asian investing summit (petra)_150407

7/24/2019 Asian Investing Summit (Petra)_150407

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Strictly Confidential |April 2015

Capitalizing on Korea DiscountAsian Invest ing Summit 2015


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StrictlyConfidential

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

2


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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)

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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

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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

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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



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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



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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)


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

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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)


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

39


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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

40

(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)


Market Cap Intrinsic Value

1)US$108 million 2) US$182 million

40% Discount

41

Real EstateProperty

(55 billion Won)


43/45

V. Takeaway


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Takeaway

43

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


45/45


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Important NoticeThis material has been prepared by Petra Capital Management. This material is for distribution only under such circumstances as may be permitted by

applicable law. It has no regard to the specific investment objectives, financial situation or particular needs of any recipient. It is published solely for

informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. No

representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained

herein, nor is it intended to be a complete statement or summary of the securities, markets or developments referred to in the materials. It should not be

regarded by recipients as a substitute for the exercise of their own judgment.

Any opinions expressed in this material are subject to change without notice and may differ or be contrary to opinions expressed by other business areas

or groups of Petra Capital Management as a result of using different assumptions and criteria. Petra Capital Management is under no obligation to update

or keep the current information contained herein. Petra Capital Management may, from time to time, as principal or agent, have positions in, underwrite,

buy or sell, make a market in or enter into derivatives transactions in relation to any financial instrument or other assets referred to in this material. Petra

Capital Management operates rules, policies and procedures, including the deployment of permanent and ad hoc arrangements/information barriers within

or between business groups or within or between single business areas within business groups, directed to ensuring that individual directors and

employees are not influenced by any conflicting interest or duty and that confidential and/or price sensitive information held by Petra Capital Management

is not improperly disclosed or otherwise inappropriately made available to any other client(s). Neither Petra Capital Management nor any of its affiliates,

directors, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this material.

2015 Petra Capital Management. All rights reserved. Petra Capital Management specifically prohibits the redistribution of this material and accepts no

liability whatsoever for the actions of third parties in this respect.

Petra Capital Management9F, 25 Eunhaeng-ro, Yeongdeungpo-gu

Seoul, Korea 150-871Telephone: +82-2-3774-0986

Fax: +82-2-783-0079

Email: [email protected]

www.petracm.com

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