Vision and Purpose of Coway Acquisition - Oct 14, 2019
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Vision and Purpose of
Coway Acquisition
Oct 14, 2019
Netmarble Investment in Gaming Sector
Netmarble has pursed active investment in game companies for the last 5 years
Netmarble focused on sizable companies showing stable growth based on platforms
However, it is challenging to find attractive targets having stable revenue and
R&D capability
Netmarble’s recent investment targets
※ Netmarble has reviewed investment opportunities of more than 100 companies
Investment in Non-gaming Sectors
Netmarble invested across various non-gaming sectors to find future growth engines
including entertainment, digital bank, AI, blockchain and platform
However, these are mainly minor investments in early stage companies with
limited earnings in the near future
Entertainment Digital AI/Big data
Blockchain Platform
(IP) bank AR/VR
Netmarble named as
the Preferred Bidder for Coway
Netmarble is named as the preferred bidder for acquiring 25% controlling ownership
Coway is the No.1 leader in ‘Product Subscription Economy’ with water/air purifiers
and mattresses
With Netmarble’s IT capability in AI/big data/cloud, Coway has potential to expand
its business to Smart Home market
AS-IS TO-BE
Rental Integrate Global Major Player in
AI / Big Data / Cloud
Subscription technology
Smart Home &
Economy Subscription Economy
Growth of Subscription Economy
Global subscription economy market is forecast to grow to $ 530 BN by 2020
Korea consumer/household rental market is also forecast to grow to ₩ 10.7 TN by 2020
with 5-years CAGR of 16%
Subscription Economy Index Korea Consumer/Household Rental
Market Size
(Unit: Trillion won)
322
Subscription
Economy
269 10.7
(2011 = 100) Index
217 8.5
US Consumer 7.6
180 Sales Index 6.5
155 CAGR 3.3% 5.5
5.0
111 130 125 126
114 120
105 106 111
100
125
S&P500
111 117 Revenue
105 106 108 110
100 CAGR 3.2%
2011 2012 2013 2014 2015 2016 2017 2018 2015 2016 2017 2018 2019E 2020E
SEI = Total subscription business sales of companies (SaaS/IoT/Media)
Source : Korea Development Institute
Source : ZUORA
Growth of Coway
Coway has shown steady growth with revenue of ₩ 2.7 TN and EBIT of ₩ 0.52 TN in 2018
The number of gross accounts also has shown stable growth with 7 MN (Korea 5.9 MN
and Overseas 1.1 MN) accounts in 2018
Coway is expected to show rapid growth in SEA and the US markets
Financial Performance Number of Gross Accounts
Korea Overseas YoY Growth
Revenue EBITDA EBIT
(Unit: Trillion KRW) (Unit: Million Accounts) 7%
5% 4% 5%
3%
2%
2.99 7.0
2.71 6.5
2.52 6.2
2.32 2.38 6.1 16%
2.12 2.16 5.9
1.99 5.6 6% 9%
12%
1.82 5%
3%
0.82
0.69 0.57 0.71 0.78
0.54 0.58 0.52 0.55
0.39 0.41 0.36 0.46 0.34 0.47
0.23 0.23 0.34
2011 2012 2013 2014 2015 2016 2017 2018 2019E 2013 2014 2015 2016 2017 2018
What is Subscription Economy?
Subscription and Sharing Economy has risen as new business models as a result of paradigm
shift called ‘The Age of Access’ in the 4th Industrial Revolution
People have shown increasing interests in subscription economy as it can generate
stable cash flow without conflicts with existing ecosystem
‘The Age of Access’
Sharing Economy Subscription Economy
Trend
shift
People share products and services People sign up membership service to use products and services
The key goal is to improve efficiency of resources The key goal is to provide customized experience
Potential of Product Subscription Economy
‘Product Subscription Economy’ is expected to rapidly rise after ‘Contents Subscription’
While rental model was slow in innovation, it has growth potential based on integration
with IT components
‘Content’ ‘Product’
Netflix Model Membership Model Rental Model
Provide infinite access to contents Deliver curated products with Provide door-to-door service
with monthly subscription monthly subscription with monthly subscription
Synergy between Subscription Economy and IT
Product subscription economy model was not globally adopted due to difficulty of
providing services to wide region
However, Product Subscription started to rise as mainstream with recent development of
AI/Cloud technology and logistics innovation
Coway also partnered with Amazon DRS to expand its business in the NA market
Coway Air-purifier ‘Air Mega’ IoT functions of ‘Air Mega’
Filter lifetime calculation
Filter order through Amazon with
alarm to a user
Filter delivery
One of top sellers among Amazon’s air purifiers
Expanding product category including water purifier and bidet
Smart Home Market Forecast
Smart Home is intelligent service based on appliances connected to network with IoT
Global Smart Home market is forecast to witness a 6-yrs CAGR of 43% to $ 192 BN in 2023
Coway has advantages in transforming to global Smart Home business
Global Smart Home Market Size Startups in Smart Home Market
192
172
150
120
(Unit: Billion USD) 74
51
22
2017 2018 2019E 2020E 2021E 2022E 2023E
Source : IHS Markit Source : CB INSIGHTSActive M&A Trends
Amazon and Google have competitively acquired Smart Home companies
Google acquired NEST for $ 3 BN and Amazon acquired RING for $ 1 BN
They aim to provide the best service by collecting and analyzing data from various
IoT-based devices in households
NEST by Google RING by Amazon
Google acquired NEST for $ 3 BN Amazon acquired RING for $ 1 BN
NEST offers customized A/C and heating system based RING helps a user to monitor a visitor through its
on machine-learning analysis of data collected from doorbell camera
motion, moisture, temperature sensorsSynergy with Netmarble
The goal is to implement to all devices of Coway the know-how of user big data analysis
and operation which Netmarble has accumulated via game business
Big Data
AI Big Data AI
Cloud Data
Analysis
Know-how Cloud Data
Transfer Analysis
Game Device (Netmarble) Smart Home Device (Coway)Secure a Stable Revenue Business
With the acquisition of a growing platform-based, subscription-economy company,
Netmarble’s operational stability is expected to be further strengthened
Hit-driven
game business
+
Platform-based
Subscription
Economy businessThank you.
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