Change on the way. Source: Korea Investment & Securities

Transcription

1 24 November 2006 Daekyo (019680) Textile.Apparel/Paper.Education Cindy Yu R.A. Hyun-Kyung Lee BUY (Maintain) W84,400 (21 November 2006) Price target: 6 month W100,000 (+18.5%) Share data 52-Week High/Low (Won) 90,600/65,400 Market cap (USDmn) Shares outstanding (mn) 8.5 Dividend Yield (%, FY06F) 2.3 Foreign ownership (%) 30.5 Price performance (%) Absolute Relative to KOSPI 1m m m Price Chart ( =100) Source: DATASTREAM Daekyo KOSPI Change on the way We maintain BUY and raise our six-month price target to W100,000 from W98,000. We derived the TP from a sum-of-parts valuation to properly reflect the company s asset value. Premium home tutoring service sales in high gear: After suffering from stagnant growth due to the shrinking number of Noonnoppi subscribers, the total number of subscribers turned to growth in 1Q06. The main contributors are: 1) the growing popularity of its premium home tutoring service (Soluny and Caihong) and 2) the stabilization of subscriber withdrawal from Noonnoppi. Moreover, operating profit, which has been on the decline for the past two years, should surge by 22.1% in 2007 due to the planned price hike for major tutoring services in 1H07. The change in commission system trims cost burden: In 3Q06, the company changed the commission system for most of its tutors from senioritybased to performance-based. The new system, incurring fewer costs for the company, should contribute to higher profitability in Acquisition of Fermat Edu, a path to greater brand power: Daekyo advanced to the secondary education market in September 2006 by taking over Fermat Edu, a private institute which offers preparatory courses for specialty high-school entrance exams. The takeover should provide Daekyo with an opportunity to: 1) tap into the middle school student market which represents 27% of the private education market, 2) secure high-value customers, especially high-performing students who desire to enter science or foreign language specialty high schools; and 3) enter the middle-school e-learning market. Considering that: 1) Fermat Edu wields strong brand power in the private education market; and 2) elementary students, Daekyo s major customers, should provide a potential client base for Fermat Edu, Daekyo will likely achieve maximum synergy from the takeover F 2007F 2008F Sales (W bn) %chg (YoY) OP (W bn) RP (W bn) NP (W bn) EBITDA (W bn) EPS (Won) 6,252 5,824 5,651 7,418 7,879 %chg (YoY) BPS (Won) 49,795 65,551 65,396 70,993 77,289 PER (X) PBR (X) EV/EBITDA (X) OP Margin (%) EBITDA Margin (%) ROE (%) Net Debt (W bn) Int. Coverage (X) 1, NM NM NM NM D/E ratio (%) Source: Korea Investment & Securities Korea Investment & Securities Co., Ltd. does not own over 1% shares of Daekyo as of November 23, Korea Investment & Securities Co., Ltd. has provided this report to various third parties. Neither the analyst covering this company nor his spouse owns any Daekyo shares as of November 23, The contents of this report accurately reflect the analyst s views. Under no circumstances were there any external pressures or intervention during the analysis process or the preparation of this report. Prepared by: Cindy Yu, Hyun-Kyung Lee

2 Korea Investment & Securities Co., Ltd. stock recommendation classifications based on 6-month forward share price performance relative to market index performance. Strong Buy: Assumes over 30% out performance relative to market index Buy: Assumes 10~30% out performance relative to market index Hold: Assumes -10~10% share price performance relative to market index Underweight: Assumes over 10% share price under performance relative to market index Korea Investment & Securities Co., Ltd. sector recommendation classifications based on 6-month forward performance of sector s portfolio weight to KOSPI (KOSDAQ) market capitalization weight Overweight: Assumes sector s portfolio weight to outperform KOSPI (KOSDAQ) market capitalization weight Neutral: Assumes sector s portfolio weight to have same return as KOSPI (KOSDAQ) market capitalization weight Underweight: Assumes sector s portfolio weight to under perform KOSPI (KOSDAQ) market capitalization weight Analyst Certification I/We, as the research analyst/analysts who prepared the report, do hereby certify that the views expressed in the research report accurately reflect my/our personal views about the subject securities and issuers discussed in the report. I/We do hereby also certify that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in the research report. This report was written by Korea Investment & Securities Co., Ltd. to help its clients invest in securities over which Korea Investment & Securities Co., Ltd. holds the copyright. This report cannot be copied, redistributed, forwarded or altered in any way without the consent of Korea Investment & Securities Co., Ltd. This report has been prepared by Korea Investment & Securities Co., Ltd. and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. We make no representation as to its accuracy or completeness and it should not be relied upon as such. The company accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. The final investment decision is based on the client s judgment, and this report cannot be used as evidence in any legal dispute related to investment decisions.

3 Investment summary We maintain BUY with a TP of W100,000 We maintain BUY and adjust up our price target from W98,000 to W100,000 based on the 07F PER of 13.5x and adj. EV/EBITDA of 4.1x. We raised the price target as we took into consideration the value of some of the company s real estate. After losing some market share since 2000 due to the desertion of subscribers, Daekyo managed to regain its market presence since 1Q05. The company achieved this remarkable feat through two new products: Soluny (launched in 1Q05) and Caihong (acquired in 3Q05), both of which are premium home tutoring services. Thanks to its allout efforts, Daekyo s home tutoring service sales turned to growth in 4Q05 on a YoY basis and the decline in Noonnoppi subscribers plateaued, thereby boosting its total number of subscribers again since 1Q06. Considering that Korea has the lowest birth rate in the world and the subsequent weak subscriber base going forward, the growth potential of the home tutoring service market appears very limited. However, Daekyo is likely to overcome the limitations of the home tutoring service market based on its premium product lineup. A case in point is Soluny, the company s home tutoring line for children, which received a positive response from the market due to the recent popularity of reading and essay writing in Korea. Daekyo plans to raise subscription prices for Noonnoppi by 6-10% in 1H07. The price increase is not likely to drive away existing or would-be subscribers as the home tutoring service market has already matured and new demand is being created by the launch of premium products. Thus, we believe operating profit is unlikely take a hit from the price hike. Instead, the price increase, combined with a rebound in the number of subscribers, will likely drive up operating profit by 22% in In 3Q06, most of the company s tutors converted from the seniority-based millennium to the performance-based pro compensation system. Although a compensation expense was paid to tutors in 3Q06 as an incentive for the conversion, it was just a one-off expense, and a commission drop down the road is likely to improve profitability in 4Q. Acquisition of Fermat Edu, a path to greater brand power Daekyo advanced to the secondary education market in September 2006 by taking over Fermat Edu, a private institute which offers preparatory courses for specialty high-school entrance exams. Since its establishment in 2003, Fermat Edu has built 10 academies and opened 60 franchised academies nationwide. We predict that Daekyo s acquisition of Fermat Edu will bring out synergy effects due to the following: 1) Fermat Edu has strong brand power in the private education market; 2) most of its members are academically advanced students whose opinions carry weight in the private education market, and 3) elementary students, Daekyo s major customers, will become a potential client base for Fermat Edu. Together with Fermat Edu, Daekyo plans to launch an online education service Gongbuwarac in December targeting middle school students. We do not believe that Gongbuwarac will make a significant earnings contribution in the short term. However, we expect the online business will have solid growth potential given Fermat Edu s strong market presence. Daekyo (019680) 1

4 Valuation We maintain BUY with a TP of W100,000 We maintain BUY and adjust up our price target from W98,000 to W100,000 based on the 07F PER of 13.5x and adj. EV/EBITDA of 4.1x. We raised the price target as we took into consideration the value of some of the company s real estate when we calculated it. We derived our TP based on a sum-of-parts valuation to reflect the company s asset value properly in calculating its corporate value. We applied an EV/EBITDA of 5.5x (the manufacturing industry average in our Kospi Universe) to derive the operating asset value and a 70% discount to the market value to derive the value of available-for-sale securities. In the case of land & buildings, we applied a 50% discount to the book value considering that most properties are used for business, not for investment. Sum-of-parts valuation (W bn) Valuation Note Operating assets (A) EBITDA F estimate EV/EBITDA multiple (x) 5.5 Non-operating assets (B) (1)+(2)+(3) (1) Available-for-sale securities % discount to the market value (2) Land & buildings % discount to the book value (3) Cash Debt (C) 0.0 Total equity value (A)+(B)-(C) 1,043.5 Outstanding shares ('000) 10,413 Incl. preferred stocks NAV (won) 100,208 Source: Company data, Korea Investment & Securities Investment assets & real estate held by Daekyo (Won, %, W bn) Closing price on 21 Nov 2006 # of shares held Stake Market value Shinhan Financial Group 46,100 5,344, LGT 10, , KT 47, , LG Electronics 58,300 13, Daishin Securities (preferred stock) 14,050 61, Others 5.0 Total Land 39.2 Buildings 90.8 Total real estate Source: Company data Secondary education market entry, a foundation for longterm growth As Daekyo s flagship product, Noonnoppi suffered from subscriber defection over the past 2~3 years, there were concerns over the loss of market dominance and low growth. However, Daekyo is dismissing those concerns by blazing the trail for premium home tutoring service. Another encouraging sign is the company s foray into the secondary education market based on the strong brand power and No.1 market position in the primary education market. Education service providers, like consumer goods providers, require strong brand power and deep pockets to realize long-term growth. In that sense, Daekyo s strong cash position, with cashable assets accounting for more than 50% of its market cap, is very positive. On the downside, the ROE and the corporate value can be hurt if the company s assets are inefficiently managed. However, we believe more focus should be placed on possible long-term growth rather than on a short-term fall in ROE. In tandem with the overall rally of education shares, Daekyo showed robust share performance (the 3-month absolute return of 25.4% and the relative return to the Kospi of 19%). We believe investors are pinning high expectations on Daekyo s earnings improvement in Its current share price, which is equal to the adj. EV/EBITDA of 3.0x, appears undervalued compared to major domestic consumer goods plays. As the sluggish business has acted as a discount factor, improving profitability backed by subscriber growth and price increases should gradually resolve the company s undervalued status. Daekyo (019680) 2

5 EV/EBITDA comparison between consumer goods companies in Korea EV/EBITDA (x) Average Daekyo Nongshim KT&G Shinsegae Amore Pacific Cheil Communications Note: Based on adj. 07F EV/EBITDA Source: Korea Investment & Securities Peer comparison in Korea and abroad Apoll Group Career Edu Laureated Edu Scholastic Corp. Daekyo Woongjin ThinkBig Megastudy YBM Sisa.com APOL.US CECO.US LAUR.US SCHL.US KR KR KR KR Country US US US US KOR KOR KOR KOR Currency USD USD USD USD KRW KRW KRW KRW Mkt cap (USD bn, W bn) PER 2005A F F Mkt PER 2005A F F Relative to Mkt PE 2005A 79% 107% 168% 100% 117% 38% 107% 140% 2006F 91% 98% 166% 110% 128% 124% 243% 180% 2007F 92% 122% 148% 109% 165% 139% 223% 199% PBR 2005A F F EV/EBITDA 2005A F F ROA (%) 2005A F F ROE (%) 2005A F F EPS (USD, KRW) 2005A ,651 1,549 3, F ,418 1,272 4,703 1, F ,879 1,507 6,247 1,244 EPS growth % -10.8% 23.8% 43.6% 31.3% 18.5% 32.8% 16.6% BPS (USD, KRW ) 2005A ,551 6,160 14,940 4, F ,396 8,508 18,440 4, F ,993 9,709 22,555 5,588 EBITDA (USD bn, W bn) 2005A F F Net Debt (USD bn, W bn) 2005A F Source: Datastream, Korea Investment & Securities 2007F Daekyo (019680) 3

6 Premium home tutoring service sales in high gear Overcoming low growth based on high-performing premium products and slowdown in the loss of Noonnoppi subscribers Soluny and Caihong should break-even in 2007 After a temporary dip over the recent few years, Daekyo s market share is likely to pick up going forward thanks to its strengthened product lineup. In 2000, its share in the home tutoring service market targeting preschoolers and elementary school students reached as high as 50%. However, amid competitors stepped-up efforts to snatch Daekyo s market share over the past two years, Daekyo saw its Noonnoppi subscribers (flagship home-tutoring program) decline with the market share plunging to 40% in 1H06. As a way to regain its presence, Daekyo launched Soluny (home tutoring program for children specializing in reading and essay writing) in 1Q05. Following the acquisition of Caihong, a Chinese learning material program for adults, in 3Q05, Daekyo is paying extra attention to its premium home tutoring business. Its concentration on premium products looks appropriate considering the low growth potential of the home tutoring market. The number of potential subscribers is likely to dwindle as Korea s birth rate is lowest level in the world. However, Daekyo is likely to overcome the limitations of the study material market based on its premium product lineup. A case in point is Soluny, the company s home tutoring line for children, which received positive response from the market due to the recent popularity of reading and essay writing in Korea. The premium home tutoring division, which posted operating losses in 3Q06 due to its nascent status, should break-even in To arrive at the BEP, Soluny and Caihong should attract 30,000 and 50,000 subscribers, respectively. As of end-3q06, the number of subscribers stood at 20,000 for Soluny and 30,000 for Caihong. As the number of premium home tutoring subscribers is rapidly growing, we believe that Soluny and Caihong will generate profits in 2007 via economies of scale. Sales breakdown (W bn) Noonnoppi Premium products Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06F Source: Company data, Korea Investment & Securities Membership growth 2,240 2,220 2,200 2,180 2,160 2,140 2,120 2,100 (Members) (%) Number of members %chg (RHS) 05.1Q 05.2Q 05.3Q 05.4Q 06.1Q 06.2Q 06.3Q 06.4QF Source: Company data, Korea Investment & Securities Daekyo (019680) 4

7 A price increase will likely drive up the 07F operating profit 22.1% from this year Daekyo plans to raise subscription prices for Noonnoppi by 6-10% in 1H07 after its last price increase in 1Q04. At that time, the company suffered serious earnings aggravation as the price increase coincided with subscriber migration. However, this time, the past is not likely to repeat itself, as the subscriber decline has recently stabilized with the home tutoring market maturing and creation of new demand by premium home tutoring services. Against this backdrop, a price increase will likely drive up the 07F operating profit 22.1% from this year. Rationalized commission system Rationalized commission system should improve profitability from 2007 In 3Q06, most tutors hired by Daekyo converted their wage system from the senioritybased millennium to the performance-based pro. The millennium system saddled the company with a significant cost burden ever since being introduced in 2000 as it guarantees contribution commission, similar to severance wages. Under the system, tutors get paid 3~4% of their operational performance at the time of retirement. As a onetime compensation expense was paid to tutors in 3Q06 as an incentive for conversion from millennium to pro, a commission drop is likely to improve profitability in There are currently 2000 tutors working under the millennium system, or 13.8% out of 14,500. The conversion to the pro system is scheduled to be complete in 2007 when the remaining tutors renew their contracts. Sales commission vs. contribution commission 50 (%) (%) Contribution commission (RHS) Sales commission F 2007F Note: Sales commission includes contribution commission Source: Company data, Korea Investment & Securities Lossmaking new businesses should start to generate profits earlier than expected Unlike the home tutoring business, the after-school class and Sobics businesses have yet to generate meaningful earnings. The after-school program turned to the red in 3Q due to the declining profitability per school despite a growing number of contracts (from 315 at end-2005 to 390 as of end-september). In the case of the Sobics business, although the reduced number of branches lowered fixed costs, the business failed to recover profitability. However, we believe the company s new business will surpass the break-even point in the near future as the company announced its plan to shift its focus from quantitative growth to qualitative growth. Considering the mere 10% weighting of the new business in total sales, its contribution to profitability is unlikely to be significant for the time being. Daekyo (019680) 5

