August 23, 2013

Korea

Company News & Analysis Major Indices Close Chg Chg (%) Cheil Worldwide (Buy/TP: W34,000) KOSPI 1,870.16 21.04 1.14 Earnings stable; Positive momentum ahead KOSPI 200 243.37 3.00 1.25 KOSDAQ 529.19 11.55 2.23 Economy & Strategy Update Turnover ('000 shares, Wbn) Volume Value Quant Strategy KOSPI 368,614 3,805 Look for companies capable of expanding market share KOSPI 200 87,065 2,899 KOSDAQ 316,842 1,445

Market Cap (Wbn) Value KOSPI 1,091,377 KOSDAQ 122,906

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,066 961 104 Institutional 799 868 -68 Retail 1,922 1,952 -29

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 119 66 53 Institutional 65 88 -22 Retail 1,261 1,291 -31

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 520 885 -366 KOSDAQ 25 13 12

Advances & Declines Advances Declines Unchanged KOSPI 611 190 72 KOSDAQ 818 128 36

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Electronics 1,295,000 40,000 443 KODEX LEVERAGE 10,495 260 308 KODEX INVERSE 8,130 -100 254 Hyundai Motor 228,500 500 132 Hynix 28,500 450 118

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value 61,900 1,900 57 INICIS 21,800 1,000 55 TPC 6,120 60 40 Soribada 3,475 450 25 Paradise 20,050 -50 23 Note: As of August 23, 2013

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.

Cheil Worldwide (030000 KS) Earnings stable; Positive momentum ahead

Media What’s new: Company visit confirms 3Q earning resilience & major ad campaigns Yesterday, we visited Cheil Worldwide to gain insight on 3Q developments and key Company Visit Note earnings indicators. In 3Q, we expect operating profit to remain largely flat QoQ. We believe domestic ad operations are continuing to outpace the overall ad market. In July, August 23, 2013 the agency handled major ad campaigns for (SEC; Galaxy S4 LTE-A and UHD TV) and KT (the “Double Campaign”), as well as for Dongsuh Foods, Dong-A Pharmaceutical, Dongwon F&B, Orion, and Samsung . On the overseas front, the agency has been seeing revenue from retail marketing activities. (Maintain) Buy Cheil Worldwide is set to oversee the Samsung Unpacked event in Berlin on September Target Price (12M, W) 34,000 4th, where the new Galaxy Note 3 and the Galaxy Gear smartwatch are expected to be unveiled. In November, SEC is anticipated to kick off promotional campaigns in relation Share Price (08/22/13, W) 22,700 to the Sochi Winter Olympics. Catalyst: Resilient earnings despite weak season; Look for tailwinds through 2014 Expected Return 50% Although 3Q is traditionally a weak quarter for the media industry, we believe Cheil Worldwide will remain largely unaffected. Because the firm’s client base is tilted towards large advertisers, earnings have remained resilient to economic fluctuations. In the OP (13F, Wbn) 168 domestic IT/telecom sector, the rollouts of LTE-A services and related handsets are Consensus OP (13F, Wbn) 151 leading to increasing marketing activities. In September, Cheil Worldwide should recognize earnings from the Samsung Unpacked event. Recently, China Mobile tapped EPS Growth (13F, %) 35.5 SEC to supply handsets for its TD-LTE network, suggesting SEC could bolster its Market EPS Growth (13F, %) 17.1 smartphone marketing in China, which has been the fastest growing market for Cheil P/E (13F, x) 20.6 Worldwide. Market P/E (13F, x) 9.3 KOSPI 1,849.12 In 4Q, SEC is likely to launch regional marketing campaigns for its Galaxy Note 3, which should contribute to Cheil Worldwide’s retail marketing revenue. It should also be noted Market Cap (Wbn) 2,611 that Russia, where the 2014 Winter Olympics will be held, has been stepping up LTE Shares Outstanding (mn) 115 deployment in 2H. In late 2012, SEC released the Galaxy S3 LTE through MegaFon, one Free Float (%) 68.8 of Russia’s top two mobile carriers. The country’s LTE deployment should add to the positive impact of SEC’s official sponsorship of the Olympics and its Galaxy Note 3 Foreign Ownership (%) 37.2 campaign. Beta (12M) 0.78 52-Week Low (W) 19,650 Major sporting events are lined up for 2014, including the World Cup in Brazil in the 52-Week High (W) 28,600 summer and the Asian Games (Incheon) in the fall. We note that South America has one of the world’s highest usage rates for over-the-top (OTT) services, and NHN’s mobile (%) 1M 6M 12M messaging service LINE recently became the continent’s most downloaded app. Absolute -7.5 -2.4 14.9 Upcoming global sporting events in emerging markets should boost smartphone Relative -5.9 6.0 19.4 marketing campaigns there. In Russia, Cheil Worldwide has steadily attracted local advertisers since 2010, including Baltika Breweries in 2013. We expect Cheil to make Share price major advances in the Russian market in 2014. 160 KOSPI

