20 uary 2011 Asia Pacific/South Korea Equity Research Internet Infrastructure Services Rating OUTPERFORM* [V] Price (19 11, W) 201,000.00 Target price (W) 330,000¹ Chg to TP (%) 64.2 Market cap. (W bn) 4,381.40 (US$ 3.94) Enterprise value (W bn) 3,927 Number of shares (mn) 21.80 Free float (%) 35.00 52-week price range 273000-120500 *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. [V] = Stock considered volatile (see Disclosure Appendix). Share price performance 300000 200000 100000 0 Price (LHS) Research Analysts Jeff Kahng 822 3707 3738 jeff.kahng@credit-suisse.com Jihong Choi 82 2 3707 3796 jihong.choi@credit-suisse.com Rebased Rel (RHS) -09 May-09 Sep-09-10 May-10 Sep-10 The price relative chart measures performance against the KOREA SE COMPOSITE (KOSPI) index which closed at 2106.66 on 19/01/11 On 19/01/11 the spot exchange rate was W1121.25/US$1 400 300 200 100 0 Performance Over 1M 3M 12M Absolute (%) -11.8-13.4 50.0 Relative (%) -15.6-23.9 21.3 (036570.KS / 036570 KS) COMPANY UPDATE March CBT of B&S to fuel share performance Poor performance in past one month. After the stock hit an all-time high of W273,000 following the November game show in Busan, NCsoft fell 26% in two months on: (1) potential delays in the commercial launch of Blade & Soul (B&S) and Guild Wars 2 (GW2) to 2012 or even to 2013, and (2) the negative impact from NHN s Tera launch. We, however, believe the market concerns are overdone. In particular, with a firm plan to launch B&S in 2H11, we expect NCsoft to start the first round of close beta testing (CBT) for B&S in March and start reversing the negative sentiments around the stock. Expect flattish 2011 but solid 2012. Although we remain confident about the commercial launch of B&S and GW2 in 2H11, we push our assumption on the product launch schedule back by one quarter (from 3Q11 to 4Q11) for B&S in Korea and GW2 in the US/EU. Thus, along with more conservative assumptions on item sales for Lineage 2 (L2), we cut our 2011E revenue by 14.8% to W826 bn, operating profit by 24.8% to W279 bn, and net profit by 23.9% to W223 bn. However, with most of the new products revenue impact fully reflected in 2012, we make virtually no changes to our 2012E revenue and profit. Based on our earnings adjustments, we now expect 2011-12E EPS growth to reach 14.2% and 64.9%, respectively. Catalysts. Key catalysts for NCsoft include: (1) announcement of B&S CBT in March (possibly during the February 4Q10 earnings announcement), (2) announcement of China publishing B&S in mid-2011 and (3) resilient earnings, despite the full commercial launch of Tera. Maintain target price at W330,000. Despite downgrading our 2011E earnings significantly, we maintain our 12-month target price of W330,000 based on the same 2012E P/E of 18x. Given NCsoft s share price movement is driven largely by new product launch, we believe 2012E earnings are more reflective of its fundamentals and earnings outlook. Financial and valuation metrics Year 12/09A 12/10E 12/11E 12/12E Revenue (W bn) 634.7 658.3 703.9 993.2 EBITDA (W bn) 260.6 290.7 305.9 519.3 EBIT (W bn) 234.0 265.0 279.2 482.8 Net income (W bn) 184.2 191.2 220.5 367.2 EPS (CS adj.) (W) 9,155.38 9,407.94 10,743.17 17,717.61 Change from previous EPS (%) n.a. -1.8-23.9-1.1 Consensus EPS (W) n.a. 9,039 12,846 17,413 EPS growth (%) 633.7 2.8 14.2 64.9 P/E (x) 22.0 21.4 18.7 11.3 Dividend yield (%) 0.25 0.37 0.50 0.82 P/B (x) 6.9 5.4 4.3 3.2 ROE 35.0 26.3 23.8 30.4 Net debt/equity (%) net cash net cash net cash net cash Source: Company data, Thomson Reuters, Credit Suisse estimates. DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
20 uary 2011 Focus tables Figure 1: NCSoft 2010-12E earnings revision New CS est. Old CS est. Change W bn 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E Revenue 658 704 993 665 826 991-1% -15% 0% (1) Subscription 610 655 876 616 752 874-1% -13% 0% L1 186 187 183 188 189 185-1% -1% -1% L2 119 126 123 123 140 137-3% -10% -10% Aion 264 253 248 264 255 250 0% -1% -1% B&S 0 30 247 0 95 208 n.a. -68% 19% GW 12 30 41 12 43 61 0% -32% -32% Others 29 30 33 29 30 33 0% -1% 0% (2) Royalty 49 49 117 49 74 117 0% -34% 0% Lineage 21 20 20 21 20 20 0% 0% 0% Lineage2 7 5 5 7 6 5 0% 0% 1% Aion 19 18 21 19 18 21 0% 0% 0% Blade & Soul 0 0 60 0 25 60 n.a. n.a. 0% Others 3 6 11 3 6 