November 17, 2016

KOREA Daily Focus

Sector News & Analysis Major Indices Close Chg Chg (%) Holding Companies (Overweight) KOSPI 1,980.55 0.90 0.05 Right now, wrong then: (1) Considering shareholder value KOSPI 200 250.46 0.14 0.06 KOSDAQ 627.76 -0.07 -0.01

Turnover ('000 shares, Wbn) Volume Value KOSPI 267,152 3,483 KOSPI 200 66,629 2,544 KOSDAQ 658,763 2,760

Market Cap (Wbn) Value KOSPI 1,270,111 KOSDAQ 198,631

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,036 980 55 Institutional 743 829 -86 Retail 1,670 1,663 7

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 131 150 -19 Institutional 60 64 -4 Retail 2,573 2,545 28

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 757 669 88 KOSDAQ 46 50 -4

Advances & Declines Advances Declines Unchanged KOSPI 375 419 91 KOSDAQ 583 487 101

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Electronics 1,568,000 10,000 246 KODEX LEVERAGE 10,310 -25 160 167,500 -2,500 157 Doosan Infracore 9,550 -100 151 KODEX 200 Futures 10,400 15 105 Inverse 2X

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value CammSys 3,360 205 87 GNCO 5,660 170 86 Solco Biomedical 1,225 70 76 ATEC T& 16,600 1,700 74 TLI 8,550 950 70 Note: As of November 17, 2016 Mirae Asset Daewoo Research

This document is a summary of a report prepared by Daewoo Securities Co., Ltd. (“Daewoo”) and published on our website. Please review the compliance notices contained in the original report. Information and opinions contained herein have been compiled in good faith from sources deemed to be reliable. However, the information has not been independently verified. Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy or completeness of the information and opinions contained in this document. Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. This document is for informational 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. This document may not be reproduced, further distributed or published in whole or in part for any purpose.

Holding Companies Right now , wrong then : (1) Considering shareholder value

Ownership restructuring has been an overriding theme of 2016. We anticipate that Overweight (Maintain) large conglomerates, including Samsung, will continue to pursue ownership restructuring in 2017 in efforts to secure competitiveness and solidify control over Industry Report their groups. In this report, we begin to examine the areas where current November 17, 2016 standards regarding ownership restructuring—which were once considered adequate—need revision, and forecast changes to come.

Mirae Asset Daewoo Co., Ltd. Why the Samsung C&T/ merger met such resistance 1) Controversies over timing and merger ratio: Some shareholders of Samsung [Holding Companies/IT Services ] C&T opposed the merger with Cheil Industries, raising questions about the fairness

Dae -ro Jeong of the merger’s timing and the calculation of the merger ratio. However, Samsung +822 -768 -4160 C&T stressed that the merger ratio was set in accordance with the Financial [email protected] Investment Services and Capital Markets Act (FSCMA). The merger was approved at the general shareholders’ meeting, with 69.53% voting in favor (2.86%p higher than Yoon -seok Seo the quorum). +822 -768 -4127 [email protected] 2) Effect and outlook of lawsuit to adjust appraisal rights value: In a lawsuit

brought by minority shareholders, an appeals court ruled that the appraisal rights exercise price (set in accordance with the FSCMA) failed to reflect the true value of the company and should be adjusted (from W57,234 to W66,602 per share) , reversing a lower court’s ruling. The court felt that reasonable doubts could be raised regarding allegations that Samsung C&T had posted a poor performance intentionally (taking an extremely passive approach to construction orders) in order to lower its stock price.

Supreme Court precedent suggests there is only limited risk of the merger being nullified. For other corporate groups, the case of Samsung C&T-Cheil Industries may be instructive in terms of factors that must be considered in the process of corporate governance restructuring. In particular, the case suggests that 1) merger terms should not, without reason, be disadvantageous or unfair to shareholders of either company; and 2) the timing of mergers should be determined with consideration given to the value of even minority shareholders.

Merger regulations in foreign countries: No direct regulations The merger price of listed domestic companies is determined by the market price. As the actual merg er price can vary depending on the calculation period, we believe the calculation period of the merger price can be extended to ensure fairness.

Other countries, including the US, UK, Germany, and Japan, allow companies to determine the merger price on their own through negotiation, instead of directly regulating the calculation. They use an indirect method, in which companies must provide enough information on the merger to investors via public announcements.

Status of merger regulations in foreign countries

KoreaKoreaKoreaUSUSUS JapanJapanJapan UKUKUK Germany

Regulations on merger price OOOXO XX XX XXX△△△

Legal guarantee of appraisal rights OOO OO OOOXXXXOOOO

Obligation for external evaluation of merger price computation OOOX O XX XX XX XXX

Obligation for announcement of merger conditions, etc. OO O OO OO OO OOO

Notes: In Germany, lower limits on merger prices are set only in the case of hostile takeovers Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Key Universe Valuations November 17, 2016

※All data as of close November 16, 2016, unless otherwise noted.

17F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F 015760 KEPCO 30,044 46,800 3.2 -12.1 19.3 -15.5 25.0 4.4 3.5 0.4 0.4 9.1 10.5 005380 Hyundai Motor 29,076 132,000 3.0 5.5 13.9 1.6 12.4 6.5 5.8 0.5 0.5 8.4 8.8 035420 NAVER 24,557 745,000 0.2 39.0 21.1 33.1 25.4 22.6 18.0 4.9 3.9 31.7 29.6 012330 23,509 241,500 1.5 11.6 6.0 12.5 8.4 6.4 5.9 0.7 0.7 12.2 11.8 032830 Samsung Life 23,200 116,000 - - - - 0.0 0.0 055550 20,746 43,750 - - - - 0.0 0.0 090430 AmorePacific 20,577 352,000 0.6 27.5 17.6 27.8 17.6 28.1 23.9 5.2 4.4 20.1 19.9 017670 SK Telecom 17,522 217,000 4.6 0.9 1.5 -14.4 1.8 14.1 13.8 0.9 0.9 7.8 7.6 105560 KB Financial Group 16,934 40,500 - - - - 0.0 0.0 034730 SK Holdings 16,851 239,500 1.4 9.2 1533.5 41.8 1866.3 10.1 0.5 1.1 0.3 11.8 105.3 051910 LG Chem 15,872 239,500 1.9 12.6 8.0 25.0 8.4 10.4 9.6 1.1 1.0 11.5 11.4 000270 Motors 14,857 36,650 3.3 6.0 6.6 -2.4 4.6 5.0 4.7 0.5 0.5 10.8 10.3 096770 SK Innovation 14,378 155,500 2.6 -9.3 11.4 6.6 12.5 7.0 6.2 0.8 0.7 11.5 11.7 000810 Samsung F&M 13,739 290,000 - - - - 0.0 0.0 033780 KT&G 13,729 100,000 3.6 -0.8 3.2 4.8 5.2 12.7 12.1 1.8 1.6 15.1 14.5 051900 LG Household & Health Care 12,901 826,000 0.9 12.9 12.4 8.8 11.0 22.3 20.0 4.5 3.8 22.7 20.9 009540 12,008 158,000 -15.4 -5.0 -16.7 -5.7 14.4 15.2 0.7 0.7 5.5 4.9 018260 Samsung SDS 11,452 148,000 0.3 6.1 1249.6 6.6 1147.3 22.6 1.8 2.1 1.0 9.7 73.3 002790 AmoreG 11,251 141,000 0.3 15.2 13.4 20.0 13.3 28.4 25.1 3.7 3.2 14.4 14.3 011170 Lotte Chemical 10,831 316,000 0.8 7.4 2.0 10.7 2.5 5.8 5.7 1.0 0.9 18.6 16.2 003550 LG Corp. 10,181 59,000 2.2 1.2 0.0 1.8 -0.2 8.5 8.6 0.7 0.7 8.4 7.9 034220 LG Display 9,947 27,800 1.8 57.6 - 105.2 - 12.5 0.8 6.3 0.0 086790 9,650 32,600 - - - - 0.0 0.0 010950 S-Oil 9,288 82,500 4.4 -1.1 5.6 -9.3 5.6 7.9 7.5 1.3 1.1 17.5 16.3 030200 KT 8,055 30,850 2.9 1.0 -1.5 5.5 0.8 10.9 10.8 0.6 0.6 6.3 6.1 035250 7,702 36,000 3.3 7.6 5.5 9.3 7.7 14.2 13.2 2.0 1.9 15.7 15.4 066570 LG Electronics 7,667 46,850 1.7 14.0 34.9 60.0 51.8 14.1 9.3 0.7 0.6 5.0 7.2 024110 7,308 13,050 - - - - 0.0 0.0 023530 Lotte Shopping 7,274 231,000 0.9 13.7 - 16.3 - 13.6 0.4 3.2 0.0 047810 Korea Aerospace Industries 6,726 69,000 0.6 15.1 16.0 19.7 22.2 21.6 17.7 4.0 3.4 20.3 20.7 021240 Coway 6,683 87,500 3.4 50.2 8.1 58.5 8.5 18.8 17.3 4.2 3.8 26.2 25.0 006400 Samsung SDI 6,553 95,300 1.0 - - 56.3 - 16.4 0.6 3.7 0.0 161390 6,342 51,200 1.0 4.2 5.9 -0.5 7.0 7.4 6.9 0.9 0.8 13.8 13.0 086280 6,056 161,500 1.9 9.7 2.4 -5.0 15.8 10.8 9.3 1.5 1.3 14.8 15.2 088350 Hanwha Life 5,863 6,750 - - - - 0.0 0.0 036570 NCSOFT 5,603 255,500 2.2 75.1 22.9 60.7 22.4 13.4 10.9 2.4 2.1 19.6 20.5 035720 5,476 81,000 0.2 83.3 19.9 163.4 17.6 36.3 30.8 1.6 1.5 4.4 5.0 139480 Emart 5,143 184,500 0.8 11.9 12.8 19.6 16.8 12.3 10.6 0.6 0.6 5.4 5.9 005830 Dongbu Insurance 5,105 72,100 - - - - 0.0 0.0 032640 LG Uplus 5,087 11,650 2.8 3.3 1.5 4.7 2.5 10.7 10.5 1.0 0.9 9.5 9.2 078930 GS Holdings 5,073 54,600 2.7 9.8 5.4 10.0 6.2 7.1 6.7 0.7 0.6 10.3 10.1 097950 CJ CheilJedang 4,975 378,000 0.7 13.7 9.2 6.7 20.5 16.2 13.5 1.4 1.3 9.5 10.4 000120 CJ Korea Express 4,277 187,500 20.1 7.7 108.9 -0.2 24.9 24.9 1.4 1.3 6.9 6.5 001800 Orion 4,176 695,000 0.9 9.0 9.7 5.2 11.7 19.6 17.6 2.4 2.1 13.2 13.2 009830 Hanwha Chemical 4,104 24,900 0.6 -16.6 13.1 -10.4 9.3 5.8 5.3 0.7 0.6 12.5 12.1 027410 BGF Retail 4,088 165,000 0.7 23.6 19.2 19.1 19.5 19.6 16.4 3.7 3.1 20.7 20.7 036460 KOGAS 4,011 43,450 0.4 12.9 15.6 44.6 34.6 9.9 7.4 0.4 0.4 3.9 5.0 009150 Samsung Electro-Mechanics 3,649 48,850 1.3 126.6 20.5 80.2 35.0 44.1 32.7 0.9 0.9 2.0 2.7 007070 GS Retail 3,600 46,750 1.8 15.6 22.4 -25.9 18.9 17.9 15.0 1.7 1.6 9.7 10.8 012750 S1 3,450 90,800 1.4 4.2 876.4 7.0 950.5 22.6 2.2 2.5 1.2 13.3 80.7 Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Market Data November 17, 2016

※All data as of close November 17, 2016, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 374.45 2.27 0.61 5.18 USD/KRW 1,167.20 1,168.80 1,132.90 1,172.70 KOSPI 1,980.55 0.90 0.05 3.22 JPY100/KRW 1,072.60 1,071.80 1,087.50 951.52 KOSDAQ 627.76 -0.07 -0.01 -7.38 EUR/KRW 1,249.55 1,253.60 1,242.96 1,253.44 Dow Jones* 18,868.14 -54.92 -0.29 8.28 3Y Treasury 1.71 1.69 1.35 1.76 S&P 500* 2,176.94 -3.45 -0.16 8.16 3Y Corporate 2.10 2.07 1.78 2.13 NASDAQ* 5,294.58 18.96 0.36 7.98 DDR2 1Gb* 1.17 1.16 1.11 1.11 Philadelphia Semicon* 857.55 9.65 1.14 30.67 NAND 16Gb* 1.78 1.78 1.74 1.48 FTSE 100* 6,749.72 -43.02 -0.63 10.77 Oil (Dubai)* 43.45 41.97 49.88 40.35 Nikkei 225 17,862.63 0.42 0.00 -3.19 Gold* 1,223.90 1,224.50 1,253.10 1,083.60 Hang Seng* 22,280.53 -43.38 -0.19 4.47 Customer deposits (Wbn)* 22,165 22,771 21,553 20,665 Taiwan (Weighted) 8,995.26 33.04 0.37 10.86 Equity type BC (Wbn)(Nov. 15) 73,046 72,956 72,650 80,356 Note: * as of November 16, 2016 Source: KSDA, Wisefn, DRAMeXchange, MSCI

KOSPI Top 10 Foreign Net Buy / Net Sell (Wbn) KOSPI Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell Hynix 37.08 NHN 17.61 Hyundai Heavy Industries 22.83 36.21 Samsung Electronics 36.29 TIGER200 15.75 TIGER200 15.57 POSCO 25.94 POSCO 28.49 KEPCO 14.37 Korea Life Insurance 13.34 Shinhan Financial Group 16.16 Shinhan Financial Group 10.32 Kia Motors 13.96 10.81 Hynix 11.46 SAMSUNG BIOLOGICS 9.40 KT&G 12.90 LG Display 10.26 KODEX LEVERAGE 11.08 LG Corp. 6.94 LG Display 9.27 KOREA AEROSPACE 9.50 SAMSUNG C&T 10.60 Hyundai Motor 6.75 Korea Life Insurance 8.06 CJ Cheiljedang 7.38 SK Telecom 9.65 LG Chem 4.88 Orion 6.24 MIRAE ASSET LIFE 6.02 KB Financial Group 7.56 Samsung Techwin 4.79 CJ Cheiljedang 6.00 Orion 4.98 Hyundai Motor 7.31 Korea Plant Service & Amore Pacific 3.97 Hyundai M&F Insurance 5.14 4.66 SAMSUNG BIOLOGICS 6.28 Engineering Source: KSDA, Wisefn

KOSDAQ Top 10 Foreign Net Buy / Net Sell (Wbn) KOSDAQ Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell CJ E&M 2.67 4.68 Daum Communications 6.04 Celltrion 1.68 Paradise 2.30 Hugel 2.72 Hugel 1.75 Innox 1.11 Kornic Systems 1.71 Daum Communications 1.95 Com2us 1.23 LabGen 0.99 TLI 0.90 SK Materials 1.47 WONIK IPS 1.02 APSI 0.96 SFA Engineering 0.88 Eugene Technology 1.45 Maeil Dairy Industry 0.82 CJ E&M 0.94 Intops 0.77 Techno Semichem 1.08 Viatron 0.81 ST Pharm 0.93 CLIO Cosmetics 0.77 Komipharm 1.00 SK Materials 0.71 Binex 0.89 EO Technics 0.74 Paru 0.81 Easy Bio System 0.59 Silicon Works 0.86 SIMMTECH 0.71 SYPANEL 0.78 Kortek 0.55 NUTRIBIOTECH 0.85 Jinsung T.E.C. 0.71 Viatron 0.74 LOEN 0.54 Semiconductor 0.79 Source: KSDA, Wisefn

KOSPI Top 10 by Market Cap (Wbn) KOSDAQ Top 10 by Market Cap (Wbn) Close (W) Chg (W) Mkt Cap Close (W) Chg (W) Mkt Cap Samsung Electronics 1,568,000 10,000 220,585 Celltrion 103,900 -1,200 12,115 Hynix 41,900 1,050 30,503 Daum Communications 81,000 700 5,476 KEPCO 46,800 -500 30,044 CJ E&M 65,700 900 2,545 Hyundai Motor 132,000 1,000 29,076 Medy-tox 400,000 1,400 2,263 SAMSUNG C&T 141,500 -2,500 26,841 Komipharm 39,800 -600 2,177 Samsung Electronics (P) 1,236,000 10,000 25,355 LOEN 73,400 400 1,856 NHN 745,000 -6,000 24,557 SK Materials 158,600 -1,400 1,673 Hyundai Mobis 241,500 -1,000 23,509 ViroMed 94,800 -1,100 1,513 Samsung Life Insurance 116,000 4,000 23,200 Paradise 13,600 600 1,237 POSCO 253,000 -500 22,058 GS Home Shopping 178,000 -2,300 1,168 Source: