2H17 Internet Game Advertising Outlook

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S.

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Jee-hyun [email protected]

Actions to drive growth coming into focus

2H17 Outlook

Internet/Game/Advertising

[Summary] Actions to drive growth coming into focus 3

I. 1H17 review 4

II. 2H17 outlook 7

III. [Internet] Two-track strategy 8

IV. [Game] New titles & M&As 16

V. [Advertising] Environmental factors & inorganic growth 21

VI. Investment strategy & valuation 25

VII. Top picks & other notable stocks 31

[Top picks] NAVER, NCsoft

[Conclusion] Focus on game changers 50

Contents

Mirae Asset Daewoo Research3| 2H17 Outlook [Internet/Game/Advertising]

Source: Mirae Asset Daewoo Research

Growth engines such as AI, new game launches, and M&As to boost earnings and shares; Maintain Overweight

[Summary] Actions to drive growth coming into focus

Action![Internet] AI [Game] New game launches [Internet/Game/Advertising] M&As


Expectations reflected in 1H17

- Game: Expectations for new titles, IPO of Netmarble Games, deregulation

- Kakao: Near-term earnings rebound, spin-off of Kakao Pay, reorganization of the mobility services business

• In 1H17, game stocks and Kakao delivered robust share performances among internet/game/advertising plays.

• Game: Expectations for new titles (NCsoft); solid earnings and valuation merits (Com2uS); IPO (Netmarble Games)

• Kakao: Recovery in ad revenue, growth in content revenue (cash cow), and expectations for YoY earnings growth

In 1H17, game stocks and Kakao delivered robust share performances

1H17 share performance: NCsoft, Com2uS, and Kakao outperformed peers

Source: Thomson Reuters, Mirae Asset Daewoo Research

I. 1H17 review

80

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120

140

160

5/16 7/16 9/16 11/16 1/17 3/17 5/17

(1/17=100)NAVER KakaoNCsoft Com2uSCheil Worldwide INNOCEAN Worldwide 2017


The ad business represents a key business model for internet firms.

- The ad business is a core business model for internet firms.

- Tencent has seen performance-based ad revenue exceed traditional display ad revenue since 3Q16.

• For Kakao, ad revenue fell 10% YoY in 2016.

• In 1Q17, however, ad revenue resumed growth, boosting the stock.

• In 2H17, the company plans to roll out new ad products, including Kakao Moment, a performance-based ad platform boasting superior targeting.

Key shifts in Kakao’s drivers in 1H17

In 1Q17, shares of Kakao rebounded on ad revenue growth

Source: Company data, Thomson Reuters, Mirae Asset Daewoo Research

I. 1H17 review

4,500

5,000

5,500

6,000

6,500

7,000

-15

-10

-5

0

5

10

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17F

(Wbn)(%, YoY)Ad revenue growth (L) Market value (R)


Impact of the Netmarble Games IPO on game stocks

- Game stocks enjoyed a boost following confirmation of theupper bound of Netmarble’s price range

- Marketing for new titles drew attention to the game sector.

- Increased M&A activity shined a spotlight on small/medium-sized game stocks

• Biggest event of 1Q17: Netmarble Games IPO (KOSPI)

• Netmarble Games’ market cap stands at around W13tr. Globally, there are only six game stocks with market caps of more than W10tr (Tencent, Activision Blizzard, Nintendo, NetEase, Electronic Arts, and Netmarble Games).

• For most game companies, the number of new title launches has increased YoY this year. Valuation merits are increasing.

Netmarble Games IPO

Major game stocks have advanced since the beginning of the year; Differentiated share performance since the Netmarble Games IPO

Note: For Netmarble Games, 100 marks the IPO priceSource: Thomson Reuters, Mirae Asset Daewoo Research

I. 1H17 review

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100

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1/17 2/17 3/17 4/17 5/17

(1/17=100)NCSOFT Com2uSNHN Entertainment DoubleUWebzen GamevilNetmarble Games



Major variables and stocks in the internet/game/advertising sectors in 2H17

• Companies will likely make visible efforts to achieve growth in 2H17.

• Internet: AI businesses are likely to take off, leading to an increase in AI device launches. Existing businesses will continue to seek additional growth drivers.

• Game: New title launches, overseas publishing, and M&A activity should pick up.

• Advertising: Digital will likely gain ground in the ad market; domestic regulatory risks vs. overseas M&A opportunities.

Actions to drive growth taking shape

II. 2H17 outlook

2H17 Top picks and other notable stocks

Internet • AI service and device launches to pick up• Internet ad market to exceed the TV ad market• Content AI-based recommendation services; increase in

exclusive production/distribution

• Top pick: NAVER• Notable stocks: Kakao, Interpark

Game• Pickup in new mobile title launches in the domestic

market• Increase in overseas publishing, particularly in China• Greater M&A activity and deregulation

• Top pick: NCsoft• Notable stocks: Netmarble Games,

Com2uS

Advertising• Digital media to gain ground in the ad market• Ad agencies: Increase in affiliate billings vs. stricter

regulations on related-party transactions • Global M&As to increase, backed by ample cash holdings

• Notable stocks: INNOCEAN Worldwide, Nasmedia, Cheil Worldwide


Source: Thomson Reuters, Advertising Yearbook, Mirae Asset Daewoo Research

Korea internet index: Seeking growth through AI

• The domestic internet index has displayed three distinct growth stages:

1) 2017-12: The index gained 35%, in line with the expansion of the internet ad market from W1tr to W2tr.

2) 2013-16: The index advanced 70%, with the pickup in mobile revenue pushing up the value of the internet ad market to W3tr.

3) 2017 and beyond: Internet ad revenue has caught up with TV ad revenue. Companies are looking for new growth opportunities via AI.

Current stage: Looking for growth through AI

III. [Internet] Two-track strategy

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(Wtr)(P)Korean internet ad market (R)

Korean internet sector index (L)

Korean TV ad market (R)

Mobile ad-led growth

Application of AI

Internet ads: W1tr → W2tr

Global financial

crisis


Note: As of 1Q17 (YoY)Source: Company data, Mirae Asset Daewoo Research

NAVER’s AI business to drive cloud business growthGlobal IT firms, which are expanding their AI businesses, are enjoying rapid growth in cloud revenue

Source: Company materials, Mirae Asset Daewoo Research

• AI businesses and devices are taking off at home and abroad.

• Global IT firms, which have recently been expanding their AI businesses, are delivering rapid growth in cloudservices revenue.

• NAVER unveiled its AI platform Clova in March, and announced its plans to expand its global B2B cloud business in April.

• AI platforms serve as interfaces. Cloud services should generate actual revenue.

New business opportunities: AI + services


43%

35%

11% 10%

19%

31%

Amazon IBM Microsoft Amazon IBM Microsoft

Cloud revenue growth Cloud revenue share

Clova Papago Smart devices


Source: Company data, Mirae Asset Daewoo Research

Kakao tackles daily tasks: Increased integration of AIKakao’s AI business: Kakao Talk to be transformed into a platform

Source: Company data, Mirae Asset Daewoo Research

• “Bots are the new apps,” said Microsoft CEO Satya Nadella at a 2016 conference .

• With users currently reliant on a plethora of apps, bots can improve convenience by responding to voice commands.

• Total time spent (TTS) on messaging apps is on the rise. Messaging apps have broadened their scope to include features aimed at making daily tasks easier.

• If chatbots evolve into one-stop service platforms via AI, they can provide real concierge services.

New business opportunities: AI + services


Assistant Bot

Plus Friend Bot


Notes: NAVER/LINE’s voice recognition speaker WAVE and display device FACE; NAVER Labs’ M1 robot; Kakao’s AI device launch in 3Q17 Source: Company materials, Mirae Asset Daewoo Research

Launch of AI-based hardware by internet firms to increase full swing in 2H17

• Internet firms’ medium- to long-term goal for their AI investments is the expansion of influence in the platform space.

• Internet firms are now turning their eyes to unclaimed areas—living rooms and cars.

• To make forays into living rooms, they are developing voice recognition speakers. Voice recognition and robotics will likely pave the way for entries into the automotive market by internet firms.

• As drivers tend to consume audio content heavily while they are driving, voice recognition technology should be useful. Robotic hardware and autonomous technology will also likely be widely utilized.

New business opportunities: AI + hardware



Notes: Based on consolidated data; business platform revenue includes search ad revenue; IT platform revenue includes payments, IT services, and cloud revenue Source: Company data, Mirae Asset Daewoo Research

NAVER shopping search ads payments: Virtuous cycle NAVER’s shopping business boosts revenue growth of business and IT platforms


• Internet firms need to make further progress in the monetization of mobile traffic.

• For NAVER, the shopping business supports the company’s other businesses, including search ads (business platform) and payments (IT platform).

• Launched in November 2016, the shopping search ad business will likely boost revenue across all business units in 2017.

• NAVER’s Shopping Window has created a virtuous cycle across the ecosystem by providing a wide range of solutions to sellers.

Additional growth of existing businesses:Shopping to provide catalysts


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1Q16 3Q16 1Q17 3Q17F

(Wbn)(Wbn)Business platform revenue (L)

IT platform revenue (R)

NAVERShopping

Productregistration

NAVERShopping

search ads

Ad registration

NAVERPay

Point accumulation

to users

Sales commissions

based on shopping

mall visits

Search ad revenue

Fees based on ad

registrationand clicks

User accumulates pointsbased on ad clicksPoints can be used on

subsequent purchases

Payment fees and purchase data collection

+ bid


Notes: Under consolidated K-IFRS; Loen Entertainment’s revenue is recognized as music content revenue (consolidated since 2Q16))Source: Company data, Mirae Asset Daewoo Research

Kakao benefiting from launches of more sophisticated games;KakaoPage transactions grew 60% YoY in 1Q

Kakao’s content business: Maintaining robust growth andcontinuing to serve as a cash cow


• Kakao’s content business is maintaining steady growth, and remains the company’s cash cow.