11 0% 0% 0% Operating profit 265 279 483 269 371 488-2% -25% -1% Pre-tax profit 249 292 496 253 384 502-2% -24% -1% Net profit 194 224 372 198 294 376-2% -24% -1% EPS (W) 9,408 10,743 17,718 9,576 14,122 17,915-2% -24% -1% Operating margin 40.3% 39.7% 48.6% 40.5% 44.9% 49.3% Source: Credit Suisse estimates Figure 2: CS estimates versus consensus 4Q10E 2010E 2011E 2012E W bn CS Cons CS Cons CS Cons CS Cons Revenue 167.5 163.9 658.3 647.9 703.9 770.7 993.2 972.6 Operating profit 62.3 68.9 265.0 271.9 279.2 337.6 482.8 495.1 Pre-tax profit 66.7 72.5 249.0 260.9 292.4 363.5 496.3 492.4 Net profit 56.7 56.2 194.2 193.2 223.7 278.2 372.2 395.7 Operating margin 37.2% 42.1% 40.3% 42.0% 39.7% 43.8% 48.6% 50.9% Source: Credit Suisse estimates, Bloomberg Figure 3: Valuation comparison Company Ticker CS Price EPS grth (%) P/E (x) 10E ROE 10E P/B Rating Local Target 11E 12E 11E 12E (%) (x) NCsoft 036570 KS O 201,000 330,000 14.2 64.9 18.7 11.3 26.3 5.4 Neowiz Games 095660 KS O 43,550 75,000 33.9 65.3 8.7 7.0 32.2 3.4 NHN 035420 KS N 199,500 205,000 15.1 31.5 17.4 15.3 41 7.1 Daum 035720 KS O 80,100 99,000 25.3 18.6 12.8 10.4 40.9 3.3 Source: Company data, Credit Suisse estimates Figure 4: Game room market share by playing hours uary 2011 daily game room market share 2010 daily market share by month 11-12- 13-14- 15-16- 17-18- 19- J-10 F-10 M-10 A-10 M-10 J-10 J-10 A-10 S-10 O-10 N-10 D-10 Aion 16.4 14.6 15.5 14.7 14.1 14.9 15.1 15.5 14.8 17.2 16.6 18.5 18.6 17.5 17.4 14.8 14.7 15.8 18.3 20.2 18.2 L1 3.5 3.2 3.3 3.1 3.0 3.2 3.2 3.0 3.2 4.3 4.0 4.6 4.6 4.0 4.0 3.8 3.8 4.0 4.2 4.0 3.3 L2 3.1 3.5 4.0 3.9 3.7 3.8 3.7 3.8 3.6 4.9 4.5 4.9 4.6 4.2 4.3 3.8 4.0 4.1 4.1 4.1 3.7 Tera 9.5 12.5 11.8 13.6 14.0 15.0 15.0 15.7 15.7 Source: Gametrics (036570.KS / 036570 KS) 2
20 uary 2011 Earnings adjustments for 2010-12E Downward earnings adjustments Due to changes to our basic assumptions on new product launch as well as its business models, we cut our 2011E revenue by 14.8% to W826 bn, operating profit by 24.8% to W279 bn, and net profit by 23.9% to W223 bn, driven largely by our assumption of one quarter delay (from 3Q11 to 4Q11) for the B&S as well as GW2 launch. However, with most of the new products revenue impact fully reflected in 2012, we make virtually no changes to our 2012E revenue and profit. Figure 5: Earnings revision 2010-12E New CS est. Old CS est. change W bn 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E Revenue 658.3 703.9 993.2 664.6 826.1 991.1-1.0% -14.8% 0.2% (1) Korea subs. 420.8 456.1 570.2 427.1 504.7 558.5-1.5% -9.6% 2.1% Lineage 168.6 169.9 166.5 170.8 172.3 168.9-1.3% -1.4% -1.4% Lineage 2 66.5 72.4 71.3 70.6 86.7 85.4-5.9% -16.5% -16.5% Aion 175.3 171.8 169.2 175.3 173.5 170.9 0.0% -1.0% -1.0% Blade & Soul 0.0 30.0 150.0 0.0 60.0 120.0 n.a. n.a. 25.0% Others 10.4 12.1 13.3 10.4 12.1 13.3 0.1% -0.4% -0.3% (2) Overseas subs. 188.7 198.9 305.7 188.7 247.5 315.2 0.0% -19.6% -3.0% Lineage 17.0 16.9 16.4 17.0 16.9 16.4-0.3% -0.1% -0.1% Lineage2 52.7 53.5 51.9 52.7 53.2 51.6 0.1% 0.5% 0.5% CoH/CoV 16.7 14.7 14.2 16.7 14.7 14.2-0.2% -0.1% 0.3% Guild Wars 12.3 29.6 41.4 12.3 43.4 60.8 0.1% -31.8% -31.8% Aion 88.5 81.4 79.0 88.5 81.4 79.0 0.0% 0.0% 0.0% Blade & Soul 0.0 0.0 97.1 0.0 35.0 87.5 n.a. n.a. 10.9% Others 1.5 2.9 5.7 1.5 2.9 5.7 3.0% -1.7% 0.0% (3) Royalty 48.8 48.9 117.3 48.8 73.9 117.3-0.1% -33.8% 0.0% Lineage 20.6 20.1 19.5 20.6 20.1 19.5 0.0% 0.2% 0.2% Lineage2 6.6 5.5 5.3 6.6 5.5 5.3-0.3% -0.2% 0.5% Aion 18.6 17.7 21.2 18.6 17.7 21.2 0.0% 0.0% 0.2% Blade & Soul 0.0 0.0 60.0 0.0 25.0 60.0 n.a. n.a. 0.0% Others 3.0 5.6 11.2 3.0 5.6 11.2-0.4% 0.0% 0.0% Operating profit 265.0 279.2 482.8 269.4 371.3 488.3-1.6% -24.8% -1.1% Pre-tax profit 249.0 292.4 496.3 253.4 384.3 501.8-1.7% -23.9% -1.1% Net profit 194.2 223.7 372.2 197.6 294.0 376.3-1.7% -23.9% -1.1% EPS (W) 9,408 10,743 17,718 9,576 14,122 17,915-1.8% -23.9% -1.1% Operating margin 40.25% 39.67% 48.61% 40.54% 44.95% 49.27% Source: Company data, Credit Suisse estimates Figure 6: CS estimates versus consensus 4Q10E 2010E 2011E 2012E W bn CS Cons CS Cons CS Cons CS Cons Revenue 167.5 163.9 658.3 647.9 703.9 770.7 993.2 972.6 Operating profit 62.3 68.9 265.0 271.9 279.2 337.6 482.8 495.1 Pre-tax profit 66.7 72.5 249.0 260.9 292.4 363.5 496.3 492.4 Net profit 56.7 56.2 194.2 193.2 223.7 278.2 372.2 395.7 Operating margin 37.2% 42.1% 40.3% 42.0% 39.7% 43.8% 48.6% 50.9% Source: Credit Suisse estimates, Bloomberg (036570.KS / 036570 KS) 3