8 Acquisition of Fermat Edu, a way to greater brand power Daekyo s acquisition of Ferma Edu should maximize synergy effects -- an entrance to the secondary education market and expand the potential customer base Daekyo advanced to the secondary education market in September 2006 by taking over Fermat Edu, a private institute which offers preparatory courses for specialty high-school entrance exams. Since its establishment in 2003, Fermat Edu has set up 10 academies and opened 60 franchised academies nationwide. The merger with Fermat Edu should give Daekyo an opportunity to: 1) tap the middle school student market which represents 27% of the private education market; 2) secure high-value customers, especially highperforming students who desire to enter science or foreign language specialty high schools; 3) develop middle school e-learning products, and 4) expand sales and achieve sustainable growth by establishing a competitive and premium business model. We anticipate that Daekyo s acquisition of Fermat Edu will bring out synergy effects as: 1) Fermat Edu has strong brand power in the private education market; 2) most of its members are academically advanced students whose opinions carry weight in the private education market, and 3) elementary students, Daekyo s major customers, will become a potential client base for Fermat Edu. Together with Fermat Edu, Daekyo plans to launch an online education service Gongbuwarac in December targeting middle school students. The company expects the online learning program to generate W5bn of sales in 2007 by staging joint-marketing with Fermat Edu to Noonnoppi members. We do not believe that Gongbuwarac will make a significant earnings contribution in the short term. But, we expect the online business to have solid growth potential given Fermat Edu s strong market presence. Private education market by age Preschool education Elementary school Middle school High school W3trn (16.2%) W1.5trn (8.1%) W9trn (48.6%) W5trn (27.0%) Source: Ministry of Education and Human Resources Development Earnings estimates for Fermat Edu (W mn, %) F Sales 1,100 14,400 30,000 (Private academy:20,000 + overseas study agency: 8,000) Operating profit 54 2,300 6,500 Operating margin Source: Company data Daekyo (019680) 6

9 Major e-learning service providers in the secondary education market Mbest 1318class Company Mbest Daehan Printing & Publishing Co Established Type On/off-line business Online business Sales Operating profit OP margin % 3.8% % 14.2% Sales contributor Online business (90%) + Online business (90%) + Franchise business Sales partnership / home shopping sales etc. Core competence Star lecturer marketing Online business know-how Strong brand power (Content R&D, sales partnerships) Content service 20,000 lecture D/B + 3,000 lectures in service 50,000 lecture D/B + 5,000 lectures in service 8,000 lecture productions per year 10,000 lecture productions per year Competitive edge In-house lecture production In-house lecture production Excellent teaching groups Partnership with publishers Source: Respective company data Daekyo (019680) 7