• Loen Entertainment’s earnings have been consolidated since 2Q16; MelOn has been enjoying net growth in paid subscribers in 2017, thanks in part to the linkage of Kakao Talk and MelOn accounts.

• Game revenue is anticipated to rebound following the launches of more sophisticated games, including Penta Storm in 2Q and Onmyoji in 3Q.

• KakaoPage is enjoying double-digit transaction growth YoY, as well as higher traffic than NAVER Webtoon.

Additional growth of existing businesses:Digital content


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1Q16 3Q16 1Q17 3Q17F

(Wbn)(Wbn)Game content revenue (L)

Music content revenue (L)

Other content revenue (R)


Note: Concept map for Kakao’s interactive content recommendation system RUBICS Source: Company materials, Mirae Asset Daewoo Research

AI and recommendation services/targeting are boosting revenue by pushing up content consumption; Display ad revenue could increase for free content

• Internet firms are seeking to bolster the growth momentum of existing businesses via AI technology.

• For example, mobile content services are adopting personalized recommendation services.

• By applying targeting technologies to mobile services, internet firms aim to boost per-user content consumption.

• After applying AI, per-user consumption of mobile news content increased by 20% for Daum and over 30% for NAVER.

Additional growth of existing businesses: AI and targeting


Individual user

Individual user

Individual user

Individual user

mtop news1

Individual user

Individual user

Individual user

Individual user

mtop news2

mtop news3

mtop news1

User interest not

reflected

User interest not

reflected

User interest not

reflected

User interest not

reflected

User interest reflected in

news content



Risks: Concerns over cost increases due to investment expansion

Opportunities: Margin growth driven by monetization ofadditional business models and new businesses


• Opportunities: Potential upside to margins via additional monetization of mobile business models; AI to support new businesses and drive the growth of existing businesses

• Risks: Concerns over increasing AI investment costs; slow pace of monetization of new businesses

• Internet firms’ capex stands at just 10-20% of revenue.

• Internet firms are pursuing sustainable, secular growth by simultaneously pursuing further growth of existing businesses and the expansion of new businesses.

Opportunities vs. risks


• Potential upside to margins via monetization of mobile business models

• AI to support new businesses as well as growth of existing businesses

• Concerns over increasing AI investmentexpenses

• Monetization of new businesses should be approached from a long-term

perspective


Notes: Combined market cap is based on the market caps of NCsoft, Com2uS, NHN Entertainment, Webzen, DoubleU Games, and Neowiz Games as of mid-May of each year. For Netmarble Games, estimated valuations during 2014-16 were included. Combined revenue includes revenue from PC online, mobile, console, PC CD, arcade, and internet café games. Source: KOCCA, Thomson Reuters, Mirae Asset Daewoo Research

Game industry is undergoing restructuring, spurred by increasingly elaborate mobile titles and a wave of M&A deals

• The domestic game industry’s market cap trend can be divided into three growth stages:

1) 2000s: Rapid growth of online games; diversification and increasing sophistication of PC online games

2) 2012-15: Growth driven by mobile casual games; the rise of games based on messaging apps/social networking services (SNS)

• 3) 2016 and beyond: Increasingly ambitious mobile games and industry restructuring; the introduction of MMORPGs; increasing M&A activity among global players

Long-term trends: Increasingly large-scale games and industry restructuring

IV. [Game] New titles & M&As

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(Wtr)(Wtr) Korean game market revenue (L)Total market cap of Korea's major game stocks (R)

Double-digit growth in online games

Mobile casual game-driven growth

Mobile game market expansion and restructuring


Note: ARPPU = average revenue per paying user)Source: KOCCA, App Annie, Mirae Asset Daewoo Research

Major domestic game firms’ new titles scheduled for launch after May 2017

RPGs and MMORPGs to drive competition among new mobile titles


• New mobile title launches are projected to pick up in 2017, mainly driven by MMORPGs.

• Expectations for new titles (i.e., new sources of revenue) serve as the strongest momentum driver for game stocks.

• Best-case scenario: Generation of new revenue without cannibalization of existing game revenue

• For this scenario to actually materialize, game companies need to pursue genre and market diversification and strategically set user targets.

1) Increasing new title launches


Company Games

NetmarbleGames

Night of War, Stone Age Mobile, Destiny 6, Epic Saga, Monster Age, ArchMoon, Soul King, GLiNDA, Seven Knights (MMORPG), Phantom Gate, 4Ones Poker, Blade & Soul (MMORPG),

Tera Mobile, The King of Fighters: All Star, Teria Saga, First Born, G. I. Joe, Trendy Town

NCsoft

Lineage M (mobile), Aion Legions (mobile), a new game developed

by a US subsidiary,Lineage Red Knights (mobile) overseas,

Lineage Eternal (PC), Blade & Soul Mobile, Lineage II Mobile

Com2uS

Majestia, Project S, Ace Fishing VR, Birdie Crush,

Danceville, Skylanders Mobile, Heroes War 2,

Summoners War (MMORPG)


Note: 2017 data are our forecasts Source: Bloomberg, Mirae Asset Daewoo Research

Domestic game companies’ export and import trends M&A and investment trends in the global game industry

Note: 2016 and 2017 data are our estimates Source: KOCCA, Mirae Asset Daewoo Research

• We are likely to see an increase in M&A deals in the global game industry.

• In 2011, mobile games sharply gained popularity with the rapid penetration of smartphones, and major game companies’ acquisitions of mobile game studios picked up significantly.

• The most significant M&A deal in 2015 was Activision Blizzard’s acquisition of mobile game developer King Digital.

• M&A activity will likely pick up going forward as the scales of individual titles grow more ambitious, the development studio system proliferates, and global game companies pursue revenue growth.

2) M&A activity to pick up


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(no.)(US$bn)Total value (L)No. of deals (R)

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(US$mn)(US$mn)Exports (L)Imports (R)


Note: Our 2017 estimate includes expected capital inflow from the IPO of Netmarble Games, NCsoft’s sale of NC Tower 2, and Com2uS’s annual free cash flow expansionSource: Company data, Korea Ratings, Mirae Asset Daewoo Research

Smaller companies are differentiating themselves with advanced technologies, including AR and VR Leading players are accumulating cash

Note: Includes yet-to-be-released titles Source: Company materials, media reports, Mirae Asset Daewoo Research

• Major domestic and overseas game companies are currently accumulating cash, which could be used for M&As.

• Smaller companies are differentiating themselves by focusing on new releases and entries into augmented reality (AR) and virtual reality (VR).

• Amid the ongoing restructuring of the game market, leading game companies will likely receive premiums.

• With M&A activity picking up, small/mid-sized game companies boasting robust competitiveness and/or solid intellectual property should attract attention. We anticipate the game sector to undergo a broad-based re-rating.

2) M&A activity to pick up


Company VR and AR game titles

Com2uS Ace Fishing VR

JoyCity Gunship Battle 2 VR

Mgame Scions of Fate VR

Dragonfly Special Force VR, Ddobot VR

Hanbit Soft Hellgate: London VR

Epic Games Robo Recall

Bluehole Valkyrie Blade

5minLab Snake VR, Welder VR, Toy Clash

SkonecEntertainment Mortal Blitz VR for PS 0

1

2

3

4

5

6

2011 2012 2013 2014 2015 2016 2017F

(Wtr)Netmarble Games

NCsoft

Com2uS



Risks: Higher share price volatility and cost increases Opportunities: Revenue growth from success of new titles and potential improvement in Chinese business


• Opportunities: Potential success of new titles; the possibility of deregulation; and improvement in the Chinese business

• Risks: Share price volatility related to uncertainties over new games’ prospects and market competition; structural growth in expenses related to the development of mobile games

• Game companies have recently been utilizing a variety of pre-launch marketing tools to increase the likelihood of success for new titles.

• Mobile game user base is expanding on the inflow of PC online game users (thanks to increasing sophistication and genre diversification).



• Success of new games could accelerate revenue growth

• Potential deregulation and improvement in the Chinese business environment

• Uncertainty over the prospects of new titles could lead to higher share price

volatility

• Structural increase in expenses related to mobile game business


Source: Company data , Thomson Reuters, Mirae Asset Daewoo Research

Advertising firms’ overseas gross profit growth slowing in 2017; M&A wave will resume amid growing focus on global brand marketing

• Korean advertising firms’ market cap trend can be divided into three phases:

• 1) Early/mid-2000s: Dominance of single-entity business structure; dependence on the domestic market and affiliates

• 2) 2008-13: Expansion into overseas markets amid the global financial crisis and limited upside to domestic advertising market growth

• 3) 2014 and beyond: Shift toward an M&A-driven, group-based business structure; development of digital media capabilities holds the key

Growing importance of digital media platforms and M&As

V. [Advertising] Environmental factors & inorganic growth

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(Wtr)(Wbn)

Ad universe - gross profit from overseas sales (L)Ad universe - market cap (R)

Domestic-oriented

Expansion of overseas networks, start of overseas M&As

Increasing digital importance, continued overseas M&As


Source: Adweek, company materials, Mirae Asset Daewoo Research

Nasmedia: Beneficiary of intensifying competition Cheil Worldwide and INNOCEAN endeavoring to expand affiliate business


• Ad firms must proactively and flexibly respond to changes in both advertisers and the media environment.

• Advertisers: Cheil Worldwide and INNOCEAN Worldwide have been endeavoring to expand orders from affiliates mainly in North America. This year, they have been focusing on expanding affiliate billings, rather than diversifying their advertiser bases.

• Media: Nasmedia, an media rep, has expanded into the search ad market, through the acquisition of N Search Marketing.

1) Environmental factors: Advertiser-driven shifts and media platforms


Cheil WorldwideUS subsidiary TBG

recently appointed Cathy Butler (formerly of

DigitasLBi/Publicis, the agency of Samsung

global) as CEO.

Cheil WorldwideUS subsidiary TBG

recently appointed Cathy Butler (formerly of

DigitasLBi/Publicis, the agency of Samsung

global) as CEO.

Set to expand orders from affiliates, mainly in North America

Set to expand orders from affiliates, mainly in North America

INNOCEANWith Kia’s contract

with a US ad agency slated to expire in 2018,

the firm will likely acquire a company that can carry out Kia’s US ad business.

INNOCEANWith Kia’s contract

with a US ad agency slated to expire in 2018,

the firm will likely acquire a company that can carry out Kia’s US ad business. 58%

20%

7%

15%

2017F revenuebreakdown

Online display ads

Online search ads

IPTV ads

Digital outdoor ads


Note: 2017F data are based on our estimates.Source: Bloomberg, Mirae Asset Daewoo Research

INNOCEAN plans to forge an M&A deal in 2H Global ad industry M&A trend


• Ad firms view M&As as a way to drive top-line growth.

• Ad agencies create synergies through M&As in the following ways:

1) Existing clients could forge additional deals in recognition of the acquired company’s capabilities.

2) If acquired companies are allowed to operate independently, ad agencies can increase their account coverage while avoiding conflicts between clients that operate in the same industry.

3) Market regions and business areas can be further diversified.

2) Inorganic growth:M&As


M&AM&A

Internalization of overseas media

capabilities

Internalization of overseas media

capabilities

Expansion of non-affiliate orders

Expansion of non-affiliate orders

Global business expansion Global business expansion

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(No.)(US$bn)

Value (L)

No. of deals (R)



Risks: Restrictions on related-party transactions could be strengthened

Opportunities: Increased marketing spend and growing demand for global brand marketing


• Opportunities: Ad agencies should see increased business if clients aggressively expand marketing spend amid intensifying competition.

• Risks: Ad agencies could be hit hard by the new administration’s potential tightening of regulations on related-party transactions (amid the recent uptrend in the contribution of affiliate billings to total revenue).

• Meanwhile, overseas transactions are not subject to regulations on related-party transactions.

• There are opportunities for inorganic growth driven by acquisitions of overseas companies and firms with strong digital media capabilities.



• Companies in the IT, game, internet bank, and auto industries will likely expand marketing spend amid intensifying market competition

• Growing need for global brand marketing to boost overseas sales

• Ad agencies are now more dependent on affiliate billings

• The new administration could toughen restrictions on related-party transactions



Shares reflect AI commercialization expectationsExpectations for additional monetization of mobile businesses


• Three potential upside catalysts for shares of internet companies:

1) Contributions of new mobile businesses: The successful monetization of mobile profit models backed by strong user traffic should lead to a rise in EV.

2) Commercialization of AI-related businesses: Amazon’s launch of the Echo smart speaker and Alexa triggered a broad-based P/E re-rating of internet companies.

3) Global business expansion: Given the limited growth potential of the domestic market, global market expansion should give additional momentum to Korean internet shares.

[Internet] Investment strategy

VI. Investment strategy & valuation

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(x)(W'000)NAVER price (L)

NAVER P/E (R)

Launched Shopping Window

Launched shopping

search ads

Launched NAVER

Pay

Launched SNOW,V Live

LINEIPO

Snap IPO(SNOW

spotlighted)

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(x)(US$)Amazon price (L)Amazon P/E (R)

Launched Echo, Alexa

Launched Echo Dot

Launched 2 types of Prime plans

Launched Prime Video globally

Opened1st offline bookstore


Notes: Korean companies’ data are based on our estimates; other companies’ data are based on the Bloomberg consensusSource: Bloomberg, Mirae Asset Daewoo Research

Global internet companies’ valuations


Company Market cap (Wbn)

Revenue (Wbn) Operating profit (Wbn) Net profit (Wbn) P/E (X) EV/EBITDA (x) P/ B (x) ROE (%)

17F 18F 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F

NAVER 27,161 4,715 5,467 1,274 1,548 909 1,095 30.5 25.3 16.6 13.5 4.7 4.0 22.1 21.6

Kakao 6,453 1,908 2,104 169 220 130 138 53.2 49.9 23.4 20.1 1.8 1.8 3.5 3.6

Interpark 441 510 530 29 26 19 17 24.4 27.2 8.9 9.0 2.5 2.3 10.5 8.7

Alphabet 722,500 99,356 115,424 40,866 47,808 32,900 38,617 22.7 19.3 12.7 10.9 4.0 3.4 14.8 14.9

Amazon 507,097 185,492 224,167 6,245 10,538 6,737 9,945 75.0 51.0 23.4 17.7 17.9 12.6 19.4 22.2

Facebook 471,458 43,366 55,597 19,653 25,591 18,699 23,755 26.0 20.6 16.4 12.9 5.7 4.6 24.1 24.5

Yahoo 53,424 3,899 3,887 445 422 746 709 69.7 69.8 46.6 45.9 1.5 1.5 1.9 2.0

Snap 26,350 1,134 2,190 -1,018 -806 -928 -534 - - - - 8.5 10.9 -64.6 -28.0

Twitter 15,002 2,644 2,797 317 404 264 318 57.1 46.9 18.2 16.3 2.9 2.8 5.2 7.2

Yahoo Japan 27,964 9,072 9,734 2,127 2,335 1,423 1,552 19.1 17.5 9.5 8.5 2.7 2.6 13.8 13.8

Rakuten 18,470 8,787 9,734 1,203 1,394 695 817 25.2 21.2 3.7 3.3 2.5 2.3 10.1 11.2

LINE 8,568 1,665 1,908 269 378 153 222 55.6 38.3 23.0 17.1 4.7 4.2 9.3 11.4

Tencent 355,162 34,875 44,988 11,918 14,903 9,670 12,293 36.5 28.5 25.7 20.6 9.6 7.4 28.2 27.5

Alibaba 338,269 25,315 33,538 7,606 10,556 9,746 12,265 35.1 28.1 27.6 21.2 7.6 6.1 19.4 20.2

Baidu 72,599 13,964 16,955 1,930 2,684 2,199 2,984 33.6 24.4 24.5 18.5 4.2 3.6 12.0 15.1

JD.com 64,224 56,997 71,873 139 861 579 1,327 123.3 53.7 70.6 35.4 8.7 7.7 -0.2 8.3

Momo 8,797 1,270 1,755 281 414 322 452 29.6 20.9 23.6 16.1 9.5 6.6 33.7 33.6

Average 39.6 32.6 23.4 17.9 5.8 5.0 14.2 15.4


Source: NAVER Data Lab, Thompson Reuters, Mirae Asset Daewoo Research

P/E re-rating on fundamental improvementExample of re-rating on expectations for new game launches


• Investment strategy for game stocks:

1) Short term: Focus on event-driven momentum (e.g., new game launches). For game stocks, expectations for key events tend to move shares ahead of actual earnings growth.

2) Medium term: Focus on growth potential (in revenue terms). Qualitative aspects of revenue growth are also noteworthy.

3) Long term: Focus on potential re-ratings backed by fundamental improvement (e.g., PC online game companies’ expansion into mobile games).

[Game] Investment strategy


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(W'000)(Max=100)"Lineage M" search index (L)

"Lineage Red Knights" search index (L)

"Lineage 2: Revolution" search index (L)

NCsoft stock price (R)

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Activision Blizzard market cap (L)

Activision Blizzard P/E (R)

2015:Acquired

mobile game developer


Notes: Netmarble Games, NCsoft, and Com2uS data are based on our estimates; other companies’ data are based on the Bloomberg consensusSource: Bloomberg, Mirae Asset Daewoo Research

Global game companies’ valuations


Company Marketcap (Wbn)

Revenue (Wbn) Operating profit (Wbn) Net profit (Wbn) P/E (x) EV/EBITDA (x) P/B (x) ROE (%)

17F 18F 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F

Netmarble Games 12,540 2,374 2,601 678 740 514 568 23.0 20.8 17.4 15.5 6.1 4.7 30.5 25.5

NCsoft 8,201 1,580 1,784 516 666 389 503 21.0 16.3 13.4 10.1 3.5 3.0 19.1 21.1

Com2uS 1,499 565 625 212 234 166 183 9.0 8.2 3.6 2.6 1.9 1.5 23.4 21.2

NHN Entertainment 1,366 951 1,045 46 69 58 80 23.4 17.4 7.3 6.0 0.9 0.9 3.9 5.0

DoubleU Games 995 220 269 90 131 79 95 11.8 9.5 7.0 4.8 2.1 1.7 19.0 19.3

Webzen 734 256 371 64 87 53 71 14.0 10.4 9.5 7.1 2.5 2.0 19.7 21.5WeMade Entertainment 549 171 213 26 30 23 27 23.6 20.6 9.1 8.0 1.3 1.3 4.6 5.3

Activision Blizzard 46,715 7,328 8,053 2,324 2,804 1,726 2,132 27.7 22.7 18.3 15.3 4.1 3.6 13.9 15.3

Electronic Arts 36,914 5,886 6,290 1,906 2,211 1,475 1,736 25.3 21.6 15.8 13.8 6.9 5.5 28.7 28.1

Take-Two 7,677 2,088 2,504 329 504 258 379 33.1 23.7 18.1 12.6 6.5 5.2 24.4 21.0

Zynga 3,293 930 1,026 78 132 83 114 41.4 31.4 18.9 14.4 1.9 1.8 4.5 5.8

Glu Mobile 400 295 339 -26 3 -28 -1 - - - - 1.9 1.9 -10.8 3.2

Ubisoft 6,589 2,097 2,487 313 485 219 355 28.6 19.4 6.7 5.6 4.2 3.6 13.9 17.8

Nintendo 43,797 8,011 9,897 1,065 1,726 804 1,255 44.6 28.9 29.1 17.8 2.9 2.8 6.8 9.6

Nexon 9,399 2,087 2,193 792 807 590 641 15.1 14.4 7.0 7.1 2.1 1.9 14.7 13.7

Square Enix 4,420 2,534 2,674 390 423 254 274 17.1 15.7 6.9 6.6 2.2 2.0 13.2 12.9

DeNA 4,115 1,537 1,562 324 346 207 220 18.9 17.3 7.3 6.6 1.6 1.5 9.1 9.2

Gungho Online 2,766 970 889 359 313 222 193 9.6 11.1 6.2 6.7 3.7 2.9 43.8 28.8

GREE 2,281 617 672 81 106 109 58 16.7 30.4 14.1 10.0 2.0 1.9 11.9 6.6

Tencent 362,763 35,762 283 11,943 92 9,680 76 37.0 28.9 25.6 20.2 9.6 7.4 28.5 27.8

NetEase 41,934 8,615 64 2,619 19 2,432 17 17.2 15.0 13.3 11.3 5.1 4.1 31.8 28.6

Kingsoft 4,049 1,685 2,059 232 305 236 311 17.6 13.4 10.8 8.2 2.8 2.3 16.9 18.8

Youzu Interactive 4,007 603 763 136 179 145 189 28.7 22.3 28.8 24.3 6.8 5.2 24.4 24.1

Changyou 2,139 639 699 181 199 195 210 11.5 10.6 5.8 5.5 1.5 1.3 13.9 13.2

Average 22.4 18.6 12.9 10.2 3.4 2.8 17.1 16.8


Global valuation trends

- Shares of Chinese and Japanese ad agencies displayrelatively high P/Es, backed by strong growth of the Chinese ad market and economic recovery and solid demand in Japan.

