20160719-三星证券-A_visit_to_Japanese_content_companies_21页_941kb

Sector Update Summary

Core Content Overview

This document provides an analysis of the Media/Entertainment sector in South Korea and Japan, focusing on e-commerce, entertainment, and broadcast/media. It compares the business models and market dynamics of Korean and Japanese companies, offering insights into their potential growth and investment value.

Key Companies and Target Prices

Main Sections and Key Points

E-commerce

• Japanese Market Characteristics:

  • The world's fourth-largest e-commerce market, valued over KRW150t, grew at a 12% CAGR from 2010 to 2015.
  • C2C players (Rakuten, Yahoo Japan) dominate, using loyalty programs and ecosystem strategies to retain customers.
  • Rakuten's operating profit exceeds KRW1t annually, while Amazon is the second-largest player in Japan, with a strong focus on e-books and consumer electronics.
  • Yahoo Japan has recently shifted to ad income and implemented aggressive marketing, leading to a rapid increase in transaction value.

• Korean Market Comparison:

  • Korean e-commerce is more fragmented and competitive, with B2C players (e.g., Coupang, Ticket Monster) gaining traction due to smartphone and credit card usage.
  • Price and logistics competition is the primary focus, but this approach may not be sustainable.
  • SK Planet's 11st is suggested to adopt a Rakuten-style ecosystem and loyalty program to enhance its market position and value.

• Investment Implications:

  • The Japanese e-commerce environment is more favorable due to less competition and stronger consumer loyalty.
  • SK Telecom is undervalued as its shares do not yet reflect the value of 11st. A sum-of-the-parts valuation suggests the company could be worth KRW260,000 with an upside of 17.9%.
  • 11st has a transaction value of KRW5t in 2015, second only to Gmarket. It is experiencing rapid mobile traffic growth and has attracted Chinese investors.

Entertainment

• Japanese Market Insights:

  • Japan's music and entertainment market is larger than Korea's, with CD sales still strong and concert sales significantly higher (about 20x Korea's).
  • Japanese artists have longer careers, with some performing for over 20 years, allowing for long-term fan base growth.
  • Avex and Amuse are the only listed entertainment firms in Japan, with Avex dominating the album market and Amuse leading in girl groups.

• Korean Market Outlook:

  • Korean entertainment companies (e.g., YG Entertainment, SM Entertainment) are expected to follow Japan's model by expanding artist lineups.
  • Streaming services in Japan have low penetration (15%), with CDs still being a major revenue source.
  • Korean artists such as TVXQ and Big Bang are popular in Japan and are expected to maintain their relevance for years.

• Investment Implications:

  • YG Entertainment and SM Entertainment are expected to benefit from longer artist careers and diversified revenue streams.
  • The entertainment sector in Korea is volatile, but artist lineup expansion can help stabilize earnings and increase enterprise value.

Broadcasting/Media

• Japanese Market Dynamics:

  • Terrestrial broadcasters (e.g., Nippon Television, Tokyo Broadcasting System) continue to dominate the TV market due to flexible regulations.
  • Pay TV in Japan has low penetration, while terrestrial broadcasters have a stronger presence and more stable revenue.

• Korean Market Comparison:

  • Korean broadcasters are underperforming compared to Japanese terrestrial broadcasters due to strict regulations.
  • CJ E&M is expected to increase ad sales and take market share from terrestrial broadcasters, despite domestic market sluggishness.

• Investment Implications:

  • CJ E&M is undervalued relative to its growth potential in ad sales.
  • SK Telecom could benefit from CJ E&M's ad sales growth, which may lift margins and increase value.

Summary Table

Conclusion

The document emphasizes that Japanese companies have a more favorable business environment in e-commerce and entertainment, driven by loyalty programs, ecosystem strategies, and longer artist careers. Korean companies, particularly SK Telecom and YG Entertainment, are underperforming relative to their potential and should consider adopting Japanese strategies to enhance their market value and long-term growth.