2H17 Outlook
Retail Blurring lines between online and offline channels
Aiden Lee (82-2)3774-1708 [email protected]
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. Contents
[Summary] Retail stocks to rebound in 2H 3
I. 1H17 review 4
II. Retail outlook: Sophisticated success formula 6
III. Outlook by format 16
IV. Investment strategy for 2H 21
V. Top Picks and stocks to watch 25
[Conclusion] Mega trends to persist for more than five year 31 [Summary] Retail stocks to rebound in 2H
Retail stocks to rebound in 2H in line with revenue growth recovery
(04.01=100) (%, 12-month MA) 300 15 KOSPI Steady de-rating due to: Distribution Sector Index (L) 1) Sluggish consumption, Dept. stores SSSG (YoY) (R) demographic changes Hypermarket SSSG (YoY) (R) 2) Growth of online channels 250 10
200
5
150
0
100
-5 50 In 2017, 1) Consumption is bottoming out, and retailers are better able to deal with demographic changes 2) Retailers have strengthened competitiveness in online channels 0 -10 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Source: Mirae Asset Daewoo Research
3| 2017 Outlook [Sector] Mirae Asset Daewoo Research I. 1H17 review
Retail plays fared well in • Among the 10 retail stocks in our universe, nine outperformed the KOSPI in 1H 1H • Although consumption remained weak, positive issues or valuation merits for individual companies pushed up share prices • Hyundai Department Store was the only underperformer, due to its high exposure to consumer sentiment and lack of favorable issues; a bottom-up approach is recommended until consumer sentiment recovers fully
Nine retail stocks in Mirae Asset Daewoo’s universe outperformed the KOSPI in 1H
(17.01=100) 160 BGF Retail Lotte Himart Shinsegae Emart Lotte Shopping CJO Shopping 150 GS Home Shopping KOSPI Hyundai Department Store
140
130
120
110
100
90
80 16.1 16.4 16.7 16.10 17.1 17.4
Source: Mirae Asset Daewoo Research
4| 2017 Outlook [Sector] Mirae Asset Daewoo Research I. 1H17 review
Share performances • Emart: Re-rating is underway based on strong channel and product competitiveness clearly diverged by • Lotte Himart and Shinsegae: Share prices rebounded on back of marked market share expansion company • Lotte Shopping: Share prices have displayed high volatility, due to issues related to the THAAD system deployment and Lotte Group’s decision to convert to a holding company structure • Among home shopping channels, CJ O Shopping and GS Homeshopping shares rebounded on earnings momentum and stronger shareholder-return policies, respectively • BGF Retail shares rebounded, aided by steady convenience store growth and stable profit expansion
Emart, Shinsegae, and Lotte Himart stocks rebounded sharply Home shopping and BGF Retail stocks also rebounded
(17.01=100) (17.01=100) 150 Lotte Himart Shinsegae Emart 150 BGF Retail CJO Shopping Lotte Shopping KOSPI GS Home Shopping KOSPI 140 140
130 130
120 120
110 110
100 100
90 90
80 80 16.1 16.4 16.7 16.10 17.1 17.4 16.1 16.4 16.7 16.10 17.1 17.4
Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research
5| 2017 Outlook [Sector] Mirae Asset Daewoo Research II. Retail outlook: Sophisticated success formula
Sophisticated success • For traditional retailers, success has been largely determined by location and store development formula for retailers • Location is still the most important success factor for distribution channels for low-involvement products, such as hypermarkets and convenience stores • However, the ability of retailers to sell differentiated products (PL products, etc.) in various formats (channel diversification) is becoming increasingly important • The provision of seamless shopping experiences based on high-end digital technology has emerged as the essential factor for channel diversification
Formula for factors in retailers’ success
F Customer (Location + loss leaders) attraction
1) Diversification of channels 2) Product differentiation via sophisticated PL product offerings 3) Technology development Spread of omni-channel retailing Improvement in shopping experience via AI, VR, and IoT technologies
Format diversification Reduced importance Sourcing of differentiated products of location Strengthening of digital shopping channel Different approaches to overseas expansion
6| 2017 Outlook [Sector] Mirae Asset Daewoo Research II. Retail outlook: Sophisticated success formula
Retailers’ format • Department stores: Comprehensive retailers, operating online, outlet, duty-free, and offline shopping mall channels diversification efforts so • Hypermarkets: Operators of online stores, category killers, and warehouse-type stores far • TV home shopping channels: Entry into offline, as well as mobile and online, channels • Lotte Himart is making efforts to expand its foothold in the online channel, based on its success in the offline channel
Retailers’ format diversification efforts have picked up since 2010
20002005 2010 2015
Home- Dept. stores shopping Outlets Lotte Hypermarkets Duty-free Convenience stores Shopping Supermarkets malls
Dept. stores Outlets Downtown Shinsegae Online duty-free malls Shopping malls Convenience Hypermarkets Supermarkets 홈쇼핑Home stores shopping Warehouse Online (T-commerce)(티커머스) Emart type marts Shopping malls
Dept. stores Hyundai Dept. Outlets Downtown Store duty-free
7| 2017 Outlook [Sector] Mirae Asset Daewoo Research II. Retail outlook: Sophisticated success formula
New format • Online players’ attempt to secure offline footholds: Alibaba’s partnership with Suning, Amazon Books, Warby diversification trend Parker, Bonobos, etc. • 1) Expansion into the offline market, based on strength in the online space; and 2) provision of face-to-face services a weakness of online retailing Vertical integration of all retailing processes • Given that established offline stores’ entry into the online space should be much easier than vice versa, and that Korea has no dominant online players, like Amazon, offline retailers’ online penetration will likely accelerate
Online players’ attempt to secure offline footholds
Offline Online
Consumers’ demand Distribution for product Store experience, Showroom center consulting, and direct product pick-up
Product Product experience, experience, consulting, Purchase Delivery Purchase consulting, direct product direct product Offline or pick-up pick-up online purchase
Consumer Consumer
8| 2017 Outlook [Sector] Mirae Asset Daewoo Research II. Retail outlook: Sophisticated success formula
Onffline cases • Amazon Books: Attract loyal customers to offline stores; offline pricing the same as online pricing • Warby Parker: Allow customers to try wearing up to five different eyeglass frames; offline stores are aimed at lens production • Online menswear brands Bonobos and Stripes: Size measurement at offline stores (which serve as showrooms) • Lotte HiMart’s showroom-style stores: Tablet PCs available for product searches; lifestyle-oriented product display
Lotte HiMart benchmarks Argos stores in UK Amazon Books
Source: Google, Mirae Asset Daewoo Research
9| 2017 Outlook [Sector] Mirae Asset Daewoo Research II. Retail outlook: Sophisticated success formula
Onffline cases • Concerns: Will these stores just become simple showrooms? • Competitiveness comes from ability to lock in consumers that visit showrooms and make them buy products at online or offline stores • Question: Why do consumers go to the trouble of using both online and offline stores? • Online retailers can secure customer loyalty by providing price merits for them and then open offline stores • Consumers visit offline stores to make online purchases
Offline stores that consumers visit to buy Warby Parker glasses Stripes provides size measure services before customers buy online online
Source: Google, Mirae Asset Daewoo Research
10| 2017 Outlook [Sector] Mirae Asset Daewoo Research II. Retail outlook: Sophisticated success formula
Retailers starting to achieve economies of scale in online
Monthly unique visitors of mobile apps
('000 persons) - Large retailers’ online malls: Top-line growth based on superior capital power 10,000 Three - Online retailers (including social commerce): Pursuing profitability types - Steadily growing open-market platform 9,000 11st Coupang 8,000 Tmonster Wemakeprice 7,000 Gmarket
6,000 Auction CJmall 5,000 GS SHOP Hmall 4,000 Lotte Homeshopping
3,000 Homeplus NS Shopping 2,000 Emart mall Interpark 1,000 Lotte.com Lotte Mart 0 12.01 12.07 13.01 13.07 14.01 14.07 15.01 15.07 16.01 16.07 17.01 SSG.com
Source: KoreanClick, Mirae Asset Daewoo Research
11| 2017 Outlook [Sector] Mirae Asset Daewoo Research II. Retail outlook: Sophisticated success formula
2000 2010 2015
[1st] [2nd] PC-online-based Mobile-based [3th] open-market retailers social commerce Entry of large retailers’ online malls retailers intensified price/delivery competition [4th] To pursue sustainable growth; Food market competition to mount
Large retailers’ expansion into online channels
Before Online channels: There were concerns that online channels could dent overall margins and even cannibalize online stores revenue.
Ample room for large retailers to penetrate the fragmented domestic online retail market It is essential to provide consumers with a shopping environment that have no on-/offline limits Slowdown in offline growth
After
• Advantages of having offline stores: 1) Efficient management of fixed and variable costs, 2) serve as showrooms for online consumers. • Online business strategy based on superior capital power (Emart’s online automated logistics center, Lotte/Shinsegae Groups’ omnichannel strategies) • It is important to achieve economies of scale in the domestic market, given the absence of a dominant player, like Amazon.
12| 2017 Outlook [Sector] Mirae Asset Daewoo Research II. Retail outlook: Sophisticated success formula
Online market to be • Competition in the highly fragmented online market continues to heat up reorganized based on top • Competitiveness will diverge from company to company until they achieve economies of scale and thus turn profitable tiers • In the food segment, Emart Mall, which has a competitive edge in the online direct sourcing business, has outperformed Homeplus Mall, which has not invested in logistics infrastructure • Shinsegae Mall is also aggressively implementing omnichannel strategies (combining online with offline), with SSG.com securing customer loyalty
Korean players’ online market shares by transaction volume Increasing traffic by Emart Mall and SSG.com
('000 persons) SSG.com Emart mall Lotte.com 2400 Himart Lotte DF Homeplus
2000
Coupang
Tmonster 1600 Wemakeprice Ebay Korea 1200 11th Street Other 800
400
0 12 13 14 15 16 17
Source: KoreanClick, Mirae Asset Daewoo Research
13| 2017 Outlook [Sector] Mirae Asset Daewoo Research II. Retail outlook: Sophisticated success formula
Players with strong • Retailers make product mix decisions in view of expected: 1) margins; and 2) customer traffic product competitiveness • In order to boost both margins and traffic, retailers need to increase the proportion of competitive PB products and other differentiated products • Despite having low margins, the grocery category attracts high levels of traffic; a good example of this is Emart’s high-end, food-specialized brand, Peacock, as well as its low-end No Brand lineup • Lotte Himart also displays differentiated product sourcing ability, backed by its scale advantages
Low-priced PB products Premium PB products Groceries Price-competitive PB products Discounted products Other differentiated products
Margins
Long-tail products High-margin products
Traffic
Source: Mirae Asset Daewoo Research
14| 2017 Outlook [Sector] Mirae Asset Daewoo Research II. Retail outlook: Sophisticated success formula
Need for new views on • Retailers’ entries into overseas offline markets overseas often entail high risk overseas expansion • Indeed, the strategy by Lotte Mart and Emart of opening overseas offline stores turned out to be a failure • Recently, Korean retailers launched their respective stores on a variety of overseas online marketplaces (e.g. CJ mall – Lazada, and Baozun; Interpark – JD.com, and GOME; Ticket Monster – Tmall Global; Lotte Mart and Emart- Tmall Global) • Meanwhile, Emart has been rapidly expanding its exports of PB products
Ticket Monster launched its online store on Tmall Global Emart’s PB product exports
(W100mn)
1200 Exports
1000
800
600
400
200
0 13 14 15 16 17F 18F
Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research
15| 2017 Outlook [Sector] Mirae Asset Daewoo Research III. Outlook by format
Department stores: • Issues to watch in 2H: 1) a potential upturn in consumption; and 2) upside in the number of inbound tourists Focus on potential from China • For department stores, revenue growth has been limited; with new store opening being concentrated in large consumption pickup shopping malls, transactions have been increasing, while ticket size has been shrinking • Investments in other sales channels (e.g. large shopping malls, duty-free shops) will continue, due to the limited growth potential of department stores • Expansion of the online channel should serve as a new growth driver for department store operators Revenue contributions from department stores vs. online Department stores’ SSSG shopping sites Hyundai sales (L) (%YoY) SSSG (Wbn) (%) Hyundai online sales (L) No. of purchases 6,000 35 15 Shinsegae sales (L) Average spend per visit Shinsegae online sales (L) Portion of Hyundai online (R) 30 10 5,000 Portion of Shinsegae online (R)
25 5 4,000
20 0 3,000 15
-5 2,000 10
-10 1,000 5
-15 0 0 14.1 14.7 15.1 15.7 16.1 16.7 17.1 12 13 14 15 16 17F 18F Source: Ministry of Trade, Industry and Energy, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
16| 2017 Outlook [Sector] Mirae Asset Daewoo Research III. Outlook by format
Hypermarkets: Shift to • Issues to watch in 2H: 1) companies that will secure first mover advantage in the online shopping mall market; profit-focused and 2) a margin pickup at discount stores • Profit-focused management: limited store openings, and store shutdowns management strategy • A retail format that sees the fastest shift in its key sales driver to online channels from offline channels • Only a few players will likely succeed in the market, given the importance of customers’ first-buying experience and massive initial investments
Top-three players’ store counts SSSG of Emart and hypermarkets as a whole
Emart - overall hypermarkets (R) (Stores) (%) (%P) Emart SSSG (L) 450 Emart 20 10 HomePlus 400 Lotte Mart 350 10 5 300
250 0 0 200
150 -10 -5 100
50
-20 -10 0 12 13 14 15 16 17 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Source: Company data, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
17| 2017 Outlook [Sector] Mirae Asset Daewoo Research III. Outlook by format
• Issues to watch in 2H: 1) improvements in both revenue and OP margin, fueled by sharp increases in store counts; Convenience stores: and 2) sustained growth in revenue from existing stores Intensifying competition • Growth opportunities for convenience stores remain valid: given: 1) some upside to traffic growth, led by new to open new stores a service offerings and expansion of existing services; 2) increases in the social and economic benefits of convenience stores; and 4) potential increases in OP margin through product mix improvements necessary evil • Risk factors: 1) Sharp increases in store counts; and 2) the need for seeking balanced growth between retailers and store owners • Finding good store locations will continue to be an important factor for convenience stores
Store count growth drives down revenue per store Top-two players’ market share erosion accelerates
(%YoY) (%) 25 Per-store sales growth 34 GS25 Store count growth CU Transaction 33 7-Eleven 20 32
15 31
