[2016 Outlook] Media Advertisement

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.
Media Advertisement
Growing ad agency
Take note of ad agency growth amid favorable changes in market environment
Media shined as one of the top performers in the Korean stock market this year. Content
powered the sector, leading to an earnings recovery at broadcasters (SBS and CJ E&M media
division) and revenue expansion at filmmakers (CJ E&M film division, Showbox and NEW).
In 2016, we expect advertising to extend the media rally. Ad shares, which have been on
the sidelines this year, appear undervalued to its content-focused peers. Meanwhile,
operating conditions in the space are improving along with earnings.
Ad agencies see internal and external improvements
Ad earnings are picking up. In 2016, we forecast Cheil Worldwide, INNOCEAN Worldwide
and Nasmedia (ad shares under KDB Daewoo Universe) to deliver combined revenue
growth of 10%, operating profit growth of 15%, and net profit growth of 11% YoY.
In addition, we are seeing positive developments at advertisers and in ad media. At Cheil
Worldwide, concerns of order reduction from Samsung Electronics have eased and the
firm has managed to generate over 30% of its consolidated gross profit from non-
affiliated advertisers this year. New media is also producing opportunities. Thanks to its
Chinese digital marketing subsidiary Cheil PengTai, digital ads now account for 30% of
the firm’s consolidated gross profit. Cheil PengTai is one of China’s top three digital
marketers, contributing 30% of Cheil Worldwide’s revenue, and 49% of net profit (1- 3Q,
cumulative).
INNOCEAN Worldwide is expected to launch a major ad campaign for the Hyundai
Motor Company’s (HMC) new luxury brand, “Genesis”. The agency established a joint
venture in the US to perform media buying for the firm.
Nasmedia is well positioned to benefit from the secular growth of internet/mobile, IPTV
and online video ads. Furthermore, Korean and global internet firms are making
significant strides in monetizing mobile traffic (mobile/video ads).
Present Overweight; Top pick is Cheil Worldwide
We present Overweight on media ads as fundamentals (earnings, corporate structure,
etc.) are improving, and positive developments (advertisers and overseas earnings) have
yet to be fully priced in.
Our top pick is Cheil Worldwide (030000 KS). We reiterate Buy and raise our target price
from W28,000 to W30,000, in light of growing revenue/profit contributions from its
Chinese subsidiary Cheil PengTai. In fact, we forecast 50% of Cheil Worldwide’s 2016
EPS to originate from China. We expect Cheil PengTai’s growth to be propelled by a rise
in local advertisers, wider business coverage, and the expansion of digital marketing and
e-commerce.
We also like INNOCEAN Worldwide (214320 KS) and Nasmedia (089600 KQ). We are
initiating coverage of INNOCEAN Worldwide with Buy and a target price of W86,000.
HMC’s launch of new luxury brand and joint venture operations in the US will likely boost
INNOCEAN’s growth. We reiterate Buy on Nasmedia, but lower our target price from
W73,000 to W58,000, as we anticipate earnings growth to slow next year.
Overweight (Maintain)
Industry Report
November 25, 2015
Daewoo Securities Co., Ltd.
[Telecom Service / Media]
Jee-hyun Moon
+822-768-3615
jeehyun.moon@dwsec.com
Nu-ri Ha
+822-768-4130
nuri.ha@dwsec.com

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November 25, 2015
KDB Daewoo Securities Research
Media (content) stocks outperform KOSPI in 2015; Ads to drive media rally in 2016
Note: Based on aggregate market cap
Source: KDB Daewoo Securities Research
Ad agencies link advertisers and ad media
Three stages of ad agency growth
Note: INNOCEAN is in late first stage, and Cheil is in mid second stage

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C O N T E N T S
I. Ad agency business 4
1. Ad business structure 4
2. Ad agency environment 5
II. Advertising firms’ growth phase 8
1. Three phases of growth 8
2. How to grow 9
3. Three steps in branding 11
III. Mid/long-term outlook and key issues 12
1. Structural overview 12
2. Growth strategies and challenges 14
3. Changes in advertiser brand strategies 15
IV. Valuation and investment strategy 16
1. Valuation approach 16
2. Global peer comparison 17
V. Key Recommendations 18
Cheil Worldwide (030000 KS) 19
Innocean Worldwide Inc. (214320 KS) 26
Nasmedia (089600 KQ) 35

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I. Ad agency business
1. Ad business structure
The advertising value chain comprises of advertisers, ad agencies, media representatives, and ad
mediums. Payments made by advertisers are delivered to ad media through the value chain.
Advertisers can directly pay ad media, but advertising has become increasingly fragmented, as
advertisers have grown in size, and advertising has become more specialized, requiring the
services of ad agencies. Indeed, Samsung Electronics (SEC) relies on its ad agency Cheil
Worldwide, HMC on INNOCEAN and Apple on Omnicom for advertising. Advertisers’ ad expenses
are affected by their brand strategies, individual products/services, business environments and
their financials.
Ad agencies plan/produce ads and buy ad media for advertisers. Ad agencies can directly contact
ad media, but in most cases, they commission the task to media representatives due to regulatory
issues and convenience. Since the ad agency business centers around advertisers, ad agency
earnings hinge largely on advertisers (ad order volume, addition of new advertisers, loss of
existing advertisers, etc.)
Media representatives work closely with ad media. They offer specialized services according to ad
medium. KOBACO and Media Create are media representatives specializing in terrestrial
broadcasts (KOBACO for KBS and MBC, and Media Create for SBS and provincial broadcast
networks). Nasmedia and MezzoMedia are media representatives focused on new media
(internet/mobile and IPTV VOD). Media representatives connect ad media with ad agencies, assist
ad media with planning and operation, and measure ad effectiveness and deliver the results to ad
agencies and advertisers.
Traditional ad media can be largely categorized into: 1) newspapers and magazines (print), and 2)
terrestrial network and radio (radio wave). New media can be divided into: 1) pay TVs (cable TV/
general programming channels), 2) digital (online and mobile), and 3) out-of-home. Growth has
slowed in the traditional media segment, but the number of ad media is limited, and deregulation
is underway in terrestrial broadcasting. General elections and global sporting events next year
should also be positive. New media has high growth potential, but competition is intense due to
low barriers to entry and a large number of competitors.
For ad agencies, growth should be dictated by advertisers and ad media diversification, whereas
for media representatives, expansion of business coverage and positioning in high-growth
medium should be important.
Figure 1. Ad business value chain

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2. Ad agency environment
(1) Stands between advertisers and media companies
Ad firms (including ad agencies and media reps) stand between advertisers and media companies.
As such, shares of ad firms would underperform, if either advertisers or media companies do not
fare well.
Factors that are currently important to both advertisers and media companies are 1) large size
and 2) economic conditions. Ad firms have been growing, as both advertisers and media
companies are becoming larger. Large advertisers typically have more impact on ad firms’
earnings due to massive marketing campaigns. Media companies are increasingly becoming
conglomerates via business reorganization, including M&As. In particular, SBS Media Holdings has
one terrestrial TV network and seven cable TV channels, while CJ E&M holds 17 cable channels.
Internet/mobile firms, such as Naver and Kakao, are increasing ad slots in line with traffic growth.
With regard to economic conditions, it should be noted that the first thing advertisers cut during
an economic slowdown is marketing costs. For media firms, content production costs and the
composition of ad products change depending on seasonality and economic conditions, affecting
ad revenues.
Advertisers’ marketing strategies and ad spending/targets (brand, products, or services) are
different at each stage of their growth. For example, Samsung Electronics mounted ad campaigns
for new solution services, including Samsung Pay, this year. In addition, Hyundai Motor Company
has been changing its brand strategy due to the spin-off of its luxury nameplate “Genesis”.
Furthermore, advertisers who pursue global expansion can change the areas into which they
focus on advancing. A decade ago, they focused on penetrating the US and European countries,
but currently, they have shifted their focus to emerging Asian markets, including China.
For media firms, their growth trends have been differentiated. Although deregulation on
traditional media firms is underway, it appears too late for them to reverse the current business
environment. Meanwhile, the rapid growth of the digital media ad market, which is being driven
by mobile firms, has been attracting keen attention. With the advent of the on-demand economy,
digital ads are creating other market segments, including VOD ads and location-based search ads.
Under the current environment, ad firms need to focus on 1) attracting large advertisers, and 2)
restructuring media business to streamline sluggish businesses and expand new, fast growing
businesses.
Figure 2. Ad agencies link advertisers and ad media

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2) Performance of advertisers is key to ad firms’ share performance
Shares of ad agencies typically move in line with those of major advertisers. The four figures seen
below compare the share performances of Samsung Electronics (SEC), Apple, Toyota, and Doosan
with those of their respective ad agencies.
In 1H15, Cheil Worldwide, which is in charge of Samsung Electronics’ domestic media operations,
and Publicis Groupe, which handles SEC’s global media operations, delivered better share
performance than Samsung Electronics amid the launch of the Galaxy S6.
Similarly, shares of Omnicon and Dentsu have moved in line with their major clients Apple and
Toyota, respectively. Oricom, an in-house advertising agency for Doosan Group, advanced more
sharply than Doosan Corp. after Doosan won the downtown duty-free store license.
In this regard, Innocean is expected to enjoy the strongest advertiser momentum as its biggest
client HMC will likely expand marketing activities with the launch of a luxury car brand Genesis.
Figure 3. Share performances of SEC, Cheil and Publicis Figure 4. Share performances of Apple and Omnicom
Source: Thomson Reuters, KDB Daewoo Securities Research Source: Thomson Reuters, KDB Daewoo Securities Research
Figure 5. Share performances of Toyota, Dentsu and Publicis Figure 6. Share performances of Doosan and Oricom
Source: Thomson Reuters, KDB Daewoo Securities Research Source: Thomson Reuters, KDB Daewoo Securities Research
80
90
100
110
120
130
140
150
1/15 3/15 5/15 7/15 9/15 11/15
(1/15=100)
SEC Cheil Worldwide Publicis
80
90
100
110
120
130
1/15 3/15 5/15 7/15 9/15 11/15
(1/15=100)
Apple Omnicom Group
80
90
100
110
120
130
140
150
1/15 3/15 5/15 7/15 9/15 11/15
(1/15=100)
Toyota Motor
Dentsu
Publicis
0
100
200
300
400
500
90
100
110
120
130
1/15 3/15 5/15 7/15 9/15 11/15
(1/15=100)(1/15=100)
Doosan (L)
Oricom (R)

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(3) Media environment
In the media environment, the growth of digital media, including online media and mobile
internet, is prominent. In Korea and China, digital ads have already become the largest segment in
their respective ad markets. In the US, digital ads are rapidly catching up with TV ads. In all the
three countries, digital ads are expected to display the strongest growth compared to other
advertising media over the next four years. Accordingly, ad agencies need to expand investments
in digital ads to pursue further growth, and such effort should positively affect their share
performance.
Figure 7. Domestic ad media market: US$14.4bn in 2016 (digital to command 44% and TV 22%)
Figure 8. Chinese ad media market: US$53.6bn (digital to command 45% and newspaper 18%)
Figure 9. US ad media market: US$ 235.5bn (TV to command 32% and digital 26%)
Note: Based on foreign exchange rate forecasts from a single source
Source: PwC, KDB Daewoo Securities Research
0
5
10
15
20
11 12 13 14 15F 16F 17F 18F
(US$bn)
B2B and other Outdoor Digital TV Radio Magazine Newspaper
0
50
100
150
200
250
300
11 12 13 14 15F 16F 17F 18F
(US$bn)
0
10
20
30
40
50
60
70
11 12 13 14 15F 16F 17F
(US$bn)

