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Capitalizing on Korea DiscountAsian Invest ing Summit 2015
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Disclaimer
These slides serve as a supplement to an oral presentation (together, the Presentation) and are forinformational purposes only and should not be considered as the giving of any investment, financial, securities,
or other advice by Petra Capital Management (Petra). In particular, the Presentation does not constitute anoffer, inducement or invitation to subscribe for or purchase any securities, services, or products in anyjurisdiction.
Certain funds or accounts managed by Petra may have positions that provide them with an economic interestin the price movement of the securities mentioned in the Presentation and securities similar to thosediscussed in the Presentation. Any such positions are subject to change at any time and without notice. Petramay change its views on the securities and markets discussed herein at any time and has no duty to updateyou on any such change in views or trading positions that may result. This Presentation is only current as of
April 7, 2015, or such earlier dates specifically noted in the Presentation.While the information contained herein has been prepared in good faith from sources believed to be reliable,Petra gives no representations, warranties or undertakings (express or implied) as to, or in relation to, theaccuracy, reliability or completeness of the information or opinions in this Presentation, and all liability thereforis expressly disclaimed. You must make your own independent assessment of the materials herein, aftermaking such investigations and taking such advice as you may deem necessary. In particular, any estimatesor projections or opinions contained herein necessarily involve significant elements of subjective judgment,analysis and assumptions, and you should satisfy yourself in relation to such matters. All trade names,
trademarks, service marks, and logos herein are the property of their respective owners who retain allproprietary rights over their use.
Certain statements in the Presentation may be forward looking statements. By their nature, forward lookingstatements involve a number of risks, uncertainties and assumptions that could cause actual results or eventsto differ materially from those expressed or implied by the forward looking statements. Forward lookingstatements contained in the Presentation regarding past trends or activities are included only for illustrativepurposes and should not be taken as a representation that such trends or activities will continue in the future.You should not rely on forward looking statements, which speak only as of the date of the Presentation.
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Petra Capital ManagementOverview
Petra Capital Management (Petra) is a licensed investment advisory and investment
management firm based in Seoul, Korea registered with the Financial Services Commission ofKorea since August 2009
Co-founded by Managing Partners, Albert H. Yong and Chan H. Lee (investment style60%
Benjamin Graham + 40% Charlie Munger)
Petra specializes in investing in undervalued Korean public companies and employs a
disciplined deep value investing to earn superior returns with limited volatility; a bottom-up
stock selection approach and detailed fundamental/research-based analysis
Petra: 8.2% vs. KOSPI index: -4.8% (2014)
Petra: 22.1% vs. KOSPI index: 3.4% (annualized return since inception in Sept 2009)
Korea offers compelling value investing opportunities
Many Korean companies with earnings power + strong balance sheet + growth potential
Many small/mid-cap Korean companies are underfollowed, misunderstood or mispriced
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-10%
-5%
0%
5%
10%
15%
20%
25%
30%
4/21/14 6/21/14 8/21/14 10/21/14 12/21/14 2/21/15
2014 Asian Investing Summit
3
Nexen+18.1%
Nexen Tire+12.1%
KOSPI+1.5%
Nexen Tire
Preferred+12.4%
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9/30 12/31 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
Petra Portfolio KOSPI Index
(%)
2015
Petra Performance
Petra Korea Value Equity Strategy has continued to deliver a steady return for its investors
and substantially outperformed the Korean index (i.e., KOSPI)
Note: Petra's returns (before fees) were independently verified by the Korea Securities Depository; past investment performance is no guarantee of future results