- Full-service ad agencies WPP and Publicis are trading at relatively low P/Es due to low growth.

• For advertising stocks, growth potential (in revenue terms) is the primary investment focus. As such, investors are advised to focus on the growth gaps among different regions and platforms.

1) Ad market growth varies from region to region: Asia > US > Europe

2) Firms with greater exposure to digital media platforms should deliver strong top- and bottom-line growth.

• At the moment, exposure to digital media platforms is considered a more important variable than regional factors.

[Advertising] Investment strategy

Major global advertising agencies’ 12-month forward P/E trends: Asia > US > Europe



10

14

18

22

26

30

1/17 2/17 3/17 4/17 5/17

(x) Cheil Worldwide INNOCEAN Worldwide NasmediaWPP (UK) Omnicom (US) Publicis (France)Dentsu (Japan) BlueFocus (China) Avg.


Notes: Korean companies’ data are based on our estimates; other companies’ data are based on the Bloomberg consensusSource: Bloomberg, Mirae Asset Daewoo Research

Global advertising companies’ valuations


Company Marketcap (Wbn)

Revenue (Wbn) Operating profit (Wbn) Net profit (Wbn) P/E (x) EV/EBITDA (x) P/B (x) ROE (%)

17F 18F 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F

Cheil Worldwide 2,209 3,265 3,390 162 170 114 120 19.9 18.9 8.7 8.1 2.0 1.8 13.8 13.2

INNOCEAN Worldwide 1,368 1,136 1,226 106 115 74 80 22.1 20.5 6.0 5.1 2.0 1.8 9.1 9.2

Nasmedia 405 118 138 31 36 24 28 18.8 16.2 11.6 9.6 3.5 3.0 20.1 19.9

Guangdong Advertising 3,030 2,223 2,659 190 227 132 159 23.0 17.9 16.5 14.1 3.3 2.9 14.7 14.9

BlueFocus 2,660 2,713 3,553 142 189 139 169 17.8 15.2 16.7 13.4 2.2 2.0 13.5 13.8

Dentsu 17,317 9,197 9,770 1,459 1,562 887 973 18.1 16.6 10.2 9.7 1.6 1.5 9.3 9.6

Hakuhodo DY 5,846 13,045 13,508 499 532 290 306 19.2 18.2 8.1 7.7 1.8 1.7 9.7 9.8

Asatsu-DK 1,202 3,534 3,594 61 66 52 56 22.2 20.7 13.3 12.4 1.0 0.9 4.5 4.1

WPP 31,682 21,946 22,889 3,202 3,382 2,294 2,422 13.6 12.8 9.9 9.4 2.2 2.1 17.3 17.1

Omnicom 21,699 17,113 17,845 2,293 2,409 1,327 1,396 16.4 15.2 9.6 9.3 8.6 8.3 50.9 51.5

Publicis 18,653 12,382 12,847 1,998 2,168 1,352 1,469 13.7 12.7 8.8 8.3 2.2 2.0 16.8 16.5

Interpublic 10,732 9,007 9,398 1,123 1,204 661 722 16.2 14.6 9.0 8.4 4.5 4.4 27.5 28.2

Average 18.4 16.6 10.7 9.6 2.9 2.7 17.3 17.3


Stocks to watch Top picks are NAVER and NCsoft


• Our top picks in internet/game/advertising for 2H17 are NAVER and NCsoft.

• NAVER: The AI business is likely to generate new revenue opportunities, while the shopping segment serves as a key catalyst for growth across the company.

• NCsoft: Momentum is building for the new mobile title Lineage M. If the PC online game-focused company is able to become a leader in mobile games as well, the stock could be re-rated higher.

• In our view, the biggest investment merit of both companies is the fact that new revenue opportunities (multiple expansion) are emerging alongside solid existing businesses (EPS).

Our top picks in internet/game/advertising:NAVER and NCsoft

VII. Top picks & stocks to watch

Sector Company Rating Investment points

Internet

Kakao Buy Content recovery; revenue from new businesses

Interpark Trading Buy

Improving margins; strong performance of tour business

Game

Netmarble Games Buy Overseas launch of Lineage II:

Revolution; M&A

Com2uS TradingBuy

High overseas exposure; attractive valuation

Ad

INNOCEANWorldwide Buy US business gaining traction;

M&As

Nasmedia BuyStrength in digital media;benefits from advertiser

competition

CheilWorldwide

Trading Buy

Cost controls support steady profits; affiliate billings

• Maintain Buy and TP of W1,160,000

• New opportunities- AI business- Cloud revenue on

the horizon

• Growth of existing businesses - Shopping is key

catalyst of growth - Progress in mobile

offerings

• Maintain Buy and TP of W1,160,000

• New opportunities- AI business- Cloud revenue on

the horizon

• Growth of existing businesses - Shopping is key

catalyst of growth - Progress in mobile

offerings

• Maintain Buy and TP of W500,000

• New titlemomentum- Launch of Lineage

M (mobile)- Lineage Eternal (PC)

under development

• Consolidation- Mobile games are

growing more advanced

- M&A activities

• Maintain Buy and TP of W500,000

• New titlemomentum- Launch of Lineage

M (mobile)- Lineage Eternal (PC)

under development

• Consolidation- Mobile games are

growing more advanced

- M&A activities



(Maintain)

Target Price (12M, W)

Share Price (5/18/17, W)

1,279

EPS Growth (17F, %)

Market EPS Growth (17F, %)

P/E (17F, x)

Market P/E (17F, x)

KOSPI

Market Cap (Wbn) FY (Dec.) 12/14 12/15 12/16 12/17F 12/18F 12/19F

Shares Outstanding (mn) Revenue (Wbn) 2,758 3,254 4,023 4,715 5,467 6,240

Free Float (%) OP (Wbn) 758 830 1,102 1,274 1,548 1,812

Foreign Ownership (%) OP margin (%) 27.5 25.5 27.4 27.0 28.3 29.0

Beta (12M) NP (Wbn) 454 519 749 891 1,073 1,249

52-Week Low EPS (W) 13,787 15,737 22,732 27,025 32,556 37,905

52-Week High ROE (%) 27.8 26.5 26.2 22.1 21.6 20.5

(%) 1M 6M 12M P/E (x) 51.6 41.8 34.1 30.5 25.3 21.7

Absolute 5.9 6.9 18.1 P/B (x) 8.7 6.8 5.2 4.7 4.0 3.4

Relative -0.5 -7.7 1.0 Div.Yield (%) 0.1 0.2 0.1 0.1 0.2 0.2

Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests

Source: NAVER, Mirae Asset Daewoo Research estimates

36.4

Buy

1,160,000

824,000

Expected Return 41%

OP (17F, Wbn) 1,274

Consensus OP (17F, Wbn)

18.9

61.4

0.61

687,000

900,000

30.5

9.8

2,286.82

27,161

33

76.6

90

95

100

105

110

115

120

125

130

135

16.5 16.9 17.1 17.5

NAVER

KOSPI

AI and shopping business to drive growth

Top pick

Investment points

• New businesses: AI platform Clova, translation app Papago, and releases of smart devices are likely to help drive cloud revenue.

• Existing businesses: Shopping segment serves as a key catalyst for growth across the company, particularly in search ads and payment.

• Global businesses: Content (Webtoon), camera (SNOW), and video (V Live) services/apps are expected to go global.

Risk factors

• Worries over increasing investments and the slow adoption of new business models

• Slowing growth and relatively low margins at consolidated subsidiary LINE

NAVER (035420 KS)


Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Forecasts/Valuations (Summarized)

(Wbn) 12/16 12/17F 12/18F 12/19F (Wbn) 12/16 12/17F 12/18F 12/19F 12/16 12/17F 12/18F 12/19F

Revenue 4,023 4,715 5,467 6,240 Current Assets 4,200 5,421 6,797 8,332 P/E (x) 34.1 30.5 25.3 21.7

Cost of Sales 0 0 0 0 Cash and Cash Equivalents 1,726 2,486 3,417 4,474 P/CF (x) 18.5 19.0 16.4 14.4

Gross Profit 4,023 4,715 5,467 6,240 AR & Other Receivables 694 823 931 1,063 P/B (x) 5.2 4.7 4.0 3.4

SG&A Expenses 2,921 3,440 3,919 4,429 Inventories 10 12 14 16 EV/EBITDA (x) 18.2 16.6 13.5 11.1

Operating Profit (Adj) 1,102 1,274 1,548 1,812 Other Current Assets 1,770 2,100 2,435 2,779 EPS (W) 22,732 27,025 32,556 37,905

Operating Profit 1,102 1,274 1,548 1,812 Non-Current Assets 2,171 2,174 2,211 2,276 CFPS (W) 41,966 43,417 50,345 57,114

Non-Operating Profit 30 64 60 59 Investments in Associates 182 216 251 286 BPS (W) 150,192 176,242 207,749 244,518

