The administration of Theodore Roosevelt Essay Example for Free

The administration of Theodore Roosevelt Essay Theodore Roosevelt was the 26th President of the United States. Roosevelt, who was 42 when he became President after the assassination of William McKinley, was the youngest man ever told to hold that office. â€Å"Teddy† or â€Å"T.R.,† as he was called, was one of the nation’s most dynamic and colorful Presidents, remembered perhaps as much for his spirited personality as for the accomplishments of his administration (Pringle, 2006). Roosevelt had tremendous energy and wide-ranging interests. He was a patrician and a reformer, a cowboy and a scholar, a big-game hunter and a conservationist, and a soldier and a Nobel Peace prize winner, As President, he promoted progressive reforms and a strongly nationalistic and expansionist foreign policy. A popular writer and forceful speaker, Roosevelt coined many phrases that are skill quoted. He denounced the â€Å"malefactors of great wealth† and sought to curb these powerful businessmen by a variety of means. Antitrust legislation was enforced (â€Å"trust busting,† as it was called); the Food and Drugs Act was passed; and conservation laws were enacted to keep the nation’s natural resources out of the hands of private exploiters (Beale, 2004). His domestic program was called the â€Å"Square Deal,† from a speech in which he said he wanted â€Å"to see to it that every man has a square deal.† â€Å"Speak softly, carry a big stick, and you will go far,† was another of Roosevelt’s sayings. He often applied it in his conduct of foreign, as well as domestic, affairs. When negotiations to acquire the Panama Canal were at a standstill, Roosevelt recognized a rebel government in Panama, made a treaty with it for a canal zone, and authorized digging the canal. When a crisis with Japan seemed close, Roosevelt spoke softly but sent the â€Å"Great White Fleet† around the world to demonstrate the new naval might of the United States. Under Roosevelt, the United States became a major military and commercial power and gained an influence in world affairs (Mowry, 2004). Roosevelt’s administration saw the beginnings of 20th-century social legislation. Since the Civil War, big business had become monopolistic, operating in total disregard of the public interest. Roosevelt wanted â€Å"square deal, no more and no less† for everyone and his administration began a campaign of â€Å"trustbusting,† aimed at curbing the abuses perpetrated by big business. In 1902, Northern Securities Company, a railroad trust, was sued by the government under the Sherman Antitrust Act. Eventually, the U.S. Supreme Court held the trust to be illegal and ordered it dissolved. The Elkins Act, passed in 1903, banned secret rebates to favored shippers, a monopolistic practice that had been much criticized. In 1902, when owners of anthracite coal mines refused to accept arbitration to settle a long strike, Roosevelt threatened to use the army to operate the mines. The owners back down (Harbaugh, 2005). In 1903, the president pushed through Congress a bill to create a new executive department—the Department of Commerce and Labor—whose purpose was to promote industrial growth and improved working conditions. In addition, encouraged by endorsement at the polls, Roosevelt became more clearly a champion of progressivism. His progressivism, however, was aimed more at the correction of immediate abuses that at any radical change in American ways of life. He urged enactment of workers’ compensation laws, a graduated federated income tax, and federal taxation of inheritances to curb what he viewed as the menace of â€Å"swollen fortunes† (Blum, 2006). He, as mediator, succeeded in bringing to an end the Russo-Japanese War with the Treaty of Portsmouth in 1905. For this accomplishment he was awarded the 1906 Nobel Peace Prize. He also helped to arrange the Algeciras Conference, called to settle differences between Germany and France over Morocco. Roosevelt urged use of the Hague Peace Conference failed to deal with limitations on armaments, he sought Congressional approval for a naval building program he felt necessary for the security of the country (Pringle, 2006). To demonstrate the nation’s preparedness, Roosevelt sent the entire America battle fleet, called the â€Å"Great White Fleet,† on an around-the-world cruise. Furthermore, in 1913, Roosevelt visited South America and explored Brazil’s jungles in search of a tributary of the Amazon called the River of Doubt, which he found and explored for 900 miles of its course. During the trip, he contracted a tropical fever and begged his party, including Kermit, to leave him, as starvation threatened them. When they refused, he insisted on pushing on. The exertion probably undermined his health. When World War I started in Europe, Roosevelt urged military preparedness and an international tribunal backed by force to execute its decrees. When the Lusitania was sunk, he urged a trade embargo against Germany, assailing Wilson for â€Å"weakness.† In 1916, the Progressive party again nominated Roosevelt for President, but he withdrew when the Republicans nominated Charles Evans Hughes (Blum, 2006). Reference: 1. Beale, H.K. (2004). Theodore Roosevelt and the Rise of America to World Power (Johns Hopkins University). 2. Blum, J.M. (2006). The Republican Roosevelt, 5th edition (Harvard University). 3. Harbaugh, W.H. (2005). The Life and Times of Theodore Roosevelt, revised edition (Oxford University). 4. Mowry, G.E. (2004). The Era of Theodore Roosevelt, 1900-1912 (Harper Row). 5. Pringle, H.F. (2006). Theodore Roosevelt: a Biography, revised edition (Harcourt Brace Jovanovich).

Challenges And Prospects For The Asean Economic Community Economics Essay

Challenges And Prospects For The Asean Economic Community Economics Essay Free trade is a significant stimulus to regional production, linkages and competitiveness.   ASEAN has made significant progress in that regard since the implementation of the ASEAN Free Trade Area (AFTA) from 1993.   The AFTA initiative has been particularly successful in reducing tariffs in the trade in goods. Currently, some 99.8 per cent of the products in the Inclusion Lists of ASEAN-6 (Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand) have been brought down to the tariff range of 0-5 per cent, with about 65 per cent of those products having zero import tariffs.   Meanwhile, 91 per cent of the products traded by the CLMV countries (Cambodia, Lao Peoples Democratic Republic, Myanmar and Viet Nam) under the Common Effective Preferential Tariff package have been moved into their respective Inclusion Lists.   About 77 percent of those products are already within the 0-5 per cent tariff band. However, regional free trade alone is not sufficient to release the full energies and the inherent potential of ASEAN.   All of us now have to take a further step forward.   Deeper economic integration is necessary for ASEAN to cope effectively with the unprecedented opportunities as well as the unprecedented challenges, on both scale and depth, unleashed by globalisation. China and India have altered the global economic landscape through huge market openings and greater competition, too.   Meanwhile, interlinked supply networks have proliferated all over the world, among many other innovative and more efficient ways in value creation and industrial organization.   Last but not least, there are the freer and often instant movements of new ideas, people and resources across national boundaries. The ASEAN Economic Community.   In the midst of two giant economies, ASEAN Leaders made a historic resolution in December 1997 to leverage the regions potential by building an economic community (ASEAN Vision 2020).   Henceforth, ASEAN is to be transformed into a stable, prosperous, and highly competitive region with equitable economic development, and reduced poverty and socio-economic disparities.   Notably, that resolution took place in the midst of a severe financial and economic crisis in ASEAN.   This underscored once again ASEANs common perception of the critical importance of greater regional cohesion and complementation in coping with good as well as bad times.   Subsequently at the Bali Summit in November 2003, ASEAN Leaders declared that the AEC would be the end-goal of regional economic integration (Bali Concord II).   This Community shall weld together 10 separate entities as a single market and production base by 2020.   The ASEAN Economic Ministers have recently recommended that the target year be sped up to 2015. Put it simply, there will be a free flow of goods, services, investment and a freer flow of capital in the AEC.   This is to be complemented by freer movements of skilled human resources including regional business persons, professionals, and cultural and artistic talents.   The consequent gains from deeper and broader integration are substantial in ASEAN.   They are estimated by McKinsey and Co to cut as much as one-fifth of production costs of consumer goods in the region.   As such, the AEC building process will empower ASEAN to remain a dynamic and competitive player in the regional and global supply chains.   But the same process is also predicated on wide-ranging adjustments and reforms to be carried out by Governments and the business sector, among other stakeholders in the region.   The commitments so far made include, to name just a few, the ASEAN Free Trade Area of 1992; the ASEAN Framework Agreement on Services of 1995; the ASEAN Agreement on Customs and the ASEAN Customs Vision 2020 of 1997; the Framework Agreement on the ASEAN Investment Area and the ASEAN Framework Agreement on Mutual Recognition Agreements, both of 1998; the Initiative for ASEAN Integration of 2000; the ASEAN Framework Agreement for the Integration of Priority Sectors of 2004; and the ASEAN Policy on Standards and Conformance of 2005. ASEAN has three key strengths in the economic arena.   We have abundant natural resources in our region.   We have large supplies of professionals and talented people.   And, we have the capability to adopt, adapt and advance technology.   By leveraging on these strengths the AEC is likely to be realised sooner than later. ASEAN Charter.   A key development complementing the AEC work is the process to establish the ASEAN Charter.   A Charter is certainly not a panacea. But at a minimum, it is going to facilitate the transformation of ASEAN into a rules-based regional organization with a legal personality.   Provisions in the Charter to establish robust mechanisms for monitoring implementation and ensuring compliance would contribute greatly to ASEANs effectiveness. Through the Charter, ASEAN will be able to enshrine the values and principles that shaped by our history and experiences in the last 39 years.   It will virtually become our new and official birth certificate in the sense that we are re-born as the ASEAN Community. Such a Charter would also serve to make ASEAN a more responsive, dynamic and integrated regional organisation. In short, the Charter will define ASEANs future. The ASEAN Eminent Persons Group (EPG) has been working on its recommendation for the drafting of the Charter.   In a few days, the EPGs report will be considered by the ASEAN Leaders during the 12th ASEAN Summit in Cebu, the Philippines, from 11-12 December 2006.   In that report, the EPG will recommend what should go into an ASEAN Charter. And at the upcoming Summit, a High-Level Task Force is expected to be mandated by the ASEAN Leaders to start drafting an ASEAN Charter, taking into account recommendations of the EPG, among other things. This achievement would not only become a benchmark for the region to further enhance its cohesiveness and coherence, but also would venture forth a new cooperative spirit for the community building in the region.  Ã‚   To be sure, there is a lot more work to do, especially in converging the different levels of ambition.   Yet, I am optimistic ASEAN is on the threshold of a quantum leap in collective development and growth. ASEAN-EU economic interaction. Against that backdrop of dynamic changes and developments within ASEAN, the EU has remained, among other roles, an important partner in trade and investment and a major source of technical assistance to ASEAN. The EUs valued roles will continue to be very helpful to AEC building efforts in the coming decade. As a market, for example, the EU-15 economies took in some US$ 78 billion worth of ASEAN exports in 2005, a steady growth of 5 per cent a year since 2000.   The EU was the third largest trading partner, with an average share of 12 per cent of ASEAN trade in the last two years (or just about one percentage point behind Japan and the U.S.A. during 2004-2005).   Germany, Netherlands, the United Kingdom, and France are the most important EU traders with ASEAN. Likewise, the EU-15s foreign direct investment (FDI) in ASEAN has been significant, with the largest share of 57 per cent of the FDI hosted by our region in 2000 (totalling US$ 23.5 billion).   However, this share fell to 19 per cent of the FDI flows to ASEAN (US$ 38.1 billion) in 2005.   Singapore, Indonesia, Malaysia, Viet Nam and Thailand were the main destinations of FDI from the EU. http://www.aseansec.org/19001.htm 30 MAC 2011

