(001120) Solid 4Q, excluding one-offs (LGI) yesterday reported that its consolidated sales rose 3.8% q-q to KRW3.8t in 4Q, but that its operating profit plunged 98% q-q to KRW600m with a net loss of KRW237.2b, which we attribute to impairment losses. Since non-ferrous metal derivative profits are reflected as non-operating profit, we believe pre-tax profit better illustrates the company s earnings power, with the figure up in 4Q absent a one-off CER-related profit of KRW20b reflected in 3Q15. The firm was also weighed down by impairment losses of KRW300b, 55% of which came from oil fields, but additional losses are unlikely absent further commodity price declines. Weak commodity prices might forestall earnings improvements, with LGI set to assume a larger role in the LG Group since the Koo family owns a controlling stake and given its status as the only affiliate involved in logistics. Still, the firm has yet to disclose detailed business plans for Pantos Logistics, the logistics player acquired in May 2015, so we cut our 12-month target price by 15% to KRW38,000. Our BUY rating is nevertheless unchanged given the growth potential of its logistics operations. WHAT S THE STORY? 4Q review: (LGI) yesterday reported that its consolidated sales rose 3.8% q-q to KRW3.8t in 4Q, but that its operating profit plunged 98% q-q to KRW600m with a net loss of KRW237.2b, which we attribute to impairment losses of KRW300b. We see pretax profit as a better earnings power indicator since non-ferrous metal derivatives used for hedging against price volatility are reflected as non-operating profit and which would have improved q-q, if excluding: 1) a one-off profit of KRW20b related to certified emission reductions futures [CER] that was reflected in 3Q15; 2) losses from non-ferrous metal products [which rose KRW26.4b q-q]; and 3) the aforementioned impairment losses. Moreover, recognition of additional impairment losses seems improbable if commodity prices remain at current levels. Expectations remain: We reiterate LGI at BUY, but cut our 12-month target price by 15% to KRW38,000, since: 1) earnings improvements are unlikely amid weak commodity prices; and 2) it has yet to detail business plans for Pantos Logistics [acquired in May 2015] although this might sustain related expectations. Investors should nevertheless note that: 1) the company s value chain now includes E&P, trade, and logistics, which differentiates it from local peers; and 2) the Koo family hold controlling stakes in the firm and Pantos Logistics, which insinuates both soon assuming more prominent roles within the group.
Table 1. Sum-of-the-parts valuation (KRWb) Consolidated value (A) 1,450.3 1) Trading business 17.7 2016 net profit 2.7 Target P/E (x)* 6.4 2) Pantos Logistics 766.4 2016 net profit 46.8 Target P/E (x)** 16.4 3) Other business (including E&P) 666.2 2016 net profit 45.6 Target P/E (x)*** 14.6 Enterprise value 1,450.3 Shares outstanding 38,760,000 Target price (KRW) 38,000 Note: * 20% discount to global peer average ** 40% discount to domestic peer average *** 30% discount to global mining companies average Table 2. Trading companies: Global peer valuations (KRWb) Sales Operating profit Net profit EPS Growth P/E ROE P/B EBITDA Growth EV/ EBITDA Operation margin (2016E) (2016E) (2016E) (CAGR*, %) (2016E, x) (2016E, %) (2016E, x) (CAGR*, %) (2016E, x) (2016E, %) 14,689 182 67 107.8 12.7 6.0 0.8 (2.6) 10.1 1.2 Mitsubishi 80,613 1,994 3,418 (10.8) 8.9 5.6 0.5 (0.5) 17.5 2.5 Mitsui 51,000 1,729 2,292 (18.0) 10.7 5.3 0.6 (3.8) 11.1 3.4 Marubeni 139,915 1,627 1,933 28.8 5.2 11.4 0.6 0.7 13.0 1.2 Sumitomo 86,672 1,778 2,228 n/a 6.5 8.3 0.5 215.0 13.7 2.1 Itochu 55,797 3,019 3,553 3.8 6.3 12.3 0.7 4.7 11.6 5.4 Toyota Tsusho 86,051 1,675 847 6.5 11.3 8.0 0.9 (8.5) 8.6 1.9 Sojitz 45,746 440 448 9.5 7.4 7.2 0.5 6.7 11.9 1.0 Trading business