20 uary 2011 Key revenue assumptions Launch date for Blade & Soul With a firm plan to commercially launch B&S in 2H11, NCsoft is preparing to the announce CBT date. Although no specific dates have been set, we expect NCsoft to begin the first round of CBT in March 2011, following an announcement in mid-february. If all goes well, it is still possible for NCsoft to complete the second round of CBT and 2-3 weeks of OBT by end-jul. In such a case, the company could begin its commercial service by Aug 2011. However, it seems increasingly likely for NCsoft to take a slightly longer testing period for B&S. Even if there isn t any technology glitches, NCsoft may still launch B&S at the start of 2011/2012 winter season purely due to marketing reasons. With winter season typically generating higher interest and usage for online games, NCsoft had conducted Aion OBT in Nov and went commercial in Dec 2008. Thus, rather than our previous assumption for a 3Q11 launch for B&S, we now push our B&S launch assumption back to 4Q11, more specifically to Dec 2011, for Korea. For overseas markets, we assume 2Q12 launch for China, Japan and Taiwan, and 3Q12 launch for North America and Europe. Launch assumption for Guild War 2 Although the market has paid less attention to GW2 versus B&S, the launch of GW2 is an important event for NCsoft from the perspective of its North American and European expansion strategy. After its demo version received a number of key awards in game shows across Europe and the US in the past six months, GW2 has potential to become a blockbuster game for NCsoft s US/EU product line. It is widely speculated that GW2 is less prepared to enter beta testing than B&S, with the company yet to release any firm launch schedule. However, we understand Arenanet, the developer of GW2 and a 100%-owned subsidy of NCsoft, is still targeting 2011 Christmas season launch. Thus, despite less certainty over the GW2 launch in 2011 compared to that of B&S, we assume a 4Q11 launch (versus 3Q11 previously) for GW2 in North America and Europe, with no launch assumptions for Asia. Downward adjustments for existing titles For existing titles, we make downward adjustments to 2010-12E revenue based on the following factors. Although we are confident that NHN s Tera launch will have a minimal impact on NCsoft s existing titles, we cut our domestic 2011-12E revenue for L2 by 16.5%, due largely to our more conservative assumptions on item sales. Impact of Tera. With NHN s Tera still on OBT (commercial launch will begin on 25 at the same monthly price of W19,800 to that of Aion), it is difficult to gauge the full impact of Tera on NHN s existing titles. Simply looking at the game room market share data, NCsoft s top titles have mostly maintained their market share, despite a slight dip in market share. Given the company has maintained similar levels of revenue during 3Q10 versus previous quarters when the World Cup fever brought down their market share, we remain confident that NCsoft s existing titles will maintain their current stream of revenue in 2011. Slow adoption of item sales. Following the successful launch of item sales for L1 in 2010, NCsoft has failed to replicate the success of L1 to L2 and Aion. However, besides L1, the results were rather disappointing, with a minimal revenue impact from item sales. Although the company is looking to introduce more aggressive measures, including opening of in-game stores and structural changes to facilitate item sales, we cross out our assumptions for 2011-12E related to additional revenue from item sales. (036570.KS / 036570 KS) 4
20 uary 2011 Figure 7: Game room market share by playing hours uary 2011 daily game room market share 2010 daily market share by month 11-12- 13-14- 15-16- 17-18- 19- J-10 F-10 M-10 A-10 M-10 J-10 J-10 A-10 S-10 O-10 N-10 D-10 Aion 16.4 14.6 15.5 14.7 14.1 14.9 15.1 15.5 14.8 17.2 16.6 18.5 18.6 17.5 17.4 14.8 14.7 15.8 18.3 20.2 18.2 L1 3.5 3.2 3.3 3.1 3.0 3.2 3.2 3.0 3.2 4.3 4.0 4.6 4.6 4.0 4.0 3.8 3.8 4.0 4.2 4.0 3.3 L2 3.1 3.5 4.0 3.9 3.7 3.8 3.7 3.8 3.6 4.9 4.5 4.9 4.6 4.2 4.3 3.8 4.0 4.1 4.1 4.1 3.7 Tera 9.5 12.5 11.8 13.6 14.0 15.0 15.0 15.7 15.7 Source: Gametrics Figure 8: Share price vs OBT/commercial launch 300,000 (W) 250,000 Tabula launch Nov 07 200,000 GW OBT Apr 05 GW launch May 05 Tabula CBT May 07 Tabula OBT Oct 07 150,000 100,000 Lineage 2 CBT Oct 02 Lineage 2 launch Oct 03 Lineage 2 OBT Jul 03 CoH OBT 06 CoH CBT Aug 05 CoH launch Mar 06 Aion 1st CBT Oct 07 Aion OBT Nov 08 Aion lanuch Nov 08 50,000 - Jul-00 Oct-00-01 Apr-01 Jul-01 Oct-01-02 Apr-02 Jul-02 Oct-02-03 Apr-03 Jul-03 Oct-03-04 Apr-04 Jul-04 Oct-04-05 Apr-05 Jul-05 Oct-05-06 Apr-06 Jul-06 Oct-06-07 Apr-07 Jul-07 Oct-07-08 Apr-08 Jul-08 Oct-08-09 Apr-09 Jul-09 Oct-09-10 Apr-10 Jul-10 Oct-10-11 NCSoft share price Source: Datastream, Company data Figure 9: Quarterly earnings estimates W bn 1Q10 2Q10 3Q10 4Q10E 1Q11E 2Q11E 3Q11E 4Q11E Revenue 167.4 167.6 155.8 167.5 162.6 160.4 159.1 221.9 (1) Subscription 157.4 154.8 142.8 154.5 153.4 146.5 147.3 207.8 L1 47.5 51.2 40.5 46.4 47.9 46.7 45.4 46.8 L2 29.7 29.9 28.6 31.0 29.6 30.4 32.4 33.5 Aion 71.2 62.4 63.0 67.2 66.9 60.9 60.7 64.8 B&S 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30.0 GW 2.4 5.1 2.3 2.5 1.9 1.5 1.2 25.0 Others 6.6 6.2 8.5 7.4 7.1 7.0 7.7 7.8 (2) Royalty 10.1 12.8 12.9 13.0 9.2 13.8 11.8 14.1 L1 3.5 5.8 5.7 5.6 3.3 5.8 5.4 5.6 L2 1.7 1.6 1.6 1.7 1.2 1.6 1.1 1.6 Aion 4.5 4.7 4.7 4.7 3.6 5.2 3.8 5.2 B&S 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Others 0.4 0.7 0.9 1.0 1.1 1.3 1.5 1.7 Operating profit 76.7 70.7 55.2 62.3 74.8 70.6 68.4 65.5 Pre-tax profit 78.4 41.9 62.0 66.7 78.1 73.9 71.7 68.8 Net profit 58.2 30.4 47.3 55.3 58.9 55.7 54.1 51.8 Operating margin 45.8% 42.2% 35.4% 37.2% 46.0% 44.0% 43.0% 29.5% Source: Company data, Credit Suisse estimates (036570.KS / 036570 KS) 5
20 uary 2011 Target price and valuations Despite downgrading our 2011E earnings significantly, we maintain our 12-month target price of W330,000 due to our target P/E 2012E. We believe using 2012E P/E target is appropriate, as NCsoft s share price movement is largely driven by new product launch that would have full-year impact only in 2012 rather than in 2011. In fact, when comparing one-year as well as two-year forward P/E charts, we see less volatility in two-year forward P/E charts than that in one-year forward P/E charts, which indicates NCsoft s share price performance is driven more by longer-term earnings outlook. In terms of DCF valuations, we see a slight decline in the company s value, due mostly to our 2011E earnings downgrade. That said, the decline for 2011E is not significant enough to cause a major drop in its share price or hurt earnings momentum for 2012 and beyond. Figure 10: Valuation comparison Company Ticker CS Price EPS grth (%) P/E (x) 10E ROE 10E P/B Rating Local Target 11E 12E 11E 12E (%) (x) NCsoft 036570 KS O 201,000 330,000 14.2 64.9 18.7 11.3 26.3 5.4 Neowiz Games 095660 KS O 43,550 75,000 33.9 65.3 8.7 7.0 32.2 3.4 NHN 035420 KS N 199,500 205,000 15.1 31.5 17.4 15.3 41 7.1 Daum 035720 KS O 80,100 99,000 25.3 18.6 12.8 10.4 40.9 3.3 Source: Company data, Credit Suisse estimates Figure 11: DCF valuation summary Based on current est. Based on previous est. DCF value (W) 339,264 343,386 Current share price (W) 201,000 201,000 % upside 68.7% 70.8% WACC 9.0% 9.0% Cost of debt 5.5% 5.5% Cost of equity 9.0% 9.0% Implied terminal growth rate 4.0% 4.0% Source: Credit Suisse estimates Figure 12: NCsoft s one-year versus two-year forward P/E 60 50 40 30 20 10 0 (X) -06 May-06 Sep-06-07 May-07 Sep-07-08 May-08 Sep-08-09 May-09 Sep-09-10 May-10 Sep-10-11 1yr fwd PE 2yr fwd PE Source: Datastream, Credit Suisse estimates (036570.KS / 036570 KS) 6
20 uary 2011 Summary financials Figure 13: Income statement Year to Dec. (W bn) 2007 2008 2009 2010E 2011E 2012E Sales 329.7 346.8 634.7 658.3 703.9 993.2 % YoY -2.6% 5.2% 83.0% 3.7% 6.9% 41.1% (1) Subscription revenue 314.4 326.4 585.6 609.5 655.0 875.9 Lineage 111.4 112.6 132.0 185.6 186.8 182.9 Lineage2 131.2 147.2 152.8 119.2 125.8 123.1 City of Heroes 23.4 24.2 22.9 16.7 14.7 14.2 Guild Wars 42.1 23.2 17.1 12.3 29.6 41.4 Aion 0.0 9.7 252.1 263.8 253.2 248.2 Others 6.4 9.5 8.7 12.0 14.9 19.0 (2) Overseas royalty 15.3 20.4 49.2 48.8 48.9 117.3 Lineage 13.3 15.0 17.3 20.6 20.1 19.5 Lineage2 1.6 2.8 9.3 6.6 5.5 5.3 Aion 0.0 0.0 22.3 18.6 17.7 21.2 Others 0.5 2.5 0.4 3.0 5.6 11.2 Operating costs (280.2) (296.8) (400.7) (393.3) (424.7) (510.4) % YoY -5.1% 5.9% 35.0% -1.9% 8.0% 20.2% Labour (138.4) (154.9) (198.7) (209.8) (228.0) (249.0) Depreciation & amortisation (20.6) (22.0) (26.6) (25.7) (26.6) (36.4) Commission paid (27.3) (26.6) (40.4) (36.1) (41.6) (53.3) Marketing commission (5.9) (5.8) (13.7) (0.8) (0.7) (0.9) Advertising (16.7) (11.8) (17.5) (14.3) (16.4) (26.3) Others (71.3) (75.7) (103.7) (106.7) (111.4) (144.5) Operating income 49.5 50.1 234.0 265.0 279.2 482.8 % YoY 14.3% 1.2% 367.5% 13.2% 5.4% 72.9% Operating margin 19.7% 21.0% 36.9% 40.3% 39.7% 48.6% EBITDA 70.0 72.1 260.6 290.7 305.9 519.3 % YoY 7.0% 2.9% 261.5% 11.5% 5.2% 69.8% EBITDA margin 21.2% 20.8% 41.1% 44.2% 43.4% 52.3% Non-operating items 12.6 (9.0) 6.7 (16.0) 13.2 13.5 Interest Income 14.7 13.1 14.8 19.4 19.4 19.4 Interest Expense (0.0) (0.1) (0.0) (0.1) (0.1) (0.1) Net FX 0.8 5.0 (2.7) 0.0 0.0 0.0 Donation (0.2) (0.3) (0.2) (0.7) (0.7) (1.0) Gain(loss) from Equity methods (2.3) (13.7) (1.8) (4.6) (0.4) 0.2 Others (0.4) (13.1) (3.3) (30.0) (5.0) (5.0) Pre-tax profit 62.1 41.0 240.7 249.0 292.4 496.3 % YoY 24.2% -34.0% 486.9% 3.4% 17.4% 69.7% Pre-tax margin 18.8% 11.8% 37.9% 37.8% 41.5% 50.0% Income Taxes (16.2) (13.3) (52.4) (54.8) (68.7) (124.1) Effective Tax Rate 26.0% 32.5% 21.8% 22.0% 23.5% 25.0% Minority interests (0.9) (2.0) (4.1) (3.0) (3.2) (5.0) Consolidated net income 45.0 25.6 184.2 191.2 220.5 367.2 % YoY 18.4% -43.1% 618.7% 3.8% 15.3% 66.5% Net margin 13.7% 7.4% 29.0% 29.0% 31.3% 37.0% EPS (W) 2,197 1,248 9,155 9,408 10,743 17,718 Source: Company data, Credit Suisse estimates (036570.KS / 036570 KS) 7
20 uary 2011 Figure 14: Balance sheet Year to Dec. (W bn) 2007 2008 2009 2010E 2011E 2012E Current assets Cash and cash equivalent 51.0 54.6 89.3 89.3 89.3 89.3 Marketable securities 240.6 180.4 365.0 365.0 365.0 365.0 Acct. receivable 39.7 39.7 71.4 74.1 79.2 111.8 Short-term loans 2.6 3.0 3.3 3.4 3.6 5.1 Inventory 2.8 1.9 0.9 2.2 2.3 2.8 Other current assets 32.2 30.6 88.2 66.5 68.8 63.4 Total current assets 368.9 310.2 618.1 600.5 608.3 637.4 Fixed Assets Long-term investments 38.6 35.0 24.0 205.8 406.1 757.8 Investments 33.2 28.9 18.3 200.0 400.0 750.0 Long-term loans 5.4 6.1 5.7 5.8 6.1 7.8 Net PP&E 124.8 164.6 169.8 177.0 182.0 190.3 Intangibles 14.9 17.0 38.6 45.0 50.6 56.3 Deferred assets 0.0 0.0 0.0 0.0 0.0 0.0 Total fixed assets 178.3 216.6 234.2 427.8 638.7 1,004.4 Total assets 547.2 526.8 852.3 1,028.3 1,247.0 1,641.8 Current liabilities Acct. payable 1.2 4.2 5.4 5.6 6.0 8.5 ST borrowings 0.0 0.0 0.0 0.0 0.0 0.0 Current portion of LT Debt 0.0 0.0 0.0 0.0 0.0 0.0 Accrued expenses 21.9 21.8 33.8 35.1 37.5 52.9 Other current liabilities 68.2 64.2 145.0 146.7 150.1 170.7 Total current liabilities 91.3 90.3 184.2 187.4 193.7 232.1 Long-term liabilities Long-term debt 0.0 0.0 0.0 0.0 0.0 0.0 Allowances for liabilities 6.8 10.2 17.8 18.8 20.4 22.3 Other LT liabilities 0.2 1.0 2.3 2.3 2.4 2.7 Total LT liabilities 7.0 11.2 20.1 21.1 22.8 25.0 Total liabilities 98.3 101.5 204.3 208.5 216.4 257.1 Shareholder equity Paid-in capital 10.2 10.2 10.9 11.0 11.1 11.2 Capital surplus 148.3 148.5 204.1 206.2 208.0 209.9 Retained earnings 336.2 346.0 518.4 702.8 911.6 1,263.7 Capital adjustment (50.6) (88.0) (100.1) (100.1) (100.1) (100.1) Total shareholder equity 448.9 427.2 648.1 819.8 1,030.5 1,384.7 Total liabilities & SH equity 547.2 528.7 852.3 1,028.3 1,247.0 1,641.8 Source: Company data, Credit Suisse estimates (036570.KS / 036570 KS) 8
20 uary 2011 Figure 15: Cash flow statement Year to Dec. (W bn) 2007 2008 2009 2010E 2011E 2012E Cash flow from operations Net income 45.9 27.7 188.3 194.2 223.7 372.2 Dep'n/Amortisation 24.7 26.4 31.9 30.8 32.0 43.7 Equity Method Valuation Loss (Gain) 2.3 13.7 1.8 4.6 0.4 (0.2) Stock Option Compensation 0.2 0.2 0.3 0.3 0.3 0.3 Other non-cash items 5.0 5.1 5.2 5.3 5.4 5.5 Change in working capital (2.1) 3.9 (29.5) (3.7) (4.9) (30.5) Net operating cash flow 76.0 77.1 198.0 231.5 256.8 391.1 Cash flow from investment Capex (26.4) (27.7) (38.1) (32.9) (31.7) (44.7) Disposal of PP&E 0.1 0.1 0.1 0.1 0.1 0.1 Other investment (net) (28.7) 10.5 (160.7) (190.9) (212.3) (328.4) Net investment cash flow (55.0) (17.2) (198.7) (223.8) (243.9) (373.0) Cash flow from financing Dividend paid 0.0 (19.1) (8.7) (9.8) (14.9) (20.1) Change in share capital (19.3) (37.2) 44.1 2.1 2.0 2.0 Change in interest-bearing debt 0.0 0.0 0.0 0.0 0.0 0.0 Other financing 0.0 0.0 0.0 0.0 0.0 0.0 Net financing cash flow (19.3) (56.3) 35.5 (7.7) (12.9) (18.1) Cash equiv. (begin) 49.4 51.0 54.6 89.3 89.3 89.3 Cash equiv. (end) 51.0 54.6 89.3 89.3 89.3 89.3 Net change in cash 1.6 3.6 34.7 0.0 0.0 0.0 Source: Company data, Credit Suisse estimates (036570.KS / 036570 KS) 9
20 uary 2011 Companies Mentioned (Price as of 19 11) Daum Communications Corp (035720.KQ, W80,100, OUTPERFORM, TP W99,000) (036570.KS, W201,000, OUTPERFORM [V], TP W330,000) Neowiz Games Corp (095660.KQ, W43,550, OUTPERFORM [V], TP W75,000) NHN Corp (035420.KS, W199,500, NEUTRAL, TP W205,000) Disclosure Appendix Important Global Disclosures Jeff Kahng & Jihong Choi each certify, with respect to the companies or securities that he or she analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. See the Companies Mentioned section for full company names. 3-Year Price, Target Price and Rating Change History Chart for 035720.KQ 035720.KQ Closing Target Price Price Initiation/ Date (W) (W) Rating Assumption 21-Aug-08 61000 83000 13-Oct-08 32000 50000 13-Feb-09 25750 36500 18-Mar-09 27300 30000 N 31-Jul-09 50000 52500 29-Oct-09 53500 70000 O 12--10 72500 75000 N 4-May-10 75300 90000 O 4-Aug-10 79000 99000 92100 82100 72100 62100 52100 42100 32100 W 22100 83000 50000 36500 30000 N 52500 70000 75000 O N 90000 99000 21--08 21-Mar-08 21-May-08 21-Jul-08 21-Sep-08 21-Nov-08 21--09 21-Mar-09 21-May-09 21-Jul-09 21-Sep-09 21-Nov-09 21--10 21-Mar-10 21-May-10 21-Jul-10 21-Sep-10 21-Nov-10 Closing Price Target Price Initiation/Assumption Rating O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered O 3-Year Price, Target Price and Rating Change History Chart for 036570.KS 036570.KS Closing Target Price Price Initiation/ 324400 Date (W) (W) Rating Assumption 274400 14-Feb-08 40700 48500 13-Oct-08 34700 42000 224400 9--09 57700 50000 174400 16-Feb-09 74400 56500 U 17-Apr-09 133000 106000 124400 12-May-09 179000 125000 74400 25-Aug-09 134000 201000 O 48500 24-May-10 181000 250000 42000 50000 W 24400 5-Nov-10 264000 330000 125000 106000 U 201000 O 250000 330000 21--08 21-Mar-08 21-May-08 21-Jul-08 21-Sep-08 21-Nov-08 21--09 21-Mar-09 21-May-09 21-Jul-09 21-Sep-09 21-Nov-09 21--10 21-Mar-10 21-May-10 21-Jul-10 21-Sep-10 21-Nov-10 Closing Price Target Price Initiation/Assumption Rating O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered (036570.KS / 036570 KS) 10
20 uary 2011 3-Year Price, Target Price and Rating Change History Chart for 095660.KQ 095660.KQ Closing Target Price Price Initiation/ Date (W) (W) Rating Assumption 7-Mar-08 19000 24000 O X 31-Jul-08 13400 16350 13-Oct-08 7775 11000 9--09 10675 12250 17-Apr-09 27800 32500 N 16-Jul-09 30200 38000 O 2-Nov-09 38600 55000 4-Mar-10 34050 46000 30-Apr-10 40400 52000 23-Nov-10 48450 75000 74870 64870 54870 44870 34870 2487024000 14870 W 7-Mar-08 4870 O 16350 11000 12250 32500 38000 N O 55000 52000 46000 75000 21--08 21-Mar-08 21-May-08 21-Jul-08 21-Sep-08 21-Nov-08 21--09 21-Mar-09 21-May-09 21-Jul-09 21-Sep-09 21-Nov-09 21--10 21-Mar-10 21-May-10 21-Jul-10 21-Sep-10 21-Nov-10 Closing Price Target Price Initiation/Assumption Rating O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered 3-Year Price, Target Price and Rating Change History Chart for 035420.KS 035420.KS Closing Target Price Price Initiation/ Date (W) (W) Rating Assumption 12-Feb-08 211000 280000 12-Aug-08 167800 215000 13-Oct-08 121000 190000 6-Feb-09 126000 170000 2-Jun-09 192500 210000 N 3-Sep-09 166000 O 24-Nov-09 194000 205000 N 274100 280000 254100 234100 214100 194100 174100 154100 134100 114100 W 94100 215000 190000 170000 210000 N 205000 O N 21--08 21-Mar-08 21-May-08 21-Jul-08 21-Sep-08 21-Nov-08 21--09 21-Mar-09 21-May-09 21-Jul-09 21-Sep-09 21-Nov-09 21--10 21-Mar-10 21-May-10 21-Jul-10 21-Sep-10 21-Nov-10 Closing Price Target Price Initiation/Assumption Rating O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts stock ratings are defined as follows: Outperform (O): The stock s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29 th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock s absolute total return potential to its current share price and (2) the relative attractiveness of a stock s total return potential within an analyst s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-japan Asia stocks, ratings are based on a stock s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks a 22% and a 12% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively, subject to analysts perceived risk. The 22% and 12% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively, subject to analysts perceived risk. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. Analysts coverage universe weightings are distinct from analysts stock ratings and are based on the expected performance of an analyst s coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. (036570.KS / 036570 KS) 11
20 uary 2011 *An analyst s coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months. Credit Suisse s distribution of stock ratings (and banking clients) is: Global Ratings Distribution Outperform/Buy* 45% (61% banking clients) Neutral/Hold* 42% (60% banking clients) Underperform/Sell* 11% (53% banking clients) Restricted 2% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors. Credit Suisse s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. See the Companies Mentioned section for full company names. Price Target: (12 months) for (035720.KQ) Method: Our target price of W99,000 per share for Daum Communications is based on 11E PE of 15.0x (10% discount to NHN's target PE multiple of 17x). Based on the latest target price, the counter trades at a 2009-10E P/E (price to earnings ratio) of 14.8x and 11.9x, with three year normalised EPS (earnings per share) CAGR (compound annual growth rate) (2009-2012E) of 49%. Risks: The following risks could impede achievement of our target price of W99,000 for Daum Communications: 1) Any unforeseen regulatory action from the government on major Internet portals, 2) sudden slowdown in macro economy, and 3) Direct competition posed by peer NHN in terms of operations. Price Target: (12 months) for (036570.KS) Method: Our W330,000 target price for NCsoft is based on a target 2012E PE of 18x, at par with other Korean Interent/game peers. Risks: The following risks could impede achievement of our W330,000 target price for NCsoft: 1) significant delay in scheduled game pipeline, 2) failure of game launch in overseas market and 3) potentiall regulation in online game sector. Price Target: (12 months) for (095660.KQ) Method: Our W75,000 target price for Neowiz Games is based on target 11E PE of 15x. Risks: Potential risks to our W75,000 target price for Neowiz Games include: 1) possible failure of new games launch, 2) potential loss of market share in the web board game segment due to strong competition, and 3) break-up of its alliance with EA. Price Target: (12 months) for (035420.KS) Method: Our target price of W205,000 for NHN is derived using a 2011E target price to earnings of 18x. Our target price is supported by a discounted cash flow (DCF) based sum-of-the-parts valuation, which values the company at W180,370 per share, based on a 10.5% WACC (weighted average cost of capital) and a 5% perpetual growth rate. Risks: The following risks could impede achievement of our W205,000 target price for NHN: 1) regulation on game revenue, 2) any failure in overseas operations, and 3) the emergence of new search services in the market. Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections. See the Companies Mentioned section for full company names. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (036570.KS, 095660.KQ, 035720.KQ) within the next 3 months. As of the end of the preceding month, Credit Suisse beneficially owned 1% or more of a class of common equity securities of (035420.KS). This holding is calculated according to U.S. regulatory requirements which are based on Section 13(d) of the Securities and Exchange Act of 1934. Important Regional Disclosures Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (035720.KQ, 036570.KS, 095660.KQ, 035420.KS) within the past 12 months. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml. As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report. (036570.KS / 036570 KS) 12
20 uary 2011 Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that. To the extent this is a report authored in whole or in part by a non-u.s. analyst and is made available in the U.S., the following are important disclosures regarding any non-u.s. analyst contributors: The non-u.s. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-u.s. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Jeff Kahng, non-u.s. analyst, is a research analyst employed by Credit Suisse Securities (Europe) Limited, Seoul Branch. Jihong Choi, non-u.s. analyst, is a research analyst employed by Credit Suisse Securities (Europe) Limited, Seoul Branch. For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.creditsuisse.com/researchdisclosures or call +1 (877) 291-2683. Disclaimers continue on next page. (036570.KS / 036570 KS) 13
20 uary 2011 Asia Pacific/South Korea Equity Research This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG, the Swiss bank, or its subsidiaries or its affiliates ( CS ) to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients as its customers by virtue of their receiving the report. The investments or services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appropriate to your individual circumstances or otherwise constitutes a personal recommendation to you. CS does not offer advice on the tax consequences of investment and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. CS believes the information and opinions in the Disclosure Appendix of this report are accurate and complete. Information and opinions presented in the other sections of the report were obtained or derived from sources CS believes are reliable, but CS makes no representations as to their accuracy or completeness. Additional information is available upon request. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, a trading call regarding this security. Trading calls are short term trading opportunities based on market events and catalysts, while stock ratings reflect investment recommendations based on expected total return over a 12-month period as defined in the disclosure section. Because trading calls and stock ratings reflect different assumptions and analytical methods, trading calls may differ directionally from the stock rating. In addition, CS may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. CS is involved in many businesses that relate to companies mentioned in this report. These businesses include specialized trading, risk arbitrage, market making, and other proprietary trading. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgement at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR s, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment, in such circumstances you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed the linked site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS s own website material) is provided solely for your convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following such link through this report or CS s website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is regulated in the United Kingdom by The Financial Services Authority ( FSA ). This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States by Credit Suisse Securities (USA) LLC ; in Switzerland by Credit Suisse AG; in Canada by Credit Suisse Securities (Canada), Inc.; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A. or its affiliates; in Mexico by Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instrument Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Securities Investment Advisers Association; elsewhere in Asia/Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited, Credit Suisse Securities (Thailand) Limited, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn. Bhd., to whom they should direct any queries on +603 2723 2020. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this report was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not regulated by the FSA or in respect of which the protections of the FSA for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. Any Nielsen Media Research material contained in this report represents Nielsen Media Research's estimates and does not represent facts. NMR has neither reviewed nor approved this report and/or any of the statements made herein. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Copyright 2011 CREDIT SUISSE AG and/or its affiliates. All rights reserved. CREDIT SUISSE (Hong Kong) Limited Asia/Pacific: +852 2101-6000 TC1482.doc