The Rise of the Byzantine Empire :: Education Essays

The Rise of the Byzantine Empire "What were some of the accomplishments of the Byzantine Empire?" Questions such as this one appear on the margins of sixth and seventh grade textbooks. What a better way of starting a new lesson or chapter than with questions that will automatically led the student to think about the answer? That is the case in the lesson of "The Rise of the Byzantine Empire." Being that the lesson I revised was only a brief part of the chapter, it was interesting to see how precise the lesson on the Rise of the Empire came about. There was nothing wrong with the format and structure of the lesson. When I fist glanced at the lesson I had received, I became very mortified to see that the lesson only consisted of 4 pages. Can the lesson on the rise of the Byzantine Empire really be described in 4 pages? I would not know that answer, unless I read the lesson, and did further research on the topic. Surprisingly, I discovered that the lesson is pretty much accurate, although it does not have much detail. Perhaps the detail is not very rich, because this lesson, (which is titled to be lesson 3) is a continuation of the study on Rome; it's emperors, etc. It is not to say that the lesson did not have weaknesses, however, it had both its strengths, and its weaknesses. Lesson 3, which is titled "The Rise of the Byzantine Empire," includes a timeline of the dates the certain lesson covers. In this case, the dates are from 532 A.D., to1453 A.D. Byzantium saw itself as the true descendent of Rome. In Byzanium many of the elements of Rome's cosmopolitan Mediterranean civilization continue. Gradually however, Greek replaces Latin as the primary language in both society and government, and distinctive social, political and cultural traditions emerge. The central figure in the revival of the power of Byzantium is the Emperor Justinian, from 527 to 565. The lesson was mainly focused on "the Byzantine Emperor Justinian." As the lesson starts, the story of how Justinian came about restoring order in the city of Constantinople is told in a brief summary of about 2 paragraphs. "Fights broke out between the rival groups, and the fighting escalated into rioting in Constantinople's streets. The rioting continued for a week while Justinian and Theodora, safe withi n their palace, debated whether to flee or to attempt to restore order.

Sight And Blindess Of Oedipus The King Essay -- Sophocles Oedipus

Oedipus the King by Sophocles was a play written after a devastating plague struck the city of Athens in 430 B.C. The play is about how knowledge can lead to devastation and destruction based on how the characters find out the truth of the Delphic Oracle. Years before Oedipus became the king of Thebes, the previous king, Laius, had received a prophecy that his son would grow up to kill his father. With this information he gave his baby son to a sheperd to dispose of him. Years later Laius is murdered and the Sphinx emerges and locks down the city by refusing to let anybody enter or leave the city unless they can solve her riddle. The city is essentially under siege. But nobody knows the answer to her riddle. "What goes on four legs in the morning, two at noon, and three at night?" Everybody who tries to answer the riddle is killed by the Sphinx until one day a stranger comes upon the city. The Sphinx asks him the riddle and he simply replies, "Man." The stranger solves the riddle a nd the Sphinx throws herself to her death. The city opens up to him, he marries the widowed queen, becomes king of Thebes, and unwillingly begins to fulfill most of the prophecy. What is the meaning of sight and blindness for an understanding of Oedipus the King? But the reason Oedipus, who is the prince of Corinth, has come to Thebes, is to escape an oracle of his own. Before coming to Thebes he went to seek the Delphic Oracle to ask if Polybus and Merope were his natural parents. The Delphic Oracle replied: "You are fated to couple with your mother, you will bring a breed of children into the light that no man can bear to see Ââ€" you will kill your father, the one who gave you life!" With that information, Oedipus fled Corinth to run away ... ...im. Oedipus just continually wanted to have more knowledge and asks more questions to gain wisdom and it eventually becomes his downfall. Knowing the future may destroy a man; and it ruins the lives of two men in this story. Oedipus was blind to see the truth; he was also blinded by the prophecies. He ran away from home, killed his father, married his mother and has children with her. "But Oedipus' play does not end with these lyrics; he gradually gains a new strength and new understanding" (Segal 133). And the true meaning of this story is, ignorance is bliss. Works Cited Knox, Bernard M.W. Oedipus at Thebes. New Haven: Yale UP. 1957. Rpt. In Oedipus Tyranmus. Ed. Lucy Berkowizs and Thedore F. Brunner. New York: Norton, 1970. 148-165 Segal, Charles. Oedipus Tyranmus: Tragic Heroism and the Limits of Knowledge. 2nd. Ed. New Yourk: Oxford UP, 2001.

