December 20, 2019 Korea Morning Focus

Sector News & Analysis Major Indices Close Chg Chg (%) Securities (Overweight) KOSPI 2,196.56 1.80 0.08 A framework for the valuation of financial platforms KOSPI 200 294.31 0.09 0.03 KOSDAQ 647.85 -1.10 -0.17

Turnover ('000 shares, Wbn) Volume Value KOSPI 630,988 5,262 KOSPI 200 68,970 3,253 KOSDAQ 794,480 3,734

Market Cap (Wbn) Value KOSPI 1,476,810 KOSDAQ 233,526

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,643 1,393 249 Institutional 1,101 1,209 -108 2,459 2,623 -164

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 421 443 -22 Institutional 196 193 3 Retail 3,097 3,049 48

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 1,320 1,165 154 KOSDAQ 381 399 -18

Advances & Declines Advances Declines Unchanged KOSPI 423 373 111 KOSDAQ 516 727 98

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Electronics 56,000 -300 786 Hynix 93,600 600 441 KODEX Leverage 14,080 30 197 KODEX Kosdaq150 7,920 60 185 Leverage Seowon 2,750 235 182

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value MedPacto 35,900 -4,100 227 Estech Pharma 17,000 700 125 S-MAC 1,185 269 110 HLB 98,900 -100 72 Hanryu A.I Center 1,355 45 71 Note: As of December 19, 2019

This document is a summary of a report prepared by Mirae Asset Co., Ltd. (“Mirae Asset 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. Mirae Asset 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. Mirae Asset 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.

Securities A framework for the valuation of financial platforms

Competition among financial platforms getting underway Overweight (Maintain)  Financial platform businesses to gather steam in 2020 Industry Report Moves to launch and bulk up financial platforms are gathering steam. Such December 20, 2019 moves include the recent licensing of a third internet-only bank, the resumption of ’s major shareholder eligibility screening in relation to its acquisition of a brokerage firm, the establishment and equity issue of NAVER Financial, and Kakao Bank’s additional capital raising. Mirae Asset Daewoo Co., Ltd. We believe the full-fledged launch of these powerful platforms will bring a [Securities/Insurance] sea change in the financial industry by replacing or building on traditional financial channels. Gil-won Jeong +822-3774-1675 [email protected]  A framework for valuing financial platforms is needed

Minjeong Kyeong In 2H20, we expect the debate over the fair valuation of financial platforms to +822-3774-1437 heat up as Kakao Bank’s IPO comes into focus. [email protected] How to reflect the dual nature of the financial business and the platform

business in valuations is an important topic. Financial platform valuation

 The characteristics of both platforms and finance need to be reflected The starting point of valuation for all assets is the discount rate on government bonds (risk-free rate of return), which rely on an extensive and stable source of income (i.e., taxing power). An asset with exclusivity and limited risks deserves a discount rate comparable to that of government bonds.

We believe platforms represent such an asset, as they are used by all economically active people, tend to be exclusive, and have the ability to generate stable income from various sources (ads, commissions, etc.).

Unlike general platforms, however, financial platforms are associated with risks inherent to the financial business (credit risks, price fluctuations, etc.) and thus warrant a higher discount.

For this reason, we believe the “low discount rate = high valuation” approach can be justified in cases where the financial platform is closer to an intermediary model, limiting exposure to inherent financial business risks while maximizing the benefits of platforms.

Figure 1. Platforms share certain characteristics with public assets Governments Platforms

Monopoly Profits, Public efficiency interest Broad (ads, commissions) (taxes) participation

Source: Mirae Asset Daewoo Research

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

December 20, 2019 Securities

 Three case studies WeBank, owned by Tencent, is ’s largest digital bank. It acts as an intermediary between Tencent users and banks. WeBank has an optimal income structure, with direct lending accounting for 20% and the rest coming from loan brokerage, commissions, and interest (with similar proportions). WeBank has been valued at a P/B of 12x (based on the digital bank’s minority stake sale in late 2018).

MarketAxess Holdings is a fixed-income trading platform that is based on a risk- free intermediary model. The company trades at a P/B of more than 20x, which is justified by its over 30% ROE and implies a discount rate of just 1.5%.

PayPal earns 90% of its income from commissions. With an ROE of 16%, the company trades at a P/B of 7.5x, implying a discount rate of 2%. PayPal is an ideal financial platform characterized by an extensive customer base, low risk reliance, and high ROE.

Valuation framework

 A central issue in 2020 will be the need to better incorporate the value of financial platforms in the valuations of entities investing in them (big platforms and financial companies with investment stakes).  It is important to establish a basic framework when evaluating a new asset. For financial platforms, we present the following three criteria: 1) Exclusive and extensive user base 2) Intermediary model with limited exposure to inherent financial business risks 3) High ROE

Figure 2. Framework for valuing financial platforms

Big tech Financial institutions

Sales Capital channels Partnerships (JVs) Risk MyData management

Innovation Expertise

Valuation

 Secure exclusivity and extensive user base  Adopt an intermediary model to reduce financial risks  Obtain high ROE

Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Key Universe Valuations December 20, 2019

※All data as of close December 18, 2019, unless otherwise noted.

19F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 005930 334,308 56,000 2.5 -54.3 40.3 -47.7 35.9 17.8 13.1 1.5 1.4 8.6 10.8 000660 SK Hynix 68,141 93,600 1.6 -85.8 150.5 -85.5 140.0 30.2 12.6 1.3 1.2 4.7 10.7 035420 NAVER 29,502 179,000 0.2 -17.8 77.0 -47.3 132.4 86.3 37.2 4.3 3.9 6.3 13.4 005380 Hyundai Motor 26,388 123,500 3.2 49.6 41.9 118.5 48.0 10.6 7.1 0.5 0.4 4.7 6.6 012330 24,875 261,000 1.9 17.9 16.4 24.3 17.1 10.8 9.2 0.8 0.7 7.3 7.9 068270 Celltrion 23,165 180,500 - - - - 0.0 0.0 051910 LG Chem 21,813 309,000 1.3 -55.7 70.9 -72.5 164.0 59.7 22.6 1.4 1.3 2.4 6.1 055550 21,552 45,450 12.3 3.9 10.0 -0.2 6.2 6.2 0.5 0.5 9.1 8.4 005490 POSCO 21,492 246,500 4.5 -23.9 -9.2 37.8 -0.3 9.2 9.3 0.5 0.4 5.3 5.1 105560 KB Financial Group 20,655 49,400 9.3 2.3 12.6 0.9 6.0 5.9 0.5 0.5 9.2 8.5 028260 Samsung C&T 20,392 107,500 1.9 -27.7 39.8 -42.8 17.9 21.0 17.8 0.7 0.6 4.0 3.9 051900 LG H&H 19,773 1,266,000 0.9 12.8 9.7 16.5 10.7 24.9 22.4 5.4 4.6 20.3 19.1 017670 SK Telecom 19,621 243,000 4.1 7.3 -3.5 -60.6 68.2 15.9 9.5 0.8 0.7 5.4 8.8 015760 KEPCO 18,232 28,400 - - - - - 148.7 0.3 0.3 - 0.2 000270 Motors 18,120 44,700 2.0 70.4 29.1 79.8 24.5 8.7 7.0 0.6 0.6 7.4 8.5 034730 SK Holdings 18,083 257,000 1.9 -2.8 21.5 -36.6 11.0 12.8 11.5 0.9 0.9 8.2 8.3 006400 Samsung SDI 15,713 228,500 0.4 -33.0 108.9 -38.3 99.8 37.2 18.6 1.2 1.2 3.5 6.7 032830 Samsung Life 15,280 76,400 - - - - 0.0 0.0 018260 Samsung SDS 15,050 194,500 1.3 10.4 12.3 10.3 11.8 21.7 19.4 2.3 2.1 11.1 11.3 096770 SK Innovation 14,055 152,000 4.2 -42.8 18.2 -68.7 92.4 27.6 14.3 0.7 0.7 2.8 5.4 033780 KT&G 13,359 97,300 4.3 12.8 5.6 17.5 5.1 12.6 12.0 1.5 1.4 12.7 12.6 035720 Kakao 12,932 150,000 0.1 184.6 138.3 226.0 114.7 75.1 35.0 2.4 2.3 3.2 6.7 003550 LG Corp. 12,890 74,700 3.3 -28.0 45.0 -18.4 16.8 8.6 7.4 0.7 0.6 8.1 8.9 000810 Samsung F&M 11,938 252,000 - - - - 0.0 0.0 066570 LG Electronics 11,864 72,500 1.0 -4.2 15.6 -39.2 107.1 17.4 8.4 0.9 0.8 5.1 9.9 036570 NCsoft 11,701 533,000 1.1 6.0 76.9 33.5 52.9 21.0 13.7 3.6 3.0 21.6 27.0 090430 AmorePacific 11,692 200,000 0.5 -15.7 30.9 -9.8 31.4 39.0 29.7 3.0 2.8 6.6 8.1 086790 11,589 38,600 4.6 2.7 14.8 -6.2 4.5 4.8 0.4 0.4 9.2 8.1 010950 S-Oil 10,887 96,700 0.3 -13.3 197.8 -54.2 948.9 95.5 9.1 1.7 1.5 1.8 17.3 009540 KSOE 8,917 126,000 - 88.1 - -39.1 36.3 59.6 0.8 0.8 2.1 1.3 009150 Samsung Electro-Mechanics 8,851 118,500 0.9 -32.8 17.4 -5.4 -2.9 14.8 15.2 1.6 1.5 12.1 10.5 010130 Korea Zinc 8,029 425,500 2.6 12.2 15.7 25.4 9.3 12.1 11.1 1.2 1.1 10.2 10.3 011170 Lotte Chemical 7,781 227,000 4.6 -46.0 12.7 -54.7 32.3 10.9 8.2 0.6 0.6 5.5 6.9 251270 7,657 89,300 1.8 57.7 14.5 36.9 35.0 25.6 1.6 1.5 4.9 6.3 091990 Celltrion Healthcare 7,556 52,500 - 144.5 435.7 165.0 123.3 46.5 4.2 4.0 3.7 9.3 024110 7,128 12,350 0.6 -0.8 -1.0 -2.3 4.7 4.8 0.4 0.3 8.0 7.3 030200 KT 7,050 27,000 4.1 -2.4 -1.1 -7.8 21.0 11.1 9.2 0.5 0.5 4.7 5.5 032640 LG Uplus 6,287 14,400 4.5 -11.8 10.9 -16.7 15.0 15.7 13.6 0.9 0.9 5.8 6.4 018880 Hanon Systems 5,979 11,200 - - - - 0.0 0.0 034220 LG Display 5,761 16,100 ------0.5 0.5 - - 267250 5,757 353,500 5.2 -1.6 92.1 74.3 199.2 12.3 4.1 0.7 0.6 6.0 16.5 Holdings 086280 5,494 146,500 2.3 22.7 2.0 3.3 34.0 12.2 9.1 1.2 1.1 10.1 12.2 029780 Samsung Card 4,744 40,950 11.7 -28.6 1.7 6.8 13.5 12.7 0.7 0.7 1.5 1.6 000720 Hyundai E&C 4,738 42,550 1.2 12.4 10.9 42.6 -6.7 8.7 9.3 0.7 0.7 8.3 7.3 010140 4,479 7,110 - - - - - 45.4 0.7 0.7 - 1.7 004020 4,250 31,850 2.4 -45.2 39.1 -75.8 289.4 44.1 11.3 0.2 0.2 0.6 2.1 271560 Orion 4,072 103,000 0.6 14.2 7.7 56.5 9.1 18.6 17.1 2.5 2.2 14.4 13.7 005830 DB Insurance 4,064 57,400 - - - - 0.0 0.0 004990 4,044 38,550 2.1 91.0 11.9 198.2 20.3 7.4 6.2 0.4 0.4 7.5 8.3 071050 Korea Investment Holdings 4,023 72,200 - - - - 0.0 0.0 Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Market Data December 20, 2019

※All data as of close December 19, 2019, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 469.98 -1.08 -0.23 9.57 USD/KRW 1,165.30 1,166.70 1,164.50 1,129.90 KOSPI 2,196.56 1.80 0.08 9.28 JPY100/KRW 1,063.57 1,065.33 1,071.45 1,004.94 KOSDAQ 647.85 -1.10 -0.17 -3.21 EUR/KRW 1,295.29 1,301.16 1,289.39 1,285.09 Dow Jones* 28,239.28 -27.88 -0.10 21.06 3Y Treasury 1.38 1.36 1.49 1.78 S&P 500* 3,191.14 -1.38 -0.04 27.14 3Y Corporate 1.95 1.93 2.00 2.27 NASDAQ* 8,827.73 4.37 0.05 32.43 DDR4 8Gb* 3.02 3.02 2.80 6.47 Philadelphia Semicon* 1,820.29 -1.63 -0.09 56.21 NAND MLC 64G* 2.33 2.33 2.32 2.76 FTSE 100* 7,540.75 15.47 0.21 11.98 Oil (Dubai)* 66.14 65.62 62.84 57.21 Nikkei 225 23,864.85 -69.58 -0.29 22.00 Gold* 1,472.60 1,474.60 1,471.90 1,249.20 Hang Seng* 27,884.21 40.50 0.15 10.96 Customer deposits (Wbn)* 25,814 25,594 24,607 22,996 Taiwan (Weighted) 12,018.90 -103.55 -0.85 -99.81 Equity type BC (Wbn)(Dec. 17) 84,672 83,620 81,970 83,224 Note: * as of December 18, 2019 Source: KSDA, FnGuide, 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 136.44 KODEX 200 69.30 KODEX 200 74.63 Hynix 107.41 Samsung Electronics 82.70 Samsung Electronics (P) 67.35 Samsung Electronics (P) 36.12 Samsung Electronics 60.24 Samsung C&T 12.67 KODEX MSCI Korea TR 35.99 KODEX MSCI Korea TR 35.98 KODEX 200 Futures Inverse 2X 10.43 Shinhan Financial Group 10.08 KT 12.57 Celltrion 12.57 Hyundai Motor 9.00 KAL 8.97 Kia Motors 7.54 Samsung C&T 12.33 Shinhan Financial Group 8.64 Amore Pacific 8.33 Honam Petrochemical 6.15 KODEX Leverage 11.31 Hyundai Mobis 7.35 Dongbu Hannong Chemical 7.83 KB Financial Group 5.58 KT 10.70 SK C&C 7.22 Hyundai Heavy Industries 7.25 Samsung SDI 5.49 SK Telecom 7.37 NC Soft 7.12 SK Energy 7.12 LG Household & Health Care 5.26 SEMCO 6.97 Honam Petrochemical 5.36 LG Electronics 6.76 KODEX 200 Futures Inverse 2X 4.97 KB Financial Group 5.64 KODEX KOSDAQ150 INVERSE 5.29 Source: KSDA, FnGuide

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 Soulbrain 3.63 Celltrion Healthcare 7.59 Celltrion Healthcare 9.13 MedPacto 21.66 Seegene 3.22 SFA Semicon 7.20 GemVax 6.65 ABL Bio 10.26 Seojin System 3.19 KMW 5.17 HLB 5.69 Kukil Paper 6.84 HLB 3.14 BH,LTD. 4.19 Paradise 3.04 Tes 2.25 SK Materials 2.51 RoboRobo 3.89 Mezzion Pharma 2.45 Wonik IPS 1.90 Koh Young 2.36 SangSangIn 3.83 Bio Solution Co.,Ltd. 2.06 Alteogen 1.87 Hugel 1.69 Chemtronics 2.94 SyntekaBio 1.94 PearlAbyss 1.74 Dae Bo Magnetic 1.61 Semiconductor 2.41 Energy Solutions 1.87 Dae Bo Magnetic 1.58 Wonik Materials 1.59 Medy-tox 2.33 KH Vatec 1.62 MC Nex 1.30 CJ ENM 1.53 Tes 2.23 EO Technics 1.45 RoboRobo 1.30 Source: KSDA, FnGuide

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 56,000 -300 334,308 Celltrion Healthcare 52,500 1,400 7,556 Hynix 93,600 600 68,141 HLB 98,900 -100 4,227 Samsung Electronics (P) 45,750 -950 37,647 CJ ENM 155,200 -200 3,403 NAVER 179,000 500 29,502 PearlAbyss 183,600 -900 2,391 Hyundai Motor 123,500 500 26,388 76,900 600 2,161 395,500 1,000 26,168 SK Materials 190,700 -600 2,011 Hyundai Mobis 261,000 -6,000 24,875 Hugel 385,400 11,300 1,973 Celltrion 180,500 3,000 23,165 KMW 48,400 -1,050 1,926 LG Chem 309,000 2,000 21,813 ViroMed 83,900 700 1,797 Shinhan Financial Group 45,450 150 21,552 Paradise 19,350 400 1,760 Source: