CJ E&M's film hit ”Veteran” (2015, film) (tvN)

For investors looking to take a bet on Korea’s hot pop culture scene, CJ E&M deserves a close look.

The Seoul-based firm is arguably Korea’s most prominent provider of cultural content now, churning out one mega hit after another.

From “Grandpas Over Flowers (2013,) “Incomplete Life (2014),” to “Reply 1988” last year, many of its TV productions aired on cable channel tvN were cultural sensations.

“At least in the TV segment, it is safe to say that CJ E&M has proven its mettle,” said analyst Chung Yu-seok of Kyobo Securities in Seoul.

CJ E&M’s business interest spans across TV, film, music, live entertainment and animation, but TV is the mainstay of its revenue.
Operating profits from TV soared a whopping 2,039 percent in 2015, helping the company swing to a surplus of 53 billion won ($44.7 million).

The popularity of TV content is typically monetized through commercials and hit TV shows and dramas lead to spikes in ad rates, Chung explained.

“The average ad rates at tvN rose 54.7 percent last year, but that is still less than half the levels at territorial networks,” the analyst said, indicating that there is room for further growth. CJ E&M runs 15 other cable TV channels, including the music entertainment channel Mnet and the country’s top movie channel OCN.

As to the big screen, CJ E&M is at the top for five straight years now.

“Grandpas Over Flowers” (2013, TV show) (tvN)

Its releases -- including both domestic and foreign productions -- took up 23 percent of the local box office in 2015.

The year’s biggest box-office hit was also a CJ E&M release. Directed by Ryoo Seung-wan, “Veteran” became the third most viewed film in Korea, drawing 13.4 million viewers since its release in August last year. It was CJ’s fifth production to breach the 10 million viewership mark in a country of 50 million.

Despite the seemingly strong performance, however, experts are paying more attention to the company’s overseas business plan, particularly in China, the movie world’s hottest market, as Korea’s domestic film market nears saturation.

“CJ E&M is increasing its network in China, with four releases scheduled in the country this year alone. That is a positive for the company’s growth outlook,” said Km Hyun-yong of eBest Securities. CJ E&M is the brokerage’s top pick for entertainment-media stocks.

Reply 1998” (2015, TV drama) (tvN)

Shares in CJ E&M closed at 76,500 won per share on the secondary stock exchange KOSDAQ on Monday. Its market cap is slightly above 2.9 trillion won, the fifth largest on the bourse for smaller-cap stocks.

A unit of the retail-centered conglomerate CJ, CJ E&M is 42 percent controlled by the group’s holding firm CJ Corp. and its owner family. The second-largest stakeholder is the National Pension Fund, Korea’s largest investor. Foreigners hold a combined 18.55 percent stake.

In another positive development to the company’s profit outlook this year or next, the company’s game-publishing spin-off Net Marble is preparing for an initial public offering. CJ E&M holds a 31.5 percent stake in the mobile game developer which set a new record in annual revenue last year, raking in 1.1 trillion won.

By Lee Sun-young (milaya@heraldcorp.com)