Capitalizing on Korea Discount

Asian Investing Summit 2015

Strictly Confidential | April 2015

Disclaimer
These slides serve as a supplement to an oral presentation (together, the Presentation) and are for
informational 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 an
offer, inducement or invitation to subscribe for or purchase any securities, services, or products in any
jurisdiction.

Certain funds or accounts managed by Petra may have positions that provide them with an economic interest
in the price movement of the securities mentioned in the Presentation and securities similar to those
discussed in the Presentation. Any such positions are subject to change at any time and without notice. Petra
may change its views on the securities and markets discussed herein at any time and has no duty to update
you 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, the
accuracy, reliability or completeness of the information or opinions in this Presentation, and all liability therefor
is expressly disclaimed. You must make your own independent assessment of the materials herein, after
making such investigations and taking such advice as you may deem necessary. In particular, any estimates
or 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 all
proprietary rights over their use.

Certain statements in the Presentation may be forward looking statements. By their nature, forward looking
statements involve a number of risks, uncertainties and assumptions that could cause actual results or events
to differ materially from those expressed or implied by the forward looking statements. Forward looking
statements contained in the Presentation regarding past trends or activities are included only for illustrative
purposes 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.
Strictly Confidential

Petra Capital Management Overview

Petra Capital Management (Petra) is a licensed investment advisory and investment

management firm based in Seoul, Korea registered with the Financial Services Commission of

Korea since August 2009

Co-founded by Managing Partners, Albert H. Yong and Chan H. Lee (investment style 60%
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

Strictly Confidential

2014 Asian Investing Summit

30%

25%

20%

Nexen
+18.1%

15%

Nexen Tire
Preferred
+12.4%

10%

Nexen Tire
+12.1%

5%

KOSPI
+1.5%

0%

-5%

-10%
4/21/14

Strictly Confidential

6/21/14

8/21/14

10/21/14

12/21/14

2/21/15

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)
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

12.4%p

177.5%p

220
200
180

4.1%p

160
140
120
100
80
60
40
20

0
Petra Portfolio

KOSPI Index
-20

9/30 12/31 3/31

2009

6/30

9/30 12/31 3/31

2010

2011

6/30

9/30 12/31 3/31

6/30

2012

9/30 12/31 3/31

2013

6/30

9/30 12/31 3/31

6/30

2014

*Performance inception date: September 16, 2009

Note: Petra's returns (before fees) were independently verified by the Korea Securities Depository; past investment performance is no guarantee of future results

Strictly Confidential

9/30 12/31
2015

Table of Contents
I.

Korea Recap

II.

Why Korea Discount?

III. Investing Opportunity 1 GS Home Shopping

IV. Investing Opportunity 2 Korea Alcohol Industrial

V.

Takeaway

Strictly Confidential

I.

Korea Recap

Remarkable Economic Achievement

The Korean economy has achieved remarkable economic achievement in a short period of
time
Rapid Economic Growth
1940s

1950s

1960s

1970s

1980s

1990s

2000s

2010s

Strictly Confidential

Country Overview

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

Strictly Confidential

Home of Global Champions

Strictly Confidential

Korea is the largest mobile phone

manufacturer in the world with
Samsung Electronics being the
largest mobile phone manufacturing
company

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

Hyundai Motor along with Kia

Motors is the worlds fastest growing
and 4th largest automaker and has
more than 10 percent of the global
market share

Amore Pacific is becoming one of

the leading cosmetics companies in
the 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

Korea's Big Three shipbuilders

Daewoo Shipbuilding and Marine
Engineering, Hyundai Heavy
Industries and Samsung Heavy
Industries dominate the global
shipbuilding industry with over 50
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

Korean Education
Performance in Math, Science and Reading

Education Level by Age Group

In a study by the OECD, Korean students were assessed as one

of the best performing students in the world

Math

Science

Reading

The proportion of highly educated increases drastically as the

age group gets younger with 74% of the 25~34 age group
having received undergraduate degrees in Korea

(%)
100

Shanghai-China

613

580

570
90

Singapore

573

551

542
80

Korea

554

538

536

Japan

536

547

538

Germany

514

524

508

Australia

504

521

512

40

OECD average

494

501

496

30

Italy

485

494

490

20

Spain

484

496

488

10

United States

481

497

498

70
60
50

25-34

Israel

466

470

486

Uneducated
High School

Source: OECD, PISA 2012 Database

Strictly Confidential

35-44

45-54

65-74

Elementary School
Undergraduate

Source: Statistics Korea, Census 2010

10

55-64

75-84

85-

Middle School
Graduate School

Warren Buffett on Korea

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 2nd time to visit

TaeguTec, a Berkshire company Were looking to

buy big businesses in Korea
Strictly Confidential

11

II.

Why Korea Discount?

Cheap Valuation
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)

Strictly Confidential

13

Numerous Cheap Stocks in Korea

Comparison to the S&P 500:

P/E*
KOSPI

10.6x

1.0x

S&P 500

17.7x

2.9x

40%

65%

KOSPI Discount

P/B

Amount of companies trading for less than:

US$ Amount

Number of Companies

8x Earnings

137 billion

163

70% of Tangible Book Value

219 billion

375

45 billion

60

Both of the above

* Based on 2015 Estimates

Source: Bloomberg (as of February 28, 2015)

Strictly Confidential

14

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

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

Strictly Confidential

Market Cap

15

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)

Strictly Confidential

16

Korea Discount (1) Corporate Governance

Complex Ownership Structure

Strictly Confidential

17

Image Problems Chaebols

Korea Discount (2) Capital Allocation

Hoarding Cash

Dividend Stingy

Corporate Cash Holdings (% of GDP)

Dividend Yield

50%
45%

Country

Dividend Yield

44%

40%

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%

34%

35%
30%
25%

19%

20%
15%

11%
10%
5%
0%
Japan

Korea

Germany

United States

Source: Bloomberg

Strictly Confidential

18

Case Study: Hyundai Motor

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

Market Cap

US$30.2 billion

Net Cash & Cash Equivalents

US$16.3 billion

Source: Bloomberg

Strictly Confidential

19

x 415,000

Dividend Yield (2014)

1.9%

Payout Ratio (2014)

11.1%

Improvement on Corporate Governance

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

chaebols and 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

Strictly Confidential

20

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 effective
in 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

Strictly Confidential

21

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

Strictly Confidential

22

III. Investing Opportunity 1 GS Home Shopping

GS Home Shopping (028150) Snapshot

Share Price (3/25/2015)

Industry

215,100 Won

EPS

Market Cap

1,347 billion Won1)

11.8x

Sales (2014)

1,086 billion Won2)

140,151 Won

EBIT (2014)

137 billion Won3)

18,269 Won

P/E
BPS
P/B

Home Shopping

Dividend Yield

1.5x

3.5%

1) US$1,224 million
2) US$987 million
3) US$125 million

(Won)
350,000
290,000
230,000
170,000

110,000
50,000
12/30/10

6/30/11

12/31/11

6/30/12

12/31/12

US$1 = 1,100 Won

Strictly Confidential

24

6/30/13

12/31/13

6/30/14

12/31/14

Investment Thesis

Strong
Operation

Cash

Attractive
Valuation

Strictly Confidential

The Company is Koreas leading TV home shopping channel

The Company possesses a strong brand and maintains superior bargaining

power over merchants

The Company can benefit from growth opportunities in mobile and international

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 allocation
improvements; in 2014, the Company increased dividends by 120% from 2013

The Company fell into undervalued territory in 2014 after the stock price dropped
steeply due to a series of bad news

The Company offers a high margin of safety as it boasts a strong balance sheet
with no debt

The market cap is extremely cheap compared to its intrinsic value

25

Company Overview

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%)
3.5% 1.7%
18.5%

TV
55.1%

21.3%

Mobile

Valuation Matrix

Internet
Catalog
Other

Major shareholders
GS Holdings:

3.5x

EV/EBITDA

3.1x

P/E (2014)

11.8x

P/E (2015E)

11.5x

30.0%

JP Morgan Chase:

7.3%

Matthews International:

6.1%

Truston Asset Management:

5.2%

National Pension Services:

5.1%

P/B

Source: GS Home Shopping

Strictly Confidential

EV/EBIT

26

1.5x

Korean Home Shopping Industry

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:

(Jan 2010 = 100)

(%)

180

4.9

Home Shopping Sales

% of Retail Industry

160

4.5

140

4.1

120

3.7

100

3.3

80

2.9
2010

2011

2012

2013

2014

Source: Statistics Korea, Petra Analysis

Strictly Confidential

27

2015

Sales Trend
(trillion Won)

(billion Won)

3.6

180
Gross Sales (LHS)

3.2

160

Operating Profit (RHS)

2.8

140

2.4

120

2.0

100

1.6

80

1.2

60

0.8

40

0.4

20

0.0

-0.4

-20

1995

1998

2001

2004

Source: GS Home Shopping

Strictly Confidential

28

2007

2010

2013

Market Share Trend

(trillion Won)
9
12%

8
8%
7

Home&

9%
18%

10%

NS

19%
10%

5
10%

Lotte
21%
19%

22%

19%

CJO
GS

22%
22%

22%

20%

23%

24%

22%

1
26%

24%

23%

2009

2010

2011

23%

22%

2012

2013

0
* Market share of TV channel gross sales
Source: GS Home Shopping

Strictly Confidential

Hyundai

23%

19%
3

9%

29

Source of Growth: International & Mobile

International Presence
Company/
Country

Equity
%

15.4%

Mobile Growth
(trillion Won)

Gross Sales/Net Income (billion Won)

2013

2014

229.1/(20.9)

290.9/(29.2)

India
4%

35.0%

23.0/(2.0)

22.7/(2.4)

4%

19%

5%

Thailand

Catalog

25%

28.2%

412.0/13.6

553.2/41.4

6%
33%

China
5.4/(0.2)

8.2/(0.2)

21%

34%

Mobile

1%

9%

Vietnam

32%

TV

30%

40.0%

8.8/(1.5)

9.5/(1.9)

Indonesia

1
59%

15.0%

3.5/(9.4)

5.7/(10.2)

40.0%

3.9/(4.9)

60%

Turkey
Astro GS Shop
Malaysia

Internet

9%

8%

2
30.0%

Other

55%

2013

2014

58%

0
2009

Source: GS Home Shopping

Strictly Confidential

58%

60%

30

2010

2011

2012

Peer Comparison
(billion Won; million US$)
GS
(028150, KQ)

CJO
(035760, KQ)

Hyundai
(057050, KS)

HSN
(HSNI, NASDAQ)

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

11.8x

13.9x

10.4x

20.5x

Market Cap

P/E

Source: GS Home Shopping, CJ O Shopping, Hyundai Home Shopping, HSN

Strictly Confidential

31

Financials

Income Statements

Sales
% Growth
Cost of Sales
% COGS/Sales
Gross Profit
% Margin
SG&A
% SG&A/Sales
Operating Income
% Margin
EBITDA
% Margin
Net Income
% Margin

Valuation

NOPAT
Multiple
Operation Value
Net Cash & Investments
Equity Value

(million Won)
2010

2011

2012

2013

2014

2015E

817,547
0.71%
171,213
20.94%
646,334
79.06%
536,966
65.68%
109,368
13.38%
120,593
14.75%
77,001
9.42%

921,613
12.73%
205,253
22.27%
716,360
77.73%
612,963
67.23%
96,729
10.50%
105,813
11.48%
202,370
21.96%

1,016,381
10.28%
197,827
19.46%
818,554
80.54%
683,496
67.25%
135,059
13.29%
144,976
14.26%
106,614
10.49%

1,049,118
3.22%
128,911
12.29%
920,208
87.71%
766,465
73.06%
153,743
14.65%
165,534
15.78%
122,041
11.63%

1,085,541
3.47%
139,047
12.81%
946,494
87.19%
809,175
74.54%
137,318
12.65%
153,521
14.14%
114,363
10.54%

1,234,800
13,75%
156,820
12.70%
1,077,980
87.30%
935,820
75.79%
142,160
11.51%
158,935
12.87%
117,400
9.51%

(million Won; thousand US$)

Won

US$

113,100
12x
1,357,200
868,520
2,225,720

102,818
12x
1,233,818
789,564
2,023,382

US$1 = 1,100 Won

Source: GS Home Shopping, Petra analysis

Strictly Confidential

32

Valuation
1)

US$1,224 million

2) US$2,020

million

40% Discount
Operation
(1,350 billion
Won)

2,220 billion Won2)

(US$2,020 million)

Common
Market Cap

1,347 billion Won1)

(US$1,224 million)

Cash
(870 billion Won)

Market Cap

Intrinsic Value

Source: Petra analysis

Strictly Confidential

33

IV. Investing Opportunity 2 Korea Alcohol Industrial

Korea Alcohol Industrial (017890) Snapshot

Share Price (3/25/2015)

Industry

5,790 Won

EPS

Market Cap

119 billion Won1)

10.3x

Sales (2014)

186 billion Won2)

9,234 Won

EBIT (2014)

13 billion Won3)

565 Won

P/E
BPS

Chemical

P/B

Dividend Yield

0.6x

1.0%

1) US$108 million
2) US$169 million
3) US$12 million

(Won)
6,500

5,500

4,500

3,500

2,500
12/30/10

6/30/11

12/31/11

6/30/12

12/31/12

US$1 = 1,100 Won

Strictly Confidential

35

6/30/13

12/31/13

6/30/14

12/31/14

Investment Thesis
Korea
Alcohol
Industrial

Non-Core
Assets

Attractive
Valuation

Strictly Confidential

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 a
steady income thanks to its market dominant position in the oligopolistic industry

The Company owns the controlling equity stake of ENF Technology (a publicly traded
company), a manufacturer of process chemicals used in making semiconductors and
TFT-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 property
and returning cash to shareholders

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 the
Company

The Companys liquidation value far exceeds its market cap

36

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.
Specialty Chemicals

Valuation Matrix

Source: Korea Alcohol Industrial

Strictly Confidential

37

EV/EBIT

6.3x

EV/EBITDA

4.0x

P/E (2014)

10.3x

P/E (2015E)

9.7x

P/B

0.6x

None-Core Assets (1) ENF Technology (102710)

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
Share Price Trend

Financial Summary
Share Price (3/25/2015)
Market Cap
EPS
P/E
BPS
P/B

(Won)

14,000 Won

15,000

196 billion Won

13,000

728 Won

11,000

19.2x

9,000

7,815 Won

7,000

5,000
12/30/10

1.8x

Source: ENF Technology, Korea Stock Exchange

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12/30/11

12/30/12

12/30/13

12/30/14

None-Core Assets (2) Real Estate Property

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

Source: Korea Alcohol Industrial

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Financials

Income Statements

Sales
% Growth
Cost of Sales
% COGS/Sales
Gross Profit
% Margin
SG&A
% SG&A/Sales
Operating Income
% Margin
EBITDA
% Margin
Net Income
% Margin

Valuation

NOPAT
Multiple
Operation Value
Non-Operation Assets
Equity Value

(million Won)
2010

2011

2012

2013

2014

2015E

175,826
6.30%
148,450
84.43%
27,376
15.57%
13,035
7.41%
14,341
8.16%
19,512
11.10%
12,383
7.04%

202,298
15.06%
173,434
85.73%
28,864
14.27%
15,218
7.52%
13,647
6.75%
19,932
9.85%
9,922
4.90%

207,349
2.50%
186,366
89.88%
20,983
10.12%
14,114
6.81%
6,869
3.31%
13,431
6.48%
8,209
3.96%

194,292
-6.30%
174,396
89.76%
19,896
10.24%
13,401
6.90%
6,496
3.34%
13,797
7.10%
5,513
2.84%

186,291
-4.12%
160,600
86.21%
25,691
13.79%
12,765
6.85%
12,927
6.94%
20,208
10.85%
11,619
6.24%

191,302
2.69%
164,711
86.10%
26,591
13.90%
13,047
6.82%
13,544
7.08%
20,844
10.90%
12,279
6.42%

(million Won; thousand US$)

Won

US$

9,477
10x
94,770
105,076
199,846

8,615
10x
86,155
95,524
181,678

US$1 = 1,100 Won

Source: Korea Alcohol Industrial, Petra analysis

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Valuation
1)

US$108 million

2) US$182

million

40% Discount
Operation
(95 billion Won)

200 billion Won2)

(US$182 million)

ENF
Technology
(50 billion Won)

Common
Market Cap

119 billion

Won1)

(US$108 million)

Real Estate
Property
(55 billion Won)

Market Cap

Intrinsic Value

Source: Petra analysis

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V.

Takeaway

Takeaway

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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43

Contact Us
Petra Capital Management
9F, 25 Eunhaeng-ro, Yeongdeungpo-gu
Seoul, Korea 150-871
Telephone: +82-2-3774-0986
Fax: +82-2-783-0079
Email: info@petracm.com
www.petracm.com

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