June 18, 2014

KOREA

Company News & Analysis Major Indices Close Chg Chg (%) Hyundai Department Store (069960/Buy/TP: W161,000) KOSPI 1,990.04 -5.44 -0.27 Patience will be rewarded KOSPI 200 259.68 -0.88 -0.34 KOSDAQ 524.03 0.91 0.17 (086280/Trading Buy/TP: W270,000) 3PL expansion needs to be more aggressive Turnover ('000 shares, Wbn) Volume Value KOSPI 207,205 4,514 KOSPI 200 63,771 3,680 KOSDAQ 229,234 1,320

Market Cap (Wbn) Value KOSPI 1,188,827 KOSDAQ 126,706

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,502 1,482 20 Institutional 1,137 1,140 -3 Retail 1,841 1,860 -19

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 113 105 8 Institutional 85 97 -11 Retail 1,118 1,115 3

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 1,110 790 320 KOSDAQ 20 22 -2

Advances & Declines Advances Declines Unchanged KOSPI 463 361 62 KOSDAQ 488 444 65

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Samsung Electronics 1,409,000 -48,000 629 KODEX LEVERAGE 11,780 0 231 Samsung Corp. 72,900 -5,900 202 Hynix 46,100 -350 187 Samsung SDI 168,000 -500 157

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Diostech 15,350 150 52 Com2us 45,300 2,600 41 Daum Communications 92,700 600 37 Medy-tox 118,900 -9,300 29 Keayeast 3,940 -200 22 Note: As of June 18, 2014

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.

Hyundai Department Store (069960 KS) Patience will be rewarded

Retail Another weak quarter expected Retailers’ earnings remain lackluster overall. We estimate Hyundai Department Store’s Company Update (HDS) same-store sales (SSS) grew just 2% in April-May due to depressed consumer June 18, 2014 sentiment in the wake of the ferry tragedy. We expect the company to post another weak quarter, with gross merchandise sales ( GMS) of W1.11tr (+1.6% YoY) and

operating profit of W99.2bn (-8.2% YoY), in 2Q. Fixed cost burden should also weigh on (Maintain) Buy earnings , as sales at existing stores have not been strong enough to offset the depreciation costs of the Coex branch (which was expanded in 2013). Target Price (12M, W) 161,000 The bright side is that consumer spending has recently been showing some signs of improvement, and the heavy fixed cost burden from the Coex branch is likely to ease Share Price (6/17/14, W) 131,500 from 3Q. However, the near-term earnings outlook still remains muted, as 3Q is typically a weak season. Expected Return 22%

Seeking growth through new store openings OP (14F, Wbn) 382 In addition to the Gasan High Hill outlet, which opened in May (operated under a Consensus OP (14F, Wbn) 402 management contract), HDS is set to open three new outlets (Gimpo, Songdo, and Garden Five). The retailer’s more aggressive store expansion efforts should assuage EPS Growth (14F, %) -2.8 investor concerns over its relatively late entry into the discount outlet market. For t he Market EPS Growth (14F, %) 22.9 Gasan High Hill store, the retailer has blended the high-end image of its department P/E (14F, x) 10.6 stores with the traditional outlet format, setting the store apart from other adjacent Market P/E (14F, x) 11.1 outlets. While it is too soon to tell if this strategy will work, we believe the Gasan outlet KOSPI 2,001.55 will serve as a good benchmark for the opening of the company’s future outlets. Market Cap (Wbn) 3,077 Pangyo Alphadom City, which is set to open in 2H15, is widely expected to become a Shares Outstanding (mn) 23 local landmark. The company expects annual revenue of W700bn from the shopping Free Float (%) 62.3 arcade, but our estimates are more bullish at around W1tr within two to three years of Foreign Ownership (%) 36.3 opening. HDS’s outlet and shopping arcade expansion efforts should make it s growth Beta (12M) 0.95 52-Week Low 124,500 story the most compelling in the brick-and-mortar retail segment in 2015. 52-Week High 174,000 Maintain Buy and TP of W161,000 (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M We keep our Buy rating on HDS with a target price of W161,000. The stock’s current Absolute -1.1 -17.8 -14.3 valuation looks attractive (2014F and 2015F P/Es of 10.6x and 9.6x), given the expected Relative -0.5 -19.3 -19.4 momentum from new store openings (which should begin in December 2014 or January

120 Hyundai Department Store 2015). However, the clouded outlook for private consumption, as well as continued KOSPI 110 earnings weakness, point to limited upside momentum in the near term. We expect the stock to remain range-bound on poor earnings for the time being. However, we believe 100 HDS is more appealing than other major retailers, as it has the highest g rowth potential 90 for 2015. We continue to recommend buying on weakness from a medium- to long-term 80 view. 70 6.13 10.13 2.14 6.14

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/11 12/12 12/13 12/14F 12/15F 12/16F Revenue (Wbn) 1,439 1,520 1,534 1,570 1,765 1,958 [Retail] OP (Wbn) 437 426 393 382 422 506

Young Ryu OP margin (%) 30.4 28.0 25.6 24.3 23.9 25.8 +822-768-4138 NP (Wbn) 346 322 299 291 319 374 [email protected] EPS (W) 15,027 13,755 12,771 12,417 13,635 15,992

ROE (%) 15.4 12.4 10.4 9.2 9.3 9.9 P/E (x) 10.8 11.6 12.6 10.6 9.6 8.2 P/B (x) 1.5 1.3 1.2 0.9 0.8 0.8 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

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

Hyundai Glovis (086280 KS) 3PL expansion needs to be more aggressive

Logistics 2Q14 preview: Likely to fall short of consensus We forecast Hyundai Glovis to post 2Q revenue of W3.44tr (+4.8% YoY). We project 2Q Earnings Preview operating profit to come in at W175.1bn (-2.2% YoY), 0.8% shy of our previous estimate June 18, 2014 (W176.6bn), and 4.9% below the market consensus (W183.7bn, +2.5% YoY ). At current F/X levels, it appears unlikely operating profit will come in above consensus. We

trimmed our 2014F-15F operating profit by 1.1% and 1.6%, respectively. (Maintain) Trading Buy International logistics revenue should grow 7.7% YoY in 2Q, supported by growth in finished car transportation, iron ore transportation, and overseas subsidiaries . Domestic Target Price (12M, W) 270,000 logistics, on the other hand, is likely to suffer negative growth (-7.3% YoY) due to inter- affiliate deal regulations. CKD revenue is also likely to contract (-4.5 % YoY) on won Share Price (06/17/14, W) 266,000 appreciation and weak output (-1.9% YoY excl. China). As such, we see 2Q OP margin declining to 5.1% (from 5.5% in 2Q13). Expected Return 2%

Lack of near-term momentum: Solution lies in aggressive 3PL expansion OP (14F, Wbn) 688 Hyundai Glovis has been struggling with the double whammy of ’s Consensus OP (14F, Wbn) 690 (HMG) slowing output and the strengthening won. The solution to this problem lies in the expansion of the 3PL business (third-party logistics: logistics services for non- EPS Growth (14F, %) 12.7 affiliated parties). The share of non-affiliates has increased to 40% of the company’s Market EPS Growth (14F, %) 22.9 logistics revenue and to 29% of overall revenue (up from 22% in 1Q13). P/E (14F, x) 18.4 Market P/E (14F, x) 11.1 But if this share is to rise further, Glovis needs to speed up the expansion of its bulk KOSPI 2,001.55 shipping business. The company currently has around 25 bulk carriers (three owned, and 20-25 chartered), but operation has been minimal. The company acquired one VLCC in Market Cap (Wbn) 9,975 April and another in June to beef up its crude carrier business. It is discouraging , Shares Outstanding (mn) 38 however, that there have been no major deals since the Korea South-East Power Free Float (%) 34.7 (KOSEP) long-term contract. Glovis also recently denied rumors of a much-anticipated Foreign Ownership (%) 25.7 Pan Ocean acquisition. If the company is choosing to grow organically, then it needs to Beta (12M) 1.26 52-Week Low 181,500 be more aggressive in expanding its fleet and securing long-term contracts. 52-Week High 278,000 Reiterate Trading Buy and TP of W270,000 (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M We maintain our Trading Buy rating and target price of W270,000. The stock is trading Absolute 3.5 22.0 43.4 at a P/E of 18.4x, a discount to the average of Asian peers (21.6x). However, i f Glovis Relative 4.1 19.8 34.9 fails to grow beyond the boundaries of HMG, it would be a stretch to say the company is undervalued compared to group affiliates. In other words, we believe aggressive 180 Hyundai Glovis KOSPI 160 expansion of the 3PL business is the only way to a re-rating . The stock has gained 17.1% over the past three months on anticipated benefits from changes in the group’s 140 ownership structure. But the company now needs to demonstrate that it can deliver on 120 the market’s growth expectations. 100