140 Valuation: Fundamentals intact; Current share price offers good entry point

120 Our recent company visit confirmed that the company’s operating and financial

100 fundamentals remain intact. Earnings should stay stable in the near term and the overseas operating environment and conditions should see positive 80 8/12 12/12 4/13 8/13 momentum in 2H and 2014. We maintain Buy on Cheil Worldwide with a target price of W34,000.

Daewoo Securities Co., Ltd. FY (Dec.) 12/10 12/11 12/12 12/13F 12/14F 12/15F Revenue (Wbn) 1,450 1,758 2,365 2,912 3,343 3,791 Media/Telecom Services OP (Wbn) 139 107 126 168 216 272 Jee-hyun Moon OP margin (%) 9.6 6.1 5.3 5.8 6.5 7.2 +822-768-3615 NP (Wbn) 108 93 94 127 167 207 [email protected] EPS (W) 935 811 814 1,103 1,449 1,796

ROE (%) 17.5 13.7 13.5 18.0 20.5 20.5 P/E (x) 14.8 23.4 26.5 20.6 15.7 12.6 P/B (x) 2.4 3.1 3.5 3.1 2.6 2.1 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 the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Quant Strategy Look for companies capable of expanding market share

Expanding market share is hallmark of competitiveness Quant Report KOSPI returns (based on installment funding) have collapsed in recent years. While August 23, 2013 market participants who have invested since 2000 are enjoying an average return of +6.5%, the return for those who have invested for only the most recent one year stands

at -3.5% (as of August 21st). When expectations of returns run low, buying sentiment Daewoo Securities Co., Ltd. usually dries up and gravitates towards names with stable earnings flows. In other words, even during a prolonged bear market, it is still possible for investors to identify Quantitative Analysis and pick companies capable of expanding market share via improved competitiveness. Sangho Kim +822-768-4122 Operating competitiveness is best measured by ROIC [email protected] When the economic outlook is murky, low-beta stocks with bright earnings prospects are usually favored. Here, return on invested capital (ROIC) can serve as an important yardstick by which to measure the worthiness of a stock. Generally speaking, a steadily

rising ROIC signals superior competitiveness. And if a company keeps expanding its market share even during an economic slowdown, this indicates that it has dug a very deep and wide economic moat.

Inventory turnover is a good proxy for competitiveness A company showing improving activity indicators, such as a rise in inventory turnover, on top of steadily growing ROIC, is likely to be a diamond in the rough. This is because high inventory turnover (or high receivables turnover) is a good proxy for competitiveness.

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.

Key Universe Valuations August 23, 2013

※All data as of close August 22, 2013, unless otherwise noted.