Earth Sociology Essay

The author of the book entitled Down to Earth Sociology focused his writings on conceptual issues regarding the social interactions of the people in everyday life including the aspect of understanding the individual experiences in the society and the analysis of the different dominant social cultures. The selections of the said book also emphasizes the different significant themes of the modern sociology including sociological analysis of the concept of gender, power, politics, sports, religion, racial tensions, crimes, poverty, homelessness, and the global outlook of economic capitalism. In this book, the author Henslin presented his ideas and analysis in the same scientific manner and process that is being implemented by the contemporary sociologist of the modern age. Through this, the book has able to critically analyze and present every intricate detail that is involved in the sociological research as guided by the main concept of the hypothesis. The book presented its views in relation to the present hypothetical concepts and theories in trying to explain and interpret the different social phenomena in the modern civilization. Included in the book of Henslin are detailed discussions of the different sociological theories that are guiding the research and development pursuit of the said field. These sociological theories are defined to have been developed at multiple levels, ranging from large theory to highly definite and explicit small-scale ones. Rather than thinking of one theory being excellent to the other theories it is more beneficial as well as informative to view these different theories as correlation with each other. One of the sociological theories on how to explain different phenomena that has been elaborated is the Structural-Functionalism, which is defined as a sociological theory that pertains on how to explain several social institutions as a means to be able to satisfy or fulfill the individual’s biological means. Another theory that has been discussed in Henslin’s book is the Conflict theory that is explained as a sociological theory that points out that society is not about unity or universal agreement but rather this theory is all about competition. According to this theory, society consists of different individuals who are competing for the limited supply of resources. An example of this conflict is in the Legislative branch of the United States Government wherein men are still viewed as more powerful and superior over women when it comes to the politics. As an effect, women’s privileges to express their opinions and ideas are still significantly limited. In this situation, it is clearly stated that there is a clash or conflict between genders, which also illustrate the obvious concept of inequality between men and women. Aside from the ones previously mentioned, another theory that was discussed by Henslin is the Symbolic Interactionalism that is discussed as a sociological approach on how to understand the proximity or relationship between human and society. The basic idea of Symbolic Interactionalism is that human action and interaction are only by means of exchanging substantial communications and symbols. Based on this theory, humans and lower forms of animals are different from each other because lower form of animals can easily respond to the environment while the human being has the capability to interrupt this process. In addition, lower forms of animals do not have the capability in conceiving different alternative responses to gestures unlike human beings they can easily grasp different gestures. Another theory is the Role Theory; this pertains to the different roles represented by an individual in their everyday lives such as the father, secretary, or friend. For instance, most people their notion or representations of secretary include: answering phone calls, making and managing appointments, filling different paper works, and typing memorandums. These different roles of a secretary could not be expected of professional basketball player. Basically, every individual have different personalities and roles in the society. In addition, the book entitled Down to earth sociology by James M. Henslin focused on real life situation in which all the readers can surely relate. Henslin’s book is indeed user friendly, entertaining to read and indeed valuable because it talks about actual life situations and social phenomenon. The sociological perspectives that is generally employed in the book enables the people to look below the surface of social life and examine different factors that shape our behavior, attitudes, and culture as well as our beliefs in life. Bibliography Henslin, J. M. (2005). Down to Earth Sociology. The Free Press, New York, USA. 13th Edition, Pages 281-296. ISBN 0743267605. Von Der Haar, Christine M. (2005). Social Psychology: A Sociological Perspective. Prentice Hall, USA. ISBN: 0130809837.