*Performance inception date: September 16, 2009
20102009 2011 2012 2013 2014
1 Month 3 Months 6 Months 1 Year Since Inception*
Petra Portfolio 3.0% 5.1% 0.1% 12.7% 197.6%
KOSPI Index 1.9% 0.3% -4.0% 0.3% 20.1%
+/- 1.1%p 4.8%p 4.1%p 12.4%p 177.5%p
0
60
220
80
20
40
-20
100
120
140
160
180
200
4
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Table of Contents
I. Korea Recap
II. Why Korea Discount?
III. Investing Opportunity 1GS Home Shopping
IV. Investing Opportunity 2Korea Alcohol Industrial
V. Takeaway
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I. Korea Recap
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Remarkable Economic Achievement
Rapid Economic Growth
The Korean economy has achieved remarkable economic achievement in a short period of
time
7
1940s 1950s 1970s
1980s 1990s 2010s
1960s
2000s
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Country Overview
8
Koreas GDP ranks 14th in the world
(US$1.3 trillion)
Total Equity Market Cap: US$1.2 trillion
- Nearly the size of Switzerland (US$1.5
trillion) and Australia (US$1.4 trillion)
- Larger than Taiwan (US$0.9 trillion)
and Spain (US$0.7 trillion)
Fiscally sound government and economy
- Budget surplus 9 of the past 10 years
- Public debt / GDP is amongst the
lowest of developed economies (~34%)
- Currently running a trade surplus
- S&P sovereign rating of A+ (better than
Japan and China)
Source: IMF, OECD, Bloomberg
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Home of Global Champions
9
Korea has become an epicenter of
Asian culture/entertainment; for
example, Psy, a Korean rapper has
successfully entered into global
markets with an immensely popular
hit song Gangnam Style,
reaching over 2 billion YouTube
views
Korea's Big Three shipbuilders
Daewoo Shipbuilding and Marine
Engineering, Hyundai Heavy
Industries and Samsung Heavy
Industriesdominate the global
shipbuilding industry with over 50
percent of the global market share
Korea is the largest mobile phone
manufacturer in the world with
Samsung Electronics being the
largest mobile phone manufacturing
company
Hyundai Motor along with Kia
Motors is the worlds fastest growingand 4th largest automaker and has
more than 10 percent of the global
market share
The 2018 Winter Olympics are set
to take place in Pyeongchang,
Korea, the first city in Asia outside
of Japan to host the Winter
Olympics; Korea was home to the
Summer Olympics in 1988 and is
the eighth country to host both the
Winter and Summer Games
Amore Pacific is becoming one of
the leading cosmetics companies inthe world thanks to its increasing
market shares throughout Asia,
benefiting from rise in popularity of
Korean culture, including Korean
movies, dramas and K-pop songs
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Performance in Math, Science and Reading Education Level by Age Group
Math Science Reading
Shanghai-China 613 580 570
Singapore 573 551 542
Korea 554 538 536
Japan 536 547 538
Germany 514 524 508
Australia 504 521 512
OECD average 494 501 496
Italy 485 494 490
Spain 484 496 488
United States 481 497 498
Israel 466 470 486
Korean Education
10
0
10
20
30
40
50
60
70
80
90
100
25-34 35-44 45-54 55-64 65-74 75-84 85-
Uneducated Elementary School Middle School
High School Undergraduate Graduate School
(%)
Source: OECD, PISA 2012 Database
In a study by the OECD, Korean students were assessed as oneof the best performing students in the world
The proportion of highly educated increases drastically as theage group gets younger with 74% of the 25~34 age group
having received undergraduate degrees in Korea
Source: Statistics Korea, Census 2010
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Warren Buffett on Korea
11
2004: Given a copy of a Korean stock market guide,
he found the values so compelling that he put
together a US$100 million portfolio
2006: If Id been running a little partnership three
years ago, Id have started 100% in Korea
2007: You have a flourishing economy here with
50 plus million people that seem to be working very
hard. So I would think that the Korean market would
do as well over the next 10 years ... not 10 weeks,
10 months ... but 10 years
2007: Berkshire discloses 5% POSCO stake
2008: I could find better things to do with a million
dollars probably in Korea than I could probably find
in the U.S. market
2011: He traveled to Korea for the 2ndtime to visit
TaeguTec, a Berkshire companyWere looking to
buy big businesses in Korea
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II. Why Korea Discount?