Net Financial Income 30 44 58 74 Property, Plant and Equipment 863 735 633 553 DPS (W) 1,131 1,200 1,300 1,400

Net Gain from Inv in Associates -9 0 0 0 Intangible Assets 112 95 83 73 Payout ratio (%) 4.3 3.8 3.4 3.2

Pretax Profit 1,132 1,338 1,608 1,871 Total Assets 6,371 7,595 9,008 10,608 Dividend Yield (%) 0.1 0.1 0.2 0.2

Income Tax 361 427 513 597 Current Liabilities 1,804 2,098 2,396 2,703 Revenue Growth (%) 23.6 17.2 15.9 14.1

Profit from Continuing Operations 771 912 1,095 1,275 AP & Other Payables 425 504 584 667 EBITDA Growth (%) 28.3 12.3 17.0 14.4

Profit from Discontinued Operations -12 -3 0 0 Short-Term Financial Liabilities 227 227 227 227 Operating Profit Growth (%) 32.8 15.6 21.5 17.1

Net Profit 759 909 1,095 1,275 Other Current Liabilities 1,152 1,367 1,585 1,809 EPS Growth (%) 44.4 18.9 20.5 16.4

Controlling Interests 749 891 1,073 1,249 Non-Current Liabilities 437 491 545 601 Accounts Receivable Turnover (x) 9.1 9.1 9.0 8.9

Non-Controlling Interests 10 18 22 25 Long-Term Financial Liabilities 150 150 150 150 Inventory Turnover (x) 311.2 416.8 412.4 409.4

Total Comprehensive Profit 724 909 1,095 1,275 Other Non-Current Liabilities 287 341 395 451 Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0

Controlling Interests 733 998 1,202 1,400 Total Liabilities 2,241 2,589 2,942 3,304 ROA (%) 14.1 13.0 13.2 13.0

Non-Controlling Interests -9 -89 -107 -125 Controlling Interests 3,595 4,453 5,492 6,704 ROE (%) 26.2 22.1 21.6 20.5

EBITDA 1,265 1,420 1,662 1,901 Capital Stock 16 16 16 16 ROIC (%) 169.2 389.2 -1,939.1 -400.5

FCF (Free Cash Flow) 1,010 1,251 1,433 1,574 Capital Surplus 1,217 1,217 1,217 1,217 Liability to Equity Ratio (%) 54.3 51.7 48.5 45.2

EBITDA Margin (%) 31.4 30.1 30.4 30.5 Retained Earnings 3,810 4,669 5,707 6,919 Current Ratio (%) 232.8 258.4 283.6 308.2

Operating Profit Margin (%) 27.4 27.0 28.3 29.0 Non-Controlling Interests 535 553 575 600 Net Debt to Equity Ratio (%) -73.1 -81.6 -87.9 -92.0

Net Profit Margin (%) 18.6 18.9 19.6 20.0 Stockholders' Equity 4,130 5,006 6,067 7,304 Interest Coverage Ratio (x) 181.5 272.0 330.4 386.6

Source: NAVER, Mirae Asset Daewoo Research estimates

Top pick NAVER (035420 KS)


(Maintain)



461

EPS Growth (17F, %)


P/E (17F, x)

Market P/E (17F, x)

KOSPI


Shares Outstanding (mn) Revenue (Wbn) 839 838 984 1,580 1,784 1,857

Free Float (%) OP (Wbn) 278 237 329 516 666 711


Beta (12M) NP (Wbn) 230 165 272 390 504 539

52-Week Low EPS (W) 10,486 7,542 12,416 17,800 23,005 24,559

52-Week High ROE (%) 18.4 10.6 14.9 19.1 21.1 19.2

(%) 1M 6M 12M P/E (x) 17.4 28.2 19.9 21.0 16.3 15.2

Absolute 4.3 47.2 56.5 P/B (x) 2.7 2.6 2.7 3.5 3.0 2.6

Relative -2.0 27.1 33.9 Div.Yield (%) 1.9 1.3 1.5 1.3 1.5 1.6


Source: NCSOFT, Mirae Asset Daewoo Research estimates

36.4

Buy

500,000

374,000

Expected Return 34%

OP (17F, Wbn) 516


43.4

37.3

0.84

218,000

378,500

21.0

9.8

2,286.82

8,201

22

84.8

80

90

100

110

120

130

140

150

160

170

180

16.5 16.9 17.1 17.5

NCSOFT

KOSPI

Going mobile with Lineage

Top pick

Investment points

• New title momentum: NCsoft is set to launch its new mobile MMORPG Lineage M, which marries the strengths of the PC version with the convenience of mobile games.

• Margin support: Revenue from long-running PC games and royalties help prop up profit margins.

• Enhanced fundamentals: A successful transition from PC to mobile could trigger a re-rating.

Risk factors

• Volatility around the schedule of new title releases and uncertainties surrounding their prospects for success

• Structural cost increase related to the mobile game business

NCsoft (036570 KS)




Revenue 984 1,580 1,784 1,857 Current Assets 1,192 1,342 1,706 2,135 P/E (x) 19.9 21.0 16.3 15.2

Cost of Sales 188 301 340 354 Cash and Cash Equivalents 145 127 335 549 P/CF (x) 14.1 15.0 11.7 11.0

Gross Profit 796 1,279 1,444 1,503 AR & Other Receivables 161 258 291 303 P/B (x) 2.7 3.5 3.0 2.6

SG&A Expenses 467 763 778 792 Inventories 1 1 1 1 EV/EBITDA (x) 12.7 13.4 10.1 8.9

Operating Profit (Adj) 329 516 666 711 Other Current Assets 885 956 1,079 1,282 EPS (W) 12,416 17,800 23,005 24,559

Operating Profit 329 516 666 711 Non-Current Assets 1,169 1,518 1,616 1,631 CFPS (W) 17,610 24,993 31,833 33,885


Net Financial Income 19 0 0 0 Property, Plant and Equipment 225 198 172 145 DPS (W) 3,820 5,000 5,500 6,000

Net Gain from Inv in Associates 7 0 0 0 Intangible Assets 53 47 42 36 Payout ratio (%) 29.9 27.3 23.2 23.7

Pretax Profit 346 516 666 711 Total Assets 2,361 2,860 3,322 3,766 Dividend Yield (%) 1.5 1.3 1.5 1.6

Income Tax 75 127 163 174 Current Liabilities 284 457 516 537 Revenue Growth (%) 17.4 60.6 12.9 4.1

Profit from Continuing Operations 271 389 503 537 AP & Other Payables 28 45 51 53 EBITDA Growth (%) 32.7 51.8 27.4 6.4

Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 0 0 0 0 Operating Profit Growth (%) 38.8 56.8 29.1 6.8

Net Profit 271 389 503 537 Other Current Liabilities 256 412 465 484 EPS Growth (%) 64.6 43.4 29.2 6.8

Controlling Interests 272 390 504 539 Non-Current Liabilities 181 200 206 209 Accounts Receivable Turnover (x) 8.0 7.7 6.6 6.3

Non-Controlling Interests -1 -1 -2 -2 Long-Term Financial Liabilities 150 150 0 0 Inventory Turnover (x) 1,455.7 1,821.5 1,567.3 1,507.3

Total Comprehensive Profit 329 389 503 537 Other Non-Current Liabilities 31 50 206 209 Accounts Payable Turnover (x) 21.0 34.7 29.9 28.7

Controlling Interests 329 388 502 536 Total Liabilities 465 657 722 746 ROA (%) 11.9 14.9 16.3 15.1

Non-Controlling Interests 0 1 1 1 Controlling Interests 1,886 2,194 2,593 3,015 ROE (%) 14.9 19.1 21.1 19.2

EBITDA 361 548 698 743 Capital Stock 11 11 11 11 ROIC (%) 61.8 91.9 139.8 169.6

FCF (Free Cash Flow) 95 487 558 577 Capital Surplus 432 432 432 432 Liability to Equity Ratio (%) 24.5 29.8 27.8 24.7

EBITDA Margin (%) 36.7 34.7 39.1 40.0 Retained Earnings 1,544 1,853 2,251 2,673 Current Ratio (%) 419.1 293.8 330.7 397.7



Source: NCSOFT, Mirae Asset Daewoo Research estimates

Top pick NCsoft (036570 KS)


(Maintain)



183

EPS Growth (17F, %)


P/E (17F, x)

Market P/E (17F, x)

KOSDAQ


Shares Outstanding (mn) Revenue (Wbn) 499 932 1,464 1,908 2,104 2,189

Free Float (%) OP (Wbn) 176 89 116 169 220 237


Beta (12M) NP (Wbn) 150 76 58 121 129 140

52-Week Low EPS (W) 6,116 1,269 874 1,788 1,908 2,073

52-Week High ROE (%) 11.4 3.0 1.9 3.5 3.6 3.8

(%) 1M 6M 12M P/E (x) 20.2 91.2 88.1 53.2 49.9 45.9

Absolute 7.9 18.0 -8.9 P/B (x) 2.9 2.7 1.5 1.8 1.8 1.7

Relative 7.4 14.7 -2.4 Div.Yield (%) 0.1 0.1 0.2 0.2 0.2 0.3


Source: Kakao, Mirae Asset Daewoo Research estimates

36.4

Buy

115,000

95,200

Expected Return 21%

OP (17F, Wbn) 169


104.7

24.2

0.71

71,300

104,500

53.2

9.8

638.12

6,453

68

55.7

60

70

80

90

100

110

120

16.5 16.9 17.1 17.5

Kakao

KOSDAQ

Potential as an everyday platform

Investment points

• Potential of messenger services: Content businesses play the role of cash cow; the company has growth potential as an everyday platform for financial and transportation services.

• Stabilization of ad revenue: Ad revenue growth is likely to turn around in 2017; Kakao Moment, a performance-based ad product, is slated for release.

• Progress of new businesses: Look for more concrete business models in mobility services and progress in FinTech (Kakao Pay and Kakao Bank).

Risk factors

• Possible delay in profitability improvement if a slower-than-expected ad revenue recovery coincides with increased new business expenditures

• Competitive threats facing the ad, FinTech, mobility services, and AI businesses

• Limited growth potential due to its high exposure to the domestic market

Kakao (035720 KQ)





Cost of Sales 0 0 0 0 Cash and Cash Equivalents 642 869 1,091 1,307 P/CF (x) 23.1 26.3 23.4 24.4

Gross Profit 1,464 1,908 2,104 2,189 AR & Other Receivables 251 282 306 318 P/B (x) 1.5 1.8 1.8 1.7

SG&A Expenses 1,348 1,739 1,884 1,952 Inventories 13 14 16 16 EV/EBITDA (x) 24.3 23.4 20.1 19.3

Operating Profit (Adj) 116 169 220 237 Other Current Assets 311 350 385 401 EPS (W) 874 1,788 1,908 2,073


Non-Operating Profit -16 -47 -30 -31 Investments in Associates 117 131 145 151 BPS (W) 50,777 52,292 54,020 55,893

Net Financial Income -5 -4 10 23 Property, Plant and Equipment 254 205 169 141 DPS (W) 148 180 200 240

Net Gain from Inv in Associates -10 0 0 0 Intangible Assets 3,733 3,668 3,609 3,556 Payout ratio (%) 15.3 9.4 9.8 10.8


Income Tax 35 -7 51 56 Current Liabilities 806 880 950 980 Revenue Growth (%) 57.1 30.3 10.3 4.0



Net Profit 65 130 138 150 Other Current Liabilities 332 372 410 427 EPS Growth (%) -31.1 104.6 6.7 8.6

Controlling Interests 58 121 129 140 Non-Current Liabilities 975 997 1,018 1,027 Accounts Receivable Turnover (x) 11.1 10.3 10.3 10.0



Controlling Interests 58 112 120 130 Total Liabilities 1,781 1,877 1,968 2,007 ROA (%) 1.5 2.3 2.4 2.5



FCF (Free Cash Flow) 236 304 290 254 Capital Surplus 3,105 3,105 3,105 3,105 Liability to Equity Ratio (%) 48.1 49.1 49.8 49.1

EBITDA Margin (%) 15.7 14.8 15.0 14.5 Retained Earnings 304 415 532 659 Current Ratio (%) 151.0 172.1 189.2 208.3

Operating Profit Margin (%) 7.9 8.9 10.5 10.8 Non-Controlling Interests 270 279 288 298 Net Debt to Equity Ratio (%) 3.3 -3.5 -9.7 -15.0


Source: Kakao, Mirae Asset Daewoo Research estimates

Kakao (035720 KQ)


Focus on earnings recovery and robust tour division

Investment points

• Improvement in profitability: Lee Sang-kyu’s return to the CEO post and the removal of one-off expenses seen in 2016 should support profitability improvement.

• Robust tour division: Market conditions look favorable for the tour division thanks to long holidays in May and October of this year; the division plans to focus on higher-margin overseas package tours.

• Concierge commerce services: Adoption of the chatbot service TalkJipsa (in 2Q16) is likely to lead to improvement in service quality and purchase volume.

Risk factors

• Competitors’ expansion into tour and ticket sales businesses

• Low profitability in the shopping and book divisions

• Security risks, as evidenced by last year’s customer data leak

Interpark (108790 KQ)

(Maintain)



26

EPS Growth (17F, %)


P/E (17F, x)

Market P/E (17F, x)

KOSDAQ


Shares Outstanding (mn) Revenue (Wbn) 407 402 466 510 530 546

Free Float (%) OP (Wbn) 17 23 9 29 26 29


Beta (12M) NP (Wbn) 11 17 2 18 16 18

52-Week Low EPS (W) 335 516 71 548 491 548

52-Week High ROE (%) 8.5 10.5 1.4 10.5 8.7 9.1

(%) 1M 6M 12M P/E (x) 68.6 44.3 144.3 24.4 27.2 24.4

Absolute 23.6 17.1 -30.5 P/B (x) 4.8 4.4 2.0 2.5 2.3 2.1

Relative 23.0 13.8 -25.5 Div.Yield (%) 0.4 1.1 1.0 0.7 0.7 0.7


Source: Interpark, Mirae Asset Daewoo Research estimates

14.1

1.07

8,100

19,550

24.4

9.8

638.12

441

33

30.7

36.4

Trading Buy

15,000

13,350

Expected Return 12%

OP (17F, Wbn) 29


675.7

40

50

60

70

80

90

100

110

120

130

16.5 16.9 17.1 17.5

Interpark

KOSDAQ




Revenue 466 510 530 546 Current Assets 313 362 396 431 P/E (x) 144.3 24.4 27.2 24.4


Gross Profit 221 245 255 262 AR & Other Receivables 89 97 101 104 P/B (x) 2.0 2.5 2.3 2.1


Operating Profit (Adj) 9 29 26 29 Other Current Assets 117 129 133 138 EPS (W) 71 548 491 548

Operating Profit 9 29 26 29 Non-Current Assets 155 146 137 128 CFPS (W) 467 1,102 1,018 1,102


Net Financial Income -2 0 0 0 Property, Plant and Equipment 46 41 36 31 DPS (W) 100 100 100 100


Pretax Profit 4 27 24 27 Total Assets 467 508 534 559 Dividend Yield (%) 1.0 0.7 0.7 0.7


Profit from Continuing Operations 3 19 17 19 AP & Other Payables 66 72 75 77 EBITDA Growth (%) -42.4 100.0 -5.3 5.6

Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 35 35 0 0 Operating Profit Growth (%) -60.9 222.2 -10.3 11.5

Net Profit 3 19 17 19 Other Current Liabilities 198 216 260 267 EPS Growth (%) -86.2 671.8 -10.4 11.6





Non-Controlling Interests 0 1 1 1 Controlling Interests 165 180 192 207 ROE (%) 1.4 10.5 8.7 9.1


FCF (Free Cash Flow) -1 34 29 31 Capital Surplus 98 98 98 98 Liability to Equity Ratio (%) 184.0 181.2 173.9 164.9



Net Profit Margin (%) 0.4 3.5 3.0 3.3 Stockholders' Equity 165 181 195 211 Interest Coverage Ratio (x) 3.4 0.0 0.0 0.0

Source: Interpark, Mirae Asset Daewoo Research estimates

Interpark (108790 KQ)


(Maintain)



937

EPS Growth (17F, %)


P/E (17F, x)

Market P/E (17F, x)

KOSPI


Shares Outstanding (mn) Revenue (Wbn) 362 1,073 1,500 2,374 2,601 2,853

Free Float (%) OP (Wbn) 89 225 295 678 740 809


Beta (12M) NP (Wbn) 25 121 174 437 483 529

52-Week Low EPS (W) 457 2,024 2,567 6,448 7,119 7,801

52-Week High ROE (%) 7.8 14.8 15.3 30.5 25.5 22.0

(%) 1M 6M 12M P/E (x) - - - 23.0 20.8 19.0

Absolute 0.0 0.0 0.0 P/B (x) - - - 6.1 4.7 3.8

Relative 0.0 0.0 0.0 Div.Yield (%) - - - 0.0 0.0 0.0


Source: Netmarble Games Corporation, Mirae Asset Daewoo Research estimates

36.4

Buy

200,000

148,000

Expected Return 35%

OP (17F, Wbn) 678


151.2

6.9

0.00

144,000

162,000

23.0

9.8

2,286.82

12,540

85

27.7

85

87

89

91

93

95

97

99

101

103

105

5.12 5.13 5.14 5.15 5.16 5.17 5.18

Netmarble Games Corporation

KOSPI

A major player in the mobile gaming market

Investment points

• Revenue diversification: Netmarble Games holds a well-diversified portfolio of mobile game titles; the revenue contribution of MMORPGs has grown since the release of Lineage II: Revolution.

• Earnings momentum in 2H17: 17 new titles are scheduled for release in 2017; Lineage II: Revolution is moving toward a global release.

• Global revenue: Overseas revenue contribution stood at 50% in 2016; overseas M&As using proceeds from the IPO are possible.

Risk factors

• Volatility from intensifying competition in the mobile gaming market

• Uncertainties over new title release schedules and commercial potential

• Changes in publishing schedules resulting from volatility in overseas market conditions (especially in China)

Netmarble Games (251270 KS)




Revenue 1,500 2,374 2,601 2,853 Current Assets 721 1,146 1,713 2,331 P/E (x) - 23.0 20.8 19.0

Cost of Sales 751 1,189 1,303 1,429 Cash and Cash Equivalents 273 436 935 1,478 P/CF (x) - 14.1 12.9 11.7

Gross Profit 749 1,185 1,298 1,424 AR & Other Receivables 247 391 428 470 P/B (x) - 6.1 4.7 3.8

SG&A Expenses 454 506 558 614 Inventories 2 3 3 4 EV/EBITDA (x) - 17.4 15.5 13.6

Operating Profit (Adj) 295 678 740 809 Other Current Assets 199 316 347 379 EPS (W) 2,567 6,448 7,119 7,801


Non-Operating Profit -19 9 14 20 Investments in Associates 6 10 11 12 BPS (W) 17,949 24,397 31,516 39,317

Net Financial Income 2 0 0 0 Property, Plant and Equipment 123 115 107 98 DPS (W) 0 0 0 0

Net Gain from Inv in Associates -3 0 0 0 Intangible Assets 540 518 495 473 Payout ratio (%) 0.0 0.0 0.0 0.0

Pretax Profit 276 687 754 829 Total Assets 1,957 2,668 3,287 3,966 Dividend Yield (%) - 0.0 0.0 0.0






Non-Controlling Interests 35 77 85 93 Long-Term Financial Liabilities 200 200 0 0 Inventory Turnover (x) 1,374.8 975.0 831.8 832.3





FCF (Free Cash Flow) 107 566 604 659 Capital Surplus 1,200 1,200 1,200 1,200 Liability to Equity Ratio (%) 49.4 46.3 37.4 31.6

EBITDA Margin (%) 21.7 29.9 29.6 29.4 Retained Earnings 294 731 1,213 1,742 Current Ratio (%) 171.3 190.0 263.4 331.7



Source: Netmarble Games Corporation, Mirae Asset Daewoo Research estimates

Netmarble Games (251270 KS)


Solid overseas revenue and new title momentum

Investment points

• Overseas revenue: Overseas revenue contribution reached 86% in 2016, driven by the solid global performance of Summoners War.

• Expectations for new title releases: Genre diversification of Com2uS’s mobile game portfolio will continue in 2H17; an MMORPG version of Summoners War and a mobile version of Skylanders are slated for release in 2018.

• Valuation merits: The tock is undervalued, trading at a P/E of 9x (vs. global peer average of 22x).

Risk factors

• Overreliance on a single game, Summoners War

• Volatility around new title releases and uncertainties surrounding commercial potential

• Possible cost hikes with the increase in game development projects and shift toward large-scale games (e.g., MMORPGs)

Com2uS (078340 KQ)

(Maintain)



206

EPS Growth (17F, %)


P/E (17F, x)

Market P/E (17F, x)

KOSDAQ



Free Float (%) OP (Wbn) 101 166 192 212 234 255


Beta (12M) NP (Wbn) 79 126 152 166 183 199

52-Week Low EPS (W) 6,981 9,779 11,796 12,880 14,259 15,471

52-Week High ROE (%) 49.8 35.0 26.5 23.4 21.2 19.1

(%) 1M 6M 12M P/E (x) 17.3 12.1 7.4 9.0 8.2 7.5

Absolute -2.3 36.7 -13.1 P/B (x) 6.4 3.0 1.7 1.9 1.5 1.3

Relative -2.8 32.9 -6.9 Div.Yield (%) 0.0 0.0 1.6 1.2 1.2 1.2


Source: Com2uS, Mirae Asset Daewoo Research estimates

24.4

0.92

78,500

141,200

9.0

9.8

638.12

1,499

13

72.6

36.4

Trading Buy

135,000

116,500

Expected Return 16%

OP (17F, Wbn) 212


9.2

50

60

70

80

90

100

110

120

16.5 16.9 17.1 17.5

Com2uS

KOSDAQ




Revenue 513 565 625 682 Current Assets 654 811 987 1,178 P/E (x) 7.4 9.0 8.2 7.5





Operating Profit 192 212 234 255 Non-Current Assets 58 57 56 55 CFPS (W) 15,166 17,307 19,134 20,766


Net Financial Income 8 0 0 0 Property, Plant and Equipment 3 1 -1 -3 DPS (W) 1,400 1,400 1,400 1,400

Net Gain from Inv in Associates 0 0 0 0 Intangible Assets 3 1 0 -1 Payout ratio (%) 11.5 10.6 9.5 8.8

Pretax Profit 199 220 243 264 Total Assets 712 868 1,043 1,233 Dividend Yield (%) 1.6 1.2 1.2 1.2









Non-Controlling Interests 0 0 0 0 Controlling Interests 635 783 949 1,131 ROE (%) 26.5 23.4 21.2 19.1



EBITDA Margin (%) 38.0 38.1 37.9 37.8 Retained Earnings 435 583 749 931 Current Ratio (%) 879.0 989.7 1,088.3 1,190.2


Net Profit Margin (%) 29.6 29.4 29.3 29.2 Stockholders' Equity 635 783 949 1,131 Interest Coverage Ratio (x) 6,487.4 0.0 0.0 0.0

Source: Com2uS, Mirae Asset Daewoo Research estimates

Com2uS (078340 KQ)


(Maintain)



111

EPS Growth (17F, %)


P/E (17F, x)

Market P/E (17F, x)

KOSPI


Shares Outstanding (mn) Revenue (Wbn) 745 988 1,052 1,136 1,226 1,300

Free Float (%) OP (Wbn) 83 93 99 106 115 122


Beta (12M) NP (Wbn) 82 70 65 62 67 71

52-Week Low EPS (W) 4,551 3,696 3,267 3,091 3,336 3,525

52-Week High ROE (%) 21.5 13.7 10.4 9.1 9.2 9.1

(%) 1M 6M 12M P/E (x) - 18.9 17.5 22.1 20.5 19.4

Absolute 7.4 6.0 -20.6 P/B (x) - 2.3 1.7 2.0 1.8 1.7

Relative 0.9 -8.4 -32.0 Div.Yield (%) - 1.3 1.7 1.4 1.4 1.4


Source: INNOCEAN Worldwide, Mirae Asset Daewoo Research estimates

36.4

Buy

90,000

68,400

Expected Return 32%

OP (17F, Wbn) 106


-5.4

17.6

0.95

56,200

88,800

22.1

9.8

2,286.82

1,368

20

56.5

60

70

80

90

100

110

120

130

16.5 16.9 17.1 17.5

INNOCEANWorldwideKOSPI

New car marketing and M&A momentum

Investment points

• Revenue growth in 2H17: Earnings momentum is likely to accelerate in 2H17 with the releases of major new car models by group affiliates.

• High business volume driven by group affiliates over the medium/long term: We highlight HMC’s plan to roll out six models under its Genesis brand by 2020 and the bright outlook for global marketing demand.

• M&A plans: Deals are expected in North America ahead of the early-2018 expiry of Kia’s contract with a local creative agency.

Risk factors

• Concerns over tighter regulations on chaebols and related-party transactions under the new administration

• Possible earnings slowdowns and uncertainties facing group affiliates (e.g., HMC and Kia)

• High reliance on group affiliates

INNOCEAN Worldwide (214320 KS)






Gross Profit 382 412 444 471 AR & Other Receivables 853 943 1,017 1,078 P/B (x) 1.7 2.0 1.8 1.7




Non-Operating Profit 10 -2 -2 -3 Investments in Associates 19 21 23 24 BPS (W) 32,728 34,919 37,305 39,880




Income Tax 32 30 32 34 Current Liabilities 975 1,078 1,164 1,234 Revenue Growth (%) 6.5 8.0 7.9 6.0

Profit from Continuing Operations 78 74 80 85 AP & Other Payables 900 995 1,074 1,138 EBITDA Growth (%) 6.1 5.7 7.2 5.0


Net Profit 78 74 80 85 Other Current Liabilities 74 82 89 95 EPS Growth (%) -11.6 -5.4 7.9 5.7




Controlling Interests 68 59 63 67 Total Liabilities 997 1,102 1,189 1,261 ROA (%) 5.0 4.2 4.2 4.1


EBITDA 105 111 119 125 Capital Stock 10 10 10 10 ROIC (%) 520.7 -801.4 -354.8 -251.2




Net Profit Margin (%) 6.2 5.5 5.5 5.5 Stockholders' Equity 678 735 796 862 Interest Coverage Ratio (x) 2,323.1 4,678.9 4,616.7 4,580.5

Source: INNOCEAN Worldwide, Mirae Asset Daewoo Research estimates

INNOCEAN Worldwide (214320 KS)


A key player in the domestic digital ad market

Investment points

• Growth potential to be highlighted: Nasmedia is seeing double-digit YoY organic growth on a non-consolidated basis thanks to the positive effects of N Search Marketing (acquired in 4Q16).

• Robust demand side: Demand is strong from advertisers in highly competitive sectors (games, internet-only banks, and automakers).

• Diversification of ad media: Nasmedia is evolving into a full-service media agency, expanding beyond display ads to search ads, IPTV, VOD, and outdoor ads.

Risk factors

• Burden from high expectations for growth

• Profitability risks from outdoor ads should revenue growth not be strong enough to adequately offset fixed costs

• Volatility of commission policies

Nasmedia (089600 KQ)

(Maintain)



28

EPS Growth (17F, %)


P/E (17F, x)

Market P/E (17F, x)

KOSDAQ



Free Float (%) OP (Wbn) 9 12 15 31 36 40

Foreign Ownership (%) OP margin (%) 30 26.7 21.4 26.3 26.1 25.2

Beta (12M) NP (Wbn) 8 10 12 22 25 27

52-Week Low EPS (W) 965 1,202 1,350 2,459 2,864 3,111

52-Week High ROE (%) 13.4 14.3 14.1 20.1 19.9 18.7

(%) 1M 6M 12M P/E (x) 24.7 41.6 29.3 18.8 16.2 14.9

Absolute 3.6 13.8 -4.5 P/B (x) 3.1 5.9 3.5 3.5 3.0 2.6

Relative 3.0 10.6 2.3 Div.Yield (%) 1.2 0.7 1.0 1.5 1.7 1.9


Source: Nasmedia, Mirae Asset Daewoo Research estimates

5.1

1.20

31,350

52,200

18.8

9.8

638.12

405

9

36.5

36.4

Buy

65,000

46,300

Expected Return 40%

OP (17F, Wbn) 31


82.2

50

60

70

80

90

100

110

120

16.5 16.9 17.1 17.5

Nasmedia

KOSDAQ




Revenue 70 118 138 159 Current Assets 188 308 373 440 P/E (x) 29.3 18.8 16.2 14.9






Non-Operating Profit 1 0 0 -1 Investments in Associates 0 0 0 0 BPS (W) 11,207 13,276 15,441 17,752



Pretax Profit 16 31 36 39 Total Assets 264 389 456 524 Dividend Yield (%) 1.0 1.5 1.7 1.9














Net Profit Margin (%) 17.1 18.6 18.1 17.0 Stockholders' Equity 104 125 147 170 Interest Coverage Ratio (x) 171.6 0.0 0.0 0.0

Source: Nasmedia, Mirae Asset Daewoo Research estimates

Nasmedia (089600 KQ)


Controlling costs and waiting for recovery

Investment points

• Possible recovery in North America: Expectations are high for the US subsidiary’s new CEO, as she has extensive experience leading global marketing campaigns for SEC.

• Possible recovery in China: The Chinese business could regain strength if tensions over THAAD ease.

• Need for brand marketing: SEC needs marketing for handset products to restore its brand image.

