1) Investment highlights- 2Q16 output and sales narrowly beat our forecasts but lower-than-expected raw material costs combined with an improving product mix (e.g., robust sales of UHPT) drove operating profit much higher than the consensus and our estimates.- The domestic market remains sluggish, but in China, the pace of sales decline is slowing. Growth in European and North American sales are still upbeat. With the growth in demand slowing, price competition will likely continue for a bit lon

Aug. 18, 2016

Backed by likely high earnings growth at its FuelCell division and reduced operating losses at its DFS business, operating profit at Doosan Corp’s inhouse domain is set to rise in 2H16. Moreover, the firm’s consolidated financial structure and shareholder value should also improve going forward.Currently trading at a 48% discount rate to NAV, we view Doosan Corp’s shares as offering valuation merit. In-house business earnings to be strong in 2H16We estimate that Doosan Corp’s operating profit wi

Aug. 18, 2016

Affected by lackluster 2Q16 results, the domestic F&B industry index plunged on Aug 17. Having suffered from rising COGS-to-sales ratios in 1Q16, F&B players faced growing cost burdens in 2Q16 due to fiercer competition. With competition set to heat up further, and with F&B demand likely to remain lackluster, it is difficult to expect sector earnings momentum to pick up over the near term. Also worrisome, the sector’s valuations remain lofty. Finding the sector unappealing for the above reasons,

Aug. 18, 2016

[THE INVESTOR] Chinese toy-maker Heng Sheng Holding Group ’s stock slumped on its first day of trading on South Korea’s secondary KOSDAQ market as a public company. The stock closed at 2,690 won (US$2.40) on Aug. 18, down nearly 17 percent from its opening price, which was already below the initial public offering price of 3,600 won.  Heng Sheng Holding Group’s Chairman Hui Man-Kit (third from left) poses with Korea Exchange officials. KRXSluggish demand from investors is a disappointing result

Aug. 18, 2016

[THE INVESTOR] Hanwha Investment & Securities, South Korea’s mid-sized brokerage house, is considering an acquisition of a bigger peer, the CEO of the firm said Aug. 17. “Hanwha Investment is a small company which ranked No. 14 among local securities firms, but I think we can soon become a mega-sized brokerage,” Yeo Seung-Joo, who took office as CEO in February, said during a press conference held in Seoul. Hanwha Investment & Securities CEO Yeo Seung-Joo speaks during a press conference.He said

Aug. 17, 2016

Declining production and weak profitability will reduce earnings. Our view that Asian steelmakers’ aggregate earnings will be lower in the next 12 months keeps the outlook negative. A continued decline in demand, driven by China, and increasing trade barriers around the world, which limit exports, will reduce steel production. And persistent overcapacity will keep steel prices and companies’ average profitability low.China drives demand weakness. We expect Asian steel demand will continue to dec

Aug. 17, 2016

[THE INVESTOR] Shares in Orion, South Korea’s leading confectionery firm, dropped to its lowest level in three years on Aug. 17, as the company’s latest results missed market estimates by a large margin. Second-quarter sales and profit fell far short of estimates as the company has struggled in the Chinese market due to soaring marketing costs in the face of growing competition from local rivals.Orion shares traded at 763,000 won (US$693.20), down 15.6 percent as of 11:30 a.m.“Sales in both Kore

Aug. 17, 2016

[THE INVESTOR] Jeju Air, South Korea‘s largest low-cost carrier, plans to enter the hotel business and buy its own aircrafts in a search of a new revenue stream amid fierce competition among local budget airlines. The carrier will commit 60 billion won (US$54.9 million) to build a 17-story hotel near Hongik University in Seoul, a popular destination among young people and tourists, the company said in a regulatory filing. Marking a foray into the new business aims at attracting more inbound tour

Aug. 17, 2016

2Q16 review: Earnings well above expectationsFor 2Q16, NCSOFT reported earnings well above our estimates and the market consensus. The latest results once again confirmed the stable earnings potential of the company’s existing titles, including Lineage I and Blade & Soul. 2Q16 revenue and operating profit expanded 10.6% and 28.4% YoY to W240.5bn and W86.1bn, respectively.By title, revenue from Lineage I grew to W94.4bn (+10.5% YoY, 19.8% QoQ) thanks to a microtransaction event. Despite concerns,

Aug. 17, 2016

We expect the BOK to cut the base rate again in October, given: 1) the likelihood of continued won strengthening (attributable to global monetary easing); and 2) significant economic downward risk. Under the circumstances (and until the next rate cut), we recommend expanding duration upon yield hikes. ▶BOK leaves base rate frozen for second consecutive monthAt the August Monetary Policy Committee (MPC) meeting, members unanimously decided to leave the base rate unchanged. We believe that the Ban

Aug. 17, 2016

[THE INVESTOR] Korea Gas Corporation, the nation’s public natural gas company, is liable to pay over 100 billion won (US$91.6 million) in extra taxes following extensive investigation by the tax agency.The National Tax Service charged 124.9 billion won to the state-run energy company in the form of corporate and individual consumption taxes due to failed tax payments on some of its gas product sales.  Kogas headquarters.Tax authorities began investigating Korea Gas Corporation‘s accounting pract

Aug. 16, 2016

[THE INVESTOR] Doosan Bobcat, the South Korean firm that controls U.S. construction machinery-maker Bobcat, received preliminary exchange approval to float its shares on the main KOSPI market, Korea Exchange announced Aug. 16. With the bourse operator’s green light, the company will proceed with one of this year’s largest initial public offerings, along with those of Samsung BioLogics and Netmarble Games, which are also seeking KOSPI listings in the second half of 2016. Doosan Infracore and Doos

Aug. 16, 2016