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Cheap Valuation
13
Attractive Valuations
Country Index P/E* P/B
Russia RTSI 5.8 0.4
Korea KOSPI 10.6 1.0
Brazil IBOV 11.8 1.3
China SHCOMP 12.7 2.1
Greece ASE 13.4 0.8
Taiwan TWSE 13.4 1.8
Germany DAX 14.0 1.9
France CAC 40 16.9 1.6
United States S&P 500 17.7 2.9
India SENSEX 17.7 3.1
Mexico MEXBOL 19.0 2.8
Japan NIKKEI 225 19.6 1.7
Philippines PCOMP 20.0 2.9
* Based on 2015 Estimates
Source: Bloomberg (as of February 28, 2015)
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Numerous Cheap Stocks in Korea Comparison to the S&P 500:
Amount of companies trading for less than:
14
P/E* P/B
KOSPI 10.6x 1.0x
S&P 500 17.7x 2.9x
KOSPI Discount 40% 65%
Source: Bloomberg (as of February 28, 2015)
US$ Amount Number of Companies
8x Earnings 137 billion 163
70% of Tangible Book Value 219 billion 375
Both of the above 45 billion 60
* Based on 2015 Estimates
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How Cheap? Net-Nets
There are still many publicly listed Korean companies which can be categorized as Net-Net
as defined by Benjamin Graham, the Father of Value Investing
(million Won)
Company Net-Net Value Market Cap
Tongyang 396,919 328,501
Dongil Industries 198,391 169,325
Woongjin Holdings 272,361 119,518
Mi Chang Oil 121,163 117,541
Samsung Climate Control 114,357 96,629
Woo Sung Feed 89,442 80,994
PS Tec 89,213 80,178
Dongbang Agro 97,797 74,488
Wooree E&L 71,221 69,506
Daesung Group Partners 187,579 67,595
Man Ho Rope & Wire 104,738 64,012
Samhyun Steel 68,410 63,316
HNK Machine Tool 99,014 58,819
Taegu Broadcasting 69,074 55,979
Keum Kang Steel 81,825 50,612
.
.
....
.
.
.
Source: Petra analysis
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Difficulties of Investing in Korea
Difficult for international investors to invest in Korea for the following reasons:
- Few companies report in English
- Trading ID required; trading volume is generally lower than in the U.S.
- Companies often own several non-core business units/subsidiaries
- Recent accounting change from Korean GAAP to IFRS (International Financial
Reporting Standards) makes historical comparisons challenging
- Tough to analyze qualitative aspect of management teams due to language barrier and
cultural difference
Fearful of value trap
- Corporate governance
- Capital allocation
- Shareholder activism not yet widely embraced (at least not yet)
16
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Complex Ownership Structure
Korea Discount (1)Corporate Governance
17
Image ProblemsChaebols
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44%
34%
19%
11%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Japan Korea Germany United States
Korea Discount (2)Capital Allocation
18
Source: Bloomberg
Country Dividend Yield
Korea 1.3%
India 1.4%
Japan 1.4%
Philippines 1.9%
United States 1.9%
China 2.0%
France 2.9%
Taiwan 3.0%
Russia 4.3%
Brazil 4.8%
Dividend YieldCorporate Cash Holdings (% of GDP)
Hoarding Cash DividendStingy
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Case Study: Hyundai Motor
19
Hyundai Motor won the bid to purchase real estate in Gangnam with a US$10 billion offer that
was triple the propertys appraisal value
US$10 billion could buy:
- Goodyear Tire & Rubber: US$7 billion
- Ferrari: US$7 billion
- x 415,000
Market Cap Net Cash & Cash Equivalents Dividend Yield (2014) Payout Ratio (2014)
US$30.2 billion US$16.3 billion 1.9% 11.1%
Source: Bloomberg
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Improvement on Corporate Governance
20
An increasing number of public companies are transforming into a holding company structure
by spinning off their business operations, which increases transparency and accountability
Despite the image problem caused by Korean chaebols, the corporate governance of small/
mid-cap Korean companies are much better with a simpler ownership structure
The government enacted regulations prohibiting the cross-holding ownership structure of
chaebolsand forbidding inequitable business transactions with affiliated companies
The Korean courts are finally cracking down on white-collar crimes by chaebol family insiders
and enforcing jail time
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A New Policy of Returning Money to Shareholders
Amid widespread recognition that Korean corporate capital allocation policies need to
improve, Korean companies are turning course to become more shareholder friendly- Samsung Electronics recently bought back shares worth $2 billion, its first since 2007;
Hyundai Motor increased its dividend payouts by more than 50% in 2014
- Total dividends in 2014 (US$13 billion) by Korean public companies increased by 30%
from 2013
The Korean government recently adopted two key pieces of legislation (becoming effectivein the beginning of year 2016) that could be of great benefit to Korean shareholders
- Deduction on the taxes on dividend payments
- Imposition of penalties on Korean corporations for holding excessive cash
21
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Demands from Minority Shareholders
The corporate governance and rule of law have improved significantly in Korea, creating a
more favorable environment for shareholder activism
- National Pension Service, Koreas largest equity investor, has adopted its internal
guideline to become an active shareholder
- Increase in M&As and private equity transactions are expected
22
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III. Investing Opportunity 1GS Home Shopping
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50,000
110,000
170,000
230,000
290,000
350,000
12/30/10 6/30/11 12/31/11 6/30/12 12/31/12 6/30/13 12/31/13 6/30/14 12/31/14
(Won)
Share Price (3/25/2015) 215,100 Won Industry Home Shopping
EPS 18,269 Won Market Cap 1,347 billion Won1)
P/E 11.8x Sales (2014) 1,086 billion Won2)
BPS 140,151 Won EBIT (2014) 137 billion Won3)
P/B 1.5x Dividend Yield 3.5%
GS Home Shopping (028150)Snapshot
1) US$1,224 million
2) US$987 million
3) US$125 million
US$1 = 1,100 Won
24
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AttractiveValuation
The Company fell into undervalued territory in 2014 after the stock price droppedsteeply due to a series of bad news
The Company offers a high margin of safety as it boasts a strong balance sheetwith no debt
The market cap is extremely cheap compared to its intrinsic value
Cash
The Company holds excess cash equivalent to 60% of its market cap
The home shopping business requires little incremental investments to grow
The Company can deliver tremendous potential returns with capital allocationimprovements; in 2014, the Company increased dividends by 120% from 2013
Investment Thesis
StrongOperation
The Company is Koreas leading TV home shopping channel
The Company possesses a strong brand and maintains superior bargainingpower over merchants
The Company can benefit from growth opportunities in mobile and international
25
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Pioneered home shopping in Korea in 1995 (an oligopolistic industry)
One of the most respected brands in Korea
Has expanded distribution from cable TV to internet and mobile (domestic penetration > 95%)
Major shareholders
GS Holdings: 30.0%
JP Morgan Chase: 7.3%Matthews International: 6.1%
Truston Asset Management: 5.2%
National Pension Services: 5.1%
55.1%21.3%
18.5%
3.5% 1.7%
TV
Mobile
Internet
Catalog
Other
Company Overview
26
Valuation Matrix
EV/EBIT 3.5x
EV/EBITDA 3.1x
P/E (2014) 11.8x
P/E (2015E) 11.5x
P/B 1.5x
Source: GS Home Shopping
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2.9
3.3
3.7
4.1
4.5
4.9
80
100
120
140
160
180
2010 2011 2012 2013 2014 2015
Home Shopping Sales
% of Retail Industry
(Jan 2010 = 100) (%)
The Company is the largest of six Korean home shopping companies
Korean government limits home shopping licenses Home shopping sector in Korea has grown 14% per year over the past 5 years
Popularity explained by:
Trendy, fast-changing merchandise assortment
Free home delivery/return
Entertainment factors
Now accounts for 4% of total retail sales
Home shopping sector has been gaining market share:
Korean Home Shopping Industry
27
Source: Statistics Korea, Petra Analysis
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-20
0
20
40
60
80
100
120
140
160
180
-0.4
0.0
0.4
0.8
1.2
1.6
2.0
2.4
2.8
3.2
3.6
1995 1998 2001 2004 2007 2010 2013
Gross Sales (LHS)
Operating Profit (RHS)
(trillion Won) (billion Won)
Sales Trend
28
Source: GS Home Shopping
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26% 24%23%
23% 22%
24% 22%
23%
22%20%22%
22%
23%
19%19%
19%
22%
21%
19%
18%
10%
10%
10%
9%
9%8%
12%
0
1
2
3
4
5
6
7
8
9
2009 2010 2011 2012 2013
Home&
NS
Lotte
Hyundai
CJO
GS
(trillion Won)
Market Share Trend
29
* Market share of TV channel gross sales
Source: GS Home Shopping
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60% 58%
58%
59% 60% 55%
1%
9%
21%
30%
32%
34%
33%
25%
19%
9%
8%
6%
5%
4%
4%
0
1
2
3
4
2009 2010 2011 2012 2013 2014
Other
Catalog
Internet
Mobile
TV
(trillion Won)
Source of Growth: International & Mobile
30
Company/
Country
Equity
%
Gross Sales/Net Income (billion Won)
2013 2014
India
15.4% 229.1/(20.9) 290.9/(29.2)
Thailand
35.0% 23.0/(2.0) 22.7/(2.4)
China
28.2% 412.0/13.6 553.2/41.4
Vietnam
30.0% 5.4/(0.2) 8.2/(0.2)
Indonesia
40.0% 8.8/(1.5) 9.5/(1.9)
Turkey
15.0% 3.5/(9.4) 5.7/(10.2)
Astro GS Shop
Malaysia40.0% - 3.9/(4.9)
Source: GS Home Shopping
Mobile GrowthInternational Presence
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Peer Comparison
31
(billion Won; million US$)
GS(028150, KQ)
CJO(035760, KQ)
Hyundai(057050, KS)
HSN(HSNI, NASDAQ)
Market Cap 1,347 1,316 1,534 3,540
Net Cash 869 (748) 788 (371)
EV 478 2,064 746 3,911
EBIT 137 234 145 285
EBITDA 154 537 153 342
Net Income 114 95 148 173
EV/EBIT 3.5x 8.8x 5.1x 13.7x
EV/EBITDA 3.1x 3.8x 4.9x 11.4x
P/E 11.8x 13.9x 10.4x 20.5x
Source: GS Home Shopping, CJ O Shopping, Hyundai Home Shopping, HSN
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Financials
(million Won)
2010 2011 2012 2013 2014 2015E
Sales 817,547 921,613 1,016,381 1,049,118 1,085,541 1,234,800% Growth 0.71% 12.73% 10.28% 3.22% 3.47% 13,75%
Cost of Sales 171,213 205,253 197,827 128,911 139,047 156,820
% COGS/Sales 20.94% 22.27% 19.46% 12.29% 12.81% 12.70%
Gross Profit 646,334 716,360 818,554 920,208 946,494 1,077,980
% Margin 79.06% 77.73% 80.54% 87.71% 87.19% 87.30%
SG&A 536,966 612,963 683,496 766,465 809,175 935,820
% SG&A/Sales 65.68% 67.23% 67.25% 73.06% 74.54% 75.79%
Operating Income 109,368 96,729 135,059 153,743 137,318 142,160
% Margin 13.38% 10.50% 13.29% 14.65% 12.65% 11.51%
EBITDA 120,593 105,813 144,976 165,534 153,521 158,935
% Margin 14.75% 11.48% 14.26% 15.78% 14.14% 12.87%
Net Income 77,001 202,370 106,614 122,041 114,363 117,400
% Margin 9.42% 21.96% 10.49% 11.63% 10.54% 9.51%
Income Statements
(million Won; thousand US$)
Won US$
NOPAT 113,100 102,818
Multiple 12x 12xOperation Value 1,357,200 1,233,818
Net Cash & Investments 868,520 789,564
Equity Value 2,225,720 2,023,382
Valuation
US$1 = 1,100 Won
Source: GS Home Shopping, Petra analysis
32
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Valuation
Operation
(1,350 billionWon)
CommonMarket Cap
Cash
(870 billion Won)
1,347 billion Won1)
(US$1,224 million)
2,220 billion Won2)
(US$2,020 million)
Source: Petra analysis
Market Cap Intrinsic Value
1)US$1,224 million 2) US$2,020 million
40% Discount
33
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IV. Investing Opportunity 2Korea Alcohol Industrial
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2,500
3,500
4,500
5,500
6,500
12/30/10 6/30/11 12/31/11 6/30/12 12/31/12 6/30/13 12/31/13 6/30/14 12/31/14
(Won)
Share Price (3/25/2015) 5,790 Won Industry Chemical
EPS 565 Won Market Cap 119 billion Won1)
P/E 10.3x Sales (2014) 186 billion Won2)
BPS 9,234 Won EBIT (2014) 13 billion Won3)
P/B 0.6x Dividend Yield 1.0%
Korea Alcohol Industrial (017890)Snapshot
1) US$108 million
2) US$169 million
3) US$12 million
US$1 = 1,100 Won
35
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AttractiveValuation
The Company is a good example of holding company discount opportunities in Korea
The value of non-core assets is not properly reflected in the stock price of theCompany
The Companys liquidation value far exceeds its market cap
Non-CoreAssets
The Company owns the controlling equity stake of ENF Technology (a publicly traded
company), a manufacturer of process chemicals used in making semiconductors andTFT-LCD displays
The value of the Companys real estate property is worth nearly 50% of the market cap
The Company can improve the shareholder value by selling off its real estate propertyand returning cash to shareholders
Investment Thesis
KoreaAlcohol
Industrial
The Company is one of Koreas leading manufacturers of specialty chemicals,
including Ethyl Alcohol and Ethyl Acetate
Despite the recent slump of the chemical industry, the Company has maintained asteady income thanks to its market dominant position in the oligopolistic industry
36
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Company Overview
Established in 1984, the Company engages in the manufacture of organic chemicals such as
synthetic ethanol, ethyl acetate and acetaldehyde used in cosmetics, refined alcohols,
beverages and medicines
Maintains a dominant market position in the oligopolistic industry
Owns valuable non-core assets, including the controlling equity stake in ENF Technology
(24%) and real estate property in Korea and U.S.A.
Source: Korea Alcohol Industrial
37
Valuation Matrix
EV/EBIT 6.3x
EV/EBITDA 4.0x
P/E (2014) 10.3x
P/E (2015E) 9.7x
P/B 0.6x
Specialty Chemicals
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5,000
7,000
9,000
11,000
13,000
15,000
12/30/10 12/30/11 12/30/12 12/30/13 12/30/14
(Won)
None-Core Assets (1)ENF Technology (102710)
Source: ENF Technology, Korea Stock Exchange
Financial Summary
Share Price (3/25/2015) 14,000 Won
Market Cap 196 billion Won
EPS 728 Won
P/E 19.2x
BPS 7,815 Won
P/B 1.8x
Established in 2000, ENF Technology (the Subsidiary) manufactures chemical products
used for semiconductor and TFT-LCD industry, including adhesion promoter, positive and
color processing developer, rework stripper and nozzle cleaner
The Subsidiary enjoys a high entry barrier with limited competition
The Subsidiarys chemical products have a high switching cost for its customers
The Subsidiary is expected to benefit from the turnaround of semiconductor and display
manufacturers
38
Share Price Trend
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None-Core Assets (2)Real Estate Property
Source: Korea Alcohol Industrial
The Company owns real estate property worth at least 55 billion Won and generates a steady
income
The Companys real estate property also includes several mini-malls located in California,
USA owned by its overseas subsidiary, Soosan Corporation
Office Building in Gangnam Mini-malls in California
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Financials
(million Won)
2010 2011 2012 2013 2014 2015E
Sales 175,826 202,298 207,349 194,292 186,291 191,302% Growth 6.30% 15.06% 2.50% -6.30% -4.12% 2.69%
Cost of Sales 148,450 173,434 186,366 174,396 160,600 164,711
% COGS/Sales 84.43% 85.73% 89.88% 89.76% 86.21% 86.10%
Gross Profit 27,376 28,864 20,983 19,896 25,691 26,591
% Margin 15.57% 14.27% 10.12% 10.24% 13.79% 13.90%
SG&A 13,035 15,218 14,114 13,401 12,765 13,047
% SG&A/Sales 7.41% 7.52% 6.81% 6.90% 6.85% 6.82%
Operating Income 14,341 13,647 6,869 6,496 12,927 13,544
% Margin 8.16% 6.75% 3.31% 3.34% 6.94% 7.08%
EBITDA 19,512 19,932 13,431 13,797 20,208 20,844% Margin 11.10% 9.85% 6.48% 7.10% 10.85% 10.90%
Net Income 12,383 9,922 8,209 5,513 11,619 12,279
% Margin 7.04% 4.90% 3.96% 2.84% 6.24% 6.42%
Income Statements
Valuation
US$1 = 1,100 Won
Source: Korea Alcohol Industrial, Petra analysis
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(million Won; thousand US$)
Won US$
NOPAT 9,477 8,615
Multiple 10x 10xOperation Value 94,770 86,155
Non-Operation Assets 105,076 95,524
Equity Value 199,846 181,678
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Valuation
Operation
(95 billion Won)
CommonMarket Cap
ENFTechnology
(50 billion Won)
119 billion Won1)
(US$108 million)
200 billion Won2)
(US$182 million)
Source: Petra analysis
Market Cap Intrinsic Value
1)US$108 million 2) US$182 million
40% Discount
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Real EstateProperty
(55 billion Won)
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V. Takeaway
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Takeaway
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Korean corporations have solid economic fundamentals; however, many Korean
stocks are cheap because they are suffering from Korea discount
Despite the image problem caused by Korean chaebols, Korea has been going
through positive regulatory changes for improving corporate governance and
protecting minority shareholders
Korean corporate governance at small/mid-cap Korean companies is not bad
with a much simpler ownership structure
Capital allocation will also improve as Korean companies are turning course to
become more shareholder friendly; tax changes will trigger more dividend payout
The Korean stock market offers compelling value investing opportunities for
international investors because Korea discount is likely to get smaller
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