80 6.13 10.13 2.14 6.14

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/11 12/12 12/13 12/14F 12/15F 12/16F Revenue (Wbn) 9,546 11,746 12,861 13,630 14,781 17,156 [Transportation/Energy] OP (Wbn) 462 614 637 688 761 896

Jay JH Ryu OP margin (%) 4.8 5.2 5.0 5.0 5.1 5.2 +822-768-4175 NP (Wbn) 359 498 481 542 603 692 [email protected] EPS (W) 9,568 13,271 12,834 14,462 16,074 18,443 ROE (%) 27.5 29.2 22.6 21.2 19.8 19.0 Choong-hyun Kim +822-768-4126 P/E (x) 20.1 16.7 18.0 18.4 16.5 14.4 [email protected] P/B (x) 4.8 4.3 3.7 3.6 3.0 2.5 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

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

Key Universe Valuations June 18, 2014

※All data as of close June 17, 2014, unless otherwise noted.

14F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 14F 15F 14F 15F 14F 15F 14F 15F 14F 15F 005930 Samsung Electronics 207,545 1,409,000 1.1 -1.3 1.4 7.0 3.2 7.5 7.3 1.3 1.1 20.0 17.4 005380 Hyundai Motor 49,342 224,000 0.9 5.2 3.2 -0.2 6.1 7.5 7.1 1.0 0.9 15.2 14.1 000660 SK Hynix 32,803 46,100 20.3 -0.9 6.8 -1.0 10.5 10.6 2.0 1.7 21.3 17.4 012330 28,035 288,000 0.7 9.1 13.2 10.7 9.9 7.4 6.7 1.2 1.0 17.3 16.2 005490 POSCO 25,546 293,000 2.7 28.8 26.9 34.0 62.2 13.9 8.5 0.6 0.5 4.3 6.7 035420 NAVER 25,315 768,000 0.1 73.8 21.4 -54.9 23.5 37.5 30.3 9.1 7.1 37.6 33.0 015760 KEPCO 24,972 38,900 0.2 305.2 19.5 3990.6 52.9 10.2 6.7 0.5 0.4 4.8 6.9 000270 Motors 22,903 56,500 1.3 1.9 8.3 -3.4 7.6 6.2 5.8 1.0 0.8 16.8 15.6 055550 Shinhan Financial Group 21,671 45,700 - - - - 0.0 0.0 032830 Samsung Life 20,500 102,500 - - - - 0.0 0.0 051910 LG Chem 17,993 271,500 1.5 7.3 38.5 14.6 39.1 13.8 10.0 1.6 1.4 11.9 14.8 017670 SK Telecom 17,683 219,000 4.3 5.5 7.6 19.0 2.2 9.1 8.9 1.0 1.0 13.8 12.9 009540 Hyundai Heavy 13,984 184,000 1.1 -59.6 348.4 -23.0 378.3 65.2 13.6 0.7 0.7 1.2 5.8 105560 KB Financial Group 13,542 35,050 - - - - 0.0 0.0 000810 Samsung F&M 12,696 268,000 - - - - 0.0 0.0 066570 LG Electronics 12,339 75,400 0.3 51.3 24.5 252.5 76.1 21.9 12.4 1.1 1.0 5.2 8.5 033780 KT&G 11,670 85,000 3.8 5.9 2.3 37.3 4.8 14.9 14.2 1.9 1.8 14.3 14.0 000830 Samsung C&T 11,388 72,900 0.7 40.6 30.7 110.4 27.8 23.0 18.0 1.0 1.0 4.6 5.6 003550 LG Corp. 10,837 62,800 1.6 19.9 8.3 11.5 7.2 10.7 10.0 0.9 0.8 8.5 8.5 086790 Hana Financial Group 10,799 37,250 - - - - 0.0 0.0 086280 Hyundai