SM Entertainment ( KQ)

Transcription

1 (4151 KQ) China growth story to begin in 214 Entertainment Company Update November 14, 213 (Maintain) Buy Target Price (12M, W) 6, Share Price (11/13/13, W) 38,4 Expected Return 56% OP (13F, Wbn) 61 Consensus OP (13F, Wbn) 6 EPS Growth (13F, %) 27.3 Market EPS Growth (13F, %) 15. P/E (13F, x) 15.1 Market P/E (13F, x) 11. KOSDAQ 55.6 Market Cap (Wbn) 793 Shares Outstanding (mn) 21 Free Float (%) 78.3 Foreign Ownership (%) 1.3 Beta (12M) Week Low (W) 29,1 52-Week High (W) 69,5 (%) 1M 6M 12M Absolute Relative Share price KOSDAQ 11/12 3/13 7/13 11/13 Daewoo Securities Co., Ltd. Internet/Game/Entertainment Chang-kwean Kim changkwean.kim@dwsec.com 3Q and 4Q earnings to be in line; Strong momentum anticipated in 4Q Despite a sluggish 1H, we expect s 213 revenue to grow 16.5% YoY to W281.5bn, and operating profit to remain broadly flat YoY at W6.7bn under consolidated K-IFRS. The 1H earnings weakness was attributable to: 1) sharp yen depreciation, 2) overseas concert royalty income being geared towards 2H (only 5, concertgoers were reflected in 1H out of 2.32mn concertgoers in 213F), and 3) a significant fall in album royalties from Japan (direct exports of Korean language albums, which had been a major earnings contributor in 212). We see strong earnings momentum in 4Q, as the company should recognize revenue from several directly operated concerts (which are more profitable), including the Korea- China-Japan SM Town tour. We estimate non-consolidated operating profit at W12bn in 3Q and over W18bn in 4Q. 214 earnings catalysts: China, Exo, and additional revenue streams China should become a major market for SM in 214. The entertainment firm is looking into joint ventures with local Chinese firms to establish a broad presence in the country across broadcasting, commercials, TV dramas, and films. The company is purportedly in discussions with major Chinese entertainment and media firms over potential alliances. The boy band Exo is scheduled to hold its first concert (as a headline act) in December and has been added to s 214 concert lineup. Exo s album is on track to break the 1mn sales mark, which would make it the first domestic album to do so in 13 years. The boy group, which includes four Chinese members, is gaining widespread popularity in China and Southeast Asia. The company s subsidiary SM C&C (4855 KQ) should display sharp earnings growth in 214, driven by: 1) earnings contributions from Woollim Entertainment (which represents the popular group Infinite) beginning in October 213, and 2) secondary revenue streams, including broadcast productions, fan meet-and-greet tours and merchandise stores. We estimate SM C&C s 214 revenue and operating profit at W111.2bn and W11.1bn, respectively. Maintain Buy and Lift TP to W6, While major artists TVXQ, Super Junior, and Girls Generation continue to enjoy worldwide popularity, SM has expanded its lineup with the additions of Exo and Infinite. On top of traditional album and concert sales, the company is introducing more profit models, like fan package tours and merchandise stores. We maintain Buy and lift our target price to W6, (from W46,) after revising up our 214F earnings and changing our valuation base year and P/E target comparison. We expect two straight quarters of solid earnings in 2H, which should help restore investor confidence. In addition to the nine-day SM Town Week concert in December, the growing visibility of SM s Chinese joint venture could also trigger upside to the stock. FY (Dec.) 12/1 12/11 12/12 12/13F 12/14F 12/15F Revenue (Wbn) OP (Wbn) OP margin (%) NP (Wbn) EPS (W) 942 1,235 1,994 2,539 3,114 3,675 ROE (%) P/E (x) P/B (x) Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, estimates 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.

2 November 14, 213 Investment points Gaining Chinese market share on the back of competitive content China s service and entertainment markets are growing at a rapid pace <Figures 1-6>. Huayi Brothers Media, a Chinese film studio and record label, is being traded on the Shenzhen Stock Exchange at respective 213F and 214F P/Es of 43x and 37x (market cap of at least W5tr). The Beijing SM Town concert held in October drew over 7, fans. This resounding success is evidence of the massive popularity of Korean pop culture (especially SM artists) in China. Thanks to the rapid spread of mobile internet, there is almost no time lag between the production of music content in Korea, and consumption in China. SM has an excellent track record of developing globally popular pop groups (from H.O.T. in 1995 to Exo in 213). Its global presence has been felt mainly in Japan over the past decade, but China will likely take center stage in the company s overseas growth for the next 1 years. We maintain our Buy call on SM and raise our target price from W46, to W6,. As the end of the year is approaching, we have changed the base year of valuation from 213 to 214. And in deriving our target price for SM, we applied Cheil Industries 214F P/E of 19.7x (the highest level among Korean entertainment and media firms). 214F peer average P/E levels are 23.x for global firms and 15.8x for domestic firms. Figure 1. Foreign investments in China are shifting away from manufacturing to consumption and service sectors (%) 6 4 FDI (3-year average growth) % of all FDI Increased FDI in consumption-/environment-/finance-related industries Reduced FDI in traditional manufacturing/light industries 2 Textiles Mining Computers Lodging Equipment Manufacturing Pharmaceuticals Specialty equipment Real estate -2 ICT Electricity Chemicals Water supply Technology Finance Transportation Wholesale/retail Culture Note: Cumulative Jan.- Aug. 213 data Source: CEIC, Figure 2. Earnings and share price of Huayi Brothers Media (US$bn) Revenue (L) Operating profit (L) Share price (R) (RMB) /1 7/1 1/11 7/11 1/12 7/12 1/13 7/13 Source: Bloomberg, 2

3 November 14, 213 Figure 3. Relationship between Korea s per-capita GDP & growth of culture/arts & service sectors (US$) (%) 25, Culture/arts and service boomed as percapita Real GDP per capita (L) 7 income increased from US$4, Culture/arts & service - YoY growth (R) to $1, 6 2, 5 15, 4 3 1, 5, Note: Real GDP (base year of 2) Source: World Bank, BOK, -1 Figure 4. Gov t expenditure on culture/arts & service in China Figure 5. Employment in culture/arts & service in China (US$mn) 5 (mn persons) CAGR of 23.7% between 27 and CAGR of 3.1% between 29 and /7 7/7 1/8 7/8 1/9 7/9 1/1 7/1 1/11 7/11 1/12 7/12 1/13 7/13 Source: National Bureau of Statistics of China, 14 9/5 3/6 9/6 3/7 9/7 3/8 9/8 3/9 9/9 3/1 9/1 3/11 9/11 3/12 9/12 3/13 Source: National Bureau of Statistics of China, Figure 6. Service industry as a % of GDP (% of GDP) 8 Great Britain France US 7 6 India Brazil Turkey Mexico Poland Russia Czech Taiwan Spain Italy Germany Japan 5 Malaysia Korea Thailand China 4 Indonesia (US$') Source: Bloomberg, 3

4 November 14, 213 Table 1. Earnings forecasts for global media/entertainment companies (US$mn, %) Market Revenue Operating profit OP margin Net profit Net margin EPS cap F 14F 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F YG Entertainment CJ CGV , Cheil Worldwide 2,684 2,11 2,594 3, CJ E&M 1,12 1,239 1,551 1, KT Skylife 1, Walt Disney 121,986 45,41 47,823 5,945 9,45 11,276 12, ,136 6,933 7, Time Warner 6,426 28,729 29,63 3,67 6,214 6,67 7, ,19 3,643 3, CBS 35,239 14,89 15,216 15,461 3,13 3,326 3, ,574 1,894 2, Discovery Holdings 3,41 4,487 5,553 6,27 1,861 2,75 2, ,119 1, Viacom 39,823 13,887 13,745 14,427 3,91 3,925 4, ,981 2,278 2, Liberty Interactive 14,37 1,54 1,261 1,738 1,2 1,175 1, , E.W. Scripps News Corp. 9,995 8,891 8,79 8, Clear Channel 569 6,247 6,197 6,345 1, RealNetworks Pandora 5, Avex 1,68 1,679 1,639 1, Amuse Huayi Brothers Media 4, Average Notes: Bloomberg consensus; Based on November 13 th closing prices; EPS is based on US$. Source: Bloomberg, Table 2. Valuation comparison of global media/entertainment companies (US$mn, %) Market P/E P/B P/S EV/EBITDA ROE ROA cap F 14F 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F YG Entertainment CJ CGV Cheil Worldwide 2, CJ E&M 1, KT Skylife 1, Walt Disney 121, Time Warner 6, CBS 35, ] Discovery Holdings 3, Viacom 39, Liberty Interactive 14, E.W. Scripps News Corp. 9, Clear Channel Real Networks Pandora 5, Avex 1, Amuse Huayi Brothers Media 4, Average Notes: Bloomberg consensus; Based on November 13 th closing prices. Source: Bloomberg, 4

5 November 14, 213 Music market outlook Asian music markets, especially China, to grow rapidly China has become the second largest movie market in the world, following the US, on the back of: 1) the easing of restrictions on movie imports by President Xi Jinping s administration, 2) a bump in the quality of domestic releases, and 3) improved infrastructure (e.g., an increase in multiplexes). By contrast, the nation s music market accounts for only a small fraction of the global total (1.4% based on 213F data), according to PricewaterhouseCoopers. While concert ticket sales and CD sales are the respective drivers of the US and Japanese markets, digital music sales are the engine of the Chinese music market (as in Korea). Currently, digital music sales mainly distributed by telecom operators make up 72% of the nation s music market. And it should be noted that revenue from these sales tends to barely cover related payment service and commission fees. Looking once more at the movie industry, we find that theater expansion in China accelerated market changes so rapidly that, now, high-end movie ticket sales (e.g., 3D, IMAX) represent more than 7% of the market. In our view, the proliferation of mobile internet could serve as a similar catalyst for change in the music space. Indeed, mobile internet is providing fans with greater access to music videos and other content, which is sparking a surge in fandom for idol bands. Considering Chinese-language copies accounted for half of the sales of Exo s latest album (close to 1mn copies total), we believe that the Chinese music market has already begun to evolve. Figure 7. Music market growth over the next five years by country; Growth is stronger in developing countries (%) Five-country avg.: 7.7% Four-country avg.: 1.1% -2 China Thailand Vietnam Indonesia Singapore Korea Japan US Euope Note: Total music market, including concerts, festivals, digital music, and CD albums. Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media Figure 8. Breakdown of global music market by country Other 16.9% Korea China China holds only 1.4% of the global music market 1.6% 1.4% Japan 13.1% Europe 37.% US 3.% Note: 213F total music market, including concerts, festivals, digital music, and CD albums. Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media 5

6 November 14, 213 Figure 9. Chinese music market Figure 1. Chinese music market growth (US$mn) (%) 1,2 Concerts/festivals Digital CD 15 Concerts/festivals Digital CD F 214F 215F 216F 217F F 214F 215F 216F 217F Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media Figure 11. Chinese concert market per capita Figure 12. Chinese digital music market per capita (US$) (US$).15 Concert market size per capita.6 Digital market size per capita F 214F 215F 216F 217F F 214F 215F 216F 217F Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media Figure 13. Chinese CD album market per capita Figure 14. Chinese music market per capita (US$) (US$).2 CD market size per capita.8 Overall music market size per capita F 214F 215F 216F 217F F 214F 215F 216F 217F Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media Source: National Bureau of Statistics of China, PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media 6

7 November 14, 213 Table 3. Korean music market breakdown and CAGR forecast (US$mn) F 214F 215F 216F 217F CAGR Concerts/festivals Digital Physical albums Total YoY Concerts/festivals Digital Physical albums Total Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, Table 4. Chinese music market breakdown and CAGR forecast (US$mn) F 214F 215F 216F 217F CAGR Concerts/festivals Digital Physical albums Total YoY Concerts/festivals Digital Physical albums Total Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, Table 5. Japanese music market breakdown and CAGR forecast (US$mn) F 214F 215F 216F 217F CAGR Concerts/festivals 1,511 1,534 1,564 1,547 1,557 1,574 1,592 1,61 1,625 1, Digital 1,288 1,225 1, Physical albums 5,993 4,784 4,43 4,288 4,265 4,24 4,174 4,13 4,75 4, Total 8,792 7,543 7,18 6,833 6,662 6,591 6,569 6,535 6,485 6, YoY Concerts/festivals Digital Physical albums Total Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, Table 6. US music market breakdown and CAGR forecast (US$mn) F 214F 215F 216F 217F CAGR Concerts/festivals 8,15 8,631 8,39 8,441 8,611 8,95 9,216 9,442 9,695 9, Digital 2,91 2,873 2,893 3,264 3,591 3,846 4,65 4,256 4,439 4, Physical albums 5,767 4,62 3,664 3,381 2,822 2,375 2,62 1,795 1,578 1, Total 16,827 16,16 14,596 15,86 15,24 15,126 15,343 15,493 15,712 15, YoY Concerts/festivals Digital Physical albums Total Source: PwC, Recording Industry Association of America, Bundesverband Musikindustrie, Informa Telecoms & Media, 7

8 November 14, 213 Earnings outlook More upside to earnings momentum to emerge in 214 We expect s consolidated earnings to grow only marginally YoY this year, despite an improvement in indicators for earnings and qualitative growth, due to: 1) sharp yen depreciation and 2) a plunge in album royalties from overseas markets. An increased revenue contribution from SM C&C, for which profits and margins are not yet fully on track, is also partially responsible for the projected dip in OP margin. In 213, the company s domestic CD sales are projected to grow 58.8% YoY to 1.68mn copies. CD sales in Japan, which stood at 1.7mn in October, are projected to come in at 2.4mn at end-213, similar to the 2.45mn copies recorded last year. Meanwhile, the company is expected to attract a total audience of 1.72mn to its concerts in Japan this year, up 81.8% YoY. So far, concerts held in ex-japan, ex-china markets have recorded a total attendance of 36,, fewer than the 459, figure for full-year 212. However, an SM Town concert (with a target audience of 1,) is scheduled to be held in December in Korea, which should sharply push up the company s ex-japan concert sales. For 213, we estimate s revenue and operating profit at W281.2bn and W6.7bn, respectively, under consolidated K-IFRS. In 214, consolidated revenue and operating profit are anticipated to improve to W357.4bn and W76.5bn, respectively. Of note, the company is expected to see its consolidated subsidiaries generate W1bn in operating profit in 214. Figure 15. Quarterly CD sales in Korea Figure 16. Annual CD sales in Korea (' copies) 6 Quarterly domestic sales (mn copies) 1.8 Annual domestic sales Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13F F Source: Company data, Gaon, Hanteo Information System, KDB Daewoo Securities Research Source: Company data, Gaon, Hanteo Information System, KDB Daewoo Securities Research Figure 17. Quarterly CD sales in Japan Figure 18. Annual CD sales in Japan (' copies) 9 Quarterly Japanese sales (mn copies) 3.5 Annual Japanese sales Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13F F Source: Company data, Oricon, Wikipedia, Source: Company data, Oricon, Wikipedia, 8