30 10 29
5 28
27 0 26
-5 25 13.3 13.9 14.3 14.9 15.3 15.9 16.3 16.9 17.3 10 11 12 13 14 15 16 17
Source: Ministry of Trade, Industry and Energy, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
18| 2017 Outlook [Sector] Mirae Asset Daewoo Research III. Outlook by format
Home shopping: Margins • In 2H, non-operational issues, including shareholder return policies and M&As, will likely have a significant impact on share prices to weaken despite GMS • GMS is expected to grow sharply on the back of strong growth of: 1) T-commerce and mobile channels; and 2) growth rental product sales • Intensifying competition between channel operators Increase in transmission fees and decline in product margins • Expansion of rental product sales to boost GMS should inevitably lead to a fall in gross profit margins • Since 2010, GMS and gross profit margins have moved in opposite directions GMS and gross profit margins have moved in opposite T-commerce boosting TV channel GMS directions since 2010 (Wbn) (%) CJ O Shopping 30 GS Home Shopping 7,000 CJO TV GS TV Hyundai TV Hyundai Home Shopping CJO T-commerce GS T-commerce Hyundai T-commerce 6,000 15
5,000 0
4,000 -15 (%) CJ O Shopping 3,000 36 GS Home Shopping Hyundai Home Shopping
2,000 32
1,000 28
0 24 10 11 12 13 14 15 16 17F 05 06 07 08 09 10 11 12 13 14 15 16 17F
Source: Ministry of Trade, Industry and Energy, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
19| 2017 Outlook [Sector] Mirae Asset Daewoo Research III. Outlook by format
Department stores Convenience stores (revenue growth of 5.5% in 2016, 3% in 2018 (revenue growth of 15.5% in 2017, 12% in 2018)
Opportunities 1) Expansion into duty-free business to boost Opportunities 1) Store traffic may rise revenue and store traffic (service improvements/expansion) 2) Increasing growth potential of online 2) Steady increases in social/economic benefits of channels convenience store channels 3) Margin growth based on product mix improvement Threats 1) Sluggish profit growth relative to revenue expansion Threats 1) Need to adjust store-count growth downwards 2) Large revenue contribution from low- 2) Downtrend in store efficiency margin products 3) Issue of balanced growth between retailers 3) Falling avg. purchase prices and store owners
Issues 1) To benefit from consumption Issues 1) Slowdown in cigarette sales, in line with recovery in 2H expansion of electronic cigarette market
Hypermarkets/supermarkets Home shopping (revenue growth of 1.8% in 2016, 2.2% in 2017) (revenue growth of 6.5% in 2017, 5% in 2018)
Opportunities 1) Growth of T-commerce Opportunities 1) Diversifying channels (online, warehouse 2) Expansion of product offerings in line with new stores) consumption trend: Rental services, travel, grooming products, etc. 3) Large cash holdings: M&As could serve as Threats 1) Growth of alternative channels growth engines Threats 1) Steady downtrend of TV channel GMS 2) Intensifying sourcing competition and margin 1) Competition to decrease on business type declines Issues changes or store shutdowns 2) Market share and margin differentiation Issues 1) Trend of stronger shareholder return policies, between individual players to continue M&As, etc. 2) Potential disposal of SOs
20| 2017 Outlook [Sector] Mirae Asset Daewoo Research IV. Investment strategy for 2H
Macro conditions to • Retail stocks rebounded in 1H on earnings recovery and valuation merits Valuation appeal has decreased determine further upside significantly • Macro conditions to determine further upside Changing in a favorable direction • Lotte Himart, Shinsegae, and Hyundai Department Store stand to benefit most from improvement in consumption environment • However, consumption recovery unlikely to be sustained Recommend short-term investment
CSI rebounding Avg. propensity to consume on a structural downtrend
130 Consumer Sentiment Index (%) Average consumption propensity (L) Consumption Forecast Index 80 35 Surplus rate (R) Baseline (100) 120 78 30
76 110 25
74 20 100 72 15 90 70
10 68 80 66 5
70 64 0 08 09 10 11 12 13 14 15 16 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16
Source: BOK, Mirae Asset Daewoo Research Source: KOSIS, MiraeAsset Daewoo Research
21| 2017 Outlook [Sector] Mirae Asset Daewoo Research IV. Investment strategy for 2H
Consumption rebound to • Our top picks include Emart, Lotte Himart, BGF Retail, Shinsegae, given the improvement in their competitiveness, be short-lived in 2H regardless of consumption environment • Bottom-up, rather than top-down, approach is needed
Structural decline in domestic consumption
Top-line growth upside is seen in convenience stores Upside to top-line growth? Yes and some online players
No
2. Companies that have the potential to boost bottom lines through GP 1. Companies that expand into segments with growth potential or margin improvements; improvements in GP margins, rather than OP margins, are a key measure of a retailer’s competitiveness
- Duty-free shops - Online, mobile - Superior buying power, - Well-diversified, and - Warehouse-type stores - T-commerce backed by advantages in differentiated product - Overseas expansion scale portfolios - Solid logistics - Competitive PB product management capabilities offerings (e.g. inventory) Emart, Shinsegae, Emart, Shinsegae, Lotte Himart, home Lotte Himart, Emart, home shopping companies shopping companies Emart, Lotte Himart BGF Retail
Source: Mirae Asset Daewoo Research
22| 2017 Outlook [Sector] Mirae Asset Daewoo Research IV. Investment strategy for 2H
Retailers successfully diversifying channels
Emart’s revenue by channel Emart’s OP by channel
(Wbn) (Wbn) Hypermarkets Emart Mall Traders 20,000 Hypermarkets Emart Mall Traders 900
16,000 700
12,000 500
8,000 300
4,000 100
0 -100 12 13 14 15 16 17F 18F 12 13 14 15 16 17F 18F
Shinsegae’s revenue by channel Lotte Himart’s revenue by channel Department stores (L) (Wbn) (%) (Wbn) (%) Shinsegae mall (L) 1,200 Portion of Shinsegae mall (R) 50 1,200 Offline (L) Online (L) Portion of online (R) 20 Growth rate of Shinsegae mall (R) 1,000 40 1,000 15 800 30 800
600 20 600 10
400 10 400 5 200 0 200
0 -10 0 0 1Q13 1Q14 1Q15 1Q16 1Q17F 1Q14 1Q15 1Q16 1Q17
Source: Company data, Mirae Asset Daewoo Research
23| 2017 Outlook [Sector] Mirae Asset Daewoo Research IV. Investment strategy for 2H
Retailers enjoying • Emart’s hypermarket gross profit margin is on a structural uptrend, thanks to: 1) the operation of distribution centers for perishable foods (Fresh Center) and meat (Meat Center); 2) improvement in perishable foods sourcing structural growth in capabilities; and 3) the expansion of PL product offerings gross profit margins • Lotte Himart is strengthening its small household appliance lineup and expanding the mixes of PL and globally- sourced products (the sales percentages of LGE and SEC products is decreasing) • Convenience stores’ margins are improving on the back of sales growth of non-cigarette products • Home shopping channels and department stores should see limited upside to operating profits, due to ongoing cost-cutting efforts Emart’s hypermarket gross profit margin trend Lotte Himart’s gross profit margin trend
(Wbn) (%) (%) 950 Gross profit (L) 29 27 GP Margin GP margin (R) 28 900 27 28
850 27 26
27 800 26 26 1) Operation of Meat/Fresh Center 2) Sharp growth of PL products 750 3) Higher purchasing power 26 25
25 700 25 25
650 24 24 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17F 06 07 08 09 10 11 12 13 14 15 16 17F 18F
Source: Company data, Mirae Asset Daewoo Research
24| 2017 Outlook [Sector] Mirae Asset Daewoo Research Top Pick Emart (139480 KS)
Solid competitiveness
(Maintain) Buy Investment points • Emart, Korea’s first operator of discount stores, has been expanding its warehouse (Emart Traders) and online Target Price (12M, W) 270,000 store businesses since 2010, in response to consumers shifting among different channels • Emart Traders has been expanding its revenue and profit rapidly, with its growth equivalent to that of Costco Share Price (5/18/17, W) 227,500 Wholesale Corp • Despite intensifying market competition, Emart Mall, in particular, has been improving both its top and bottom lines, backed by the efficient operations of its logistics infrastructure Expected Return 19% • The firm has enhanced its product competitiveness, by offering both premium (Peacock) and low-end/cost- effective (No Brand) food-specialized brands; this has led to an increase in customer loyalty for the Emart OP (17F, Wbn) 629 brand Consensus OP (17F, Wbn) 608 Risk factors EPS Growth (17F, %) 21.1 • Aggressive price discounts by rivals Market EPS Growth (17F, %) 35.7 P/E (17F, x) 13.9
Market P/E (17F, x) 9.9
KOSPI 2,286.82
150 Market Cap (Wbn) 6,342 Emart FY (Dec.) 12/13 12/14 12/15 12/16 12/17F 12/18F Shares Outstanding 28 Revenue (Wbn) 13,035 13,154 13,640 14,778 16,092 17,391 (mn) 140 KOSPI Free Float (%) 71.9 OP (Wbn) 735 583 504 547 629 732 130 Foreign Ownership (%) 50.9 OP margin (%) 5.6 4.4 3.7 3.7 3.9 4.2 120 Beta (12M) 0.24 NP (Wbn) 467 290 455 376 456 484
52-Week Low 153,500 110 EPS (W) 16,762 10,404 16,312 13,497 16,346 17,379
52-Week High 241,000 100 ROE (%) 7.4 4.3 6.5 5.1 5.8 5.8 (%) 1M 6M 12M P/E (x) 15.9 19.5 11.6 13.6 13.9 13.1 90 Absolute -3.0 25.7 21.7 P/B (x) 1.1 0.8 0.8 0.7 0.8 0.7 80 Relative -8.9 8.5 4.116.5 16.9 17.1 17.5 Div.Yield (%) 0.6 0.7 0.8 0.8 0.7 0.0 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Emart, Mirae Asset Daew oo Research estimates
25| 2017 Outlook [Sector] Mirae Asset Daewoo Research Top Pick Emart (139480 KS)
Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Forecasts/Valuations (Summarized)
(Wbn) 12/15 12/16 12/17F 12/18F (Wbn) 12/15 12/16 12/17F 12/18F 12/15 12/16 12/17F 12/18F
Revenue 13,640 14,778 16,092 17,391 Current Assets 1,464 1,741 1,989 2,120 P/E (x) 11.6 13.6 13.9 13.1
Cost of Sales 9,844 10,624 11,542 12,479 Cash and Cash Equivalen 63 66 151 234 P/CF (x) 6.4 4.7 5.6 5.3
Gross Profit 3,796 4,154 4,550 4,912 AR & Other Receivables 292 380 415 434 P/B (x) 0.8 0.7 0.8 0.7
SG&A Expenses 3,292 3,607 3,921 4,181 Inventories 886 980 1,083 1,101 EV/EBITDA (x) 10.1 9.1 9.6 8.5
Operating Profit (Adj) 504 547 629 732 Other Current Assets 223 315 340 351 EPS (W) 16,312 13,497 16,346 17,379
Operating Profit 504 547 629 732 Non-Current Assets 13,029 13,687 14,008 14,404 CFPS (W) 29,557 38,824 40,424 43,273
Non-Operating Profit 190 -65 -15 -63 Investments in Associates 454 473 495 521 BPS (W) 250,707 276,181 291,028 311,571
Net Financial Income -97 -87 -90 -85 Property, Plant and Equipm 9,805 9,709 10,020 10,308 DPS (W) 1,500 1,500 1,500 0