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II. Advertising firms’ growth phase
1. Three phases of growth
In our view, ad firms go through three phases of growth.
First, they grow based on dependence on a handful of advertisers and media. In Korea, in-house
agencies of large conglomerates, including Cheil Worldwide (Samsung), Innocean (Hyundai/Kia),
and Oricom (Doosan), have achieved growth based on captive demand from group affiliates.
Among unlisted firms, HS Ad (LG), Daehong Communications (Lotte), SK Planet (SK), and
Hancomm (Hanwha) are affiliated with large conglomerates. At this growth stage, orders from
affiliates are important, with ad agencies’ share performance moving in line with their major
advertisers. Cheil Worldwide has gradually reduced its dependence on affiliate orders, while
Innocean is still trying to wean itself from its dependence on Hyundai Motor and Kia Motors.
In the second growth phase, ad firms see the expansion of client base and diversification of
media. They take a leap forward based on the experience in the first phase. In the earlier stage of
the second phase, advertising media diversify from terrestrial TV to digital and non-media retail
marketing with the development of advertisers’ brand strategies.
In the medium stage, non-affiliate orders as well as orders from group affiliates increase. The
volume of affiliate orders cannot serve as a barometer for ad firms’ competitiveness as it is mostly
determined by captive demand. However, steady growth in non-affiliate orders should indicate an
improvement in competitiveness. In the later stage, firms make more aggressive efforts like JV
establishments or M&As to increase non-affiliate orders, establish overseas network and improve
media capabilities.
In the third growth stage, an ad firm grows into an advertising group with multiple brands under
its umbrella. Although all the ad firms do not pursue this model, the majority of them are
adopting it. An advertising group has a global network and the competiveness of its independent
brands amounts to competitiveness of the entire group. Recently, the industry’s long-time norm
in which advertisers in the same industry do not use the same ad agency is being breached.
Advertisers tend to select a more competitive agency despite risks of conflict of interest.
Figure 10. Three stages of ad agency growth
Note: INNOCEAN is in the late first stage, and Cheil is in the middle second stage

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Table 1. Rank of global ad agencies
2014 Company name Headquarters Remarks Gross profit
1 WPP London Holding company of group
W10-20tr
2 Omnicom Group New York Holding company of group
3 Publicis Groupe Paris Holding company of group
W6-10tr4 Interpublic Group of Cos. New York Holding company of group
5 Dentsu Tokyo Holding company of group
6 Havas Puteaux, France Holding company of group
W2tr
7 Alliance Data Systems Corp.'s Epsilon Irving, Texas Data-based marketing
8 Hakuhodo DY Holdings Tokyo Holding company of group
W1-2tr
9 IBM Corp.'s IBM Interactive Experience Armonk, N.Y. Digital marketing and consulting
10 Deloitte's Deloitte Digital New York Digital marketing and consulting
11 Accenture's Accenture Interactive New York/London Digital marketing and e-commerce consulting
12 MDC Partners New York Holding company of group
13 BlueFocus Communication Group Beijing Digital marketing in China
W0.5-1tr
14 Experian's Experian Marketing Services New York Digital marketing and consulting
15 Cheil Worldwide Seoul, Korea
16 DJE Holdings Chicago Promotions
17 Acxiom Corp. Little Rock, Ark. Digital marketing and consulting
18 PwC's Digital Services Hallandale Beach, Fla. Digital marketing and consulting
19 Aimia Montreal Data-based marketing
20 MC Group (Media Consulta) Berlin Comprehensive ad services
Source: Advertising Age (2015), KDB Daewoo Securities Research
2. Growth routes
(1) Organic
Given the cyclical nature of the ad market, it is dependent largely on the economy. Thus, we
believe that organic growth of domestic ad agencies will converge to GDP growth over the long
term. In 2016, Korea’s GDP growth is forecast at 2-3%.
Ad agencies will need to target the most active sectors in order to boost organic growth. For
example, agencies could attract advertisers that focus on massive marketing activities amid
robust growth, or could concentrate on relatively robust digital media.
Figure 11. Ad agency business closely follows economic cycles Figure 12. Positioning in high-growth segment is effective
Source: KDB Daewoo Securities Research Source: PWC, KDB Daewoo Securities Research
0
1
2
3
4
5
1Q14 1Q15 1Q16F 1Q17F
(YoY, %)
Korea GDP growth forecast
-0.7
1.0
1.9
4.9
15.3
5.2
-5
0
5
10
15
20
Ad total Newspaper Magazine Radio TV ad Internet ad
(%)
5-yr CAGR of domestic media ad estimates

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November 25, 2015
(2) Inorganic
A prime example of inorganic growth is through M&As. Ad agencies create synergies through M&As
in the following two ways. 1) Existing accounts might place ad orders in recognition of the acquired
agencies’ capability. And 2) by leaving acquired companies operated independently, ad agencies can
increase account coverage without incurring conflicts between accounts in the same industry.
WPP, the world’s leading ad giant, is the best example of an ad company delivering growth
through M&As. London-based WPP possesses hundreds of agencies under its arms around the
world. We estimate that WPP began acquiring ad agencies in 1989, and took over 20 agencies in
1998 and 54 in 2014.
During the 1990s, WPP generated average annual gross profit growth of around 5%. However,
after aggressive acquisitions, this figure jumped to 16% during the 2000s. While the company
initially pursued M&As to increase its accounts, we believe it is now aiming to sharpen its
competitiveness in new media such as digital media, and expand coverage in emerging markets
(e.g. China).
Among domestic firms, Cheil Worldwide has been most aggressive in its M&A pursuits. The
company acquired three agencies (US, UK, and China) in 2009, two (US and China) in 2012, and
one (UK) in 2015. In particular, its acquisition of China-based Cheil PengTai (formerly OpenTide
China; acquired in 2009) has been a standout, as the firm delivered nearly 400% revenue growth
since the deal. Cheil Worldwide’s acquisition of Iris, its largest M&A, provided an immediate boost
to earnings. We believe that Cheil Worldwide and other domestic ad agencies will continue to
seek for growth via. M&As.
Figure 13. WPP’s M&As and gross profit: M&As boost growth
Note: 2015 is the consensus figures; Source: WPP, Bloomberg, and KDB Daewoo Securities Research
Figure 14. Cheil Worldwide’s M&As and gross profit: M&As were also positive
Note: 2015 is KDB Daewoo Securities estimates; Source: Cheil Worldwide and KDB Daewoo Securities Research
0
4
8
12
16
20
0
15
30
45
60
88 90 92 94 96 98 00 02 04 06 08 10 12 14
(US$bn)(deals)
Number of WPP M&A (L)
WPP gross profit (R)
0
200
400
600
800
1,000
0
1
2
3
4
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F
(Wbn)(deals)
Number of Cheil Worldwide M&As (L)
Chwil Worldwide gross profit (R)

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3. Three steps in branding
Ad agencies can grow, alongside changing brand strategies by key advertisers. In the process of
looking for solutions suitable for advertisers’ situation and purpose, agencies could win an
increase in marketing orders. In addition, as this marketing campaign will serve as a reference,
they could attract additional accounts.
Generally speaking, corporate brand strategies tend to follow three steps with a focus on: 1)
quantity, 2) quality, and 3) premium image. During the initial stages of branding, agencies focus
on increasing public awareness. For a local brand to become global, it requires qualitative (mass)
marketing capitalizing on conventional media (e.g., terrestrial broadcasters). Korean brands such
as Samsung and Hyundai Motor underwent this step.
The second step is to boost consumer preference. If increased awareness does not lead to
consumer buying, companies’ revenues would stagnate despite increased costs. During this step,
while image advertising continues to progress as part of mass marketing efforts, ad agencies add
target marketing (e.g., use of digital medium) to the strategy. Revenues tend to increase,
gradually boosting margins.
Finally, the third step is to upgrade the brand image. The aim is to make consumers aspire to
possess products or services and feel proud of their decision. Apple and Lexus are successful
examples. To achieve this goal, agencies utilize social media (out of digital media), and rely on
offline marketing activities (e.g., retail store marketing, experiential marketing). Apple is running
Apple Store, while Toyota is operating dealerships that provide the Lexus experience. Companies
that establish premium brands are capable of generating margin growth. Indeed, Apple and
Toyota are yielding higher margins than peers thanks to its premium brand value.
Figure 15. Three stages of branding: Premium brand image can lead to earnings growth
Source: SEC, Cannes Lions Korea, and KDB Daewoo Securities Research
Figure 16. Global brand rank: Apple on top, Toyota in 6th
, Samsung 7th
, HMC 39th
Source: Interbrand(2015), KDB Daewoo Securities Research

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III. Mid/long-term outlook and key issues
1. Structural overview
(1) Mid/long-term outlook
From a structural standpoint, we see three trends that will define the ad industry in the medium
to long term: fragmentation, integration, and economic association.
1) Fragmentation refers to the ecosystem expansion caused by the large number of ad firms
emerging in the new media market (especially in mobile ads). Digital ads are turning into a long
tail market because of their relatively low entry barrier. The number of ad firms is likely to
continue to increase for some time, as there is still strong need for targeted ads in niche markets.
2) Integration can be defined as attempts to cross over industry boundaries. We are witnessing
an increasing number of cases where advertisers own ad agencies (in-house ad agency) and media
firms own media reps (e.g. CJ E&M’s MezzoMedia).
3) Economic association emphasizes the increasing role of internet and mobile companies in
driving economic growth, and the importance of advertising as their key business model. For
businesses, ads are important to earnings. For governments, the ad industry can be instrumental
in spurring domestic demand and creating jobs.
(2) Key issues
In the domestic ad industry, one issue has been the growing presence of in-house ad agencies.
Korea’s top ten ad firms consist of in-house ad agencies and those owned by the global big three.
In the past decade, the top ten domestic firms have grown from 71% of gross billings in 2004 to
85% in 2014. Competition between domestic ad agencies has turned into a proxy fight between
large conglomerate groups. The same goes for the new media rep market, where Nasmedia,
MezzoMedia and Incross each represent the KT, CJ, and SK groups.
In the global ad industry, ad blocks have emerged as a key topic. Many consumers are averse to
advertising, which presents a dilemma for content developers and distributors, for whom ads are
their main source of revenue. This has touched off a heated debate over the legality of ad blocks
and attempts to prevent ad-blocking users from accessing content. In the medium and long term,
we believe ads will evolve into a new form of delivery that is met with little consumer resistance
and blurs the lines between content and ads (native advertising, etc.).
Figure 17. Domestic mobile ad ecosystem: New media ads are fragmented
Source: Buzzvil(Oct. 2015), KDB Daewoo Securities Research

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Figure 18. In Korea, ad agencies affiliated with corporate groups dominate market (based on billings)
Source: Ad Market Trend (2015) KDB Daewoo Securities Research
Figure 19. Ad-blocks on internet stirs controversy
Source: Respective company data, KDB Daewoo Securities Research
Figure 20. Informative content ads gain popularity: a case of DELL ‘Native ad’
Source: NYTimes, Buisness Insider, KDB Daewoo Securities Research
36%
26%
8%
6%
3%
2%
1%
15%
Samsung: Cheil Worldwide
HMC: INNOCEAN Worldwide
LG: HS Ad
Lotte: Daehong Communications
SK: SK Planet
Omnicom: TBWA
WPP: Group M Search
Doosan: Oricom
Hanhwa: Hancom
Publicis: Leo Burnett
Other

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2. Growth strategies and challenges
Many ad firms are relying on inorganic growth through M&As to leap forward in the medium and
long term. The number of global M&A deals has been on a steady rise, except in 2003 and 2009
when the global economy fell into a slump. The number of M&A deals so far in 2015 (as of mid-
November) has already surpassed all of 2014. Most firms have been targeting digital ad agencies
to strengthen their new media capabilities, or ad agencies in emerging markets, including China,
to expand their local operations. Major domestic ad firms are also actively considering acquisitions
to increase their size.
(2) Key issues
Ad agencies typically face two issues when seeking growth: synergy and profitability.
The M&A boom in the ad industry has brought much attention to the issue of synergy. For ad
firms, advertiser synergy is an important factor in considering an M&A. The proposed merger
between the world’s second-largest ad group, Omnicom, and the third-largest group, Publicis,
(which was the industry’s largest deal ever) eventually fell through because of uncertainties about
the deal’s potential synergies. The two firms had major advertisers who were rivals in their
respective fields, such as Pepsi and Coca-Cola, Apple and SEC, and Verizon and AT&T.
It is also important for ad firms to focus on profit margins as they grow. Labor costs are usually
fixed in manufacturing, but tend to be variable for ad agencies. Publicis had previously
experienced a decline in margins when its top line was growing.
Figure 21. Global ad market M&As: Visible growth in recent years
Note: As of mid-November 2015
Source: Bloomberg, KDB Daewoo Securities Research
Figure 22. Publicis’ margin fell during top-line growth Figure 23. Publicis seems to have made advance investments
Source: Publicis, Bloomberg, KDB Daewoo Securities Research Source: Publicis, Bloomberg, KDB Daewoo Securities Research
10
12
14
16
18
0
2
4
6
8
00 02 04 06 08 10 12 14
(%)(EURbn)
Gross profit (L)
OP/gross profit (R)
-10
0
10
20
30
40
01 03 05 07 09 11 13
(YoY, %)
Change in gross profit
Change in operating expense
0
100
200
300
400
500
600
700
800
90 92 94 96 98 00 02 04 06 08 10 12 14
(deals)
Global ad M&As

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3. Changes in advertiser brand strategies
When it comes to brand strategy, we believe globalization and consumer experience will become
the key themes over the medium and long term. Many local brands are looking to position
themselves as global brands. In particular, a growing number of brands based in Korea and China
are moving beyond their borders and going global. As a result, ad agencies will face an increasing
need to develop their brand planning capabilities and global networks.
Recently, consumer experience marketing has been gaining importance. Today’s consumers have
more power over a company’s brand image than ever before. Consumers often write about their
experience with a specific product or service on social media, which can quickly go viral. Another
brand strategy on the rise is retail marketing, which helps brands engage consumers before they
have voluntarily experienced a product. Key examples are SEC’s Galaxy S6 experience campaigns,
Toyota’s independent dealerships for its Lexus brand, and HMC’s private show rooms for its new
Genesis EQ900.
(2) Key issues
One recent development worth noting is the launch of new and individual brands. Judging from
Toyota’s Lexus marketing strategy, we think HMC could expand retail marketing (separate
dealerships) in addition to traditional ad campaigns for its new Genesis model. Another important
event could be changes in brand identity. Heading into the year end, some companies could
undergo management changes, which could potentially result in new advertising slogans or even
overhauls in brand identity. Such changes would prove beneficial to ad agencies.
Figure 24. Brand globalization efforts Figure 25. Experiential marketing (SEC)
Source: Dreamstime, KDB Daewoo Securities Research Source: SEC, KDB Daewoo Securities Research
Figure 26. Independent brand launch by HMC Figure 27. Brand identity changes
Source: HMC, KDB Daewoo Securities Research Source: instantshift, KDB Daewoo Securities Research

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IV. Valuation and investment strategy
1. Valuation approach
There has been an increasing number of advertising IPOs around the world, especially in Asia. As a
result, we now have a good number of listed companies that can serve as benchmarks, which adds
more credence to average sector valuation.
Hence, we use average sector P/Es in valuing ad agencies under our coverage. In particular, we
believe foreign benchmarks should be an important component of the valuation of domestic ad
companies that have made significant progress in foreign markets, such as China.
Recently, a slew of media, ad and content companies have gone public on China’s Shenzhen Stock
Exchange. Cheil Worldwide’s China operations, including its core subsidiary Cheil PengTai, are
expected to deliver revenue of W1tr and net profit of W50bn in 2016.
Interestingly, we are seeing an increasing number of Chinese ad agencies that are comparable
with Cheil PengTai in terms of either revenue or net profit (based on our 2016 figures). We thus
believe it makes sense to value Cheil PengTai separately based on listed Chinese ad firms.
Figure 28. Cheil expands Chinese operations: Chinese peers should be considered for valuation
Source: Respective company data, KDB Daewoo Securities Research
Figure 29. Comparison of avg. P/E of ad agencies: China > Japan > Korea > US
Notes: Company names listed on Table 2
19.6
27.2
68.5
16.718.1
23.1
48.5
15.1
0
10
20
30
40
50
60
70
80
Korea Japan China West
(x)
2015F
2016F

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November 25, 2015
2. Global peer comparison
Looking at major global ad agencies, we notice that companies showing rapid growth in Asia are
trading at higher premiums. In particular, Chinese ad stocks are fetching the highest multiples,
with Beijing Tensyn Digital leading the way following impressive revenue growth of 76% in 2015.
At the country level, Korea’s ad sector is trading at an average P/E of 18x vs. 23x for Japan, 48x
for China and 15x for Western countries, based on 2016F earnings. Although Korean ad shares
are trading at a discount compared to Japan and China, we believe they have the potential to re-
rate higher on the back of robust growth and progress in China.
Table 2. Earnings outlook for global ad agencies (Wbn)
Market
cap
Revenue Operating profit Net profit
14 15F 16F 14 15F 16F 14 15F 16F
Cheil Worldwide (Korea) 2,353 2,666 2,846 3,051 127 138 158 102 109 123
INNOCEAN Worldwide 1,344 745 939 1,098 83 92 107 84 86 93
Nasmedia 378 30 45 54 9 12 14 8 10 12
Dentsu (Japan) 19,227 7,053 6,422 7,988 1,281 966 1,351 773 618 868
Hakuhodo Dy Holdings 4,983 10,948 11,071 11,413 356 373 397 192 205 218
Asatsu-Dk 1,168 3,517 3,359 3,433 41 43 49 37 42 46
BlueFocus (China) 5,744 1,017 1,674 2,270 136 200 270 122 148 205
Guangdong Advertising 4,147 1,078 1,557 1,918 103 160 205 73 110 141
Beijing Tensyn Digital 3,222 142 219 287 17 26 40 15 24 36
Zhejiang Huamei Holding 2,558 251 266 284 28 39 49 32 37 46
WPP (UK) 34,000 19,993 21,487 21,606 2,610 3,057 3,107 1,868 2,174 2,320
Omnicom Group (US) 20,636 16,135 17,524 18,153 2,048 2,223 2,322 1,163 1,251 1,306
Publicis Groupe (France) 15,551 10,146 11,681 12,272 1,495 1,739 1,878 1,007 1,169 1,276
Interpublic Group (US) 10,940 7,939 8,776 9,109 830 1,018 1,124 503 554 632
Note: KDB Daewoo Securities estimates for Korean firms, Dentsu is believed to record gross profit as revenue
Table 3. Global ad agency valuations (x, %)
EV/EBITDA P/E P/B ROE
14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F
Cheil Worldwide (Korea) 9.5 11.4 9.7 19.5 22.0 19.4 2.0 2.1 1.9 13.2 12.4 13.5
INNOCEAN Worldwide - 9.7 7.9 - 17.5 17.1 - 2.9 2.6 21.5 17.0 16.2
Nasmedia 18.5 32.3 27.1 24.7 39.2 33.5 3.1 5.7 5.0 13.4 15.3 15.9
Dentsu (Japan) - 14.9 11.6 - 30.5 21.8 1.8 1.8 1.7 - 5.9 7.6
Hakuhodo Dy Holdings 7.4 9.7 9.2 24.3 23.3 22.0 1.9 1.9 1.8 8.4 8.0 8.2
Asatsu-Dk Inc - 13.3 12.2 25.8 27.8 25.5 1.1 1.0 1.1 4.0 3.4 4.1
BlueFocus (China) - 25.9 20.2 68.6 33.2 23.2 7.3 6.2 5.2 9.2 17.0 19.2
Guangdong Advertising - 26.2 20.5 43.2 34.1 25.5 9.7 7.7 5.9 27.0 24.1 23.7
Beijing Tensyn Digital - - - 162.2 134.8 88.6 23.3 19.9 16.2 16.4 14.7 17.7
Zhejiang Huamei Holding - - - 34.3 69.7 55.7 10.2 9.7 8.2 34.3 14.0 14.9
WPP (UK) 10.6 11.5 11.0 15.3 16.2 14.9 2.7 2.5 2.4 17.4 15.7 15.9
Omnicom Group (US) 8.9 9.8 9.4 16.9 16.8 15.7 7.2 6.6 6.3 39.0 39.5 43.8
Publicis Groupe (France) 11.0 9.4 8.7 15.5 13.5 12.3 2.0 2.0 1.8 14.7 15.4 15.8
Interpublic Group (US) 8.4 10.0 9.2 20.8 20.1 17.5 5.1 4.6 4.5 25.5 22.0 24.9
Global average 10.6 15.4 13.1 39.3 35.7 28.1 6.0 5.3 4.6 18.8 16.0 17.2
Note: KDB Daewoo Securities estimates for Korean firms, Beijing Tensyn Digital was excluded from the global P/E average

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November 25, 2015
V. Key Recommendations
Cheil Worldwide (030000 KS/Buy) Bet on Cheil PengTai
 Investment point: Bet on Cheil PengTai to drive earnings growth
 Catalysts: China holds the solution
 Valuation: Reiterate Buy and Raise TP to W30,000; Our top pick
INNOCEAN Worldwide (214320 KS/Buy) Genesis brand launch and US joint venture lift
expectations
 Investment point: Positive changes in both advertisers and ad media
 Catalyst: HMC launches global luxury brand Genesis
 Valuation: Present Buy with TP of W86,000; Initiate coverage
Nasmedia (089600 KQ/Buy) Media rep befits the on-demand era
 Investment point: New media ad business befits the on-demand economy
 Catalysts: Revenue growth to persist; Profit margins to improve
 Valuation: Lower TP to W58,000; Maintain Buy

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November 25, 2015
Investment point: Cheil PengTai to drive earnings growth
Our 2016 investment case for Cheil Worldwide is based on the firm’s Chinese subsidiary
Cheil PengTai. Acquired in 2009 (previously named OpenTide Greater China), Cheil
PengTai is a digital marketing agency operating in mainly three areas: strategic
consulting, digital marketing, and e-commerce. The agency currently has 1,200
employees and has grown fivefold since the acquisition.
Cheil Worldwide’s China business (including Cheil PengTai) has been making an
increasing contribution to overall earnings. For the first three quarters of 2015, China
accounted for 30% of revenue and 49% of net profit. Growth in China has been driven
by Cheil PengTai, which posted a 40% YoY jump in non-consolidated gross profit in 3Q15.
For 2016, we expect the China business to generate revenue of roughly W1tr and net
profit of approximately W50bn.
Cheil PengTai began operating a Korean mall on China’s second-largest online retailer
JD.com in 4Q15 and has recently started to provide digital marketing services for
corporate accounts on Tencent’s mobile messenger WeChat. Such moves should help
drive China earnings in 2016.
Catalysts: China holds the solution
We believe China will be the solution for a number of challenges facing the company.
First, the agency’s overreliance on its biggest advertiser has been a major source of the
stock’s volatility. However, non-affiliated advertisers this year has grown to 35% of gross
profit on a consolidated basis and to an estimated 60% of gross profit at Cheil PengTai.
We believe China will continue to play an important role in diversifying its client base.
Meanwhile, global ad firms are all rushing to tap into the digital segment. Cheil PengTai
not only covers the overall digital segment, but also has a strong presence in the
underpenetrated e-commerce segment.
In terms of growth, we expect the China business to expand rapidly, driving overall top-
line growth. As for margins, China generates a much higher net margin compared to
other regions, and should thus contribute to overall margin expansion.
Valuation: Reiterate Buy and Raise TP to W30,000; Our top pick
We maintain our Buy call on Cheil Worldwide and raise our target price to W30,000
(from W28,000). We present the stock as our top pick in advertising. We believe the
market will begin to price in the value of Cheil PengTai, which should receive a premium
for its meaningful business performance and the successful listing of comparable peers
in China.
Cheil Worldwide (030000 KS)
Bet on Cheil PengTai
FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F
Revenue (Wbn) 2,365 2,709 2,666 2,846 3,051 3,276
OP (Wbn) 126 130 127 138 158 175
OP Margin (%) 5.3 4.8 4.8 4.8 5.2 5.3
NP (Wbn) 94 99 102 106 120 132
EPS (W) 817 857 883 921 1,044 1,150
ROE (%) 13.6 14.7 13.2 12.4 13.5 13.0
P/E (x) 26.4 32.1 19.5 22.0 19.4 17.6
P/B (x) 3.1 3.5 2.0 2.1 1.9 1.7
Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests
Source: Company data, KDB Daewoo Securities Research estimates
Media
(Maintain) Buy
TargetPrice(12M,W) 30,000
SharePrice(11/24/15,W) 20,250
ExpectedReturn 48%
OP (15F, Wbn) 138
Consensus OP (15F, Wbn) 138
EPS Growth (15F, %) 4.3
Market EPS Growth (15F, %) 22.3
P/E (15F, x) 22.0
Market P/E (15F, x) 11.4
KOSPI 2,016.29
Market Cap (Wbn) 2,330
Shares Outstanding (mn) 115
Free Float (%) 59.5
Foreign Ownership (%) 25.9
Beta (12M) 1.32
52-Week Low 16,450
52-Week High 25,000
(%) 1M 6M 12M
Absolute -1.0 -9.6 15.1
Relative 0.2 -3.8 12.9
80
100
120
140
160
11.14 3.15 7.15 11.15
Cheil Worldwide KOSPI

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November 25, 2015
Chinese digital marketing agency, Cheil PengTai
Since the 2009 acquisition, Cheil PengTai has grown steadily to become China’s third
largest digital marketing agency in 2014, and the largest foreign-invested digital
marketing agency in the country.
Headquartered in Beijing, Cheil PengTai has branch operations in Shanghai, Guangzhou,
Hong Kong, Taiwan, and Seoul. Initially, its business was confined to research and
consulting services, but later, expanded to include digital media and e-commerce. Now,
digital media and e-commerce are the firm’s two biggest revenue contributors, with the
former more profitable than the latter, but the latter presenting greater growth
potential.
Localization is Cheil PengTai’s key growth driver. Over 90% of 700 head office staff are
Chinese, and its advertisers include major local brands such as Industrial and Commercial
Bank of China and China Mobile Communications.
Cheil PengTai delivered W505.8bn in revenue last year, and W487.1bn in the first three
quarters of this year. Net profit came in at W15.3bn in 2014, and W24.1bn in 1-3Q15.
Given that fourth quarter is traditionally its peak season, the firm’s full-year revenue and
net profit are projected to surpass W600bn and 30bn, respectively. Cheil Worldwide’s
overall China operations, including Cheil PengTai, posted W692bn in revenue last year,
and W609bn in the first three quarters of this year. On a full-year basis, we expect
aggregate China revenue to near W800bn this year, and W1tr in 2016. Aggregate China
net profit was W29bn last year, and W34bn in 1-3Q15. In 2015 and 2016, we expect net
profit to exceed W40bn and W50bn, respectively.
Figure 30. Chinese subsidiary Chei PengTai Figure 31. Third largest digital ad agency in China
Source: Company data, Pengtai, KDB Daewoo Securities Research Source: China Internet Weekly(2014), Company data, Pengtai, KDB Daewoo
Securities Research
Figure 32. Business breakdown: Consulting, digital marketing
and e-commerce
Figure 33. Chinese advertisers account for 60% of gross profit
Source: Company data, Pengtai, KDB Daewoo Securities Research Source: Company data, Pengtai, KDB Daewoo Securities Research

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November 25, 2015
Digital media business in China
For Cheil PengTai, the digital media unit makes the biggest contribution to both top line
and bottom line. The unit’s businesses include search engine marketing, social media
operations, media purchase, promotions, media campaign, etc. Its business covers a big
part of the digital media value chain, including platforms, content, and digital
experiential solutions.
Cheil PengTai boasts wide digital media coverage in China. It has almost 180
partnerships with video providers, internet portals and shopping malls, the largest in
China, including Baidu, Tencent, Sina.com, NetEase, Youku Tudou, and iQiyi.
Recently, Cheil PengTai has started to provide digital marketing services for corporate
accounts on Tencent’s mobile messenger WeChat (also known as Weixin). Thus far,
WeChat had only accepted corporate accounts from Chinese companies, but starting in
December, Korean companies will be able to establish accounts thanks to Cheil PengTai.
Such addition of new media should help boost Cheil PengTai’s digital media profitability
and growth potential. Just like in Korea, China is seeing growth in social media-based
marketing. Chinese netizens value “relationship” in the digital context, and thus, digital
marketing is anticipated to focus on relationship-based social marketing.
Figure 34. Cheil PengTai’s digital media campaign Figure 35. Cheil PengTai’s digital media value chain
Figure 36. Cheil PengTai’s ad media coverage Figure 37. Marketing for Tencent’s mobile messenger WeChat

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November 25, 2015
E-commerce business in China
If digital media is a cash cow for Cheil PengTai, e-commerce could be a rising star.
Indeed, despite its late start, e-commerce is already catching up with digital media in
revenue growth.
Cheil PengTai’s e-commerce service encompasses nearly every stage of e-commerce
transactions. For instance, if a Korean company seeks to sell products on a Chinese e-
commerce site, Cheil PengTai provides services such as: 1) translation, 2) design, 3)
warehouse operations in Korea, 4) warehouse operations in China, 5) return services in
China, 6) a Chinese office, 7) a call center, and 8) IT system development/operations.
In China, e-commerce businesses are largely divided into 1) agents that contact e-
commerce sites such as Alibaba’s Tmall to sell goods on the sites, and 2) re-sellers that
buy products from manufacturers and re-sell them on e-commerce platforms. Financial
and inventory risk management is very important for the re-sellers. Cheil PengTai serves
as both an agent and a re-seller, and handles online mall operations for Samsung
Electronics, Cheil Industries, and Hotel Shilla.
China’s e-commerce transaction value showed a CAGR of 54% over the past six years,
according to iResearch. We expect transaction value to reach W732tr in 2015, and
W955tr in 2016. A growing number of Chinese e-commerce companies are opening
websites offering services to Chinese consumers directly shopping overseas products.
Given that 6mn out of 100mn Chinese outbound travelers last year chose to visit Korea,
we believe this new segment will offer huge growth opportunities for Korean
companies. Cheil PengTai was named an operator for the Korea mall of China’s second
largest e-commerce site JD.com. This direct overseas purchase business, combined with
existing e-commerce businesses, should boost the firm’s growth.
Figure 38. Cheil PengTai’s eight e-commerce service areas Figure 39. Cheil PengTai’s e-commerce business breakdown
Figure 40. Cheil PengTai’s e-commerce site coverage Figure 41. Operation of Korea mall within JD.Com from 4Q15

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November 25, 2015
Performance by country
Cheil Worldwide’s global operational performances reflect changes in the respective
region’s business environments. In 2007, Korea made the biggest contribution to
revenue and profit, followed by Europe, the US, and then, China. This year (1-3Q
cumulative), however, China has become the biggest revenue generator, followed by
Korea, Europe, and the US. In terms of net profit this year, China contributed the most,
followed by other Asian countries, Europe and the Middle East.
Cheil’s global performances have been heavily affected by ad market growth, marketing
spend by major advertisers, media positioning and M&As in the respective countries.
Strategically important emerging markets, digital-focused businesses and increase in
M&As (meaning additional investments) offered relatively favorable business
environments.
Since early this year, we see visible growth in China’s contribution to revenue and net
profit. As Cheil PengTai became the third largest ad agency in the country, growth has
accelerated, and operating leverage appears to have increased, causing net profit to soar.
Figure 42. Cheil’s annual revenue by country: remarkable
growth since 2010
Figure 43. Revenue contribution by country: China at the top
since 2015
Source: Audited consolidated financial statements of Cheil Worldwide, KDB
Daewoo Securities Research
Figure 44. Annual net profit by country: steady growth in
China
Figure 45. Net profit contribution by country: remarkable
growth since 2015
0
200
400
600
800
07 08 09 10 11 12 13 14
(Wbn)
America Europe
China Other Asia
UAE Africa
Korea
0%
10%
20%
30%
40%
50%
60%
07 08 09 10 11 12 13 14 15.3Q
America Europe
China Other Asia
UAE Africa
Korea
(contribution)
-20
0
20
40
60
80
07 08 09 10 11 12 13 14
(Wbn) America Europe
China Other Asia
UAE Africa
Korea
-20%
0%
20%
40%
60%
80%
07 08 09 10 11 12 13 14 15.3Q
America Europe
China Other Asia
UAE Africa
Korea
(contribution)