Risk factors

• High earnings exposure to China (negative should uncertainties over the Chinese business persist)

• Slowdown in YoY growth (need to see if growth rates improve upon favorable market developments or M&As)

• High reliance on revenue from group affiliates

Cheil Worldwide (030000 KS)

(Maintain)



161

EPS Growth (17F, %)


P/E (17F, x)

Market P/E (17F, x)

KOSPI


Shares Outstanding (mn) Revenue (Wbn) 2,666 2,807 3,233 3,265 3,390 3,487

Free Float (%) OP (Wbn) 127 127 150 162 170 178


Beta (12M) NP (Wbn) 102 80 88 111 117 122

52-Week Low EPS (W) 883 691 767 965 1,014 1,063

52-Week High ROE (%) 13.2 9.6 11.4 13.8 13.2 12.5

(%) 1M 6M 12M P/E (x) 19.5 29.9 20.5 19.9 18.9 18.1

Absolute 4.9 20.8 18.9 P/B (x) 2.0 2.2 1.7 2.0 1.8 1.7

Relative -1.4 4.3 1.7 Div.Yield (%) 0.0 1.4 1.9 1.6 1.6 1.6


Source: Cheil Worldwide, Mirae Asset Daewoo Research estimates

29.6

0.76

14,750

19,700

19.9

9.8

2,286.82

2,209

115

59.6

36.4

Trading Buy

21,000

19,200

Expected Return 9%

OP (17F, Wbn) 162


25.7

70

75

80

85

90

95

100

105

110

115

120

16.5 16.9 17.1 17.5

Cheil Worldwide

KOSPI





Cost of Sales 2,235 2,256 2,339 2,406 Cash and Cash Equivalents 373 487 597 709 P/CF (x) 8.8 11.7 11.8 11.7

Gross Profit 998 1,009 1,051 1,081 AR & Other Receivables 1,196 1,207 1,253 1,289 P/B (x) 1.7 2.0 1.8 1.7


Operating Profit (Adj) 150 162 170 178 Other Current Assets 226 229 238 244 EPS (W) 767 965 1,014 1,063






Income Tax 37 47 49 52 Current Liabilities 1,245 1,256 1,303 1,340 Revenue Growth (%) 15.2 1.0 3.8 2.9







Controlling Interests 74 103 108 113 Total Liabilities 1,375 1,388 1,440 1,480 ROA (%) 4.5 5.2 5.2 5.1

Non-Controlling Interests 1 11 11 12 Controlling Interests 763 844 930 1,022 ROE (%) 11.4 13.8 13.2 12.5



EBITDA Margin (%) 5.8 5.9 5.8 5.7 Retained Earnings 996 1,077 1,163 1,255 Current Ratio (%) 144.2 153.1 160.2 167.3


Net Profit Margin (%) 2.7 3.4 3.5 3.5 Stockholders' Equity 776 860 949 1,044 Interest Coverage Ratio (x) 67.9 56.5 60.1 63.5

Source: Cheil Worldwide, Mirae Asset Daewoo Research estimates

Cheil Worldwide (030000 KS)


[Conclusion] Focus on game changers

Game[Increasing sophistication of mobile titles

& revival of IP]

Internet[AI & shopping to act as catalysts]

Advertising[Demand for global brand marketing]


APPENDIX 1Important Disclosures & Disclaimers 2-Year Rating and Target Price History

Company (Code) Date Rating Target Price Company (Code) Date Rating Target PriceNAVER(035420) 04/04/2017 Buy 1,160,000 05/28/2015 Buy 52,000 No Coverage 05/18/2015 Buy 44,000 08/30/2016 Buy 1,050,000 INNOCEAN Worldwide(214320) 01/30/2017 Buy 90,000 04/28/2016 Buy 900,000 10/28/2016 Buy 100,000 07/30/2015 Buy 820,000 06/01/2016 Buy 108,000 05/04/2015 Buy 890,000 04/28/2016 Buy 98,000Com2uS(078340) 05/02/2017 Trading Buy 135,000 01/29/2016 Buy 96,000 No Coverage 11/24/2015 Buy 86,000NCSOFT(036570) 05/01/2017 Buy 500,000 Cheil Worldwide(030000) 04/28/2017 Trading Buy 21,000 No Coverage 01/30/2017 Buy 21,000 03/11/2016 Buy 420,000 11/28/2016 Buy 19,000 02/05/2016 Buy 400,000 04/22/2016 Trading Buy 19,000 05/14/2015 Buy 270,000 02/21/2016 Trading Buy 20,000Kakao(035720) 05/11/2017 Buy 115,000 01/28/2016 Buy 29,000 04/04/2017 Buy 105,000 11/24/2015 Buy 30,000 No Coverage 10/21/2015 Buy 28,000 10/13/2016 Buy 100,000 07/23/2015 Buy 26,000 08/11/2016 Buy 110,000 06/11/2015 Buy 28,000 07/15/2016 Buy 120,000 04/24/2015 Buy 30,000 05/12/2016 Buy 135,000 Interpark(108790) 05/22/2017 Trading Buy 15,000 01/26/2016 Buy 150,000 04/04/2017 Trading Buy 12,000 08/16/2015 Buy 170,000 No Coverage 05/15/2015 Buy 130,000 08/10/2016 Hold -Nasmedia(089600) 10/30/2016 Buy 65,000 02/14/2016 Buy 27,000 07/31/2016 Buy 61,000 08/04/2015 Buy 30,000 01/13/2016 Buy 71,000 05/13/2015 Buy 25,000 11/24/2015 Buy 58,000 Netmarble Games Corporation(251270) 05/01/2017 Buy 200,000 08/13/2015 Buy 73,000


APPENDIX 1

Equity Ratings Distribution

Buy Trading Buy Hold Sell 72.86% 15.58% 11.56% 0.00%

* Based on recommendations in the last 12-months (as of March 31, 2017) Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding.

Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight: Fundamentals are unfavorable or worsening Sell : Relative performance of -10%

Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.

0

500,000

1,000,000

1,500,000

May 15 May 16 May 17

(W) NAVER

0

50,000

100,000

150,000

200,000


(W) Com2uS

0

100,000

200,000

300,000

400,000

500,000

600,000


(W) NCSOFT

0

50,000

100,000

150,000

200,000


(W) Kakao

0

20,000

40,000

60,000

80,000


(W) Nasmedia

0

20,000

40,000

60,000

80,000

100,000

120,000


(W) INNOCEAN Worldwide

0

10,000

20,000

30,000

40,000


(W) Cheil Worldwide

0

10,000

20,000

30,000

40,000


(W) Interpark

0

50,000

100,000

150,000

200,000

250,000


(W) Netmarble Games Corporation


Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They areneither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject securities andcompanies accurately reflect the personal views of the Analysts primarily responsible for this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analystsand members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory boardmember of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to thespecific recommendations or views contained in this report but, like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firmprofitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time ofpublication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise statedherein. Disclaimers This report is published by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained hereinhave been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Daewoo makes no guarantee,representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation intoEnglish from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available toinvestors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws andaccounting principles and no person whose receipt or use of this report would violate any laws and regulations or subject Mirae Asset Daewoo and its affiliates to registration orlicensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and it is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or otherfinancial instruments. The report does not constitute investment advice to any person and such person shall not be treated as a client of Mirae Asset Daewoo by virtue of receiving thisreport. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitutionfor the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of theinvestments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide tofuture performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents donot accept any liability for any loss arising out of the use hereof. Mirae Asset Daewoo may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflectdifferent assumptions, views and analytical methods of the analysts who prepared them. Mirae Asset Daewoo may make investment decisions that are inconsistent with the opinionsand views expressed in this research report. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subjectsecurities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open marketor otherwise, in each case either as principals or agents. Mirae Asset Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subjectcompanies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae AssetDaewoo. Distribution United Kingdom: This report is being distributed by Mirae Asset Securities (UK) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the FinancialServices and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, fallingwithin Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not aRelevant Person should not act or rely on this report or any of its contents. United States: This report is distributed in the U.S. by Mirae Asset Securities (USA) Inc., a member of FINRA/SIPC, and is only intended for major institutional investors as defined in Rule15a-6(b)(4) under the U.S. Securities Exchange Act of 1934. All U.S. persons that receive this document by their acceptance thereof represent and warrant that they are a majorinstitutional investor and have not received this report under any express or implied understanding that they will direct commission income to Mirae Asset Daewoo or its affiliates. AnyU.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Mirae Asset Securities (USA) Inc., which acceptsresponsibility for the contents of this report in the U.S. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, insuch case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements.

APPENDIX 1


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Mirae Asset Daewoo Co., Ltd. (Seoul) Mirae Asset Securities (HK) Ltd. Mirae Asset Securities (UK) Ltd. Global Equity Sales Team Mirae Asset Center 1 Building 26 Eulji-ro 5-gil, Jung-gu, Seoul 04539 Korea

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Mirae Asset Securities (USA) Inc. Mirae Asset Wealth Management (USA) Inc. Mirae Asset Wealth Management (Brazil) CCTVM810 Seventh Avenue, 37th Floor New York, NY 10019 USA

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PT. Mirae Asset Sekuritas Indonesia Mirae Asset Securities (Singapore) Pte. Ltd. Mirae Asset Securities (Vietnam) LLC Equity Tower Building Lt. 50 Sudirman Central Business District Jl. Jend. Sudirman, Kav. 52-53 Jakarta Selatan 12190 Indonesia

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Mirae Asset Securities Mongolia UTsK LLC Mirae Asset Investment Advisory (Beijing) Co., Ltd Beijing Representative Office

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Tel: 976-7011-0806 Tel: 86-10-6567-9699 Tel: 86-10-6567-9699 (ext. 3300)

Shanghai Representative Office Ho Chi Minh Representative Office

38T31, 38F, Shanghai World Financial Center 100 Century Avenue, Pudong New Area Shanghai 200120 China

7F, Saigon Royal Building 91 Pasteur St. District 1, Ben Nghe Ward, Ho Chi Minh City Vietnam

Tel: 86-21-5013-6392 Tel: 84-8-3910-7715

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