average 3.3 8.0 8.3 0.6 30.6 12.5 2.5 Hyundai Glovis 16,224 815 593 (1.5) 12.8 15.4 1.9 6.4 9.0 5.0 Samsung SDS 9,494 728 537 5.6 32.7 10.3 3.2 (0.2) 13.3 7.7 CJ Korea Express 5,749 268 132 47.4 36.4 5.5 1.9 8.8 16.8 4.7 Distribution business average 17.2 27.3 10.4 2.3 5.0 13.0 5.8 ADM 86,013 2,945 2,146 (6.8) 11.8 10.0 1.2 (1.6) 7.4 3.4 Noble Group 95,961 1,056 500 98.4 3.4 6.4 0.3 10.8 4.9 1.1 Bunge 54,083 1,814 1,167 39.8 9.9 10.9 1.0 18.3 5.7 3.4 Vale 29,041 2,183 (580) n/a n/a 0.7 0.3 (30.9) 6.5 7.5 Rio Tinto 38,275 6,957 3,540 (33.7) 15.4 6.2 1.0 (21.2) 6.0 18.2 BHP Billiton 41,306 7,976 3,200 1.8 29.0 4.2 1.0 (10.1) 5.9 19.3 Teck Resources 6,574 326 42 n/a n/a 0.6 0.2 (24.1) 6.6 5.0 Boliden 5,499 611 447 11.7 10.9 11.7 1.1 2.1 4.6 11.1 FMG 7,448 1,048 206 (58.0) 65.8 2.2 0.4 (8.7) 4.4 14.1 Resource development business average 7.6 20.9 5.9 0.7 (7.3) 5.8 9.2 Total average** 7.8 16.7 7.5 0.9 8.6 9.4 6.2 Note: * 2014-2016 CAGR; ** excludes LGI 2
Table 3. Results and forecasts (consolidated) (KRWb) 1Q15 2Q15 3Q15 4Q15 1Q16E 2Q16E 3Q16E 4Q16E 2014 2015 2016E Sales 2,644.9 3,202.9 3,617.7 3,759.0 3,613.4 3,666.8 3,657.5 3,751.2 11,372.2 13,224.5 14,688.9 Resource development 780.8 820.0 720.0 800.0 692.2 747.9 713.5 746.0 3,144.8 3,120.8 2,899.6 E&P 151.4 155.1 158.8 134.8 128.4 131.6 135.2 139.1 748.3 595.9 534.3 Coal 112.3 111.9 119.2 100.6 97.3 98.9 100.8 102.8 489.2 439.8 399.9 Oil 28.1 32.7 28.5 23.2 19.1 20.5 22.0 23.6 210.5 112.6 85.2 Other 11.0 10.5 11.0 10.9 12.0 12.2 12.4 12.7 48.6 43.5 49.2 Trading 629.4 664.9 561.2 665.2 563.8 616.3 578.3 606.9 2,396.5 2,525.0 2,365.4 Industrial materials 1,810.2 2,044.1 2,397.7 2,289.0 2,223.6 2,221.5 2,246.5 2,307.7 8,227.3 8,541.0 8,999.3 Project 54.3 61.3 71.9 68.7 70.6 70.5 73.4 75.5 246.8 256.2 290.0 Trading 1,755.9 1,982.8 2,325.8 2,220.3 2,153.1 2,150.9 2,173.1 2,232.1 7,980.5 8,284.8 8,709.3 Distribution n/a 338.8 500.0 670.0 697.5 697.5 697.5 697.5 n/a 1,508.8 2,790.0 Operating profit 20.9 30.3 29.9 0.6 44.4 42.2 50.4 44.5 172.0 81.7 181.5 Resources/development 3.2 1.2 (37.2) (63.1) (8.1) (10.4) (4.9) (5.8) 77.9 (95.9) (29.2) Coal 14.0 13.9 11.0 4.8 6.6 6.7 6.8 7.0 25.9 43.7 27.0 Oil (4.2) 0.8 (3.8) (0.9) (0.7) (0.8) (0.8) (0.9) 29.0 (8.1) (3.2) Other (10.7) (13.5) (44.4) (67.0) (14.0) (16.3) (10.9) (11.8) 23.0 (135.6) (53.0) Adjustment 4.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (0.0) 4.1 0.0 Industrial material 17.7 15.1 46.0 45.0 30.2 30.3 30.4 30.6 94.1 123.8 121.4 Project 10.5 7.2 11.0 28.8 15.8 15.8 15.8 15.8 62.6 57.4 63.0 Trading 7.2 7.9 35.0 16.2 14.5 14.5 14.6 14.8 31.6 66.4 58.4 Other 0.0 (0.0) (0.0) 0.0 0.0 0.0 0.0 0.0 0.0 (0.0) 0.0 Distribution n/a 14.0 21.1 18.7 22.3 22.3 25.0 19.7 n/a 53.8 89.3 Operating margin (%) 0.8 0.9 0.8 0.0 1.2 1.2 1.4 1.2 1.5 0.6 1.2 Resources/development 0.4 0.1 (5.2) (7.9) (1.2) (1.4) (0.7) (0.8) 2.5 (3.1) (1.0) Industry material 1.0 0.7 1.9 2.0 1.4 1.4 1.4 1.3 1.1 1.4 1.3 Distribution n/a 4.1 4.2 2.8 2.8 2.8 2.8 2.8 n/a 3.6 3.2 Chart 1. Raw materials: Coal vs oil Chart 2. Quarterly pre-tax profit (2015) (USD/tonne) (USD/bbl) 130 140 120 Oil (RHS) 110 120 100 100 90 80 80 70 Coal (LHS) 60 60 50 40 40 20 2012 2013 2014 2015 2016 (KRWb) 45 40 35 30 25 20 15 10 5 0 Operating profit Operating profit excluding loss on derivatives* Pre-tax profit** Source: Bloomberg Note: * Excludes one-off income of KRW20b from 3Q15 operating profit ** Excludes impairment losses of KRW300b from 4Q15 pre-tax profit Source: Samsung Securities 3