Glovis 9,994 266,500 0.6 9.1 11.3 14.6 11.9 18.1 16.2 3.5 2.9 21.4 19.8 034220 LG Display 9,786 27,350 -23.6 -27.7 31.8 -19.1 17.4 21.5 0.9 0.8 5.2 4.0 023530 Lotte Shopping 9,447 300,000 0.5 0.9 5.0 8.6 8.2 11.0 10.2 0.6 0.5 5.2 5.3 096770 SK Innovation 9,431 102,000 3.1 -7.4 65.5 11.8 72.8 11.1 6.4 0.6 0.5 5.3 8.7 003600 SK Holdings 8,641 184,000 1.4 29.0 34.3 316.9 21.3 7.4 6.1 0.7 0.6 9.7 10.7 034730 SK C&C 8,400 168,000 0.7 16.9 9.9 142.2 15.8 18.4 15.8 2.6 2.3 17.8 17.6 004020 8,100 69,500 0.7 66.3 8.3 -11.6 9.3 9.7 8.9 0.6 0.5 6.1 6.3 161390 Hankook Tire 7,854 63,400 0.7 7.7 9.2 12.2 10.5 9.5 8.6 1.7 1.4 19.2 17.8 030200 KT 7,846 30,050 -93.8 3926.9 - - - 5.6 0.7 0.6 - 12.1 006400 Samsung SDI 7,654 168,000 0.9 - 208.5 147.3 17.6 24.5 20.9 1.0 1.0 4.3 4.9 010130 Korea Zinc 6,982 370,000 1.4 26.2 10.7 32.3 11.0 11.8 10.6 1.5 1.3 13.4 13.2 010140 Samsung Heavy 6,661 28,850 1.7 -77.5 288.7 -75.0 295.3 42.2 10.7 1.0 0.9 2.7 10.1 139480 Emart 6,634 238,000 0.6 7.7 10.9 8.7 15.1 13.1 11.4 0.9 0.8 7.4 7.8 021240 Coway 6,363 82,500 2.2 13.2 14.1 10.7 15.2 23.5 20.4 5.3 4.7 26.7 26.6 035250 Kangwon Land 6,311 29,500 3.1 27.0 11.7 24.4 17.5 17.1 14.5 2.2 2.0 14.1 15.2 010950 S-Oil 6,237 55,400 2.9 30.2 84.5 24.0 91.1 16.7 8.8 1.2 1.0 7.0 12.5 000720 Hyundai E&C 5,980 53,700 0.9 10.8 17.5 9.9 24.0 10.8 8.7 1.1 1.0 10.8 12.0 011170 Lotte Chemical 5,964 174,000 0.6 5.3 84.2 44.5 93.3 16.4 8.5 0.9 0.8 5.6 10.1 088350 Hanwha Life 5,602 6,450 - - - - 0.0 0.0 042660 DSME 5,148 26,900 1.1 -7.8 67.2 -0.6 80.8 19.3 10.7 1.0 0.9 5.3 9.0 036460 KOGAS 5,114 55,400 2.4 11.2 - 22.0 13.3 10.9 0.5 0.5 4.2 4.9 001800 Orion 5,048 845,000 0.4 0.6 10.0 1.0 20.0 34.3 28.6 4.0 3.5 12.4 13.2 011210 4,812 187,000 0.3 10.2 14.2 14.2 10.6 10.1 9.1 1.8 1.5 19.2 17.7 009150 Samsung Electro-Mechanics 4,706 63,000 1.2 -17.0 41.6 -8.5 29.7 16.2 12.5 1.1 1.0 7.0 8.5 097950 CJ CheilJedang 4,487 342,500 0.5 10.7 16.6 78.0 25.4 23.8 19.0 1.6 1.5 7.0 8.3 032640 LG Uplus 4,091 9,370 2.1 14.7 13.7 16.6 22.4 12.6 10.3 1.0 0.9 7.8 9.0 010060 OCI 4,007 168,000 0.1 - 140.8 - 160.7 69.9 26.8 1.4 1.3 2.0 5.0 078930 GS Holdings 3,944 42,450 3.2 -6.5 44.9 -18.8 52.4 13.8 9.1 0.6 0.6 4.4 6.5 005830 Dongbu Insurance 3,873 54,700 - - - - 0.0 0.0 001300 Cheil Industries 3,849 73,400 1.0 30.3 34.4 -23.7 37.4 19.7 14.3 1.2 1.1 6.3 8.1 Source: KDB Daewoo Securities Research