10 Earnings forecast Operating profit should be back on the growth path in 2007 Although the company suffered from a 6.7% contraction in memberships after raising home tutoring service prices in 2004, memberships should be back on the growth path from 2006 thanks to an increasing number of premium subscribers and the slowing loss in Noonnoppi memberships. The company plans to increase home tutoring service prices by 6~10% for major subjects in 2007, which in effect translates into an overall 3.4% hike. Thanks to the price increase and loss cuts in the unprofitable businesses, operating profit should recover from negative growth in 2005~2006, paving the way for an earnings turnaround in Earnings forecast F 2007F 2008F Sales Study materials Sobics school Sobics door-to-door sales After-school class Others Membership 2,365 2,205 2,191 2,217 2,237 2,270 Noonnoppi 2,365 2,206 2,165 2,167 2,148 2,144 Soluny Chaihong Weighted ASP (w) 27,316 28,569 27,500 27,571 28,503 28,788 Operating profit Study materials Sobics school Sobics door-to-door sales After-school class Others Operating margin 8.8% 10.7% 8.4% 7.9% 9.2% 9.7% Study materials 12.5% 14.8% 11.4% 10.0% 11.0% 11.5% Sobics school -10.8% -10.7% -3.9% 0.3% 1.0% 1.0% Sobics door-to-door sales -38.5% -35.5% -22.3% -11.5% 0.0% 0.0% After-school class -1.7% 6.4% 2.7% 3.0% 3.0% 3.0% Others -86.4% -44.2% -55.5% -36.5% -32.6% -31.0% %YoY Sales 4.2% -2.9% 2.4% 4.7% 2.7% Study materials 1.9% -4.2% 1.7% 3.8% 2.5% Sobics school 16.2% 28.0% -2.7% 1.3% 1.0% Sobics door-to-door sales 10.1% 9.1% 9.9% 7.5% 1.0% After-school class 55.6% 41.7% 30.9% 30.0% 10.0% Others 71.0% -31.1% -11.1% 5.1% 0.0% Operating profit 27.3% -24.0% -3.2% 22.1% 7.9% Membership -6.7% -0.7% 1.2% 0.9% 1.5% Noonnoppi -6.7% -1.8% 0.1% -0.9% -0.2% Soluny 30.1% 80.0% 60.0% Chaihong 130.4% 72.0% 30.0% Weighted ASP (w) 4.6% -3.7% 0.3% 3.4% 1.0% % of sales Study materials 92.1% 90.1% 88.9% 88.3% 87.6% 87.4% Sobics school 2.3% 2.6% 3.4% 3.2% 3.1% 3.0% Sobics door-to-door sales 2.8% 2.9% 3.3% 3.5% 3.6% 3.6% After-school class 1.2% 1.8% 2.6% 3.3% 4.1% 4.4% Others 1.6% 2.7% 1.9% 1.6% 1.6% 1.6% Source: Company data, Korea Investment & Securities Daekyo (019680) 8

11 Daekyo's product lineup Age Adult Price School Infant Kindergarten Elementary school Middle school High school Education program Weekly tutorial service K0 K1 K2 K3 K4 K5 K6 P1 P2 P3 P4 P5 P6 M1 M2 M3 H1 H2 H3 Noonnoppi Korean Language 35,000 Noli Math 39,000 Noonnoppi Math 30,000 Noonnoppi English 32,000 Noonnoppi Korean Language 30,000 Noonnoppi Chinese Characters 27,000 Noonnoppi Science 32,000 Think-Math 35,000 Infant English (Super Talk Talk) 39,000 Noonnoppi Japanese 29,000 Middle School Math 33,000 Middle School Science 33,000 Middle School Korean 33,000 Caihong Caihong 60,000 Soluny Essay Forum 84,000 Infant & Sobics preschoolers Infants Book Forum 79,000 Korean 38,000 Bebe 40,000 After-school business Private academy Sobics (Door-todoor) Afterschool Book Collections Math 40, ,000~ 850,000 Jump All 300,000 PC Class 25,000 English Class 80,000 G-CAMP Class 100,000 Calitz 180,000 Source: Company data Daekyo (019680) 9

12 Changes in recommendation and price target Company (Code) Date Recommendation Target price Daekyo (019680) BUY W86, BUY W77, BUY W84, Hold W84, BUY W86, BUY W82, BUY W98, BUY W100,000 Target price Daekyo (019680) 10

13 Balance Sheet Fiscal year ending Dec. (W bn) F 2007F 2008F Current assets Cash & cash equivalent Accounts receivable Inventory Fixed assets Investments Tangible assets Intangible assets Total assets Current liabilities Accounts payable Short-term borrowing Current portion of LT debt Long-term debt Debentures Long-term borrowings Total liabilities Paid-in capital Capital surplus Retained earnings Capital adjustments Shareholders' equity Source: Company data, Korea Investment & Securities estimates Income Statement Fiscal year ending Dec. (W bn) F 2007F 2008F Sales Gross profit SG&A expenses Operating profit Non-OP. profit Interest income FX gains Equity gains Non-OP. expenses Interest expenses FX losses Equity losses Recurring profit EBT Income taxes Net profit Adjusted EBIT EBITDA Source: Company data, Korea Investment & Securities estimates Cash Flow Fiscal year ending Dec. (W bn) F 2007F 2008F C/F from operating Net profit Depreciation Amortization Net incr. in W/C Others C/F from investing CAPEX Decr. in fixed assets Net incr. in current assets Incr. in investment Others C/F from financing Incr. in equity Incr. in debts Dividends Others Increase in cash Source: Company data, Korea Investment & Securities estimates Key Financial Data Fiscal year ending Dec F 2007F 2008F Per share data (won) EPS 6,252 5,824 5,651 7,418 7,879 BPS 49,795 65,551 65,396 70,993 77,289 DPS 1,500 1,650 1,900 2,150 2,300 SPS 99,086 96,276 98, , ,920 Growth (%) Sales growth OP growth NP growth EPS growth EBITDA growth Profitability (%) OP margin NP margin EBITDA margin ROA ROE Dividend yield Stability Net debt (W bn) Int. coverage (X) 1,451.6 NA NA NA NA D/E ratio (%) Valuation(X) PER PBR PSR EV/EBITDA Source: Company data, Korea Investment & Securities estimates Daekyo (019680) 11

14 HEAD OFFICE WON-JAE RHEE, Managing Director ) SIMON MUN, Director ) KENNETH KANG, Sales Trading ) 27-1 Yoido-dong, Youngdeungpo-ku, Seoul , Korea Toll free: US Fax: ~3 Telex: K22966 NEW YORK HK KANG, Managing Director (hkkang@kisamerica.com ) DY LEE, Sales (dylee@kisamerica.com ) JU KIM, Sales (jukim@kisamerica.com ) Korea Investment & Securities America, Inc. Two Executive Drive, Suite 640 Fort Lee, NJ USA Toll free: DONGWON Fax: HONG KONG KYUNG HEE OH, Managing Director (khoh@truefriend.com ) JOSEPH KIM, Head of Asia Sales (josephkim@kisasia.com ) JOHN CHANG, Sales (josephkim@ truefriend.com ) ANDREW CUNNINGHAM, Sales (ac@kisasia.com ) JEONG HEE LEE, Sales, (jeonghee@kisasia.com ) Korea Investment & Securities Asia, Ltd. Room Suite 2110 Jardine House 1 Connaught Place, Central, Hong Kong Fax: LONDON JJ MOON, Managing Director (jamesmoon@kiseurope.com ) KEVIN JEE (kevinjee@kiseurope.com ) BRANDON JUNE (brandonjune@kiseurope.com ) Korea Investment & Securities Europe, Ltd. 2nd Floor, Cheyne House, Crown Court Cheapside, London EC2V 6JP Fax: Telex: TOKYO SK SHIN, Chief Representative (Dongwon@marinet.co.jp ) Tokyo Representative Office 10F Yotsuya Orchid Building, 23-3, Daikyo-cho, Shinjuku-ku, Tokyo, , Japan Fax: This report has been prepared by Korea Investment & Securities Co., Ltd. and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. This report is provided solely for the information of professional investors who are expected to make their own investment decisions without undue reliance on this report and the company accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. This report is not intended for the use of private investors All rights reserved. No part of this report may be reproduced or distributed in any manner without permission of Korea Investment & Securities Co.,Ltd.