Table 4. E&P businesses related to fields and wells E&P businesses Stake (%) Book value (KRWb) Oman fields 8 (Bukha gas well) 30.0 71.8 Oman field 8 (West Bukha gas well) 50.0 Vietnam field 11-2 16.1 63.8 Geopark Chile 20.0 196.9 Geopark TdE 31.2 22.3 Geopark Colombia 20.0 13.5 Kazakhstan ADA field 35.0 80.4 Kazakhstan Zhambyl field 2.7 46.0 Kazakhstan NW Konys field 40.0 56.0 Total* 550.7 Note: * 55% of KRW300b in impairment losses reflected in 4Q15 comprise gas well and field book value Source: Company data, Samsung Securities estimates Chart 3. P/B band (KRW) 120,000 100,000 80,000 60,000 40,000 20,000 0 2005 2007 2009 2011 2013 2015 2.5x 2.0x 1.5x 1.0x 0.5x Table 5. Earnings revision (KRWb) 2016E 2017E Before After Diff. (%) Before After Diff. (%) Sales 14,579 14,689 0.8 15,264 15,286 0.1 Operating profit 208 182 (12.7) 249 215 (13.5) Pre-tax profit 123 96 (22.4) 196 166 (15.2) Net profit 86 67 (22.4) 137 116 (15.2) EPS (KRW) 2,902 2,454 (15.4) 3,805 3,268 (14.1) 4
Income statement Year-end Dec 31(KRWb) 2013 2014 2015 2016E 2017E Sales 12,073 11,372 13,224 14,689 15,286 Cost of goods sold 11,583 10,873 12,711 14,001 14,548 Gross profit 490 499 514 688 738 Gross margin (%) 4.1 4.4 3.9 4.7 4.8 SG&A expenses 392 327 432 506 523 Operating profit 98 172 82 182 215 Operating margin (%) 0.8 1.5 0.6 1.2 1.4 Non-operating gains (losses) (24) (159) (297) (86) (49) Financial profit 345 271 323 (24) 8 Financial costs 386 317 435 51 50 Equity-method gains (losses) (30) (8) (221) (11) (7) Other 47 (106) 36 0 0 Pre-tax profit 74 13 (215) 96 166 Taxes 30 26 2 29 50 Effective tax rate (%) 40.8 209.0 (0.9) 30.0 30.0 Profit from continuing operations 44 (14) (217) 67 116 Profit from discontinued operations 0 0 0 0 0 Net profit 44 (14) (217) 67 116 Net margin (%) 0.4 (0.1) (1.6) 0.5 0.8 Net profit (controlling interests) 48 (13) (217) 67 116 Net profit (non-controlling interests) (4) (1) 0 0 0 EBITDA 216 238 125 232 271 EBITDA margin (%) 1.8 2.1 0.9 1.6 1.8 EPS (parent-based) (KRW) 1,242 (340) (5,601) 1,730 3,005 EPS (consolidated) (KRW) 1,138 (355) (5,601) 1,730 3,005 Adjusted EPS (KRW)* 1,166 568 2,088 2,454 3,268 Balance sheet Year-end Dec 31(KRWb) 2013 2014 2015 2016E 2017E Current assets 2,799 2,830 3,179 3,375 3,561 Cash & equivalents 385 480 529 577 624 Accounts receivable 1,181 1,053 1,328 1,389 1,450 Inventories 689 1,047 729 800 874 Other current assets 544 250 594 608 614 Fixed assets 2,078 2,067 2,316 2,363 2,415 Investment assets 926 927 938 959 982 Tangible assets 89 96 333 358 387 Intangible assets 869 805 995 995 995 Other long-term assets 194 238 51 51 51 Total assets 4,877 4,897 5,495 5,738 5,976 Current liabilities 2,245 2,352 2,589 2,703 2,809 Accounts payable 1,239 1,476 1,550 1,600 1,640 Short-term debt 677 463 424 424 424 Other current liabilities 330 414 616 679 746 Long-term liabilities 1,018 979 1,332 1,427 1,449 Bonds & long-term debt 907 862 1,112 1,112 1,112 Other long-term liabilities 111 117 220 315 337 Total liabilities 3,264 3,332 3,922 4,130 4,259 Owners of parent equity 1,476 1,427 1,230 1,265 1,373 Capital stock 194 194 194 194 194 Capital surplus 102 102 102 102 102 Retained earnings 1,125 1,101 872 932 1,040 Other 55 30 62 37 37 Non-controlling interests equity 138 139 344 344 344 Total equity 1,613 1,565 1,574 1,608 1,717 Net debt 1,110 989 1,126 1,077 1,030 Cash flow statement Year-end Dec 31(KRWb) 2013 2014 2015 2016E 2017E Cash flow from operations (174) 348 422 214 228 Net profit 44 (14) (217) 67 116 Non-cash profit and expenses 221 252 483 184 151 Depreciation 16 13 37 44 49 Amortization 102 53 7 7 7 Other 103 187 439 133 95 Changes in A/L from operating activities (287) 145 156 (37) (39) Cash flow from investments (235) (23) (107) (94) (90) Change in tangible assets (8) (8) (8) (10) (10) Change in financial assets (27) 95 (7) (7) (7) Other (200) (110) (92) (77) (73) Cash flow from financing 239 (237) 134 (72) (91) Change in debt 178 (165) 199 0 0 Change in equity 0 0 0 0 0 Dividends (22) (23) 0 0 0 Other 83 (49) (65) (72) (91) Change in cash (149) 95 49 49 47 Cash at beginning of year 534 385 480 529 577 Cash at end of year 385 480 529 577 624 Gross cash flow 265 239 266 251 267 Free cash flow (183) 340 412 203 216 Note: * Excluding one-off items; ** fully diluted, excluding one-off items *** From companies subject to equity-method valuation Source: Company data, Samsung Securities estimates Financial ratios Year-end Dec 31 2013 2014 2015 2016E 2017E Growth (%) Sales (5.6) (5.8) 16.3 11.1 4.1 Operating profit (52.2) 75.0 (52.5) 122.2 18.6 Net profit (80.8) nm nm nm 73.7 Adjusted EPS** (64.0) (51.3) 267.6 17.5 33.2 Per-share data (KRW) EPS (parent-based) 1,242 (340) (5,601) 1,730 3,005 EPS (consolidated) 1,138 (355) (5,601) 1,730 3,005 Adjusted EPS** 1,166 568 2,088 2,454 3,268 BVPS 41,655 41,005 40,490 41,044 42,893 DPS (common) 300 300 200 200 200 Valuations (x) P/E*** 26.7 54.8 14.9 12.7 9.5 P/B*** 0.7 0.8 0.8 0.8 0.7 EV/EBITDA 10.7 9.2 18.6 10.1 8.6 Ratios (%) ROE 2.8 1.4 5.2 6.0 7.6 ROA 0.9 (0.3) (4.2) 1.2 2.0 ROIC 3.5 (11.3) 4.7 6.3 7.3 Payout ratio 24.1 (87.9) (5.3) 17.3 10.0 Dividend yield (common) 1.0 1.0 1.0 1.0 1.0 Net debt to equity 68.8 63.2 71.5 67.0 60.0 Interest coverage (x) 2.1 3.8 1.6 3.5 4.3 5
Compliance notice - As of Feb 3, 2016, the covering analyst(s) did not own any shares, or debt instruments convertible into shares, of any company covered in this report. - As of Feb 3, 2016, Samsung Securities' holdings of shares and debt instruments convertible into shares of each company covered in this report would not, if such debt instruments were converted, exceed 1% of each company's outstanding shares. - This report has been prepared without any undue external influence or interference, and accurately reflects the views of the analyst(s) covering the company or companies herein. - All material presented in this report, unless specifically indicated otherwise, is under copyright to Samsung Securities. - Neither the material nor its content (including copies) may be altered in any form, or by any means transmitted, copied, or distributed to another party, without prior express written permission from Samsung Securities. - This memorandum is based upon information available to the public. While we have taken all reasonable care to ensure its reliability, we do not guarantee its accuracy or completeness. This memorandum is not intended to be an offer, or a solicitation of any offer, to buy or sell the securities mentioned herein. Samsung Securities shall not be liable whatsoever for any loss, direct or consequential, arising from the use of this memorandum or its contents. Statements made regarding affiliates of Samsung Securities are also based upon publicly available information and do not necessarily represent the views of management at such affiliates. - This material has not been distributed to institutional investors or other third parties prior to its publication. Target price changes in past two years (KRW) 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Feb 14 Aug 14 Feb 15 Aug 15 Feb 16 Rating changes in past two years Date 2014/2/4 7/17 2015/1/21 4/2 5/12 12/3 2016/2/4 Recommendation BUY HOLD BUY BUY BUY BUY BUY Target price (KRW) 39,000 32,000 38,000 40,000 47,000 45,000 38,000 Samsung Securities uses the following investment ratings. Company BUY BUY HOLD SELL SELL Expected to increase in value by 30% or more within 12 months and is highly attractive within sector Expected to increase in value by 10% or more within 12 months Expected to increase/decrease in value by less than 10% within 12 months Expected to decrease in value by 10% or more within 12 months Expected to decrease in value by 30% or more within 12 months Percentage of ratings in 12 months prior to Dec 31, 2015 BUY (69.8%) HOLD (30.2%) SELL (0%) Industry OVERWEIGHT Expected to outperform market by 5% or more within 12 months NEUTRAL Expected to outperform/underperform market by less than 5% within 12 months UNDERWEIGHT Expected to underperform market by 5% or more within 12 months 6