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November 25, 2015
Earnings forecast and valuations
China is projected to continue to drive Cheil Worldwide’s growth next year, aided by the
addition of new clients in 4Q15 (JD.com and Tencent). Cheil Worldwide’s earnings are also
anticipated to improve after four years of stagnation, as China profits are relatively high.
In 2016, deregulation in the domestic ad market (total ad time cap) and the 2016
Summer Olympics (sponsored by Samsung Electronics) will likely boost Cheil
Worldwide’s revenue. In China, the flourishing social media ad/direct overseas shopping
segments will likely drive Cheil PengTai’s earnings.
We maintain our Buy call, and raise our target price from W28,000 to W30,000. In
deriving our target price, we changed the base year of valuation from 2015 to 2016, and
added a valuation premium for its Chinese operations, including Cheil PengTai.
Table 4. Quarterly and annual earnings trends and forecasts (Wbn, %)
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15F 2014 2015F 2016F
Operating revenue 634 679 602 752 575 743 683 844 2,666 2,846 3,051
Gross profit 171 208 188 225 206 242 237 272 793 956 1,007
Parent 50 73 61 76 52 69 63 79 259 263 259
Overseas 122 135 127 150 154 172 173 194 534 694 748
Share of gross profit
Parent 28.9 35.1 32.4 33.6 25.1 28.6 26.7 28.9 32.7 27.5 25.7
Overseas 71.1 64.9 67.6 66.4 74.9 71.4 73.3 71.1 67.3 72.5 74.3
Operating profit 21 44 23 39 24 42 27 45 127 138 158
OP margin 3.3 6.4 3.8 5.2 4.2 5.7 4.0 5.3 4.8 4.9 5.2
Net profit 14 37 17 35 18 34 18 39 102 109 123
Net margin 2.2 5.4 2.8 4.6 3.1 4.5 2.6 4.6 3.8 3.8 4.0
YoY growth
Operating revenue 12.4 -4.7 -6.9 -4.4 -9.2 9.4 13.6 12.3 -1.6 6.7 7.2
gross profit 27.4 8.0 0.8 8.7 20.0 16.0 25.7 21.0 13.6 20.6 5.3
Parent -1.8 -1.9 -7.6 -10.7 4.0 -5.3 3.6 4.0 -5.9 1.3 -1.4
Overseas 45.0 14.3 5.4 22.1 26.4 27.6 36.3 29.6 26.4 30.0 7.8
Operating profit 16.6 -17.1 -31.2 3.7 14.2 -3.4 18.4 14.4 -2.5 8.9 14.1
Net profit 0.0 15.7 -37.6 15.7 31.4 -8.4 7.2 12.8 -0.7 7.1 13.0
Note: K-IFRS consolidated; for ad agencies, consolidated gross profit represents net revenue; net profits attributable to controlling and non-controlling interests
Table 5. Sum-of-the-parts valuation methodology (Wbn, x, W)
Classification Value Notes
Operating value 3,098
2016F Net profit Multiple 2016 estimates for regional multiples
Korea 18 15.1 279 2016F average of global ad groups
China 55 34.0 1,882 Chinese peer group 2016F average
US and Europe 22 15.1 334 2016F average of global ad groups
Other 27 22.3 603 2016F avg. of global ad groups
Investment asset value 17
Listed stocks 4 As of end-3Q15 closing price
Unlisted stocks 10 As of end-3Q15 book value
Stakes in affiliates 4 As of end-3Q15 book value
Total asset value 3,115
Net borrowings -321 As of end-3Q15
NAV 3,436
No. of shares (‘000 shares) 115,041 No. of shares issued
TP (W) 30,000 Rounded up
Note: Chinese peer group is the average of BlueFocus, Guangdong Advertising and Zhejiang Huamei Holdings; Stakes in affiliates include only those stated in the
consolidated review reports

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November 25, 2015
Cheil Worldwide (030000 KS/Buy/TP: W30,000)
Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized)
(Wbn) 12/14 12/15F 12/16F 12/17F (Wbn) 12/14 12/15F 12/16F 12/17F
Revenue 2,666 2,846 3,051 3,276 Current Assets 1,523 1,532 1,729 1,951
Cost of Sales 1,873 1,890 2,044 2,195 Cash and Cash Equivalents 317 178 278 394
Gross Profit 793 956 1,007 1,081 AR & Other Receivables 899 1,009 1,080 1,160
SG&A Expenses 666 818 849 906 Inventories 0 0 0 0
Operating Profit (Adj) 127 138 158 175 Other Current Assets 307 345 371 397
Operating Profit 127 138 158 175 Non-Current Assets 321 402 405 402
Non-Operating Profit 13 12 12 12 Investments in Associates 5 6 14 15
Net Financial Income 3 5 4 6 Property, Plant and Equipment 101 93 91 90
Net Gain from Inv in Associates 0 0 0 0 Intangible Assets 151 230 224 219
Pretax Profit 140 150 170 187 Total Assets 1,844 1,934 2,134 2,353
Income Tax 38 41 47 51 Current Liabilities 905 1,023 1,095 1,173
Profit from Continuing Operations 102 109 123 136 AP & Other Payables 543 609 653 701
Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 18 28 28 28
Net Profit 102 109 123 136 Other Current Liabilities 344 386 414 444
Controlling Interests 102 106 120 132 Non-Current Liabilities 56 66 70 75
Non-Controlling Interests 0 3 3 3 Long-Term Financial Liabilities 0 2 2 2
Total Comprehensive Profit 92 115 123 136 Other Non-Current Liabilities 56 64 68 73
Controlling Interests 91 112 120 132 Total Liabilities 961 1,089 1,165 1,249
Non-Controlling Interests 1 3 3 3 Controlling Interests 879 831 951 1,083
EBITDA 160 177 196 212 Capital Stock 23 23 23 23
FCF (Free Cash Flow) 17 -9 135 144 Capital Surplus 118 118 118 118
EBITDA Margin (%) 6.0 6.2 6.4 6.5 Retained Earnings 857 963 1,083 1,215
Operating Profit Margin (%) 4.8 4.8 5.2 5.3 Non-Controlling Interests 4 15 18 22
Net Profit Margin (%) 3.8 3.7 3.9 4.0 Stockholders' Equity 883 846 969 1,105
Cash Flows (Summarized) Forecasts/Valuations (Summarized)
(Wbn) 12/14 12/15F 12/16F 12/17F 12/14 12/15F 12/16F 12/17F
Cash Flows from Op Activities 56 2 155 164 P/E (x) 19.5 22.0 19.4 17.6
Net Profit 102 109 123 136 P/CF (x) 11.4 12.4 11.5 10.7
Non-Cash Income and Expense 71 80 80 82 P/B (x) 2.0 2.1 1.9 1.7
Depreciation 22 22 22 21 EV/EBITDA (x) 9.5 11.4 9.7 8.3
Amortization 12 16 16 16 EPS (W) 883 921 1,044 1,150
Others 37 42 42 45 CFPS (W) 1,506 1,640 1,766 1,890
Chg in Working Capital -77 -154 -6 -8 BPS (W) 8,704 9,679 10,723 11,873
Chg in AR & Other Receivables 10 -84 -71 -78 DPS (W) 0 0 0 0
Chg in Inventories 0 0 0 0 Payout ratio (%) 0.0 0.0 0.0 0.0
Chg in AP & Other Payables -60 27 41 45 Dividend Yield (%) 0.0 0.0 0.0 0.0
Income Tax Paid -45 -37 -47 -51 Revenue Growth (%) -1.6 6.8 7.2 7.4
Cash Flows from Inv Activities -127 16 -46 -48 EBITDA Growth (%) 1.9 10.6 10.7 8.2
Chg in PP&E -36 -10 -20 -20 Operating Profit Growth (%) -2.3 8.7 14.5 10.8
Chg in Intangible Assets -5 -2 -10 -10 EPS Growth (%) 3.0 4.3 13.4 10.2
Chg in Financial Assets -82 -25 -16 -18 Accounts Receivable Turnover (x) 3.0 3.1 3.0 3.0
Others -4 53 0 0 Inventory Turnover (x) 0.0 0.0 0.0 0.0
Cash Flows from Fin Activities 130 -159 0 0 Accounts Payable Turnover (x) 3.5 3.5 3.5 3.5
Chg in Financial Liabilities 5 12 0 0 ROA (%) 5.8 5.8 6.1 6.0
Chg in Equity 11 0 0 0 ROE (%) 13.2 12.4 13.5 13.0
Dividends Paid 0 0 0 0 ROIC (%) 24.6 22.2 23.0 25.3
Others 114 -171 0 0 Liability to Equity Ratio (%) 108.9 128.7 120.2 113.0
Increase (Decrease) in Cash 55 -139 100 115 Current Ratio (%) 168.3 149.8 157.9 166.3
Beginning Balance 262 317 178 278 Net Debt to Equity Ratio (%) -53.0 -39.9 -46.6 -52.7
Ending Balance 317 178 278 394 Interest Coverage Ratio (x) 68.8 47.6 43.8 48.5

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November 25, 2015
Investment point: Positive changes in both advertisers and ad media
INNOCEAN Worldwide is the advertising arm of the Hyundai Motor Group (HMG).
Recently, we have noted some positive developments at its major advertisers and ad
media.
1) Orders from Hyundai Motor Company (HMC) are anticipated to rise following the
automaker’s decision to launch a new global luxury brand, “Genesis”.
2) Since its entry into the US market in 2008, INNOCEAN Worldwide’s US subsidiary has
focused on traditional media such as Super Bowl TV ads, (the US subsidiary was
consolidated to the parent in 2014). This year, it established Canvas Worldwide, a US
joint venture, which will now directly handle operations for HMG in the US. As such,
media revenue from the strategically important US market will likely expand.
Catalyst: HMC launches global luxury brand Genesis
Looking ahead, HMC is expected to launch a large-scale marketing campaign for the
Genesis brand, with a focus on improving brand awareness and customer preference
while strengthening brand positioning.
When Toyota launched its own luxury brand Lexus in the US, its marketing efforts in the
US have positively affected its US ad agencies for an extended period. Marketing
campaign was initially focused on brand agencies, but later expanded to retail channels,
including dealerships and motor shows, and afterwards, to markets beyond the US.
The global luxury car segment attracts 10% of total car demand, with a CAGR of around
10%. HMC plans to release the EQ900 model under the Genesis brand in December this
year, and roll out six more by 2020 (including SUVs). Genesis brand sales will likely pick
up with the release of the Genesis G70 (a midsize sedan) in 2H17, and independent
dealer shops may be able to sell the brand beginning in 2020. The volume and nature of
INNOCEAN Worldwide’s marketing should change as the Genesis brand grows.
Valuation: Present Buy with TP of W86,000; Initiate coverage
We initiate our coverage of INNOCEAN Worldwide with Buy and a target price of
W86,000. In 2016, we expect positive developments at the firm’s major advertisers and
ad media. In deriving our target price, we applied an average 2016F P/E of listed
Asian/US ad agencies to our 2016F EPS.
INNOCEAN Worldwide (214320 KS)
Genesis launch and US joint venture lift expectations
FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F
Revenue (Wbn) 711 634 745 939 1,098 1,208
OP (Wbn) 106 82 83 92 107 117
OP Margin (%) 14.9 12.9 11.1 9.8 9.7 9.7
NP (Wbn) 80 71 82 76 82 89
EPS (W) 4,430 3,932 4,551 3,986 4,082 4,439
ROE (%) 32.4 22.6 21.5 17.0 16.2 15.8
P/E (x) - - - 17.5 17.1 15.7
P/B (x) - - - 2.9 2.6 2.4
Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests
Media
(Initiate) Buy
SharePrice(11/24/15,W) 69,900
ExpectedReturn 23%
OP (15F, Wbn) 92
EPS Growth (15F, %) -12.4
P/E (15F, x) 17.5
KOSPI 2,016.29
Market Cap (Wbn) 1,398
Free Float (%) 56.0
Beta (12M) 0.93
52-Week Low 51,300
52-Week High 72,500
(%) 1M 6M 12M
Absolute 13.8 0.0 0.0
Relative 15.2 0.0 0.0
80
180
280
380
480
11.14 3.15 7.15 11.15
Innocean Worldwide Inc.
KOSPI

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November 25, 2015
Company overview
INNOCEAN Worldwide has been seeking to become a global marketing firm since its
incorporation, establishing an overseas subsidiary in the first year of business in 2005. Its
captive market (HMG) ensures business stability for the firm. It has operations in 17
countries with 1,440 employees. It has more employees abroad than at home, with 70%
of billings hailing from overseas. Captive market represents 62% of total orders in
domestic operations, and 94% in overseas operations. As such, the company’s earnings
and share price are dictated by orders from HMG.
Looking ahead, HMC’s Genesis brand launch, new vehicle releases by HMG, and UEFA
Euro 2016 will likely affect INNOCEAN Worldwide’s performance. As the US joint
venture commences operations, revenue from brand marketing and marketing for new
volume seller models will likely pick up.
Since its IPO, 28% of the company was held by Chung Sung-yi, 2% by Chung Eui-sun, and
9% by Hyundai Motor’s Chung Mong-koo Foundation. The stock has overhang concerns,
as the lock-up period for 27% of the shares issued (held by financial investors including
NHPEA IV and Standard Chartered Korea) will end on January 17, 2016. The lock-up for
5% of the shares in the employee stock ownership program will end on July 17, 2016.
Figure 46. Shareholder composition Figure 47. Summary of domestic and overseas businesses
Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research
Figure 48. Advertisers (mostly Hyundai group affiliates) Figure 49. Sports marketing campaign for Hyundai/Kia
Chung Sung-Yi
28%
Chung Eui-sun
2%
CMK
Foundation 9%
NHPEAIV
(MSPE)
18%Standard
Chartered
Korea
7%
STIC
5%
Employee stock
ownership 5%
Other
24%

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November 25, 2015
Figure 50. Business areas
Source: Company data, KDB Daewoo Securities Research
Figure 51. Global network
Figure 52. Ad volume is strongly affected by new model releases by Hyundai/Kia

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November 25, 2015
HMC’s launch of new luxury brand Genesis
In November 2015, HMC announced that it will launch a luxury auto brand Genesis. Key
executives include: Peter Schreyer (current CDO of Hyundai Motor Group), Luc
Donckerwolke (former head of design for Bently), and Albert Biermann (head of vehicle
test & high performance development for Hyundai Motor Group). At INNOCEAN
Worldwide, Jeremy Craigen, global COO, will spearhead global branding for the new brand.
Looking ahead, HMC is expected to launch a large-scale marketing campaign for the
Genesis brand, with a focus on improving brand awareness and customer preference,
while strengthening brand positioning. Currently HMC and Kia Motors rank 39th and
74th, respectively, in Interbrand’s annual global brand value rankings, with Genesis
placed out of the ranking.
HMC plans to launch the EQ900 model in December 2015 and six more models by 2020
under the Genesis brand. In our view, the differentiation of the brand will accelerate
starting 2H17 with the launch of the G70 (a mid-sized sedan). The company also plans to
open independent dealerships starting 2020.
The global luxury car market accounts for 10% of total car demand and is estimated to
have grown at a CAGR of 10%. Luxury car sales are generally on the rise in major global
markets. Of note, while the luxury car segment accounts for 30% of the entire car
market in Germany and 10% in the US, the percentage stands at just 9% in China.
However, China boasts the strongest growth in luxury car sales in the world. Currently,
the luxury car and EV segments are driving up China’s automobile market. HMC is
expected to target the luxury car segment with the Genesis brand in China.
Figure 53. HMC launches luxury brand “Genesis” in Nov 2015 Figure 54. Genesis brand: “Human-centered Luxury”
Source: HMC, KDB Daewoo Securities Research Source: HMC, KDB Daewoo Securities Research
Figure 55. Global automakers’ brand ranking: HMC 39th
, Kia
74th
Figure 56. Share of high-end car sales by country: China has
room for growth
Source: Interbrand(2015), KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research
5
7
8
9
28
29 29
30
11 11 11
12
0
5
10
15
20
25
30
35
2011 2012 2013 2014
(%) China Germany US

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November 25, 2015
Case study: Toyota
Toyota’s revenue and margins improved with the launch of its luxury brand Lexus.
Toyota’s case should have important implications for HMC’s strategy.
Toyota is taking strict differentiation strategy for Lexus by defining it as “Truly Global
Luxury Brand.” After unveiling the brand in 1989, the company launched the first global
sales in the US, not in Japan. At the early stage, the company implemented various
marketing strategies, including blind marketing, informative ads, performance
highlights, issue ads, and word-of-mouth.
With regard to products and services, the company introduced cars with superior
performances, provided premium services, and established a well-designed brand
portfolio. At the early stage, the company employed a penetration pricing strategy and
opened separate dealerships from Toyota’s to offer differentiated services.
Figure 57. Lexus’ brand concept: taking strict differentiation strategy for Lexus by defining it as “Truly Global Luxury Brand”
Source: Toyota, KDB Daewoo Securities Research
Table 6. Lexus’s success and implications for Korean automakers
Lexus → Implications for Korean automakers (HMC)
1. Strict differentiation from the Toyota brand → Creation of new premium brand
a) Spark customers’ curiosity through information ads a) Film ad highlighting the image of HMC’s new luxury brand
b) Emphasize performance b) Emphasize performance and comfort
c) Create issues c) Crash tests; autonomous driving test in Seoul
d) Strategically utilize word-of-mouth d) Target Mercedes Benz S Class, BMW 7 Series and Lexus LS
2. Superior performance and product quality → To strengthen durability and sensory quality
-Outweigh competitors in fuel efficiency, noise, weight, and maximum speed - Launch high-performance N Series in 2018
3. Premium services → Improvement in sales and service quality
-Excellent repair and maintenance services at dealerships - Private showroom for the EQ900 (private motor show for VI
- Strict training of sales and service employees based on Lexus Covenant
- Differentiate from Hyundai brand in customer experience;
independent dealerships starting 2020
4. Effective pricing policy (penetration pricing) → To shift from low to high prices to improve brand awareness
-Start at relatively lower prices and steadily increase
-To support individual consumption tax for customers that
preorder EQ900
5. Establishment of brand portfolio → Establishment of model portfolio under the premium brand
-Flagship sedan, luxury SUV, luxury entry car, sports coupe
-Four models over next five years, and six models by 2020
(mid-size sedan, large-size SUV, luxury sports coupe, mid-size SUV)
Source: Kim Hyun-chul, Yoon Seol (SNU/Keio University, 2008), KDB Daewoo Securities Research
Table 7. Toyota’s sales channels in Japan: Lexus has most channels (channel)
Directly operated Independent Total Notes
Toyota 4 45 49 Luxury channels
Toyopet 4 48 52 Leading channels for medium
Corolla 4 70 74 Volume retail channels centering on compact models
Netz 3 102 105 Targeting customers with new values for 21c
Lexus 166 Premium brand
Source: Toyota Annual Report, KDB Daewoo Securities Research

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November 25, 2015
Impact of car brand launch on ad agencies: Lexus  Publicis & Dentsu
Toyota’s launch and branding of Lexus also had implications on ad agencies. Toyota
appears to have carried out marketing activities via Dentsu in Japan and Publicis in the US.
Since Lexus’ unveiling of its luxury sedan LS400 in 1989 in the US, the automaker
targeted the US market, without highlighting its Japanese origin. The brand was
introduced in Asia a long time after its US launch. (Japan in 2005 and Vietnam in 2013).
As such, Toyota’s launch of Lexus had a more significant impact on its ad agency in the
US market.
Lexus was launched in the US by brand agency Team One, a subsidiary of Saatchi &
Saatchi. The Lexus launch remains Team One’s most successful and is still the agency’s
biggest client (maintains long-term contract). In fact, when Toyota/Lexus moved their
office to Texas, Team One established an office there as well.
Publicis Groupe is expected to have seen a marked growth in advertising orders from
Toyota in 1992. Zenith, another marketing arm of Publicis Groupe, carried out media
buying for Toyota and Lexus in the US since 2001. In 2010, Toyota also awarded
advertising orders for the European market to Saatchi & Saatchi’s European subsidiary.
Table 8. US ad agency for Lexus
Company Ad agency Role
Publicis Team One
Lead ad agency, Chief Creative Officer, a subsidiary of Saatchi &
Saatchi
Rokkan Experiential marketing
Zenith
Media purchase, individual model branding, dealer marketing,
sales event
Interpublic Golin Promotions
IW Group Asian-American ads
Allison & Partners Promotions
George P. Johnson Experiential marketing
Jackson Spalding Promotions, CR, and VIP events
Precise Communications Promotions, media exchanges among different cultural regions
Walton Isaacson Digital, broadcast, experiential marketing, and media purchase
Source: Advertising Age(2015), KDB Daewoo Securities Research
Figure 58. Revenue trends of Toyota and Publicis
Source: Media reports, respective company data, Bloomberg, KDB Daewoo Securities Research
0
2
4
6
8
10
0
5
10
15
20
25
30
89 92 95 98 01 04 07 10 13
(EURbn)(JPYtr)
Toyota revenue (L)
Publicis revenue (R)
Started 'Team One'
Lexus brand agency
Zenith Media picks up
Lexus business in 2001
Increase in Saatchi &
Saatchi EU billings since
2010
* M&A effect:
Publicis acquired digital ad agency
Sapient in 2015
Launch of Lexus in 1989

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November 25, 2015
Publicis Groupe’s long-term revenue trend should have been affected by various factors
like M&As and other advertisers as well as Toyota. Since end-2000s, the company has
unveiled its revenue breakdown by advertiser. Publicis’ revenue from automakers has
grown steadily over the past six years. In particular, the expansion of Toyota- and Lexus-
related advertising orders at its European network has greatly boosted growth in
revenue from automakers.
Meanwhile, Dentsu, the leading ad agency in Japan, has competed with Saatchi &
Saatchi in Europe for Lexus advertising orders since 2000. The company’s Lexus orders
are estimated to have expanded sharply since 2005, when Toyota launched the brand in
Japan. The company took charge of Lexus’ advertising in Canada since 2005, Australia
since 2010, and Vietnam since 2013.
Toyota’s launch of the Lexus brand has positively affected its ad agencies over the long
term. At earlier stages, orders were concentrated on branding agencies. After the
completion of brand portfolio, the company has focused more on retail marketing via
dealers and motor shows. At later stages, the company is turning to global marketing in
line with its expansion into the global market beyond the US.
Figure 59. Auto ad revenue at Publicis on the rise over the past six years
Source: Media reports, Publicis, Bloomberg, KDB Daewoo Securities Research
Figure 60. Dentsu became a major Asian ad agency with the launch of Lexus brand
Source: Media reports, respective company data, Bloomberg, KDB Daewoo Securities Research
200
300
400
500
600
700
800
10
14
18
22
26
30
99 01 03 05 07 09 11 13 15F
(JPYbn)(JPYtr)
Toyota revenue (L)
Dentsu gross profit (R)
Introduced Lexus
in Japan in 2005
Started Lexus ad agency
in Australia in end-2010
Started Lexus ad agency
in Vietnam in 2013
Dentsu received
Lexus order from EU
in end-2000
* M&A effect (Dentsu
acquired Aegis-UK) in 2014
Started Lexus ad agency in
Japan and Canada in 2005
0
200
400
600
800
1,000
1,200
09 10 11 12 13 14
(EURmn)
Publicis' revenue from auto advertisers
Increase in EU billings
since 2010
Started Lexus marketing
agency in Italy in 2012

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November 25, 2015
Valuation and earnings outlook
We initiate our coverage of INNOCEAN Worldwide with Buy and a target price of
W86,000. In 2016, we expect positive changes in the firm’s major advertisers and ad
media. In deriving our target price, we applied the average 2016F P/E of listed Asian/US
ad agencies to our 2016F EPS.
Thanks to HMC’s launch of the Genesis brand, INNOCEAN Worldwide should see an
increase in media ad orders in 2016. This year, the firm established Canvas Worldwide, a
US joint venture, which will handle media-related operations for HMG in the US. As such,
media revenue from the strategically important US market will likely expand.
In line with earnings growth, dividend payments are also anticipated to rise. INNOCEAN
Worldwide has a track record of paying out dividends based on its target dividend
payout ratio. Its target dividend payout ratio for 2014 was 15%. The company plans to
raise the ratio to 30% over the medium- to long-term.
Table 9. P/E valuation and target price (x, W)
Classification Price multiple Profit TP Notes
2016F P/E avg. of global ad industry 21.0 Asian and US ad company average
2016F EPS of INNOCEAN 4,082 Attributable to controlling interest
Target price 86,000 Rounded up
Table 10. Quarterly and annual earnings trend and forecast (Wbn, %)
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15F 2014 2015F 2016F
Revenue 152 185 156 252 227 208 241 263 745 939 1,098
Gross profit 50 63 57 88 70 73 78 94 258 314 368
Parent 23 37 30 46 24 30 32 47 136 132 132
Consolidated 27 27 27 42 46 44 46 47 122 182 235
Operating 13 20 17 32 18 20 20 34 83 91 107
OP margin 8.9 11.1 10.9 12.8 7.9 9.5 8.2 12.8 11.2 9.7 9.7
Net profit 13 17 15 39 16 16 17 37 84 86 93
Net margin 8.7 9.4 9.4 15.6 6.8 7.8 7.2 14.0 11.3 9.2 8.4
YoY growth
Revenue 49.6 12.0 54.3 4.5 17.5 26.0 17.0
Gross profit 39.4 15.9 36.8 7.1 9.2 22.1 17.0
Parent 4.4 -18.5 4.9 1.3 4.0 -2.7 0.3
Consolidated 69.2 63.7 73.0 13.4 15.6 49.7 29.1
Operating 33.0 -3.7 15.9 4.3 1.6 9.3 17.0
Net profit 18.0 -6.6 19.4 -5.9 18.7 2.1 7.6
Note: K-IFRS consolidated (US subsidiary consolidated in 4Q14)
Figure 61. Earnings variables in the US since 2014 Figure 62. Dividend payout target (mid/long term): 30%

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November 25, 2015
Innocean Worldwide Inc. (214320 KS/Buy/TP: W86,000)
(Wbn) 12/14 12/15F 12/16F 12/17F (Wbn) 12/14 12/15F 12/16F 12/17F
Revenue 745 939 1,098 1,208 Current Assets 1,081 1,155 1,350 1,508
Cost of Sales 487 624 730 803 Cash and Cash Equivalents 217 215 251 299
Gross Profit 258 315 368 405 AR & Other Receivables 640 646 756 831
Non-Operating Profit 26 19 22 24 Investments in Associates 14 14 17 18
Pretax Profit 109 111 129 141 Total Assets 1,174 1,245 1,440 1,598
Income Tax 25 25 37 40 Current Liabilities 725 725 848 933
Controlling Interests 75 70 79 86 Total Liabilities 747 747 873 961
Non-Controlling Interests 2 13 14 15 Controlling Interests 415 476 533 592
FCF (Free Cash Flow) 107 63 108 111 Capital Surplus 0 0 0 0
EBITDA Margin (%) 11.9 10.3 10.0 9.9 Retained Earnings 416 479 537 596
Net Profit Margin (%) 11.0 8.1 7.5 7.4 Stockholders' Equity 427 498 567 638
(Wbn) 12/14 12/15F 12/16F 12/17F 12/14 12/15F 12/16F 12/17F
Cash Flows from Op Activities 109 63 108 111 P/E (x) - 17.5 17.1 15.7
Net Profit 84 86 93 101 P/CF (x) - 12.2 11.2 10.5
Non-Cash Income and Expense 14 22 31 32 P/B (x) - 2.9 2.6 2.4
Depreciation 4 4 3 2 EV/EBITDA (x) - 9.7 7.9 6.8
Amortization 1 1 1 1 EPS (W) 4,551 3,986 4,082 4,439
Others 9 17 27 29 CFPS (W) 5,444 5,716 6,214 6,665
Chg in Working Capital 17 -21 12 8 BPS (W) 23,072 23,766 26,648 29,587
Chg in AR & Other Receivables 1 -14 -106 -73 DPS (W) 7,000 900 1,200 1,500
Chg in AP & Other Payables 38 6 111 77 Dividend Yield (%) - 1.3 1.7 2.1
Income Tax Paid -23 -32 -37 -40 Revenue Growth (%) 17.5 26.0 16.9 10.0
Cash Flows from Inv Activities 26 -62 -45 -31 EBITDA Growth (%) 3.5 9.0 13.4 8.2
Chg in PP&E -2 0 0 0 Operating Profit Growth (%) 1.2 10.8 16.3 9.3
Chg in Intangible Assets 0 -1 0 0 EPS Growth (%) 15.7 -12.4 2.4 8.7
Chg in Financial Assets 7 -60 -45 -31 Accounts Receivable Turnover (x) 1.4 1.5 1.6 1.6
Others 21 -1 0 0 Inventory Turnover (x) 0.0 0.0 0.0 0.0
Cash Flows from Fin Activities -7 0 -24 -30 Accounts Payable Turnover (x) 0.9 1.0 1.0 1.0
Chg in Financial Liabilities 0 0 0 0 ROA (%) 8.2 7.1 6.9 6.6
Chg in Equity 0 0 0 0 ROE (%) 21.5 17.0 16.2 15.8
Dividends Paid -7 0 -24 -30 ROIC (%) 329.8 581.6 613.0 2,815.3
Others 0 0 0 0 Liability to Equity Ratio (%) 174.8 150.0 154.1 150.7
Increase (Decrease) in Cash 126 -2 36 48 Current Ratio (%) 149.0 159.2 159.1 161.6
Ending Balance 217 215 251 299 Interest Coverage Ratio (x) 2,371.1 0.0 0.0 0.0

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November 25, 2015
Investment point: New media ad business befits the on-demand economy
Nasmedia is a media rep with a wide digital coverage, incorporating online/mobile video
and display ads, IPTV VOD ads, and digital outdoor ads.
We believe that Nasmedia’s image- and video-based ads will attract more attention amid
the advent of the on-demand economy, as online/mobile video and IPTV VOD ads are
exposed to users that enjoy on-demand content.
With the rise of on-demand economy, the number of advertisers has been increasing.
Competition in the existing mobile game, social commerce, and film sectors has been
intensifying, while the growth of the FinTech industry has been creating simple payment
service providers and internet-only banks. In addition, on-demand service providers are
currently mushrooming in a variety of markets, including transportation, moving
services, home services, healthcare, beauty care, food delivery, and travel. Intense
competition in these markets will likely increase the number of advertisers and ad
volume for Nasmedia.
Catalysts: Revenue growth to persist; Profit margins to improve
Nasmedia has been cited as one the fastest-growing ad firms in 2015. We expect the
company’s 2015 revenue, operating profit, and net profit to surge by 52%, 34%, and
28%, respectively. In particular, the IPTV ad unit is likely to deliver the strongest revenue
growth (+88% YoY) thanks to structural factors, including changes in KT’s media
business strategy and massive IPTV subscribers (now estimated at more than 10mn).
Now, investors will likely pay attention to whether Nasmedia will continue to grow
rapidly and profit margins will improve in 2016, as OP margin and net margin should
decline YoY due to costs in 2015, despite robust topline growth.
Valuation: Lower TP to W58,000; Maintain Buy
We reiterate our Buy rating on Nasmedia. The company is well positioned to benefit
from the current new-media-led changes in the media market.
We lower our target price to W58,000 from W73,000. The pace of earnings
improvement will likely slow YoY in 2016. In deriving our target price, we changed the
base year from 2015F to 2016F earnings and revised our earnings estimates to reflect
growth trends by unit and 3Q earnings results.
Nasmedia (089600 KQ)
Media rep befits the on-demand era
FY (12) 12/12 12/13 12/14 12/15F 12/16F 12/17F
Revenue (Wbn) 23 25 30 45 54 62
OP (Wbn) 8 6 9 12 14 16
OP Margin (%) 34.8 24.0 30.0 26.7 25.9 25.8
NP (Wbn) 6 6 8 10 12 13
EPS (W) 887 681 965 1,235 1,445 1,627
ROE (%) 15.7 11.2 13.4 15.3 15.9 15.7
P/E (x) - 16.6 24.7 39.2 33.5 29.7
P/B (x) - 1.7 3.1 5.7 5.0 4.4
Note: All figures are based on non-consolidated K-IFRS
Media
(Maintain) Buy
SharePrice(11/24/15,W) 48,400
ExpectedReturn 20%
OP (15F, Wbn) 12
EPS Growth (15F, %) 28.0
P/E (15F, x) 39.2
KOSDAQ 687.86
Market Cap (Wbn) 399
Free Float (%) 30.7
Beta (12M) 0.75
52-Week Low 21,500
52-Week High 72,500
(%) 1M 6M 12M
Absolute -3.8 11.5 83.3
Relative -4.6 15.7 44.4
70
120
170
220
270
320
11.14 3.15 7.15 11.15
Nasmedia KOSDAQ

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November 25, 2015
On-demand era brings positive business environment for Nasmedia
Figure 63. On-demand ad: 1) Increasing number of ad slots on IPTV VOD (case of CJ E&M)
Figure 64. On-demand ad: 2) Segmented internet video ads relating to VOD by PC and
mobile (case of NAVER)
Figure 65. In the light of activating ‘On-demand Economy’, related advertisers to expand
marketing activities
Source: Kakao, T Times, KDB Daewoo Securities Research

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November 25, 2015
Earnings outlook and valuation
Table 11. Annual earnings trend and forecast (Wbn, %)
2012 2013 2014 2015F 2016F
Revenue 23 25 30 45 54
Online/mobile ads 19 17 21 30 36
IPTV ads 2.0 3.2 3.6 6.8 7.9
Digital outdoor ads 2.4 4.9 5.2 7.7 9.2
Proportion of revenue
Online/mobile ads 81.1 67.4 70.3 67.2 67.5
IPTV ads 8.5 12.8 12.1 15.0 14.7
Operating profit 8 6 9 12 14
OP margin 32.4 24.5 28.8 26.7 25.9
Net profit 6 6 8 10 12
Net margin 27.5 22.7 26.7 22.2 22.2
YoY
Revenue 8.3 5.5 20.5 52.0 18.3
Online/mobile ads 1.3 -12.3 25.7 45.2 18.9
IPTV ads 38.8 58.6 14.5 88.0 15.7
Operating profit -2.8 -20.4 42.0 34.2 19.4
Net profit 7.5 -13.0 41.7 28.1 16.9
Note: Based on non-consolidated K-IFRS
Table 12. Earnings forecast revisions (Wbn, W, %)
Previous Revised % chg.
Notes
15F 16F 15F 16F 15F 16F
Revenue 46 57 45 54 -2.2 -5.3
-Adjusted for 3Q earnings, revised up online/mobile
ad and down for all other
Operating profit 13 17 12 14 -7.7 -17.6
-Reflected changes in revenue estimates and
revised SG&A estimates
Net profit 11 14 10 12 -9.1 -14.3
EPS 1,342 1,744 1,235 1,445 -8.0 -17.1
OP margin
Net margin
28.3 29.8 26.7 25.9
Revenue 23.9 24.6 22.2 22.2
Note: All figures are based on non-consolidated K-IFRS
Table 13. P/E valuation and target price (x, W)
Classification Price multiple Profit TP Notes
2016F P/E avg. of Korean & Chinese ad peers 40.0 Confer to Chinese highly growing digital marketing agency
2016F EPS of Nasmedia 1,445
Target price 58,000 Rounded
Note: Korean and Chinese ad agency peers are followed by Cheil Worldwide, BlueFocus, Guangdong Advertising, Beijing Tensyn Digital, Zhejiang Huamei Holdings

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November 25, 2015
Nasmedia (089600 KQ/Buy/TP: W58,000)
(Wbn) 12/14 12/15F 12/16F 12/17F (Wbn) 12/14 12/15F 12/16F 12/17F
Revenue 30 45 54 62 Current Assets 90 122 143 162
Cost of Sales 0 0 0 0 Cash and Cash Equivalents 4 4 7 8
Gross Profit 30 45 54 62 AR & Other Receivables 59 89 105 121
Non-Operating Profit 1 1 1 Investments in Associates 0 0 0 0
Pretax Profit 10 13 15 17 Total Assets 98 139 160 178
Income Tax 2 3 4 4 Current Liabilities 33 66 77 84
Controlling Interests 8 10 12 13 Total Liabilities 35 68 80 87
Non-Controlling Interests 0 0 0 0 Controlling Interests 63 70 80 91
FCF (Free Cash Flow) 1 -13 5 7 Capital Surplus 22 22 22 22
EBITDA Margin (%) 30.0 26.7 25.9 25.8 Retained Earnings 36 44 54 65
Net Profit Margin (%) 26.7 22.2 22.2 21.0 Stockholders' Equity 63 70 80 91
(Wbn) 12/14 12/15F 12/16F 12/17F 12/14 12/15F 12/16F 12/17F
Cash Flows from Op Activities 1 -3 5 7 P/E (x) 24.7 39.2 33.5 29.7
Net Profit 8 10 12 13 P/CF (x) 18.3 32.4 27.4 24.1
Non-Cash Income and Expense 3 2 3 3 P/B (x) 3.1 5.7 5.0 4.4
Depreciation 0 0 0 0 EV/EBITDA (x) 18.5 32.3 27.1 23.4
Amortization 0 0 0 0 EPS (W) 965 1,235 1,445 1,627
Others 3 2 3 3 CFPS (W) 1,304 1,495 1,768 2,005
Chg in Working Capital -9 -14 -7 -7 BPS (W) 7,587 8,533 9,688 11,025
Chg in AR & Other Receivables -2 -5 -3 -2 DPS (W) 290 290 290 290
Chg in AP & Other Payables -7 15 8 8 Dividend Yield (%) 1.2 0.6 0.6 0.6
Income Tax Paid -2 -3 -4 -4 Revenue Growth (%) 20.0 50.0 20.0 14.8
Cash Flows from Inv Activities 3 -11 -2 -2 EBITDA Growth (%) 50.0 33.3 16.7 14.3
Chg in PP&E 0 -9 0 0 Operating Profit Growth (%) 50.0 33.3 16.7 14.3
Chg in Intangible Assets 0 0 0 0 EPS Growth (%) 41.7 28.0 17.0 12.6
Chg in Financial Assets 4 -2 -2 -2 Accounts Receivable Turnover (x) 3.3 4.0 3.6 3.5
Others -1 0 0 0 Inventory Turnover (x) 0.0 0.0 0.0 0.0
Cash Flows from Fin Activities -1 14 -1 -4 Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0
Chg in Financial Liabilities - - - - ROA (%) 8.2 8.6 8.0 8.0
Chg in Equity 0 0 0 0 ROE (%) 13.4 15.3 15.9 15.7
Dividends Paid -1 -2 -2 -2 ROIC (%) 23.5 20.0 17.7 18.2
Others - - - - Liability to Equity Ratio (%) 55.8 97.2 99.7 95.8
Increase (Decrease) in Cash 3 0 3 1 Current Ratio (%) 269.9 185.0 186.2 192.7
Ending Balance 4 4 7 8 Interest Coverage Ratio (x) 0.0 0.0 0.0 0.0

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November 25, 2015
APPENDIX 1
Important Disclosures & Disclaimers
2-Year Rating and Target Price History
Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price
Cheil Worldwide(030000) 11/24/2015 Buy 30,000 11/25/2013 Buy 34,000
10/21/2015 Buy 28,000 INNOCEAN Worldwide(214320) 11/24/2015 Buy 86,000
07/23/2015 Buy 26,000 Nasmedia(089600) 11/24/2015 Buy 58,000
06/11/2015 Buy 28,000 08/13/2015 Buy 73,000
04/24/2015 Buy 30,000 05/28/2015 Buy 52,000
10/24/2014 Buy 27,000 05/17/2015 Buy 44,000
10/13/2014 Buy 31,000 04/24/2015 Buy 40,000
04/21/2014 Buy 32,000 11/26/2014 Buy 33,000
Equity Ratings Distribution
Buy Trading Buy Hold Sell
72.77% 13.86% 13.37% 0.00%
* Based on recommendations in the last 12-months (as of September 30, 2015)
Disclosures
As of the publication date, Daewoo Securities 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.
Analyst Certification
The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean
securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions
expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this
report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s
area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified
herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been
promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific
recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted by
overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and
private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of
the Analyst or Daewoo Securities Co., Ltd. except as otherwise stated herein.
Disclaimers
This report is published by Daewoo Securities Co., Ltd. (“Daewoo”), a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange.
Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been
independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or
correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English
translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this
report. Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This
report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any
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 Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material
development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the 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
20,000
40,000
60,000
80,000
100,000
Nov 13 Nov 14 Nov 15
(W) INNOCEAN Worldwide
0
10,000
20,000
30,000
40,000
(W)
Cheil Worldwide
0
20,000
40,000
60,000
80,000
(W) Nasmedia

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November 25, 2015
securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of
the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any
laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof.
Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or
form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. Daewoo, its affiliates and their directors, officers,
employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a
purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or
agents. Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment
banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to
in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to
future performance. Future returns are not guaranteed, and a loss of original capital may occur.
Distribution
United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. in the United Kingdom only to (i) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other
persons to whom it may lawfully be communicated, falling within 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 a Relevant 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 Daewoo Securities (America) Inc., a member of FINRA/SIPC, and is only intended for major institutional
investors as defined in Rule 15a-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 major institutional investor and have not received this report under any express or implied understanding that
they will direct commission income to Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed
herein should contact and place orders with Daewoo Securities (America) Inc., which accepts responsibility 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, in such 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.
Hong Kong: This document has been approved for distribution in Hong Kong by Daewoo Securities (Hong Kong) Ltd., which is regulated by the Hong Kong
Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for
distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws
of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person.
All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Daewoo or
its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its
affiliates to any registration or licensing requirement within such jurisdiction.
KDB Daewoo Securities International Network
Daewoo Securities Co. Ltd. (Seoul) Daewoo Securities (Hong Kong) Ltd. Daewoo Securities (America) Inc.
Head Office
34-3 Yeouido-dong, Yeongdeungpo-gu
Seoul 150-716
Korea
Two International Finance Centre
Suites 2005-2012
8 Finance Street, Central
Hong Kong, China
320 Park Avenue
31st Floor
New York, NY 10022
United States
Tel: 82-2-768-3026 Tel: 85-2-2845-6332 Tel: 1-212-407-1000
Daewoo Securities (Europe) Ltd. Daewoo Securities (Singapore) Pte. Ltd. Tokyo Branch
41st Floor, Tower 42
25 Old Broad St.
London EC2N 1HQ
United Kingdom
Six Battery Road #11-01
Singapore, 049909
7th Floor, Yusen Building
2-3-2 Marunouchi, Chiyoda-ku
Tokyo 100-0005
Japan
Tel: 44-20-7982-8000 Tel: 65-6671-9845 Tel: 81-3- 3211-5511
Beijing Representative Office Shanghai Representative Office Ho Chi Minh Representative Office
2401A, 24th Floor, East Tower, Twin Towers
B-12 Jianguomenwai Avenue
Chaoyang District, Beijing 100022
China
Room 38T31, 38F SWFC
100 Century Avenue
Pudong New Area, Shanghai 200120
China
Suite 2103, Saigon Trade Center
37 Ton Duc Thang St,
Dist. 1, Ho Chi Minh City,
Vietnam
Tel: 86-10-6567-9299 Tel: 86-21-5013-6392 Tel: 84-8-3910-6000
Daewoo Investment Advisory (Beijing) Co., Ltd. Daewoo Securities (Mongolia) LLC PT. Daewoo Securities Indonesia
2401B, 24th Floor, East Tower, Twin Towers
B-12 Jianguomenwai Avenue,
Chaoyang District, Beijing 100022
China
#406, Blue Sky Tower, Peace Avenue 17
1 Khoroo, Sukhbaatar District
Ulaanbaatar 14240
Mongolia
Equity Tower Building Lt.50
Sudirman Central Business District Jl.
Jendral Sudirman Kav. 52-53, Jakarta Selatan
Indonesia 12190
Tel: 86-10-6567-9699 Tel: 976-7011-0807 Tel: 62-21-515-1140

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