13F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 13F 14F 13F 14F 13F 14F 13F 14F 13F 14F 005930 Samsung Electronics 184,861 1,255,000 0.6 33.1 14.3 36.1 17.5 6.8 5.8 1.4 1.2 24.0 22.8 005380 Hyundai Motor 50,223 228,000 0.9 4.0 10.3 2.6 5.6 7.4 7.0 1.3 1.1 18.3 16.5 005490 POSCO 27,943 320,500 2.5 -10.5 39.5 -26.6 62.6 15.2 9.4 0.7 0.6 4.6 7.2 012330 25,650 263,500 0.8 -4.0 18.4 -3.8 12.7 7.5 6.7 1.3 1.1 18.6 17.7 000270 Motors 25,295 62,400 1.1 5.3 6.2 3.3 8.4 6.3 5.8 1.3 1.1 21.3 19.2 032830 Samsung Life 20,600 103,000 2.0 0.0 9.3 4.2 4.3 18.1 17.4 1.1 1.0 6.0 5.8 000660 SK Hynix 19,921 28,050 0.5 - 0.8 - 1.7 6.5 6.4 1.7 1.3 26.7 21.7 055550 18,778 39,600 0.2 -10.3 14.2 -10.1 13.7 10.0 8.8 0.7 0.6 7.1 7.6 051910 LG Chem 17,959 271,000 1.5 3.9 28.3 6.1 28.4 12.6 9.8 1.7 1.5 14.1 16.0 017670 SK Telecom 16,795 208,000 4.4 26.0 29.6 66.0 25.6 8.8 7.0 1.6 1.4 15.6 18.0 009540 Hyundai Heavy 15,960 210,000 -31.9 47.9 -8.8 74.6 17.8 10.2 1.0 0.9 5.2 8.5 035420 NHN 14,125 293,500 0.3 22.0 30.2 16.0 34.9 22.3 16.5 3.0 2.5 30.6 33.8 105560 KB Financial Group 13,445 34,800 -3.3 11.4 3.8 11.4 7.7 6.9 0.5 0.5 6.9 7.4 096770 SK Innovation 12,945 140,000 2.0 33.8 14.8 26.9 29.5 8.7 6.7 0.9 0.8 9.4 11.1 066570 LG Electronics 11,570 70,700 0.4 32.1 45.6 670.8 115.3 24.8 11.5 1.2 1.1 4.2 8.8 003550 LG Corp. 11,233 65,100 1.5 5.1 11.4 15.8 5.4 10.5 10.0 1.0 0.9 9.4 9.2 000810 Samsung F&M 11,204 236,500 2.8 20.2 14.1 19.2 14.4 11.1 9.7 1.2 1.1 11.7 11.9 023530 Lotte Shopping 10,581 336,000 0.4 11.7 12.3 12.6 10.3 8.6 7.8 0.9 0.8 7.4 7.6 034220 LG Display 10,090 28,200 1.9 6.0 -21.6 111.5 22.2 20.5 16.7 1.0 1.0 4.7 5.6 033780 KT&G 10,022 73,000 4.1 -4.5 5.1 1.3 5.6 13.4 12.7 1.8 1.7 14.2 14.0 086790 9,943 34,300 -8.7 10.0 -22.8 12.7 7.2 6.4 0.5 0.5 8.8 7.3 030200 KT 9,087 34,800 5.2 2.3 9.5 -7.7 10.0 9.3 8.5 0.9 0.8 7.8 8.3 010140 Samsung Heavy 8,635 37,400 1.3 11.2 5.6 26.8 8.4 8.6 7.9 1.3 1.1 17.7 16.5 010950 S-Oil 8,421 74,800 4.0 32.6 17.5 35.7 23.7 11.0 8.9 1.5 1.4 14.1 16.0 000830 Samsung C&T 8,326 53,300 0.9 -7.1 34.4 -17.3 22.4 23.0 18.8 0.8 0.8 3.2 3.7 003600 SK Holdings 8,242 175,500 1.5 12.7 19.6 20.0 9.6 6.6 6.0 1.9 1.5 10.7 10.8 051900 LG H&H 7,887 505,000 0.6 18.5 17.3 16.9 18.8 25.2 21.2 5.8 4.5 26.4 25.3 006400 Samsung SDI 7,449 163,500 0.9 -42.0 145.4 -63.9 33.6 14.5 10.9 1.0 1.0 7.1 9.2 161390 7,123 57,500 1.0 258.3 4.8 262.0 2.5 8.5 8.3 1.8 1.5 23.2 19.4 086280 6,938 185,000 1.1 7.1 6.9 -1.0 11.0 14.1 12.7 3.0 2.5 23.0 20.9 024110 6,162 11,200 0.3 -26.5 16.3 -19.6 16.1 7.7 6.6 0.5 0.5 6.6 7.3 011170 Lotte Chemical 6,084 177,500 1.2 18.1 62.0 2.9 54.4 17.5 11.3 1.0 0.9 5.6 8.2 000720 Hyundai E&C 6,024 54,100 1.2 13.5 22.2 1.2 34.4 11.7 8.7 1.2 1.1 10.8 13.2 004020 5,989 70,200 0.7 -14.3 58.1 -41.3 63.7 12.8 7.8 0.6 0.6 4.6 7.2 009150 Samsung Electro-Mechanics 5,744 76,900 1.2 21.0 9.4 18.7 10.7 11.4 10.3 1.5 1.3 12.8 12.7 032640 LG Uplus 5,610 12,850 2.7 395.6 24.9 - 37.8 15.5 11.2 1.7 1.5 9.2 11.7 139480 Emart 5,603 201,000 0.3 4.1 5.0 3.3 4.5 10.3 9.9 0.9 0.8 8.7 8.4 035250 5,584 26,100 3.2 11.6 15.4 19.7 16.6 15.7 13.5 2.0 1.9 14.3 15.4 010130 Korea Zinc 5,557 294,500 1.7 -13.2 20.7 -10.3 25.4 11.1 8.8 1.3 1.2 12.3 13.8 088350 Hanwha Life 5,498 6,330 3.5 - - 3.5 1.6 9.8 9.6 0.8 0.8 8.6 8.3 042660 DSME 5,455 28,500 0.9 -14.7 60.0 -11.0 131.5 27.6 11.9 1.2 1.1 4.2 9.1 001800 Orion 5,373 900,000 0.3 -3.6 7.9 -1.9 16.2 36.1 31.1 5.0 4.3 14.0 14.1 034730 SK C&C 5,325 106,500 12.2 6.3 30.7 4.8 11.4 10.9 1.9 1.7 19.5 18.0 090430 Amorepacific 5,203 890,000 0.7 -1.0 10.4 4.3 12.6 21.9 19.4 2.5 2.3 11.5 11.7 078930 GS 5,017 54,000 2.5 31.6 9.4 26.0 18.9 8.2 6.9 0.8 0.8 9.5 10.4 001300 4,452 84,900 0.9 2.6 45.4 21.1 49.3 17.6 11.8 1.6 1.5 7.7 11.0 034020 Doosan Heavy I&C 4,404 41,600 1.8 3.9 6.6 1028.4 19.4 10.3 8.6 1.3 1.3 9.5 11.2 011210 Hyundai Wia 3,975 154,500 0.3 3.6 14.9 4.3 17.3 9.1 7.8 1.9 1.5 21.3 20.2 018880 Halla Climate Control 3,907 36,600 3.5 17.4 7.7 16.4 8.1 12.5 11.6 2.3 2.0 20.0 18.7 010060 OCI 3,744 157,000 2.0 -43.8 381.3 - - - 11.4 1.3 1.2 - 10.6 Source: KDB Daewoo Securities Research