Global Disclosures & Disclaimers General This research report is for information purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments or to participate in any trading strategy. This report does not provide individually tailored investment advice. This report does not take into account individual client circumstances, objectives, or needs and is not intended as recommendations of particular securities, financial instruments or strategies to any particular client. The securities and other financial instruments discussed in this report may not be suitable for all investors. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein and investors should seek the advice of a financial adviser. This report may not be altered, reproduced, distributed, transmitted or published in whole or in part for any purpose. References to "Samsung Securities" are references to any company in the Samsung Securities, Co., Ltd. group of companies. Samsung Securities and/or other affiliated companies, its and their directors, officers, representatives, or employees may have long or short positions in any of the securities or other financial instruments mentioned in this report or of issuers described herein and may purchase and/or sell, or offer to purchase and/or sell, at any time, such securities or other financial instruments in the open market or otherwise, as either a principal or agent. Any pricing of securities or other financial instrument contained herein is as of the close of market for such day, unless otherwise stated. Opinions and estimates contained herein constitute our judgment as of the date of this report and are subject to change without notice. The information provided in this report is provided "AS IS". Although the information contained herein has been obtained from sources believed to be reliable, no representation or warranty, either expressed or implied, is provided by Samsung Securities in relation to the accuracy, completeness or reliability of such information or that such information was provided for any particular purpose and Samsung Securities expressly disclaims any warranties of merchantability or fitness for a particular purpose. Furthermore, this report is not intended to be a complete statement or summary of the securities, markets or developments referred to herein. Samsung Securities does not undertake that investors will obtain any profits, nor will it share with investors any investment profits. Samsung Securities, its affiliates, or any of its and their affiliates, directors, officers, employees or agents disclaim any and all responsibility or liability whatsoever for any loss (direct or consequential) or damage arising out of the use of all or any part of this report or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. Past performance is not indicative of future results. Foreign currency rates of exchange may adversely affect the value, price or income of any security or financial instrument mentioned in this report. For investment advice, trade execution or other enquiries, clients should contact their local sales representative. Any opinions expressed in this report are subject to change without notice and may differ or be contrary to opinions expressed by other business areas or groups of Samsung Securities. Any analysis contained herein is based on numerous assumptions. Different assumptions may result in materially different results. Samsung Securities is under no obligation to update or keep current the information contained herein. Samsung Securities relies on information barriers to control the flow of information contained in one or more areas or groups within Samsung Securities into other areas or groups of Samsung Securities. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other financial instruments. Samsung Securities makes no representation that any transaction can or could have been effected at those prices and any prices contained herein may not reflect Samsung Securities internal books and records or theoretical model-based valuations and may be based on certain assumptions. Different assumptions by Samsung Securities or any other source may yield substantially different results. Additional information is available upon request. For reports to be distributed to US: Securities research is prepared, issued and exclusively distributed by Samsung Securities Co., Ltd., an organization licensed with the Financial Supervisory Service of South Korea. This research may be distributed in the United States only to major institutional investors as defined in Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended, and may not be circulated to any other person otherwise. All transactions by U.S. investors involving securities discussed in this report must be effected through Samsung Securities (America) Inc., a broker-dealer registered with the U.S. Securities & Exchange Commission and a member of the Financial Industry Regulatory Authority/SIPC, and not through any non-u.s. affiliate thereof. The analysts listed [on the front of this report] are employees of Samsung Securities Co., Ltd., or a non-u.s. affiliate thereof, and are not registered/qualified as research analysts under applicable U.S. rules and regulations and may not be subject to U.S. restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account. For reports to be distributed to UK: This report is not an invitation nor is it intended to be an inducement to engage in investment activity for the purpose of section 21 of the Financial Services and Markets Act 2000 of the United Kingdom ("FSMA"). To the extent that this report does constitute such an invitation or inducement, it is directed only at (i) persons who are investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (as amended) of the United Kingdom (the "Financial Promotion Order"); (ii) persons who fall within Articles 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Promotion Order; and (iii) any other persons to whom this report can, for the purposes of section 21 of FSMA, otherwise lawfully be made (all such persons together being referred to as "relevant persons"). Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons. Persons who are not relevant persons must not act or rely on this report. For reports to be distributed to Korea: This report is for private circulation only, not for sale, and is issued and distributed only to persons permitted under the laws and regulations of Korea. For reports to be distributed to Singapore: This report is provided pursuant to the financial advisory licensing exemption under Regulation 27(1)(e) of the Financial Advisers Regulation of Singapore and accordingly may only be provided to persons in Singapore who are "institutional investors" as defined in Section 4A of the Securities and Futures Act, Chapter 289 of Singapore. This report is intended only for the person to whom Samsung Securities has provided this report and such person may not send, forward or transmit in any way this report or any copy of this report to any other person. Analyst certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of such analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research report. The analyst(s) principally responsible for the preparation of this research report receives compensation based on determination by research management and senior management (not including investment banking), based on the overall revenues, including investment banking revenues of Samsung Securities Co., Ltd. and its related entities and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. Copyright 2010 Samsung Securities Co., Ltd.. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the prior written consent of Samsung Securities America Inc. 7