Market Data June 18, 2014

※All data as of close June 18, 2014, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 455.72 0.00 0.00 2.98 USD/KRW 1,022.60 1,024.30 1,023.50 1,119.20 KOSPI 1,990.04 -5.44 -0.27 1.16 JPY100/KRW 996.88 997.23 1,007.43 1,151.32 KOSDAQ 524.03 0.91 0.17 5.59 EUR/KRW 1,395.29 1,393.25 1,416.68 1,482.32 Dow Jones* 16,924.28 88.17 0.52 2.94 3Y Treasury 2.84 2.84 2.84 2.77 S&P 500* 1,949.44 8.98 0.46 6.41 3Y Corporate 3.26 3.26 3.26 3.12 NASDAQ* 4,321.40 25.17 0.59 4.30 DDR2 1Gb* 1.81 1.81 1.78 1.35 Philadelphia Semicon* 617.25 2.95 0.48 16.96 NAND 16Gb* 2.85 2.86 3.01 2.98 FTSE 100* 6,858.21 44.72 0.66 2.09 Oil (Dubai)* 105.31 104.32 104.13 99.64 Nikkei 225 15,124.00 46.76 0.31 -4.93 Gold* 1,252.10 1,253.00 1,308.60 1,415.70 Hang Seng* 22,951.00 -158.66 -0.69 -1.67 Customer deposits (Wbn)* 15,452 14,773 14,997 18,543 Taiwan (Weighted) 9,162.74 28.28 0.31 6.39 Equity type BC (Wbn)(June.16) 80,597 80,631 81,603 90,643 Note: * as of June 17, 2014 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 Samsung SDI 18.92 Samsung Electronics 29.48 SK Energy 27.59 Samsung Corp. 51.00 NHN 17.56 Samsung Electronics (P) 28.79 Honam Petrochemical 19.65 Samsung Electronics 24.64 Samsung Life Insurance 14.92 SK Energy 23.27 DSME 17.31 KODEX LEVERAGE 21.84 KB Financial Group 10.45 KODEX 200 17.16 Samsung Heavy Ind. 16.56 Glovis 13.50 Samsung Card 9.14 LG Household & Health Care 15.47 KODEX 200 16.47 Samsung SDI 10.58 LG Chem 8.53 9.32 KODEX INVERSE 16.30 Hynix 9.04 POSCO 7.24 Shinhan Financial Group 9.07 LG Chem 11.62 GS Construction 8.46 Hyundai Department Store 7.02 Kia Motors 8.08 NHN 10.09 Samsung Life Insurance 7.85 LG Display 6.83 KODEX LEVERAGE 7.02 Hyundai Steel 9.75 Hyundai Motor 7.58 HYUNDAI WIA 6.81 LG Corp. 6.60 Shinhan Financial Group 9.02 Samsung Card 7.57 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 ATTO 2.06 Daum Communications 7.49 Paradise 8.05 Mobilians 3.24 CJ O Shopping 1.85 Semiconductor 2.21 Daum Communications 5.20 Diostech 2.89 SEEGENE 1.58 INICIS 2.02 Silicon Works 2.13 Seoul Semiconductor 2.34 GemVax 1.58 ViroMed 1.30 Maeil Dairy Industry 2.09 Solueta 1.63 Sung Kwang Bend 1.44 Nowcom 1.26 CJ E&M 1.35 Vieworks 1.30 Com2us 1.20 POSCO ICT 0.82 Com2us 1.33 Techno Semichem 1.23 Techno Semichem 1.16 CJ E&M 0.81 POSCO ICT 1.11 SBS Contents Hub 1.14 Credu Corp. 1.12 Keayeast 0.80 HaanSoft 1.11 WiSoL 1.09 Diostech 1.06 Bio Space 0.70 Joymax 1.03 BLUECOM 0.99 SundayToz 0.88 YG Entertainment 0.63 Partrion 0.79 CJ O Shopping 0.92 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 1,409,000 -48,000 207,545 Celltrion 45,650 -50 4,725 Hyundai Motor 224,000 -1,000 49,342 Paradise 38,450 1,900 3,497 Hynix 46,100 -350 32,803 CJ O Shopping 352,700 5,900 2,189 Hyundai Mobis 288,000 500 28,035 Seoul Semiconductor 37,000 200 2,157 POSCO 293,000 5,000 25,546 CJ E&M 41,850 500 1,621 NHN 768,000 25,000 25,315 Dongsuh 16,150 -550 1,610 Samsung Electronics (P) 1,100,000 -51,000 25,117 GS Home Shopping 236,900 -900 1,555 KEPCO 38,900 -850 24,972 Daum Communications 92,700 600 1,257 Kia Motors 56,500 -100 22,903 POSCO ICT 8,010 10 1,218 Shinhan Financial Group 45,700 400 21,671 SK Broadband 3,515 65 1,040 Source: