investor relations - megastudy

www.megastudy.net

Investor Relations2014

ENG14_4Q

www.megastudy.net

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1. Business Sectors

2. Business Expansion

3. Education System

4. Business Model

5. Offline Infrastructure

6. High Loyalty & Entry Barrier

7. Educational expenditure

8. Growth & Market Size

9. Sales Breakdown

10. 2014 4Q Consolidated Performance

11. 2014 FY Consolidated Performance

12. I/S & B/S Summary

Contents

3

4

5

6

7

8

9

10

11

12

13

14

www.megastudy.net

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Business Sectors

Megastudy Subsidiaries

▪ High School(on) : www.megastudy.net- provide online lectures for high school students and re-takers

Korean SAT

- Main Contents GPA

Essay & Interview

▪ High School (off) : developing contents / producing contents- running 9 offline schools in Seoul & Near Seoul

Korean SAT

- Main Contents GPA

Essay & Interview

▪ Middle School(on) : www.mbest.co.kr

- provide online lectures on term-based courses

- hiring administrators for each student to communicate their

academic improvement with students and parents by phone

or e-mail

▪ MegaMD (64%) : www.megamd.co.kr / www.megaut.com

- provide lectures for special graduate school entrance exam

(Medical, Dental, Pharmaceutical, and Law)

- provide contents for University transfer exam

(merged with MegaUT, [Jun 1st. 2013],

merged with Il Deung Law School [Mar 9th. 2014] )

▪ IvyKimyoung (46%) : www.kimyoung.co.kr

- provide contents for University transfer exam

▪ MegaFood&Service (60%) - operating food service company for students and employees

▪ MegaBooks (100%) - publishing learning materials and textbook supplementary

▪ HyungsulEdu (100%) - took over offline school in 2009 and currently operating them

just like other offline institutions of Megastudy

▪ SE Global (MegaMD: 67%) www.megacst.com

- provide lectures for police employment test

▪ Resgong (SE Global: 90%) www.rsparta.com- provide English contents for public servant employment test

▪ Megastudy Forever Joint Stock Company (62%) - running offline schools in Hanoi, Vietnam

▪ MegaInvestment (99%) - established investment company, searching for the new growth engine

▪ MegaNext (37%) : www.megahrd.co.kr

- provide job related contents and English contents

▪ Mastern No.3 Mega Project Financing Vehicle (70%) - PFV for the complex building

Megastudy

6 months : KRW 760,000

12 months: KRW 1,280,000

GPA

Special courses for elite-high school

- Price

- Main Contents

www.megastudy.net

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Business Expansion

High school online

High school offline

Mbest Mbest Merged (Middle school online)

MegaMD

MegaBooks

MegaNext

Megastudy Forever Joint Stock Company

On Off Captive market

Adult & College

MegaMD

(Merged with MegaUT,

Il Deung Law School)

IvyKimyoung, MegaNext

SEGlobal, Resgong

x

High SchoolMegastudy-on Megastudy-off

HyungsulEduMegaBooks

MegaF&SMiddle School Mbest x

Elementary School Mjunior x x

Kindergarten x x x

Overseas

Megastudy

China Ltd

(China)

Megastudy Forever

Joint Stock Company

(Vietnam)x

IvyKimyoung

MegaFood&Service

Horizontal Expanding

MegaUT

Hyungsul Edu

Vertica

l Expanding

Il Deung Law School

MegaInvestment

SEGlobal

2000 2001 20032002 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Merged with MagaMD(Jun 1st. 2013)

Merged with MagaMD(Mar 9th. 2014)

2014

Mastern No. 3 Mega PFV

Resgong

www.megastudy.net

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Education System

■ Education System

- Elementary ……. 6yrs (Age. 8 ~ 13)

- Middle School…. 3yrs (Age.14 ~ 16)

- High School……. 3yrs (Age.16 ~ 19)

- Undergraduate School

- Graduate School

Re-takers

UniversityHigh School Applying for University

▪ Re-takers : students who wish to take KSAT exam once more

2 WAYS

■ University Entrance Exam

KSAT- National standardize examination

- Once a year (3rd week of Nov.)

GPA - Academic performance records in high school

University

Specific

Requirement

- Essay writing style

- Interview

- Knowledge based test

▪ Early Application : GPA + KSAT + University Specific Requirement

(Essay writing / Interview / Language, Math, Science expertise, etc)

▪ Regular Application : GPA + KSAT + University Specific Requirement

(Essay writing / Interview)

www.megastudy.net

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Business Model

■ Megastudy Offline ■ Megastudy Online

- Single subject class

- 2~3 months (1,000 min.)

- 10 ~ 15 Chapters

- VOD type service

Filming

Editing

Uploading

■ Lecturers

▪ No. of lecturers in high school offline & online

■ Virtuous Cycle

Increase traffic

Tighten up

on keen competition

Outcome of

superb contents

Increase trafficIncrease traffic

Tighten up

on keen competition

Tighten up

on keen competition

Outcome of

superb contents

Tighten up

on keen

competition

Tighten up

on keen

competition

On : 23%

Off : 50%

On : 23%

Off : 50%

\ 190,000 \ 65,000

- Single subject class

- 2 months (8weeks)

- 2~3hrs / week

- 16 ~20 hrs

▪ Contract with lecturers on the commission basis

Outcome of

superb

contents

Outcome of

superb

contents

1/3

Offline

(373)

Popular lectures

Expert lecturers

Popular lectures

Expert lecturersOnline

(95)

www.megastudy.net

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Offline Infrastructure

Seoul

Yangji boarding school

Seocho Megastudy

Shinchon Megastudy

Kangbook MegastudyNorayngjin Megastudy

Gwangju boarding school

Namyangju boarding school

Kangnam Megastudy

▪ Launched in 2003▪ High school & Re-takers

▪ Single Subject Class1)

: 10,000

▪ Re-takers Class2): 1,100

▪ Launched in 2006▪ Re-takers▪ Capacity : 170



: 18,000

▪ Re-takers Class2): 1,150

▪ Launched in 2008▪ Re-takers▪ Capacity : 470


▪ Single Subject Class1): 3,500

▪ Re-takers Class2): 920



: 30,000




▪ Launched in 2010▪ Re-takers▪ Capacity : 1,000



Pyungchon school

Notes

1) Annual number of courses (“tickets”) sold

2) Number of students taught (“capacity”) at each offline facility

www.megastudy.net

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High Loyalty & Entry Barrier

■ Target marketing

- 5 ~ 6 times per year

- College admission convention

- generated educational culture

- giving out the useful information

about the University admission

(eg. Scoring service, College

application service, etc.)

■ High Entry Barrier

Membership

Offline

institution

Contents

(Lectures)

- Tighten up on the keen competition among offline lecturers

produce outcome of superb contents

- Offline institution is the place where the high quality of

contents can be produced

www.megastudy.net

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Educational expenditure

■ Education expenditure of householder■ Education expenditure of OECD countries

▪ Spending by households on total education and private education rose by 7.1% and 12.0% p.a respectively for past 10 years.

< % of GDP >

3.1

2.1

0.5

1.3

0.7 0.8

1.7

0.9

4.9

5.3

5.8

4.8

5.3

4.5

5.0 5.4

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

KOREA US France Canada UK Germany Japan OECD

Avg.

Public

Private

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08

Private Education

Public Education

% of Education

(%)(miilion won)

www.megastudy.net

10

0

10

20

30

40

50

60

70

2009 2010 2011 2012 2013

8.7bn

21.7bn

33.3bn

47.0bn

58.4bn

Growth & Market Size

■ Special graduate school entrance exam market

■ University transfer entrance exam market

< Sales Trend of MegaMD>

▪MegaMD is recording notable achievement and generated 58.4bn KRW

sales based on the successful performances in four different

business profit centers.

- Megastudy invested 4.3bn in 2010 to acquire “High Top” company to expand business into University transfer entrance exam market and renamed that company to MegaUT.

- In addition, Megastudy completed IvyKimyoung’s acquisition in June of 2011 to be attained the dominant player within a short period of time in UT market.

- IvyKimyoung company was known as no.1 education company in University transfer exam education market.

- Total acquisition price was 18.7 bn won.- Total equity holding of IvyKimyoung is approximately 78%.

▪Megastudy 46 %▪MegaMD 12 %▪Mgmt. of MegaMD & Megastudy 20 %

- Jun 1st. 2013, MegaUT merged with MegaMD- Mar 9th. 2014, Il Deung Law School merged with MegaMD

PEET

51.0 bn

MEET/DEET

31.0 bn

LEET

8.0 bn

MegaMD’s

M/S : 65%

MegaMD & Il Deung Law School’s

M/S : 90%

< 2013 total number of student recruiting >

(billion won)

OrdinaryBachelor's

degreeTotal

Regular 4,506 1,818 6,324

Fine Arts 713 507 778

Medical/Dental

Oriental/Veterinary148 - 148

Total 5,367 2,325 7,692

MegaMD’s

M/S : 50%

▪ Total size of special graduate entrance exam

market is estimated by 90.0 bn KRW

www.megastudy.net

11

Sales Breakdown

Megastudy

Subsidiaries

Megastudy

2010 2011 2012 2013 2014

85.1%

14.9%

25.4%

74.6%

33.3%

66.7%

38.1%

61.9%

40.0%

60.0%

Unit : Billion Won 2010 2011 2012 2013 2014

Megastudy 245.0 263.1 226.7 202.9 202.8

Subsidiaries 42.9 89.6 113.0 126.6 135.1

MegaMD 21.4 33.3 47.0 58.4 61.8

MegaUT - 3.9 3.9 1.3 -

IvyKimyoung - 21.2 29.4 23.8 22.3

MegaBooks 12.7 12.0 11.6 19.7 26.9

MegaFood&Service 0.1 12.3 16.3 17.9 19.2

SEGlobal - - - 0.9 2.8

ILDeung Lawschool 1.8 2.4 2.0 2.6 0

HyungsulEdu 4.2 3.2 2.5 1.4 0.7

M.F.J.S.C(Vietnam) 0.1 0.2 0.3 0.4 0.4

MegaInvestment - - - 0.2 0.8

MegaNext 2.6 1.1 - - -

Resgong 0.2

Internal Transaction -4.4 -9.0 -11.7 -12.6 -13.4

Total 283.5 343.7 327.9 316.8 324.5

www.megastudy.net

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13 4Q 14 4Q YoY

Sales OP OPM Sales OP OPM Sales OP

Consolidate 58.6 -4.0 -6.8% 61.8 -5.8 -9.3% 5.5% -44.8%

Megastudy 35.2 -1.4 -4.0% 36.6 -3.5 -9.6% 3.8% -147.7%

Subsidiaries 25.4 -2.5 -9.7% 27.6 -2.1 -7.7% 8.8% 13.0%

MegaMD 8.2 -3.5 -43.4% 9.7 -2.2 -22.8% 18.9% Deficit

MegaUT - - - - - - - -

IvyKimyoung 7.0 1.3 19.2% 6.6 0.8 11.5% -4.9% -42.8%

MegaBooks 7.0 0.8 11.2% 7.5 0.5 7.1% 7.1% -32.1%

MegaFood&Service 2.4 -0.1 -2.7% 2.7 -0.1 -5.2% 12.3% Deficit

SEGlobal 0.3 -0.3 -103.7% 0.7 -0.3 -40.7% 110.7% Deficit

IldeungLawschool 0.2 -0.2 -136.6% - - - -100.0% -100.0%

HyungsulEdu 0.1 -0.1 -87.1% 0 -0.2 -551.8% -71.0% Deficit

M.F.J.S.C(Vietnam1) 0.1 -0 -57.3% 0.1 -0 -38.1% 23.4% Deficit

Plus Edu(Vietnam2) 0 -0 -193.5% - - - -100.0% -100.0%

MegaInvestment 0.2 -0.1 -63.6% 0.2 -0.2 -90.2% 18.9% Deficit

M.A.V. Fund No.1 - -0.1 - - -0.1 - - Deficit

Mastern No.3 Mega PEV - - - - -0.1 - - Deficit

Resgong - - - 0.1 -0.1 -151.7% - Deficit

Internal Transaction -2.1 -0.1 -2.4 -0.1

2014 4Q Consolidated Performance

Unit : billion won

* Online revenue is recognized on the basis of stage of completion of services.

www.megastudy.net

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13 FY 14 FY YoY

Sales OP OPM Sales OP OPM Sales OP

Consolidate 316.8 50.2 15.8% 324.5 46.9 14.4% 2.4% -6.6%

Megastudy 202.9 38.4 18.9% 202.8 35.9 17.7% -0.1% -6.3%

Subsidiaries 126.6 122.2 9.7% 135.1 11.4 8.4% 6.8% -7.2%

MegaMD 58.3 10.8 18.5% 61.8 8.2 13.2% 5.9% -24.1%

MegaUT 1.3 -0.3 -22.5% - - - -100.0% -100.0%

IvyKimyoung 23.8 0.4 1.9% 22.3 0.8 3.4% -6.1% 67.6%

MegaBooks 19.7 1.4 7.2% 26.9 3.0 11.1% 36.6% 111.3%

MegaFood&Service 17.9 2.5 13.8% 19.2 2.3 12.1% 7.1% -6.6%

SEGlobal 0.9 -1.6 -183.7% 2.8 -0.6 -21.8% 223.2% Deficit

IldeungLawschool 2.6 0.3 13.7% 0 -0.2 -733.3% -99.2% Deficit

HyungsulEdu 1.5 -0.2 -15.0% 0.7 -0.4 -54.3% -54.5% Deficit

M.F.J.S.C(Vietnam1) 0.4 -0.2 -68.1% 0.4 -0.2 -43.2% 9.8% Deficit

Plus Edu(Vietnam2) 0 -0.1 -124.5% - - - -100.0% -100.0%

MegaInvestment 0.2 -0.7 -282.6% 0.8 -0.5 -60.7% 219.6% Deficit

M.A.V. Fund No.1 - -0.1 - - -0.4 - - Deficit

Mastern No.3 Mega PEV - - - - -0.5 - - Deficit

Resgong - - - 0.2 -0.3 -122.8% - Deficit

Internal Transaction -12.6 -0.4 -13.4 -0.4

2014 FY Consolidated Performance

Unit : billion won

* Online revenue is recognized on the basis of stage of completion of services.

www.megastudy.net

14

Consolidated I/S & B/S Summary

Unit : billion won

2013 2014 YOY

Sales 316.8 324.5 2.4%

COGS 124.7 129.2 3.6%

S&A expense 141.9 148.4 4.6%

Operating Profit 50.2 46.9 -6.6%

OPm (%) 15.8% 14.4%

Financial Income 7.7 12.9 68.6%

Financial Exp. 0.5 0.8 58.5%

G/L on Investment of

Subsidiaries -1.3 -1.9 48.9%

Other Operating Income 0.9 2.3 164.7%

Other Operating Exp. 2.3 4.7 101.5%

Profit before tax 54.6 54.6 0.1%

Income tax expense 13.3 14.5 8.8%

Net Profit 41.2 40.1 -2.7%

NPm (%) 13.0% 12.4%

Profit, attributable to owners

of parent36.3 39.1 7.9%

Margin (%) 11.5% 12.1%

Unit : billion won

2013 2014

Total Assets 486.7 574.7

Current assets 188.7 280.8

Non-Current assets 298.1 293.8

Total Liabilities 94.0 151.8

Current Liabilities 79.9 78.8

Non-Current Liabilities 14.2 73.1

Total Shareholder's Equity 392.7 422.8

Paid-in capital 3.2 3.2

Capital Surplus 7.7 7.9

Capital Adjustment -0.2 1.2

Retained Earnings 364.9 390.1

Non-Controlling S/H 17.2 20.5

Total Liabilities &

Shareholder’s Equity486.7 574.7

▪ Consolidated B/S▪ Consolidated I/S

investor relations - megastudy

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