Market Data August 23, 2013

※All data as of close August 23, 2013, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 374.20 -4.58 -1.21 -12.82 USD/KRW 1,124.30 1,118.10 1,118.50 1,133.50 KOSPI 1,870.16 21.04 1.14 -7.92 JPY100/KRW 1,139.28 1,144.30 1,124.40 1,442.39 KOSDAQ 529.19 11.55 2.23 5.50 EUR/KRW 1,502.74 1,492.66 1,474.69 1,421.64 Dow Jones* 14,963.74 66.19 0.44 11.57 3Y Treasury 2.96 2.99 2.88 2.88 S&P 500* 1,656.96 14.16 0.86 13.30 3Y Corporate 3.33 3.36 3.36 3.43 NASDAQ* 3,638.71 38.92 1.08 16.92 DDR2 1Gb* 1.31 1.31 1.38 1.21 Philadelphia Semicon* 463.83 5.30 1.16 16.04 NAND 16Gb* 2.97 2.97 2.98 1.80 FTSE 100* 6,446.87 56.03 0.88 6.96 Oil (Dubai)* 107.02 106.46 104.65 110.96 Nikkei 225 13,660.55 295.38 2.21 27.81 Gold* 1,371.20 1,370.60 1,336.00 1,637.40 Hang Seng* 21,895.40 77.67 0.36 -6.08 Customer deposits (Wbn)* 18,153 19,024 17,614 18,812 Taiwan (Weighted) 7,873.31 58.93 0.75 1.21 Equity type BC (Wbn)(Aug 21) 91,374 91,603 92,382 99,495 Note: * as of August 22, 2013 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 Electronics 154.84 Hyundai Mipo Dockyard 10.44 KODEX LEVERAGE 47.02 Samsung Electronics 40.38 Hyundai Mobis 23.18 KODEX 200 9.42 DSME 15.94 KODEX INVERSE 24.88 Nam Kwang Engineering & Doosan Infracore 11.59 LG Household & Health Care 8.25 15.25 12.59 Constr. POSCO 7.51 CJ Cheiljedang 8.18 Hynix 15.07 Lotte Shopping 9.69 HANKOOK TIRE 5.53 SK Corp. 6.26 Samsung SDI 12.04 SK Telecom 9.21 Samsung F&M Insurance 5.03 DSME 6.17 KODEX 200 11.59 POSCO 8.31 Lotte Shopping 4.70 6.07 SK Corp. 10.65 GKL 6.96 Korea Zinc 4.46 KEPCO 6.04 SEMCO 9.95 KEPCO 6.29 SK Telecom 4.17 Samsung SDI 5.16 Kia Motors 9.16 Hyundai Motor 4.72 Daewoo International 4.14 LG Electronics 4.78 Hyundai Mipo Dockyard 8.62 Samsung F&M Insurance 4.60 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 INICIS 10.74 Gamevil 3.81 Semiconductor 3.43 Nongwoo Bio 7.58 Display Tech 4.09 GOLFZON 1.45 Seowon Intech 1.75 Paradise 5.13 Lumens 3.18 SM 1.16 KH Vatec 1.69 WOOJEON & HANDAN 1.78 Paradise 2.91 S-MAC 0.87 HARIM 1.22 INICIS 1.64 Seoul Semiconductor 2.54 SK Broadband 0.68 Partrion 1.07 Sekonix 1.46 Sung Kwang Bend 2.49 Meta Biomed 0.63 KREIT 0.90 Wemade 1.14 Ubiquoss 2.36 Nongwoo Bio 0.60 ATTO 0.77 Daum Communications 1.08 Celltrion 2.26 Value Added Technology 0.56 Techno Semichem 0.68 YG Entertainment 0.96 Interflex 1.68 CTC Bio 0.55 KCP 0.64 KEBT 0.94 KH Vatec 1.54 MK Electron 0.50 Vieworks 0.59 Celltrion 0.85 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 1,295,000 40,000 190,753 Celltrion 61,900 1,900 6,221 Hyundai Motor 228,500 500 50,333 Seoul Semiconductor 39,800 1,750 2,321 POSCO 321,000 500 27,987 CJ O Shopping 336,400 3,300 2,087 Hyundai Mobis 269,500 6,000 26,234 Ssangyong E&C 136,800 0 1,999 Kia Motors 62,600 200 25,376 Paradise 20,050 -50 1,823 Samsung Life Insurance 102,500 -500 20,500 Dongsuh 28,250 550 1,672 Hynix 28,500 450 20,241 SK Broadband 5,180 20 1,533 Samsung Electronics (P) 863,000 12,000 19,705 CJ E&M 37,900 50 1,438 Shinhan Financial Group 39,300 -300 18,636 GS Home Shopping 217,600 3,900 1,428 KEPCO 28,750 -300 18,456 POSCO ICT 9,710 320 1,331 Source: Korea Exchange