Net Gain from Inv in Associat 7 19 52 32 Intangible Assets 383 399 405 384 Payout ratio (%) 9.2 11.0 9.0 0.0
Pretax Profit 694 482 614 669 Total Assets 14,494 15,428 15,998 16,524 Dividend Yield (%) 0.8 0.8 0.7 0.0
Income Tax 238 100 152 178 Current Liabilities 3,935 4,001 4,250 4,163 Revenue Growth (%) 3.7 8.3 8.9 8.1
Profit from Continuing Opera 456 382 462 491 AP & Other Payables 1,237 1,273 1,330 1,412 EBITDA Growth (%) -5.9 6.9 10.1 10.1
Profit from Discontinued Ope 0 0 0 0 Short-Term Financial Liab 1,469 1,390 1,670 1,436 Operating Profit Growth (%) -13.6 8.5 15.0 16.4
Net Profit 456 382 462 491 Other Current Liabilities 1,229 1,338 1,250 1,315 EPS Growth (%) 56.8 -17.3 21.1 6.3
Controlling Interests 455 376 456 484 Non-Current Liabilities 3,320 3,303 3,204 3,237 Accounts Receivable Turno 66.8 57.2 51.5 52.2
Non-Controlling Interests 1 5 6 7 Long-Term Financial Liab 2,645 2,488 2,587 2,587 Inventory Turnover (x) 16.1 15.8 15.6 15.9
Total Comprehensive Profit 124 387 462 621 Other Non-Current Liabilit 675 815 617 650 Accounts Payable Turnover 12.3 12.4 12.9 13.4
Controlling Interests 124 382 463 622 Total Liabilities 7,254 7,304 7,453 7,400 ROA (%) 3.2 2.6 2.9 3.0
Non-Controlling Interests 0 4 -1 -1 Controlling Interests 6,986 7,696 8,110 8,683 ROE (%) 6.5 5.1 5.8 5.8
EBITDA 938 1,003 1,104 1,215 Capital Stock 139 139 139 139 ROIC (%) 3.6 4.7 5.0 5.7
FCF (Free Cash Flow) -272 143 -256 331 Capital Surplus 4,237 4,237 4,237 4,237 Liability to Equity Ratio (%) 100.2 89.9 87.2 81.1
EBITDA Margin (%) 6.9 6.8 6.9 7.0 Retained Earnings 1,653 1,958 2,372 2,814 Current Ratio (%) 37.2 43.5 46.8 50.9
Operating Profit Margin (%) 3.7 3.7 3.9 4.2 Non-Controlling Interests 253 428 434 441 Net Debt to Equity Ratio (%) 54.0 43.8 44.9 38.6
Net Profit Margin (%) 3.3 2.5 2.8 2.8 Stockholders' Equity 7,239 8,124 8,544 9,124 Interest Coverage Ratio (x) 4.0 4.8 5.3 6.1 Source: Emart, Mirae Asset Daewoo Research estimates
26| 2017 Outlook [Sector] Mirae Asset Daewoo Research Lotte Himart (071840 KS)
Renewed attention needed as strong electronics retailer
(Maintain) Buy Investment points • The firm’s sluggish share performance is due mainly to valuation decreases (amid concerns over its potential market share erosion and limited growth upside, resulting from the ongoing expansion of the online Target Price (12M, W) 71,000 electronics retailer market), rather than earnings dips • The firm has enhanced its product competitiveness, backed by strong sourcing capabilities, and secured a Share Price (5/18/17, W) 61,500 competitive edge in the electronics distribution market, based on its omnichannel strategies- combining online with offline Expected Return 15% • Demand for electronic goods will continue to grow on the back of structural tailwinds (e.g. growing sales of air purifiers, fueled by the fine-dust air pollution problem), a trend that will likely benefit Lotte Himart the most among retail channels OP (17F, Wbn) 188 Risk factors Consensus OP (17F, Wbn) 191 • Potential for a sharp decline in offline store sales EPS Growth (17F, %) 8.0 Market EPS Growth (17F, %) 35.7
P/E (17F, x) 11.1
Market P/E (17F, x) 9.9 KOSPI 2,286.82 Market Cap (Wbn) FY (Dec.) 12/13 12/14 12/15 12/16 12/17F 12/18F 1,452 140 Lotte Himart Shares Outstanding 24 Revenue (Wbn) 3,519 3,754 3,896 3,939 4,115 4,288 (mn) 130 KOSPI Free Float (%) 33.6 OP (Wbn) 185 144 160 175 188 210 120 Foreign Ownership (%) 12.0 OP margin (%) 5.3 3.8 4.1 4.4 4.6 4.9
Beta (12M) 1.12 110 NP (Wbn) 129 96 107 121 131 148
52-Week Low 40,950 100 EPS (W) 5,469 4,085 4,515 5,144 5,556 6,265 52-Week High 61,900 ROE (%) 8.4 5.9 6.1 6.6 6.7 7.1 90 (%) 1M 6M 12M P/E (x) 16.0 16.5 13.1 8.2 11.1 8.9 80 Absolute 8.7 36.8 20.1 P/B (x) 1.3 0.9 0.8 0.5 0.7 0.6
Relative 2.1 18.1 2.870 Div.Yield (%) 0.3 0.5 0.7 1.2 0.8 1.1 16.5 16.9 17.1 17.5 Note: All figures are based on separate K-IFRS; NP refers to net profit attributable to controlling interests Source: Lotte Himart, Mirae Asset Daew oo Research estimates
27| 2017 Outlook [Sector] Mirae Asset Daewoo Research Lotte Himart (071840 KS)
Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Forecasts/Valuations (Summarized)
(Wbn) 12/15 12/16 12/17F 12/18F (Wbn) 12/15 12/16 12/17F 12/18F 12/15 12/16 12/17F 12/18F
Revenue 3,896 3,939 4,115 4,288 Current Assets 640 730 749 867 P/E (x) 13.1 8.2 11.1 8.9
Cost of Sales 2,933 2,926 3,041 3,139 Cash and Cash Equivalen 130 158 172 263 P/CF (x) 6.0 4.0 6.0 4.9
Gross Profit 963 1,013 1,074 1,149 AR & Other Receivables 69 91 98 103 P/B (x) 0.8 0.5 0.7 0.6
SG&A Expenses 803 839 887 939 Inventories 416 462 462 482 EV/EBITDA (x) 9.5 6.5 7.9 6.3
Operating Profit (Adj) 160 175 188 210 Other Current Assets 25 19 17 19 EPS (W) 4,515 5,144 5,556 6,265
Operating Profit 160 175 188 210 Non-Current Assets 2,265 2,275 2,314 2,336 CFPS (W) 9,887 10,432 10,296 11,339
Non-Operating Profit -17 -12 -12 -11 Investments in Associates 0 0 0 0 BPS (W) 75,519 80,298 85,424 91,054
Net Financial Income -18 -12 -11 -10 Property, Plant and Equipm 422 413 463 489 DPS (W) 430 500 500 600
Net Gain from Inv in Associat 0 0 0 0 Intangible Assets 1,705 1,704 1,699 1,695 Payout ratio (%) 9.5 9.7 9.0 9.6
Pretax Profit 143 163 176 199 Total Assets 2,905 3,005 3,063 3,203 Dividend Yield (%) 0.7 1.2 0.8 1.1
Income Tax 37 41 45 51 Current Liabilities 638 450 377 382 Revenue Growth (%) 3.8 1.1 4.5 4.2
Profit from Continuing Opera 107 121 131 148 AP & Other Payables 280 369 294 297 EBITDA Growth (%) 8.1 6.6 7.0 10.3
Profit from Discontinued Ope 0 0 0 0 Short-Term Financial Liab 285 0 0 0 Operating Profit Growth (%) 11.1 9.4 7.4 11.7
Net Profit 107 121 131 148 Other Current Liabilities 73 81 83 85 EPS Growth (%) 10.5 13.9 8.0 12.8
Controlling Interests 107 121 131 148 Non-Current Liabilities 484 659 669 670 Accounts Receivable Turno 74.3 59.8 54.1 56.7
Non-Controlling Interests 0 0 0 0 Long-Term Financial Liab 469 649 649 649 Inventory Turnover (x) 10.1 9.0 8.9 9.1
Total Comprehensive Profit 105 123 131 146 Other Non-Current Liabilit 15 10 20 21 Accounts Payable Turnover 16.0 12.3 12.3 14.7
Controlling Interests 105 123 131 146 Total Liabilities 1,122 1,109 1,046 1,052 ROA (%) 3.8 4.1 4.3 4.7
Non-Controlling Interests 0 0 0 0 Controlling Interests 1,783 1,896 2,017 2,151 ROE (%) 6.1 6.6 6.7 7.1
EBITDA 213 227 243 268 Capital Stock 118 118 118 118 ROIC (%) 5.3 5.8 6.1 6.5
FCF (Free Cash Flow) 89 197 16 117 Capital Surplus 1,056 1,056 1,056 1,056 Liability to Equity Ratio (%) 63.0 58.5 51.9 48.9
EBITDA Margin (%) 5.5 5.8 5.9 6.3 Retained Earnings 608 722 843 979 Current Ratio (%) 100.3 162.1 198.6 226.9
Operating Profit Margin (%) 4.1 4.4 4.6 4.9 Non-Controlling Interests 0 0 0 0 Net Debt to Equity Ratio (%) 34.9 25.1 23.6 17.8
Net Profit Margin (%) 2.7 3.1 3.2 3.5 Stockholders' Equity 1,783 1,896 2,017 2,151 Interest Coverage Ratio (x) 6.7 9.8 11.5 12.9 Source: Lotte Himart, Mirae Asset Daewoo Research estimates
28| 2017 Outlook [Sector] Mirae Asset Daewoo Research BGF Retail (027410 KS)
Solidifying market dominance
Investment points (Maintain) Buy • We believe convenience stores are the only retail channel that can deliver steady price and sales volume growth Target Price (12M, W) 135,000 • Although rapid store additions have raised some concerns, gaining market share is particularly critical for the convenience store business; the company is likely to remain dominant, thanks to its position as one of the two largest convenience store operators Share Price (5/18/17, W) 125,000 • Even amid rapid store expansion, operating profit per store has been rising steadily, leading to increased franchise demand Expected Return 8% • The company is also achieving qualitative growth via the expansion of franchisees-oriented store operation and margin improvement
OP (17F, Wbn) 289 Risk factors Consensus OP (17F, Wbn) 273 • Need to find a balance in the rapid store expansion and spending growth EPS Growth (17F, %) 31.0 • Likelihood of the new government introducing revised regulations Market EPS Growth (17F, %) 35.7
P/E (17F, x) 25.8
Market P/E (17F, x) 9.9 KOSPI 2,286.82 Market Cap (Wbn) FY (Dec.) 12/13 12/14 12/15 12/16 12/17F 12/18F 6,193 130 BGF Retail Shares Outstanding 50 Revenue (Wbn) 3,130 3,368 4,334 5,053 5,738 6,412 (mn) 120 KOSPI Free Float (%) 43.1 OP (Wbn) 105 124 184 217 289 358 110 Foreign Ownership (%) 33.2 OP margin (%) 3.4 3.7 4.2 4.3 5.0 5.6
Beta (12M) 1.01 100 NP (Wbn) 69 102 152 184 240 312
52-Week Low 79,500 90 EPS (W) 1,398 2,063 3,072 3,704 4,851 6,293 52-Week High 125,000 ROE (%) 35.6 27.0 22.8 21.6 23.4 24.5 80 (%) 1M 6M 12M P/E (x) - 18.6 27.9 22.1 25.8 19.9 70 Absolute 17.9 50.5 18.1 P/B (x) - 3.3 5.5 4.4 5.5 4.4 60 Relative 10.8 30.0 1.116.5 16.9 17.1 17.5 Div.Yield (%) - 1.6 1.4 1.0 0.6 0.6 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: BGF Retail, Mirae Asset Daew oo Research estimates
29| 2017 Outlook [Sector] Mirae Asset Daewoo Research BGF Retail (027410 KS)
Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Forecasts/Valuations (Summarized)
(Wbn) 12/15 12/16 12/17F 12/18F (Wbn) 12/15 12/16 12/17F 12/18F 12/15 12/16 12/17F 12/18F
Revenue 4,334 5,053 5,738 6,412 Current Assets 948 983 1,165 1,425 P/E (x) 27.9 22.1 25.8 19.9
Cost of Sales 3,434 4,049 4,589 5,110 Cash and Cash Equivalen 152 101 325 534 P/CF (x) 13.6 11.7 15.5 13.0
Gross Profit 900 1,004 1,149 1,302 AR & Other Receivables 30 42 38 43 P/B (x) 5.5 4.4 5.5 4.4
SG&A Expenses 716 787 860 944 Inventories 53 81 75 77 EV/EBITDA (x) 12.6 10.7 13.6 11.1
Operating Profit (Adj) 184 217 289 358 Other Current Assets 713 759 727 771 EPS (W) 3,072 3,704 4,851 6,293
Operating Profit 184 217 289 358 Non-Current Assets 674 934 952 980 CFPS (W) 6,330 7,005 8,044 9,618
Non-Operating Profit 12 23 31 57 Investments in Associates 11 7 10 11 BPS (W) 15,606 18,650 22,901 28,394
Net Financial Income 9 7 38 54 Property, Plant and Equipm 374 577 626 655 DPS (W) 1,200 800 800 800
Net Gain from Inv in Associat 1 3 0 0 Intangible Assets 52 86 73 63 Payout ratio (%) 19.5 21.5 16.4 12.7
Pretax Profit 196 240 320 415 Total Assets 1,622 1,918 2,118 2,405 Dividend Yield (%) 1.4 1.0 0.6 0.6
Income Tax 44 56 79 102 Current Liabilities 690 739 725 720 Revenue Growth (%) 28.7 16.6 13.6 11.7
Profit from Continuing Opera 153 185 241 313 AP & Other Payables 440 521 486 483 EBITDA Growth (%) 27.1 13.7 22.4 16.8
Profit from Discontinued Ope 0 0 0 0 Short-Term Financial Liab 116 86 95 91 Operating Profit Growth (%) 48.4 17.9 33.2 23.9
Net Profit 153 185 241 313 Other Current Liabilities 134 132 144 146 EPS Growth (%) 48.9 20.6 31.0 29.7
Controlling Interests 152 184 240 312 Non-Current Liabilities 158 236 239 258 Accounts Receivable Turno 478.9 352.6 399.6 590.5
Non-Controlling Interests 1 1 1 1 Long-Term Financial Liab 129 179 179 201 Inventory Turnover (x) 75.0 75.8 73.9 84.5
Total Comprehensive Profit 153 183 241 313 Other Non-Current Liabilit 29 57 60 57 Accounts Payable Turnover 10.0 9.8 10.5 11.8
Controlling Interests 152 181 240 312 Total Liabilities 848 975 964 978 ROA (%) 10.3 10.4 12.0 13.8
Non-Controlling Interests 1 1 1 1 Controlling Interests 773 924 1,135 1,407 ROE (%) 22.8 21.6 23.4 24.5
EBITDA 291 331 405 473 Capital Stock 25 50 50 50 ROIC (%) 300.2 145.6 85.4 89.2
FCF (Free Cash Flow) 266 213 185 272 Capital Surplus 104 79 79 79 Liability to Equity Ratio (%) 109.6 103.5 83.6 68.5
EBITDA Margin (%) 6.7 6.6 7.1 7.4 Retained Earnings 649 803 1,013 1,285 Current Ratio (%) 137.3 133.1 160.8 197.8
Operating Profit Margin (%) 4.2 4.3 5.0 5.6 Non-Controlling Interests 1 18 19 20 Net Debt to Equity Ratio (%) -76.2 -57.1 -62.3 -66.4
Net Profit Margin (%) 3.5 3.6 4.2 4.9 Stockholders' Equity 774 942 1,154 1,427 Interest Coverage Ratio (x) 19.5 21.3 8.2 9.6 Source: BGF Retail, Mirae Asset Daewoo Research estimates
30| 2017 Outlook [Sector] Mirae Asset Daewoo Research [Conclusion] Mega trends to persist for more than five years
Traffic competition, cost-effectiveness, online, small-volume purchases, differentiated products
Mega trends Big issues Impact on retailers
Decrease in household size - Increase in PL products Traffic and price competition - Emergence of hard-discount stores and low-priced PL products - Growth of warehouse-type stores Population aging Increase in food purchases - Stagnant growth of department stores, at nearby stores in small volumes hypermarkets, and home appliance mass retailers Structural growth slowdown; Open stores in shopping malls decrease in household Strengthen online channels via omnichannel disposable income strategy Rational consumption
- Expansion of online food market Minor trends Hypermarkets and online malls put greater Mobile shopping focus on food category
Technology development: - Steady growth of convenience stores Improvement in payment and delivery convenience Pursuit of small luxuries
Blurring of national - All retailers are beefing up mobile channels boundaries Greater value placed on - Expansion of ommi-channel strategy fun and experience
- Retailers’ entry into the duty-free market Increasing consumption - Robust growth of online shopping malls Pursuit of quality of life in China and Southeast Asia targeting overseas consumers - Retailers’ entry into the Southeast Asian market
Source: Mirae Asset Daewoo Research
31| 2017 Outlook [Sector] Mirae Asset Daewoo Research APPENDIX 1
Important Disclosures & Disclaimers 2-Year Rating and Target Price History
Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price BGF Retail(027410) 05/08/2017 Buy 135,000 05/20/2015 Buy 110,000 02/10/2017 Buy 120,000 Emart(139480) 04/04/2017 Buy 270,000 01/16/2017 Buy 115,000 02/05/2017 Buy 255,000 11/07/2016 Buy 250,000 12/05/2016 Buy 240,000 05/26/2016 Trading Buy 250,000 11/07/2016 Buy 220,000 02/12/2016 Buy 210,000 10/19/2016 Buy 215,000 11/25/2015 Buy 200,000 08/11/2016 Buy 200,000 10/12/2015 Buy 214,000 07/17/2016 Buy 204,000 06/14/2015 Buy 186,000 03/15/2016 Buy 230,000 03/05/2015 Buy 110,000 07/06/2015 Buy 306,000 Lotte Himart(071840) 05/14/2017 Buy 71,000 05/04/2015 Buy 315,000 10/04/2016 Buy 60,000 Shinsegae(004170) 10/23/2016 Buy 250,000 05/09/2016 Buy 67,000 01/29/2016 Buy 285,000 04/06/2016 Buy 69,000 12/01/2015 Buy 310,000 11/25/2015 Buy 90,000 04/22/2015 Trading Buy 200,000 08/09/2015 Buy 100,000
(W) BGF Retail (W) Lotte Himart (W) Emart (W) Shinsegae
300,000 120,000 400,000 400,000
250,000 100,000 300,000 300,000 200,000 80,000
150,000 60,000 200,000 200,000
100,000 40,000 100,000 100,000 50,000 20,000
0 0 0 0 May 15 May 16May May 15 17 May 16May May 15 17 May 16May May 15 17 May 16 May 17
Mirae Asset Daewoo Research 32 APPENDIX 1
Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening Sell : Relative performance of -10% Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.
Equity Ratings Distribution Buy Trading Buy Hold Sell 72.86% 15.58% 11.56% 0.00% * Based on recommendations in the last 12-months (as of March 31, 2017)
Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding.
Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein.
Mirae Asset Daewoo Research 33 APPENDIX 1
Disclaimers This report is published by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws and regulations or subject Mirae Asset Daewoo and its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and it is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person and such person shall not be treated as a client of Mirae Asset Daewoo by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Daewoo may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views and analytical methods of the analysts who prepared them. Mirae Asset Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Daewoo.
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Mirae Asset Daewoo Research 34 APPENDIX 1
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Mirae Asset Daewoo Research 35