9 November 14, 213 Figure 19. Concert ticket sales in Japan (mn tickets) 2. Concert ticket sales in Japan 1.6 Figure 2. Ex-Japan concert ticket sales (' tickets) 5 Concert ticket sales ex-china Chinese concert ticket sales F Oct. 213 Source: Company data, Wikipedia, Source: Company data, Wikipedia, Figure 21. Concerts in Japan: Large-venue (Dome) concerts vs. other (mn persons) 2 No. of other concertgoers 1.8 No of Dome concertgoers F Source: Company data, Wikipedia, Figure 22. Cumulative sales of major artists in Korea (' copies) Fewer than 5, copies sold (recession of the CD market) 2 - Jo Sungmo 2 - g.o.d. 2 - Cool 2 - DJ DOC 2 - Turbo 21 - Various artists 21 - Wax 21 - Lim Chang-jung 22 - BoA 22 - Brown Eyes 22 - Coyote 22 - Lee Sooyoung 22 - Jung Nara 28 - TVXQ Exo Note: Figures are estimates, not official data Source: Wikipedia, Hanteo Information System, 9

10 November 14, 213 Table 7. s annual earnings (Wbn, %) F 214F Revenue CD Digital Overseas Management Other Revenue breakdown CD Digital Overseas Management Other Operating profit OP margin Net profit Net margin YoY growth Revenue CD Digital Overseas Management Other Operating profit RR TTB Net profit TTB Notes: Figures are based on K-GAAP through 21; From 211, figures are based on consolidated K-IFRS; TTB stands for turn to black, and RR stands for remain red. Source: Company data, estimates Table 8. Earnings forecast revisions Previous Revised % chg. (Wbn, W, %, %p) 213F 214F 213F 214F 213F 214F Revenue Operating profit Pretax profit Net profit EPS(W) 2,5 3,3 2,539 3, OP margin Net margin Notes: All figures are based on consolidated K-IFRS; Net profit refers to net profit attributable to controlling interests Source: 1

11 November 14, 213 Table 9. s quarterly revenue breakdown (Wbn, %) 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Notes Revenue Domestic Overseas CD Cost-to-revenue ratio: Approx. 8% Digital Cost-to-revenue ratio: Approx. 2-3% Royalties Cost-to-revenue ratio of merchandise, etc.: Approx. 2-3% Management Cost-to-revenue ratio: Approx. 8% Subtotal CD Direct exports of CDs produced in Korea Digital Cost-to-revenue ratio: Approx. 2-3% Royalties mostly consist of income Royalties received from the sales of DVDs and recorded music produced overseas Cost-to-revenue ratio: Approx. 2-3% Management Revenue breakdown Concert-related income: W12bn; Balance is from other services (e.g., commercials) Concert-related income: W2bn; Balance is from other services (e.g., commercials) Cost-to-revenue ratio of management services: 8% Cost-to-revenue ratio of concerts (tickets + merchandise): 5-6% Revenue of W25-4mn (smaller venues), and W4-8mn (Domes) per 1, Japanese concertgoers Revenue of W1-3bn per SM Town concert in Southeast Asia and China Subtotal CD Digital Domestic Royalties Management CD Digital Overseas Royalties Management Operating profit OP margin Net profit Net margin Notes: K-IFRS non-consolidated basis; Figures are estimates, not official data Source: Company data, Table 1. SM C&C s annual earnings (Wbn) F 214F 215F 216F Revenue Operating profit Profit from continuing operations Net profit Revenue breakdown Tourism TV dramas Domestic broadcasting rights Product placement Overseas broadcasting rights Number of productions Variety show programs Revenue per program Number of productions Other including Woolim Notes: K-IFRS non-consolidated basis; Figures are estimates, not official data Source: Company data, 11

12 November 14, 213 (4151 KQ/Buy/TP: W6,) Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/12 12/13F 12/14F 12/15F (Wbn) 12/12 12/13F 12/14F 12/15F Revenue Current Assets Cost of Sales Cash and Cash Equivalents Gross Profit AR & Other Receivables SG&A Expenses Inventories Operating Profit (Adj) Other Current Assets Operating Profit Non-Current Assets Non-Operating Profit Investments in Associates Net Financial Income Property, Plant and Equipment Net Gain from Inv in Associates 4 Intangible Assets Pretax Profit Total Assets Income Tax Current Liabilities Profit from Continuing Operations AP & Other Payables Profit from Discontinued Operations Short-Term Financial Liabilities Net Profit Other Current Liabilities Controlling Interests Non-Current Liabilities Non-Controlling Interests Long-Term Financial Liabilities Total Comprehensive Profit Other Non-Current Liabilities Controlling Interests Total Liabilities Non-Controlling Interests Controlling Interests EBITDA Capital Stock FCF (Free Cash Flow) Capital Surplus EBITDA Margin (%) Retained Earnings Operating Profit Margin (%) Non-Controlling Interests Net Profit Margin (%) Stockholders' Equity Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/12 12/13F 12/14F 12/15F 12/12 12/13F 12/14F 12/15F Cash Flows from Op Activities P/E (x) Net Profit P/CF (x) Non-Cash Income and Expense P/B (x) Depreciation EV/EBITDA (x) Amortization EPS (W) 1,994 2,539 3,114 3,675 Others CFPS (W) 2,471 3,453 4,515 4,79 Chg in Working Capital BPS (W) 8,35 1,729 14,233 18,14 Chg in AR & Other Receivables DPS (W) Chg in Inventories Payout ratio (%).... Chg in AP & Other Payables Dividend Yield (%).... Income Tax Paid Revenue Growth (%) Cash Flows from Inv Activities EBITDA Growth (%) Chg in PP&E Operating Profit Growth (%) Chg in Intangible Assets EPS Growth (%) Chg in Financial Assets -5 9 Accounts Receivable Turnover (x) Others Inventory Turnover (x) Cash Flows from Fin Activities Accounts Payable Turnover (x) Chg in Financial Liabilities ROA (%) Chg in Equity 65-4 ROE (%) Dividends Paid ROIC (%) Others Liability to Equity Ratio (%) Increase (Decrease) in Cash Current Ratio (%) Beginning Balance Net Debt to Equity Ratio (%) Ending Balance Interest Coverage Ratio (x) Source: Company data, estimates 12

13 November 14, 213 APPENDIX 1 Important Disclosures & Disclaimers Disclosures As of the publication date, Daewoo Securities Co., Ltd. has been acting as a financial advisor to SM Entertainment for its treasury stock trust, and other than this, Daewoo Securities has no other special interests in the companies covered in this report. (W) 1, 8, 6, 4, 2, Stock Ratings Industry Ratings Buy Relative performance of 2% or greater Overweight Fundamentals are favorable or improving Trading Buy Relative performance of 1% or greater, but with volatility Neutral Fundamentals are steady without any material changes Hold Relative performance of -1% and 1% Underweight Fundamentals are unfavorable or worsening Sell Relative performance of -1% * 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. 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 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. 11/11 5/12 11/12 5/13 11/13 13

14 November 14, 213 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 2 (Financial Promotion) Order 25 (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 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 Korea Two International Finance Centre Suites Finance Street, Central Hong Kong 32 Park Avenue, 31st Fl. New York, NY 122 United States Tel: Tel: Tel: Daewoo Securities (Europe) Ltd. Daewoo Securities (Singapore) Pte. Ltd. Tokyo Representative Office Tower 42, Level Old Broad Street London EC2N 1HQ United Kingdom 6 Battery Road, #11-1 Singapore, th Floor, Yusen Building Marunouchi, Chiyoda-ku Tokyo 1-5 Japan Tel: Tel: Tel: Beijing Representative Office Shanghai Representative Office Ho Chi Minh Representative Office Suite 262, Twin Towers (East) B-12 Jianguomenwai Avenue Chaoyang District, Beijing 122 China Unit 13, 28 th Floor, Hang Seng Bank Tower 1 Lujiazui Ring Road Pudong New Area, Shanghai 212 China Centec Tower Nguyen Thi Minh Khai Street Ward 6, District 3, Ho Chi Minh City Vietnam Tel: Tel: Tel: