No. of Tving Subscribers Expected to Surge
The author is an analyst of KB Securities. He can be reached at yonghyun.choi@kbfg.com. -- Ed.
Maintain BUY, raise target price to KRW110,000
We maintain BUY and raise our P/B-ROE-based TP by 10.0% to KRW110,000 (19.9x 2023 P/E; 23.0% upside) on CJ ENM. We raised long-term ROE (7.81% 5y avg.), as focus on profitability should accelerate earnings improvement from 2023. No. of Tving subscribers should rise with the Dec 1 Seezn merger and investment focus on more lucrative content.
2023 outlook: Media/Music to compensate for sluggish Commerce
For 2023, we see Media/Music compensating for sluggishness at Commerce, underpinning overall growth (5.2% OPM; +1.9pp YoY). Despite slowing TV ad market conditions, Media OPM should rise 2.2pp YoY, with OP at Tving/Fifth Season up KRW50.0bn YoY/KRW30.0bn YoY. Commerce OPM should fall 1.3pp YoY on home shopping commissions and a drop in GMV. Pictures OPM should recover 6.6pp YoY with additional filmgoers. Music OPM should rise 0.4pp YoY on more in-house artist activity.
No. of Tving subscribers expected to surge on entry into pay broadcasting, Seezn merger
We see no. of Tving subscribers reaching BEP of 5.5mn by 4Q23 with (1) the securing of OTT subscribers via CJ ENM’s pay-based IPTV bundled package (+1.5mn subscribers) and (2) the Seezn merger (+1mn subscribers). Tving’s profitability-focused investments in content should alleviate cost burden; the merger should further facilitate content procurement, and Tving plans to focus more on lucrative content (e.g., season-based content) while lowering spending on others.
Fifth Season losses to narrow in 2023 on increase in no. of titles
We expect Fifth Season to produce 10-13 more titles YoY (currently at 14), which should narrow the company’s losses. It plans to produce 10 drama series in 2023 (four more YoY), which should more than cover fixed costs, leading to revenue growth.