%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

0

5

10

15

20

25

2013 2014 2015 2016E 2017E

OP OPM YoY (RHS)

(KRWbn)

4,331

4,650

5,166

4,694 9.8

12.4

15.3

21.0

0

5

10

15

20

25

3,600

4,000

4,400

4,800

5,200

5,600

2011 2012 2013 2014

ATP Audience (RHS)

(m)(KRW)

CJ CGV now operates 25

sites in Vietnam

11


Earnings outlook

Stable earnings at home; turnaround expected in China; growth forecast for Vietnam

We forecast CJ CGV to record overall revenue of KRW1,195.8bn (+15.1% YoY), an

operating profit of KRW72.7bn (+39.6% YoY) and an operating margin of 6.1% for 2015.

For the domestic market, we look for audience growth of 1.9% YoY and expect CJ CGV to

see 2.4% YoY audience growth on the back of a slight market-share gain, from 36.2% for

2014 to 36.3% for 2015E.

Also, we forecast CJ CGV’s average ticket price in Korea to rise by 1.1% YoY to

KRW7,711 for 2015, from KRW7,629, given the increasing proportion of premium screens.

On our forecasts, CJ CGV will post 39.6% YoY operating profit growth for 2015, as losses

from China narrow. We look for the China division’s operating loss to narrow from

-KRW12.5bn in 2014 to -KRW3.6bn in 2015, backed by strong box office revenue growth

(51.1% YoY) and expansion in the number of venues in China (40 sites in 2014 to 64 by

end-2015).

Meanwhile, the Vietnam division, while relatively small in terms of revenue volume, is also

seeing robust revenue growth. We forecast an operating profit of KRW10.4bn (up 38%

YoY) for 2015, due to stable market revenue growth and the addition of around 9 new

theatres.

Separately, we expect the company’s other divisions, such as 4DPlex, Indonesia and the

US to show YoY earnings improvements. The combined operating loss of these divisions

was -KRW14.4bn for 2014, and we expect this to narrow to -KRW8.8bn for 2015, driven by

expansion of the 4DPlex division.

For 2016, we forecast revenue of KRW1,347.7bn (up 12.7% YoY) and an operating profit

of KRW97.3bn (up 33.8% YoY, operating margin of 7.2%). Our forecast calls for EPS to

grow by 31.7% YoY, with a potential turnaround in CJ CGV China’s earnings being a major

driver of the operating-profit improvement for 2016E. Elsewhere, we forecast the operating

profit for the Vietnam division to grow by 51.5% YoY next year. However, operating profit

for the domestic arm is likely to increase by a more modest 4% YoY, as the Korea market

continues to mature.

We forecast overall audience growth for CJ CGV in Korea of 3.8% YoY and a 2.0% YoY

rise in the average ticket price in 2016. CJ CGV is planning to expand its number of sites in

China from 64 to 95 by end-2016, and in Vietnam from 25 sites (as at 3Q15) to 35 by end-

2016. Meanwhile, we expect the operating losses for its other divisions to narrow as more

movie theatres adopt 4D screens from 4DPlex.

For 2016, we forecast revenue growth for the broader China movie market of 45% YoY and

for CJ CGV’s China division to record a first-ever operating profit of KRW5.4bn. If China

market box office revenue were to grow by 60% YoY, however, we estimate CJ CGV’s

China division would post an operating profit of KRW7.5bn, and its EPS growth would be

4.8% higher than our current forecast.

We forecast CJ CGV’s

overall revenue to reach

KRW1,196bn for 2015,

driven by the China

division

A 2016 operating profit

improvement hinges on

China

12


CJ CGV: number of sites at a glance

Korea (3Q15) Korea (3Q14) China (3Q15) China (3Q14) Vietnam (3Q15) Vietnam (3Q14)

Sites Direct 83

Franchise 45 Direct 79

Franchise 44 Direct 38

JV 14 Direct 25

JV 13 26 16

Screens 969 942 415 249 168 110

4DX 24 15 3

IMAX 17 21 1

Market share 48.8% 48.5% 2.3% 2.0% +50% +50%

Average ticket price (KRW)

7,483

7,542

7,247

7,049

5,136

4,897

Source: Company, Daiwa

CJ CGV: earnings trends and forecasts

(KRWbn) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15E 2014 2015E 2016E 2017E

Revenue 247.0 225.4 307.8 259.1 257.5 278.4 358.1 301.8 1,039.3 1,195.8 1,347.7 1,536.5

YoY 9.9% 7.0% 15.3% 21.4% 4.3% 23.5% 16.3% 16.5% 13.5% 15.1% 12.7% 14.0%

Domestic 210.3 180.0 266.3 207.9 204.0 202.1 276.9 222.7 864.5 905.7 967.6 1,007.6

Box Office 141.5 119.6 183.9 136.4 134.4 133.3 189.9 145.4 581.4 602.9 646.9 672.7

Concession 36.1 29.4 46.6 35.0 35.6 33.2 50.0 38.0 147.1 156.9 167.4 175.8

Ads 16.9 19.5 22.8 21.5 19.9 21.6 24.6 23.3 80.8 89.4 93.9 96.7

Others 15.8 11.5 13.0 14.9 14.1 14.1 12.4 16.0 55.3 56.6 59.4 62.4

China 11.7 12.6 14.0 16.4 24.0 29.9 39.9 30.1 60.4 123.9 187.2 305.7

Vietnam 15.7 17.5 16.1 20.8 18.5 27.5 24.0 31.0 69.8 101.0 121.2 143.0

Others 9.3 15.3 11.4 14.0 11.0 18.8 17.3 18.0 44.6 65.2 71.7 80.3

Operating Profit 9.6 3.2 33.9 5.4 14.5 8.6 39.0 10.6 52.1 72.7 97.3 123.8

YoY -54.0% -71.4% 52.6% TB 50.8% 167.3% 15.0% 98.3% 1.1% 39.6% 33.8% 27.2%

OPM 3.9% 1.4% 11.0% 2.1% 5.6% 3.1% 10.9% 3.5% 5.0% 6.1% 7.2% 8.1%

Domestic 17.5 7.3 38.2 8.4 20.1 6.8 37.8 10.0 71.4 74.8 77.8 83.2

China -2.1 -1.1 -0.3 -2.8 -1.1 -1.8 0.2 -0.9 -12.5 -3.6 5.4 19.9

Vietnam 1.5 1.6 1.6 3.0 2.1 4.6 1.2 2.5 7.5 10.4 15.8 19.5

Others -4.4 -2.4 -5.5 -3.3 -6.6 -1.0 -0.2 -1.0 -14.4 -8.8 -1.6 3.5

Non OP -3.4 -2.6 -1.0 -10.6 0.2 7.9 2.4 -4.8 -17.5 5.6 5.3 7.1

Interest -4.0 -4.1 -4.4 -4.4 -4.0 -3.7 -3.7 -3.7 -16.9 -15.1 -16.4 -19.1

Equity Method 0.7 0.7 1.4 1.6 1.4 1.7 3.8 3.2 4.2 10.1 12.8 19.0

Others -0.0 0.8 2.0 -7.8 2.8 10.0 2.2 -4.3 -4.9 10.6 8.9 7.2

Net Profit 3.7 0.1 23.8 -11.0 9.3 11.3 34.4 2.2 16.7 57.3 75.4 96.5

YoY -65.4% TB 44.2% TR 149.5% - 44.2% TB 31.3% 243.8% 31.7% 28.0%

NPM 1.5% 0.0% 7.7% -4.3% 3.6% 4.1% 9.6% 0.7% 1.6% 4.8% 5.6% 6.3%

Domestic Audience (m) [Korea] 54.5 41.9 69.2 49.4 50.5 44.6 73.1 50.9 215.0 219.1 225.5 228.9

YoY -1.7% -2.5% 3.0% 3.7% -7.4% 6.3% 5.6% 3.0% 0.8% 1.9% 2.9% 1.5%

Dom CGV Branches 72 75 79 78 80 81 83 83 78 83 84 85

CGV Branch Audience.(m) 19 15 25 18 18 16 26 19 78 80 83 85

YoY 10.7% 3.8% 7.5% 10.9% -6.7% 7.9% 4.4% 4.6% 8.3% 2.4% 3.8% 3.0%

CGV Branch M/S 35.4% 36.4% 36.0% 37.0% 35.7% 37.0% 35.5% 37.6% 36.2% 36.3% 36.6% 37.2%

Avg. Ticket Price(Won) 7,468 7,938 7,542 7,569 7,567 8,203 7,483 7,592 7,629 7,711 7,865 7,944

YoY 3.3% 7.9% 8.2% 3.0% 1.3% 3.3% -0.8% 0.3% 6.0% 1.1% 2.0% 1.0%

China Sites(+JV) 27 28 31 40 43 47 53 64 40 64 95 120

Vietnam Sites 14 16 16 21 24 25 26 30 21 30 35 45


CJ CGV: China JV earnings


48.7 56.9

78.9

106.6

147.1

2.9 6.7 14.8

23.4 35.3

4.0 6.5 13.8 17.1

27.9 6.0%

11.7%

18.8%

22.0%24.0%

0%

5%

10%

15%

20%

25%

30%

0

20

40

60

80

100

120

140

160

2013 2014 2015E 2016E 2017E

Sales OP NP OPM (RHS)

(KRWbn)

13


Initiating with a Buy (1) call and 12-month TP of KRW150,000

Sole beneficiary of China market growth and alternative to Wanda Cinema Line in Korea We initiate coverage of CJ CGV with a Buy (1) rating and 12-month target price of

KRW150,000. In our view, the company stands to be the main Korean beneficiary of the

rapid growth in the movie market in China.

We derive our target price for CJ CGV using SOTP methodology. The resulting target price

of KRW150,000 is equivalent to a 2016E PER of 42.6x. Given the stock’s average 12-

month-forward PER (ex one-offs) over the past 4 years is 43.6x, we believe our implied

42.1x PER is not too aggressive. Indeed, the high-looking target PER is due partly to our

expectation that the China business will move into the black in 2016, giving the China

division and China JV PERs of 457.9x and 62.2x for 2016E. These numbers should fall

rapidly in subsequent years if, as we expect, margins climb to a normalised level.

Only 12% of Wanda’s market cap

To derive our target market cap for CJ CGV’s China division and CJ CGV’s China JV, we

take Wanda as our reference point, the leading China-listed movie theatre chain, which

derives 80% of its earnings from pure cinema operations. Our target value for the China

division and China JV together is KRW2,250.6bn (China division: KRW1,720.1bn, China

JV: KRW530.6bn), which is equivalent to 12% of Wanda’s market cap.

Wanda Cinema Line is the leading player in the China market, with a market share of 15%

according to various media reports. The company owns 191 sites with 1,694 screens as of

1H15, and plans to expand to 260 sites with 2,300 screens by the end of 2016. On the

other hand, CJ CGV is the No.7 player in China, with a market share of around 2%. As of

1H15, it had 47 sites with 415 screens in China.

Wanda is trading at premium PERs of 93.5x for 2015E and 62.2x for 2016E, backed by its

solid operating margins (19% for 2015E, 20% for 2016E, on Bloomberg consensus

forecasts) and high EPS growth (36% YoY for 2015E, 50% YoY for 2016E according to

Bloomberg consensus forecasts).

CJ CGV does not compare with Wanda in terms of absolute revenue (2015E Wanda:

USD1,276m, CJ CGV China+JV: USD176m). Nevertheless, we believe CJ CGV’s China

component is worth more than 12% of Wanda’s market cap, given our forecasts for

significant revenue growth and margin improvement that exceed those for Wanda in the

same period (based on Bloomberg consensus forecasts).

CJ CGV is backed by its

domestic cash-cow

operation and overseas

growth drivers

Our forecasts indicate

CJ CGV will outpace

Wanda on earnings

growth this year and

next

14


Performance comparison: CJ CGV and Wanda Cinema Line

(USDm) Wanda

Cinema Line CJ CGV CJ CGV

China Division CJ CGV

China JV

Market Cap 17,851.4 2,275.2 872.7 610.2

Revenue 2015E 1,250.6 1,195.8 107.7 68.6

Revenue 2016E 1,895.7 1,347.7 162.8 92.7

Revenue Growth 2015E 52% 15% 126% 39%

Revenue Growth 2016E 52% 13% 51% 35%

OP 2015E 245.6 72.7 (4.6) 12.9

OP 2016E 386.2 97.3 4.7 20.4

OP Growth 2015E 62% 40% RR 122%

OP Growth 2016E 57% 34% TB 58%

OPM 2015E 20% 6% -4% 19%

OPM 2016E 20% 7% 3% 22%



Sites in China 1H15 191 47 34 13

Sites in China 2016E 260 95 77 18

PSR(x) 2015E 14.3 2.2 8.1 8.9

PSR(x) 2016E 9.4 1.9 5.4 6.6

PER(x) 2015E 93.5 46.2 76.8

PER(x) 2016E 62.2 35.0 62.2

PBR(x) 2015E 21.7 5.9

PBR(x) 2016E 15.6 5.1

Source: Bloomberg, Daiwa Research Note: RR is remaining red; TB is turning black

For CJ CGV’s China division, we derive a target market cap of KRW1,720.1bn, based on

the difference in absolute revenue between the 2 companies. Given our view that CJ CGV

China is set to enter the black in 2016, we believe that comparing revenue growth and

PSR are appropriate ways to value the operation. Wanda’s 2016E revenue (Bloomberg

consensus forecast) is about 12x that of our forecast for CJ CGV China (USD1,943m vs

USD163m). Therefore, our target market cap for CJ CGV China is 1/12 (8.4%) that of

Wanda, which is equivalent to applying a 9.4x PSR multiple to CJ CGV China’s 2016E

revenue. Considering that our forecast for CJ CGV China’s revenue growth in 2015 and

2016 outstrips the market’s forecast for revenue growth at Wanda over the same period,

we believe that applying 8.4% of Wanda’s market cap to derive our target market cap for

CJ CGV China is not excessive.

For the China JV, our target market cap is KRW530.6bn. On Bloomberg consensus

forecasts, Wanda is trading at a 62.2x PER for 2016E. Hence, we apply the same multiple

to the CJ CGV China JV’s net income for 2016E. The resulting target market cap for the

China JV is just 2.6% that of Wanda. Since we believe the JV’s operating margin and

earnings growth will exceed those of Wanda in 2015 and 2016, we think it is reasonable to

argue that the JV merits the same kind of premium that Wanda currently enjoys. While our

forecasts for the China JV’s absolute revenue are small compared with Wanda’s (4.8% and

5.2% of Wanda’s revenue and operating profit for 2016E, using the consensus forecasts

for Wanda), our target market cap for the JV is only 2.6% of Wanda’s.

Meanwhile, for the Korea and Vietnam divisions, we apply PERs of 20.1x to our respective

net profit forecasts for 2016E, in line with the average PER of movie theatre chains globally

(ex Wanda). We believe this is a conservative assumption, given the steep market growth

in these countries currently, as well as CJ CGV’s dominant market share in Vietnam.

However, to be conservative, we apply zero value to other divisions, such as 4DPlex and

the theatres in Indonesia, America, Myanmar and elsewhere. Still, we forecast a rapid

earnings turnaround for the other divisions beginning in 2016.

Comparing Daiwa and

consensus forecasts, CJ

CGV China looks set to

outpace Wanda on

revenue growth …

… while the China JV

should exceed Wanda on

operating margin and

earnings growth in

2015E and 2016E

We value the Korea and

Vietnam operations

based on the average

PER of movie theatre

chains globally

15


CJ CGV: sum-of-the-parts valuation

Division (KRWbn) Note

a) Korea

Net Income 16E 58.0

Target PER(x) 20.1 Average PER 2016E of global movie theatre chains except for Wanda

Target Value 1,165.8

b) China Division

Sales 16E 187.2 CGV China's expected revenue is 8.4% of Wanda's in 16E.

Implied PSR(x) 9.4 So our target value is also 8.4% of Wanda's marketcap

Target Value 1,762.7 CGV China's revenue growth outstrips Wanda's in 2015 and 2016

c) China JV

Net Income 16E 8.5

Target PER(x) 62.2 PER of Wanda Cinema 2016E applied.

Target Value 530.6 CGV's OPM and OP growth outstrip Wanda's but limited in expansion

d) Vietnam

Net Income 16E 11.0

Target PER(x) 20.1 Average PER 2016E of global movie theatre chains except for Wanda

Target Value 221.7

e) Other Divisions

Target Value - Applied 0 value to other divisions

f) Net debt

Net debt 2016E 457.9

Target market cap: a)+b)+c)+d)+e)-f) 3,223

Shares outstanding(m) 21.2

Target price(KRW) 152,304 (Rounded off to KRW150,000)

Upside Potential 20.0%

Implied PER to 16F(x) 42.1

Source: CJ CGV, Daiwa Research

We believe CJ CGV merits a higher valuation, given it has a cash-cow business in its

home market and growth drivers in the overseas markets. With the China movie market

growing rapidly and Wanda’s share price having surged since its A-share listing at the start

of the year, we expect CJ CGV to be the sole Korea-listed beneficiary of this market’s

growth, and represents an appealing alternative to Wanda, particularly for international

investors.

CJ CGV: 12-month-forward PER band (ex one-offs in 2010-14) CJ CGV: 12-month-forward PBR band

Source: Daiwa Research Source: Daiwa Research

Wanda Cinema Line: share-price trend

Source: Bloomberg, Daiwa Research

0

50,000

100,000

150,000

200,000

250,000

2010-12 2012-04 2013-08 2014-12 2016-04 2017-08

Adj. Prc. 66.0X 54.8X

43.5X 32.3X 21.0X

0

50,000

100,000

150,000

200,000

250,000

2010-12 2011-12 2012-12 2013-12 2014-12 2015-12 2016-12 2017-12

Adj. Prc. 6.7X 5.4X

4.1X 2.8X 1.5X

0

5

10

15

20

25

27/02/15 31/03/15 30/04/15 29/05/15 31/07/15 31/08/15 30/09/15 30/10/15 30/11/15

(USD)

16


Global peer group

Company

Ticker Mkt cap TP Sales OP NP PSR P/E (x) 3-year EPS P/BV (x) ROE (%) EV/EBITDA (x)

(Bloomberg) (USDm) (Local curr) FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 CAGR (%) FY15 FY16 FY15 FY16 FY15 FY16

Coverage

CJ CGV 041510 KQ 2,275 150,000 1,195.8 1,347.7 72.7 97.3 57.3 75.4 2.2 1.9 46.2 35.1 97.2 5.9 5.1 13.8 15.6 20.0 16.8

Movie theatre chains

Regal Entertainment RGC US 2,945 NA 3,133.2 3,177.3 342.0 366.4 165.4 171.4 0.9 0.9 17.4 16.7 0.5 na na -18.5 -20.0 8.4 7.9

Cinemark Holdings CNK US 4,071 NA 2,871.7 2,963.3 441.8 464.9 223.3 246.3 1.4 1.4 18.0 16.5 14.1 3.5 3.1 20.0 19.2 8.2 7.7

AMC Entertainment AMC US 2,478 NA 2,967.4 3,103.9 251.8 281.8 105.5 134.9 0.8 0.8 23.7 18.6 29.2 1.6 1.5 6.7 7.3 8.3 7.4

Cineplex CGX CN 2,366 NA 1,015.4 1,100.4 113.7 141.6 72.7 93.0 2.4 2.2 32.5 25.0 26.6 4.3 4.2 15.7 21.0 14.4 12.3

Carmike Cinemas CKEC US 539 NA 790.2 834.2 57.1 70.8 9.3 19.6 0.7 0.7 51.4 27.1 -295.4 1.9 1.8 0.9 6.7 7.4 6.8

Cineworld Group CINE LN 2,220 NA 1,079.8 1,165.3 164.5 176.2 115.0 126.3 2.1 1.9 19.5 17.9 11.7 2.7 2.5 13.9 14.2 11.3 10.3

Marcus Corporation MCS US 558 NA 485.3 509.6 51.2 58.2 25.0 30.6 1.2 1.1 21.8 19.3 8.0 1.6 1.5 7.7 8.4 na 8.1

Wanda Cinema Line 002739 CH 17,854 NA 1,250.6 1,895.7 245.6 386.2 192.0 295.4 14.3 9.4 93.5 61.9 40.1 21.7 15.6 27.2 27.4 59.4 36.8

Average

3.0 2.3 34.7 25.4 27.5 5.3 4.3 16.8 12.2

Source: Bloomberg forecasts for all stocks except CJ CGV, Daiwa forecasts for CJ CGV

Market cap of movie theatre companies globally

Source: Bloomberg, Daiwa research

Risks to our call

Arguably the biggest risk to our Buy call and forecasts is that CJ CGV’s profitability

declines as a result of excessive spending on overseas expansion. A secondary risk would

be greater-than-expected competition in China.

While the company has been involved in the China market for more than 10 years, and its

revenue growth in overseas markets is relatively high (50% YoY in China and 15% in

Vietnam, on our forecasts), mis-steps in external markets could pose a downside risk to

our forecasts and weigh on sentiment towards the shares.

Company background

Established in 1995 and listed on the KOSPI in 2004, CJ CGV is one of the largest movie

theatre chains in Korea. It currently owns 83 direct sites and 45 franchises in Korea, as

well as 39 direct sites and 14 JV sites in China, and 26 direct sites in Vietnam. The

company also has sites in Indonesia, Myanmar and the US.

Takings from the direct sites come in as CJ CGV’s revenue, while fees from the 45

franchises in Korea are classed as “others”. Earnings from the JV sites in China are

treated on an equity-method basis.

0

50

100

150

200

250

300

Jan-

13

Feb

-13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb

-14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb

-15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-1

5

Aug

-15

Sep

-15

Oct

-15

CGV Regal Entertainment Cinemark Holdings Cineplex

Carmike Cinemas Cineworld Group Marcus Corporation AMC Entertainment

(2013=100)

17


Currently, the company is the leading player in Korea and Vietnam, with market shares of

nearly 50% in both markets. As of 3Q15, the company derived 77% of its revenue from

Korea, 11% from China, and 5% from Vietnam.

CJ CGV’s subsidiary, 4DPlex, manufactures and installs 4DX and Screen X systems. 4DX

is a theatre system featuring environmental effects such as motion chairs, air blasts, water

shots and scents, while Screen X supports 3D features. Both systems allow theatres to

charge higher ticket prices compared with conventional theatre set-ups.

4DPlex recently signed a MOU with Wanda in China to provide such systems. Wanda

already operates 4DX and Screen X systems in China, and it plans to have up to 100 such

installations in the future.

CJ CGV: global sites

Source: CJ CGV, Daiwa research

CJ CGV 4DPlex: 4DX Screen CJ CGV 4DPlex: Screen X

Source: Company, Daiwa research Source: Company, Daiwa research

18


Appendix

Korea: movie audience trends Korea: average ticket price (ATP)

Source: Korea Film Council, Daiwa research Source: Korea Film Council, Daiwa research

CJ CGV: audience trends (direct branches) CJ CGV: ATP and market-share trends (direct branches)

Source: Korea Film Council, Daiwa research Source: Korea Film Council, Daiwa research

CJ CGV: Sphere X CJ CGV: Tempur Cinema

Source: Company, Daiwa research Source: Company, Daiwa research

148.3 159.7

194.9 213.3 215.0 219.1

0

50

100

150

200

250

2010 2011 2012 2013 2014 2015E

(m)

7,466

7,271

7,738

7,901

6,000

6,500

7,000

7,500

8,000

2012 2013 2014 2015E

(KRW)

44 48

60

72 78 80

0

10

20

30

40

50

60

70

80

90

2010 2011 2012 2013 2014 2015E

(m)

7,439

7,226

7,629 7,715

7,865

30.6%

33.7%

36.2% 36.3%

36.6%

26%

28%

30%

32%

34%

36%

38%

6,800

7,000

7,200

7,400

7,600

7,800

8,000

2012 2013 2014 2015E 2016EATP MS (RHS)

(KRW)

19


Daiwa’s Asia Pacific Research Directory

HONG KONG

Takashi FUJIKURA (852) 2848 4051 [email protected]

Regional Research Head

Kosuke MIZUNO (852) 2848 4949 / (852) 2773 8273

[email protected]

Regional Research Co-head

John HETHERINGTON (852) 2773 8787 [email protected]

Regional Deputy Head of Asia Pacific Research

Rohan DALZIELL (852) 2848 4938 [email protected]

Regional Head of Product Management

Kevin LAI (852) 2848 4926 [email protected]

Chief Economist for Asia ex-Japan; Macro Economics (Regional)

Junjie TANG (852) 2773 8736 [email protected]

Macro Economics (China)

Jonas KAN (852) 2848 4439 [email protected]

Head of Hong Kong and China Property

Cynthia CHAN (852) 2773 8243 [email protected]

Property (China)

Leon QI (852) 2532 4381 [email protected]

Banking (Hong Kong/China); Broker (China); Insurance (China)

Anson CHAN (852) 2532 4350 [email protected]

Consumer (Hong Kong/China)

Jamie SOO (852) 2773 8529 [email protected]

Gaming and Leisure (Hong Kong/China)

Dennis IP (852) 2848 4068 [email protected]

Power; Utilities; Renewables and Environment (Hong Kong/China)

John CHOI (852) 2773 8730 [email protected]

Head of Hong Kong and China Internet; Regional Head of Small/Mid Cap

Kelvin LAU (852) 2848 4467 [email protected]

Head of Automobiles; Transportation and Industrial (Hong Kong/China)

Brian LAM (852) 2532 4341 [email protected]

Transportation – Railway; Construction and Engineering (China)

Jibo MA (852) 2848 4489 [email protected]

Head of Custom Products Group

Thomas HO (852) 2773 8716 [email protected]

Custom Products Group

PHILIPPINES

Bianca SOLEMA (63) 2 737 3023 [email protected]

Utilities and Energy

SOUTH KOREA

Sung Yop CHUNG (82) 2 787 9157 [email protected]

Pan-Asia Co-head/Regional Head of Automobiles and Components; Automobiles; Shipbuilding; Steel

Mike OH (82) 2 787 9179 [email protected]

Banking; Capital Goods (Construction and Machinery)

Iris PARK (82) 2 787 9165 [email protected]

Consumer/Retail

SK KIM (82) 2 787 9173 [email protected]

IT/Electronics – Semiconductor/Display and Tech Hardware

Thomas Y KWON (82) 2 787 9181 [email protected]

Pan-Asia Head of Internet & Telecommunications; Software – Internet/On-line Game

Kevin JIN (82) 2 787 9168 [email protected]

Small/Mid Cap

TAIWAN

Rick HSU (886) 2 8758 6261 [email protected]

Head of Regional Technology; Head of Taiwan Research; Semiconductor/IC Design (Regional)

Christie CHIEN (886) 2 8758 6257 [email protected]

Banking; Insurance (Taiwan); Macro Economics (Regional)

Steven TSENG (886) 2 8758 6252 [email protected]

IT/Technology Hardware (PC Hardware)

Christine WANG (886) 2 8758 6249 [email protected]

IT/Technology Hardware (Automation); Pharmaceuticals and Healthcare; Consumer

Kylie HUANG (886) 2 8758 6248 [email protected]

IT/Technology Hardware (Handsets and Components)

Helen CHIEN (886) 2 8758 6254 [email protected]

Small/Mid Cap

INDIA

Punit SRIVASTAVA (91) 22 6622 1013 [email protected]

Head of India Research; Strategy; Banking/Finance

Saurabh MEHTA (91) 22 6622 1009 [email protected]

Capital Goods; Utilities

SINGAPORE

Ramakrishna MARUVADA (65) 6499 6543 [email protected]

Head of Singapore Research; Telecommunications (China/ASEAN/India)

Royston TAN (65) 6321 3086 [email protected]

Oil and Gas; Capital Goods

David LUM (65) 6329 2102 [email protected]

Property and REITs

Shane GOH (65) 64996546 [email protected]

Small/Mid Cap (Singapore)

Jame OSMAN (65) 6321 3092 [email protected]

Telecommunications (ASEAN/India); Pharmaceuticals and Healthcare; Consumer (Singapore)

20


Daiwa’s Offices

Office / Branch / Affiliate Address Tel Fax

DAIWA SECURITIES GROUP INC

HEAD OFFICE Gran Tokyo North Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6753 (81) 3 5555 3111 (81) 3 5555 0661

Daiwa Securities Trust Company One Evertrust Plaza, Jersey City, NJ 07302, U.S.A. (1) 201 333 7300 (1) 201 333 7726

Daiwa Securities Trust and Banking (Europe) PLC (Head Office) 5 King William Street, London EC4N 7JB, United Kingdom (44) 207 320 8000 (44) 207 410 0129

Daiwa Europe Trustees (Ireland) Ltd Level 3, Block 5, Harcourt Centre, Harcourt Road, Dublin 2, Ireland (353) 1 603 9900 (353) 1 478 3469

Daiwa Capital Markets America Inc. New York Head Office Financial Square, 32 Old Slip, New York, NY10005, U.S.A. (1) 212 612 7000 (1) 212 612 7100

Daiwa Capital Markets America Inc. San Francisco Branch 555 California Street, Suite 3360, San Francisco, CA 94104, U.S.A. (1) 415 955 8100 (1) 415 956 1935

Daiwa Capital Markets Europe Limited, London Head Office 5 King William Street, London EC4N 7AX, United Kingdom (44) 20 7597 8000 (44) 20 7597 8600

Daiwa Capital Markets Europe Limited, Frankfurt Branch Neue Mainzer Str. 1, 60311 Frankfurt/Main, Germany (49) 69 717 080 (49) 69 723 340

Daiwa Capital Markets Europe Limited, Paris Representative Office 17, rue de Surène 75008 Paris, France (33) 1 56 262 200 (33) 1 47 550 808

Daiwa Capital Markets Europe Limited, Geneva Branch 50 rue du Rhône, P.O.Box 3198, 1211 Geneva 3, Switzerland (41) 22 818 7400 (41) 22 818 7441

Daiwa Capital Markets Europe Limited, Moscow Representative Office

Midland Plaza 7th Floor, 10 Arbat Street, Moscow 119002, Russian Federation

(7) 495 641 3416 (7) 495 775 6238

Daiwa Capital Markets Europe Limited, Bahrain Branch 7th Floor, The Tower, Bahrain Commercial Complex, P.O. Box 30069, Manama, Bahrain

(973) 17 534 452 (973) 17 535 113

Daiwa Capital Markets Hong Kong Limited Level 28, One Pacific Place, 88 Queensway, Hong Kong (852) 2525 0121 (852) 2845 1621

Daiwa Capital Markets Singapore Limited 6 Shenton Way #26-08, OUE Downtown 2, Singapore 068809, Republic of Singapore

(65) 6220 3666 (65) 6223 6198

Daiwa Capital Markets Australia Limited Level 34, Rialto North Tower, 525 Collins Street, Melbourne, Victoria 3000, Australia

(61) 3 9916 1300 (61) 3 9916 1330

DBP-Daiwa Capital Markets Philippines, Inc 18th Floor, Citibank Tower, 8741 Paseo de Roxas, Salcedo Village, Makati City, Republic of the Philippines

(632) 813 7344 (632) 848 0105

Daiwa-Cathay Capital Markets Co Ltd 14/F, 200, Keelung Road, Sec 1, Taipei, Taiwan, R.O.C. (886) 2 2723 9698 (886) 2 2345 3638

Daiwa Securities Capital Markets Korea Co., Ltd. 20 Fl.& 21Fl. One IFC, 10 Gukjegeumyung-Ro, Yeongdeungpo-gu, Seoul, Korea

(82) 2 787 9100 (82) 2 787 9191

Daiwa Securities Co. Ltd., Beijing Representative Office Room 301/302，Kerry Center，1 Guanghua Road，Chaoyang District，

Beijing 100020, People’s Republic of China

(86) 10 6500 6688 (86) 10 6500 3594

Daiwa (Shanghai) Corporate Strategic Advisory Co. Ltd. 44/F, Hang Seng Bank Tower, 1000 Lujiazui Ring Road, Pudong, Shanghai China 200120 , People’s Republic of China

(86) 21 3858 2000 (86) 21 3858 2111

Daiwa Securities Co. Ltd., Bangkok Representative Office 18th Floor, M Thai Tower, All Seasons Place, 87 Wireless Road,

Lumpini, Pathumwan, Bangkok 10330, Thailand (66) 2 252 5650 (66) 2 252 5665

Daiwa Capital Markets India Private Ltd 10th Floor, 3 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra East, Mumbai – 400051, India

(91) 22 6622 1000 (91) 22 6622 1019

Daiwa Securities Co. Ltd., Hanoi Representative Office Suite 405, Pacific Palace Building, 83B, Ly Thuong Kiet Street, Hoan Kiem Dist. Hanoi, Vietnam

(84) 4 3946 0460 (84) 4 3946 0461

DAIWA INSTITUTE OF RESEARCH LTD

HEAD OFFICE 15-6, Fuyuki, Koto-ku, Tokyo, 135-8460, Japan (81) 3 5620 5100 (81) 3 5620 5603

MARUNOUCHI OFFICE Gran Tokyo North Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6756 (81) 3 5555 7011 (81) 3 5202 2021

New York Research Center 11th Floor, Financial Square, 32 Old Slip, NY, NY 10005-3504, U.S.A. (1) 212 612 6100 (1) 212 612 8417

London Research Centre 3/F, 5 King William Street, London, EC4N 7AX, United Kingdom (44) 207 597 8000 (44) 207 597 8550

21


Important Disclosures and Disclaimer

This publication is produced by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, and distributed by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, except to the extent expressly provided herein. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure, distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Neither Daiwa Securities Group Inc. nor any of its respective parent, holding, subsidiaries or affiliates, nor any of its respective directors, officers, servants and employees, represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof. Neither this publication, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the securities or investments mentioned herein in any country or jurisdiction nor, unless expressly provided, any recommendation or investment opinion or advice. Any view, recommendation, opinion or advice expressed in this publication may not necessarily reflect those of Daiwa Securities Group Inc., and/or its affiliates nor any of its respective directors, officers, servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person. Daiwa Securities Group Inc., its subsidiaries or affiliates, or its or their respective directors, officers and employees from time to time have trades as principals, or have positions in, or have other interests in the securities of the company under research including market making activities, derivatives in respect of such securities or may have also performed investment banking and other services for the issuer of such securities. The following are additional disclosures.

Ownership of Securities

For “Ownership of Securities” information, please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Investment Banking Relationship

For “Investment Banking Relationship”, please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Japan

Daiwa Securities Co. Ltd. and Daiwa Securities Group Inc.

Daiwa Securities Co. Ltd. is a subsidiary of Daiwa Securities Group Inc.

Investment Banking Relationship

Within the preceding 12 months, the subsidiaries and/or affiliates of Daiwa Securities Group Inc. * has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: Modern Land (China) Co. Ltd (1107 HK); econtext Asia Ltd (1390 HK); Accordia Golf Trust (AGT SP); GF Securities Co Ltd (1776 HK); Mirae Asset Life Insurance Co Ltd (085620 KS); China Reinsurance Group Corporation (1508 HK).

*Subsidiaries of Daiwa Securities Group Inc. for the purposes of this section shall mean any one or more of: Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司), Daiwa

Capital Markets Singapore Limited, Daiwa Capital Markets Australia Limited, Daiwa Capital Markets India Private Limited, Daiwa-Cathay Capital Markets Co., Ltd., Daiwa Securities Capital Markets Korea Co., Ltd.

Hong Kong

This research is distributed in Hong Kong by Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司) (“DHK”) which is regulated by the Hong Kong Securities and Futures

Commission. Recipients of this research in Hong Kong may contact DHK in respect of any matter arising from or in connection with this research. Relevant Relationship (DHK)

DHK may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. Korea

The developing analyst of this research and analysis material hereby states and confirms that the contents of this material correctly reflect the analyst’s views and opinions and that the analyst has not been placed under inappropriate pressure or interruption by an external party.

Name of Analyst : Kevin Jin

Disclosure of Analysts’ Interests If an analyst engaging in or a person who exercises influences on the preparation or publication of a Research Report containing recommendations for general investors to trade financial investment instruments with regard to which the analyst or the influential person has personal interests and if the recommendations contained in the Report may have impacts on the personal interests, Daiwa Securities Capital Markets Korea Co., Ltd.(“Daiwa Securities Korea”)shall ensure that the Analyst or the influential person notifies that he/she has personal interests with regard to: 1. The equity, the equity-linked bonds and the instruments with the subscription right to the equity issued by the legal entity covered in the Research Report (or the legal entity subject to the investment recommendations); 2. The stock option granted by the legal entity covered in the Research Report (or the legal entity subject to the investment recommendations); or 3. The equity futures, the equity options and the equity-linked warrants backed by the equity prescribed in the preceding Paragraph 1 as the underlying assets. Legal Entities subject to Research Report Coverage Restrictions Daiwa Securities Korea hereby states and confirms that Daiwa Securities Korea has no conflicts of interests with the legal entity covered in this Research Report: 1. In that Daiwa Securities Korea does NOT offer direct or indirect payment guarantee for the legal entity by means of, for instance, guarantee, endorsement, provision of collaterals or the acquisition of debts; 2. In that Daiwa Securities Korea does NOT own one-hundredth (or 1/100) or more of the total number of outstanding equities issued by the legal entity; 3. In that The legal entity is NOT an affiliated company of Daiwa Securities Korea pursuant to Sub-paragraph 3, Article 2 of the Monopoly Regulation and Fair Trade Act of Korea; 4. In that, although Daiwa Securities Korea offers advisory services for the legal entity with regard to an M&A deal, the size of the M&A deal does NOT exceed five-hundredths (or 5/100) of the total asset size or the total number of equities issued and outstanding of the legal entity; 5. In that, although Daiwa Securities Korea acted in the capacity of a Lead Underwriter for the initial public offering of the legal entity, more than one-year has passed since the IPO date; 6. In that Daiwa Securities Korea is NOT designated by the legal entity as the ‘tender offer agent’ pursuant to the Paragraph 2, Article 133 of the Financial Services and Capital Market Act or the legal entity is NOT the issuer of the equity subject to the proposed tender offer; this requirement, however applies until the maturity of the tender offer period; or 7. In that Daiwa Securities Korea does NOT have significant or material interests with regard to the legal entity. Disclosure of Prior Distribution to Third Party This report has not been distributed to the third party in advance prior to public release. The following explains the rating system in the report as compared to KOSPI, based on the beliefs of the author(s) of this report. "1": the security could outperform the KOSPI by more than 15% over the next 12 months, unless otherwise stated. "2": the security is expected to outperform the KOSPI by 5-15% over the next 12 months, unless otherwise stated. "3": the security is expected to perform within 5% of the KOSPI (better or worse) over the next 12 months, unless otherwise stated. "4": the security is expected to underperform the KOSPI by 5-15% over the next 12 months, unless otherwise stated. "5": the security could underperform the KOSPI by more than 15% over the next 12 months, unless otherwise stated. “Positive” means that the analyst expects the sector to outperform the KOSPI over the next 12 months, unless otherwise stated. “Neutral” means that the analyst expects the sector to be in-line with the KOSPI over the next 12 months, unless otherwise stated. “Negative” means that the analyst expects the sector to underperform the KOSPI over the next 12 months, unless otherwise stated. Additional information may be available upon request.

Singapore

This research is distributed in Singapore by Daiwa Capital Markets Singapore Limited and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these category of investors, Daiwa Capital Markets Singapore Limited and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of Daiwa Capital Markets Singapore Limited’s interest and/or its representative’s interest in securities). Recipients of this research in Singapore may contact Daiwa Capital Markets Singapore Limited in respect of any matter arising from or in connection with the research.

Australia

This research is distributed in Australia by Daiwa Capital Markets Australia Limited and it may only be distributed in Australia to wholesale investors within the meaning of the Corporations Act.

https://daiwa3.bluematrix.com/sellside/Disclosures.action


22


Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research.

India

This research is distributed in India to Institutional Clients only by Daiwa Capital Markets India Private Limited (Daiwa India) which is an intermediary registered with Securities & Exchange Board of India as a Stock Broker, Merchant Bank and Research Analyst. Daiwa India, its Research Analyst and their family members and its associates do not have any financial interest save as disclosed or other undisclosed material conflict of interest in the securities or derivatives of any companies under coverage. Daiwa India and its associates may have received compensation for any products other than Investment Banking (as disclosed) or brokerage services from the subject company in this report during the past 12 months. Unless otherwise stated in BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action, Daiwa India and its associates do not hold more than 1% of any companies covered in this research report. There is no material disciplinary action against Daiwa India by any regulatory authority impacting equity research analysis activities as of the date of this report.

Taiwan

This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co., Ltd and it may only be distributed in Taiwan to institutional investors or specific investors who have signed recommendation contracts with Daiwa-Cathay Capital Markets Co., Ltd in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co., Ltd in respect of any matter arising from or in connection with the research.

Philippines

This research is distributed in the Philippines by DBP-Daiwa Capital Markets Philippines, Inc. which is regulated by the Philippines Securities and Exchange Commission and the Phil ippines Stock Exchange, Inc. Recipients of this research in the Philippines may contact DBP-Daiwa Capital Markets Philippines, Inc. in respect of any matter arising from or in connection with the research. DBP-Daiwa Capital Markets Philippines, Inc. recommends that investors independently assess, with a professional advisor, the specific financial risks as well as the legal, regulatory, tax, accounting, and other consequences of a proposed transaction. DBP-Daiwa Capital Markets Philippines, Inc. may have positions or may be materially interested in the securities in any of the markets mentioned in the publication or may have performed other services for the issuers of such securities.

For relevant securities and trading rules please visit SEC and PSE links at http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf and http://www.pse.com.ph/ respectively.

Thailand

This research is distributed to only institutional investors in Thailand primarily by Thanachart Securities Public Company Limited (“TNS”).

This report is prepared by analysts who are employed by Daiwa Securities Group Inc. and/or its non-U.S. affiliates. This report is provided to you for informational purposes only and it is not, and is not to be construed as, an offer or an invitation to make an offer to sell or buy any securities. Neither Thanachart Securities Public Company Limited, Daiwa Securities Group Inc. nor any of their respective parent, holding, subsidiaries or affiliates, nor any of their respective directors, officers, servants and employees accept any liability whatsoever for any direct or consequential loss arising from any use of this research or its contents.

The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable. However, Thanachart Securities Public Company Limited, Daiwa Securities Group Inc. nor any of their respective parent, holding, subsidiaries or affiliates, nor any of their respective directors, officers, servants and employees make no representation or warranty, express or implied, as to their accuracy or completeness. Expressions of opinion herein are subject to change without notice. The use of any information, forecasts and opinions contained in this report shall be at the sole discretion and risk of the user.

Daiwa Securities Group Inc. and/or its non-U.S. affiliates perform and seek to perform business with companies covered in this research. Thanachart Securities Public Company Limited, Daiwa Securities Group Inc., their respective parent, holding, subsidiaries or affiliates, their respective directors, officers, servants and employees may have positions and financial interest in securities mentioned in this research. Thanachart Securities Public Company Limited, Daiwa Securities Group Inc., their respective parent, holding, subsidiaries or affiliates may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any entity mentioned in this research. Therefore, investors should be aware of conflict of interest that may affect the objectivity of this research.

United Kingdom

This research report is produced by Daiwa Securities Co. Ltd. and/or its affiliates and is distributed in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Conduct Authority (“FCA”) and is a member of the London Stock Exchange and Eurex. This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FCA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available. Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at http://www.uk.daiwacm.com/about-us/corporate-governance-regulatory.

Germany

This document is distributed in Germany by Daiwa Capital Markets Europe Limited, Niederlassung Frankfurt which is regulated by BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) for the conduct of business in Germany.

Bahrain

This research material is distributed in Bahrain by Daiwa Capital Markets Europe Limited, Bahrain Branch, regulated by The Central Bank of Bahrain and holds Investment Business Firm – Category 2 license and having its official place of business at the Bahrain World Trade Centre, South Tower, 7th floor, P.O. Box 30069, Manama, Kingdom of Bahrain. Tel No. +973 17534452 Fax No. +973 535113

United States

This report is distributed in the U.S. by Daiwa Capital Markets America Inc. (DCMA). It may not be accurate or complete and should not be relied upon as such. It reflects the preparer’s views at the time of its preparation, but may not reflect events occurring after its preparation; nor does it reflect DCMA’s views at any time. Neither DCMA nor the preparer has any obligation to update this report or to continue to prepare research on this subject. This report is not an offer to sell or the solicitation of any offer to buy securities. Unless this report says otherwise, any recommendation it makes is risky and appropriate only for sophisticated speculative investors able to incur significant losses. Readers should consult their financial advisors to determine whether any such recommendation is consistent with their own investment objectives, financial situation and needs. This report does not recommend to U.S. recipients the use of any of DCMA’s non-U.S. affiliates to effect trades in any security and is not supplied with any understanding that U.S. recipients of this report will direct commission business to such non-U.S. entities. Unless applicable law permits otherwise, non-U.S. customers wishing to effect a transaction in any securities referenced in this material should contact a Daiwa entity in their local jurisdiction. Most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as a process for doing so. As a result, the securities discussed in this report may not be eligible for sales in some jurisdictions. Customers wishing to obtain further information about this report should contact DCMA: Daiwa Capital Markets America Inc., Financial Square, 32 Old Slip, New York, New York 10005 (Tel no. 212-612-7000).

Ownership of Securities

For “Ownership of Securities” information please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Investment Banking Relationships

For “Investment Banking Relationships” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. DCMA Market Making

For “DCMA Market Making” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Research Analyst Conflicts

For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The principal research analysts who prepared this report have no financial interest in securities of the issuers covered in the report, are not (nor are any members of their household) an officer, director or advisory board member of the issuer(s) covered in the report, and are not aware of any material relevant conflict of interest involving the analyst or DCMA, and did not receive any compensation from the issuer during the past 12 months except as noted: no exceptions.

Research Analyst Certification

For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The views about any and all of the subject securities and issuers expressed in this Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views of the firm producing the report if no individual analysts[s] is named on the report); and no part of the compensation of such analyst(s) (or no part of the compensation of the firm if no individual analyst[s)] is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report.

The following explains the rating system in the report as compared to relevant local indices, unless otherwise stated, based on the beliefs of the author of the report.

"1": the security could outperform the local index by more than 15% over the next 12 months. "2": the security is expected to outperform the local index by 5-15% over the next 12 months. "3": the security is expected to perform within 5% of the local index (better or worse) over the next 12 months. "4": the security is expected to underperform the local index by 5-15% over the next 12 months. "5": the security could underperform the local index by more than 15% over the next 12 months.

http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf%20and%20http:/www.pse.com.ph/

http://www.uk.daiwacm.com/about-us/corporate-governance-regulatory






23


Disclosure of investment ratings

Rating Percentage of total

Buy* 63.8%

Hold** 22.2%

Sell*** 14.0%

Source: Daiwa

Notes: data is for single-branded Daiwa research in Asia (ex Japan) and correct as of 30 September 2015. * comprised of Daiwa’s Buy and Outperform ratings. ** comprised of Daiwa’s Hold ratings. *** comprised of Daiwa’s Underperform and Sell ratings. Additional information may be available upon request.

Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law (This Notification is only applicable where report is distributed by Daiwa Securities Co. Ltd.)

If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the following items.

In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand with you. Since commissions may be included in the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for each transaction.

In some cases, we may also charge a maximum of ¥ 2 million (including tax) per year as a standing proxy fee for our deposit of your securities, if you are a non-resident of Japan.

For derivative and margin transactions etc., we may require collateral or margin requirements in accordance with an agreement made beforehand with you. Ordinarily in such cases, the amount of the transaction will be in excess of the required collateral or margin requirements.

There is a risk that you will incur losses on your transactions due to changes in the market price of financial instruments based on fluctuations in interest rates, exchange rates, stock prices, real estate prices, commodity prices, and others. In addition, depending on the content of the transaction, the loss could exceed the amount of the collateral or margin requirements.

There may be a difference between bid price etc. and ask price etc. of OTC derivatives handled by us.

Before engaging in any trading, please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with such experts as certified public accountants. *The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of each transaction etc.

When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions regarding the signing of the agreement with us.

Corporate Name: Daiwa Securities Co. Ltd. Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108 Memberships: Japan Securities Dealers Association, The Financial Futures Association of Japan Japan Securities Investment Advisers Association Type II Financial Instruments Firms Association

cj cgvasiaresearch.daiwacm.com/eg/cgi-bin/files/cj_cgv_151202.pdf · 3 cj cgv (079160 ks): 2...

Documents