Zero Tolerance

In the article Zero Tolerance by Gary Bauslaugh, he asserts the claim that the policy of zero tolerance is a really bad idea and we should not be fooled by it.   I would like to support Mr. Bauslaugh, but the evidence which he presents does not allow me to fully support his point.   He reaches this conclusion based on the following ideas, one – the policy of zero tolerance promotes the abandonment of logic and reason, and two – zero tolerance is not about protecting the public (justice), but making politicians look good.   Based on these two reasons, the conclusion he reaches can be justified.   If a public policy lacks reason and does not protect the public, then it is a bad idea. Mr. Bauslaugh asserts that the policy of zero tolerance is based on the emotional reaction of public officials to threats to public welfare.   He makes this claim in the following sentences: â€Å"The current trend for public officials to talk of â€Å"zero tolerance† has arisen because it seems to express public frustration with the lack of justice in the world. It seems to say â€Å"we are fed up and aren't going to take it anymore.†Ã¢â‚¬    Ã‚  If indeed, the policy of zero tolerance is based on the emotional reaction of public officials, the claim directly supports the premise that logic and reason have been abandoned. He presents the argument that there have been other cases of irrational behavior on the part of the public, to satisfy emotional responses.   Mr. Bauslaugh draws a comparison between the witch hunts of the 16th and 17th centuries to the policy of zero tolerance.   He cries out â€Å"Are we immune, in modern times, to such superstitious extremism and zealous intolerance?†Ã‚   This is not an argument he is making in support of any premise.   Rather, what he is doing in this passage is making an emotional appeal to the audience based on the collective memory of unfair persecutions and the taking of life, not based on logic. The use of words such as extremism and zealous and intolerance impart heavy emotional weight to his statement.   This type of argument must be closely watched.   First, he does support his point that there have been emotional reactions in the past.   Therefore, the conclusion that this type of reaction is human and possible to occur again is true.   However, the emotional charge he has added to his thesis creates rhetoric which is not necessary if the argument is good. The second case of irrational public policy and behavior Mr. Bauslaugh sites is the war on drugs, which has resulted in the imprisonment of many young people.   Mr. Bauslaugh claims that this is an emotional response to a societal problem, not ruled by reason.   However, Mr. Bauslaugh does acknowledge that there is some reason in the policy on drugs, as acknowledges that some of the people in prison are drug addicts. He takes this opportunity to insert his opinion as to the policy of the war on drugs.   He states that these people need rehabilitation care to recover from their addiction, not jail sentences.   However, these statements do not support his implied claim that the war on drugs is another example of an emotional response to a social problem.   Therefore, this example does not give another example of an irrational public policy. Mr. Bauslaugh also uses the case of suggested sexual abuse cases, where women had suddenly â€Å"recovered memory† during counseling sessions.   Based on the communities emotional responses, the accused people were persecuted, some put in prison, and some committing suicide.   He states that the actions taken by the public were not based on substantiated facts. In this case, most of these instances have been discredited.   This gives strength to his claim that the public can act out of emotional response, leaving logic and reason out of the decision-making.  Ã‚   At this point, in the article, Mr. Bauslaugh has presented 2 valid cases that show that the public has made policy in the past based on emotional response to a problem. Now we will move to the real discussion Mr. Bauslaugh would like to make, that of the case of the destruction of a herd of water buffalo at Fairburn Farms.   He uses this example to support both claims – that the policy of zero tolerance is based on emotional response and that the policy is in place only to help politicians look good in front of difficult social problems. He states that this case shows the policy of zero tolerance to be one of unmitigated justice, a device for thoughtless and indiscriminating application of the rules, and direct opposition to justice.   If this is true, he implies that the policy of zero tolerance is based on emotional response and not logic.   However, even when a public policy is shown to be unjust and applied indiscriminately, this does not mean the policy is based on emotional response. Since Mr. Bauslaugh sets out to prove the injustice of the zero tolerance policy, and not the emotional basis of the policy, his implication that the policy is based on emotions is not supported.   The additional cases he has gathered which show a lack of logic and reasoning do not ultimately support his case, because there is no connection from emotionally created policies to that of zero tolerance.   Therefore, the only proof for Mr., Bauslaugh’s case is that the zero tolerance policy is unreasonable and does not promote justice. Mr. Bauslaugh uses one case to depict the policy of zero tolerance.   In the case of Fairburn Farms and the Archers, Mr. Bauslaugh is able to prove that the application of the zero tolerance policy was unreasonable.   He shows the fault of the Inspection Agency’s logic on the following points.   One, the Archers imported water buffalo from Denmark.   There has never been a case of mad cow disease among any water buffalo population.   Two, one cow was found infected in Denmark with mad cow disease. Three, mad cow disease cannot be transmitted via cheese, and that was the intention of use for the water buffalo.  Ã‚   And four, the Australians have been using water buffalo from the same region of Denmark for making cheese, with no adverse effects.   The effects of the decision on the Archers also exceeded the bounds of justice.   The Archers are setback in pursuing their livelihood and have to slaughter all of the original buffalo. Mr. Bauslaugh is able to prove that in the case of Fairburn Farms, the policy of zero tolerance is unreasonable and unjust.   However, by using this one case he does not prove his overall points that the zero tolerance policy is based on emotional reaction and that in general, the zero tolerance policy is a bad policy.   If Mr. Bauslaugh were able to provide additional arguments to support his claim, I may be able to agree with him.   But, based only on the arguments he has presented to me, I do not see just cause to say the zero tolerance policy is bad public policy.      

Only the Strong Survive

January 17, 2013 Industry Report Shipbuilding (Neutral) Only the strong survive Offshore orders to drive growth The shipbuilding industry is in a situation similar to that of 2002. In 2013, plunging order volume and weak new building prices are fueling intensifying competition. In 2002, shipbuilding shares rose because of an increase in orders, but then quickly fell on concerns over weak new building prices, which caused earnings to stagnate. For a period in 2002, shipbuilders went into red. There is a big difference between the shipbuilding market of 2002 and 2013, however.In 2013, a few, major shipbuilders with an edge in the construction of offshore plants are expanding order backlogs due to growing demand for offshore plants. We anticipate investments in offshore E&P projects will continue to rise, as we expect oil prices will remain high. We anticipate major shipbuilders will offset sluggishness in the commercial vessels market with their offshore-plant businesses. Daewoo Securi ties Co. , Ltd. Ki-jong Sung +822-768-3263 kijong. [email  protected] com Ryan Kang +822-768-3065 ryan. [email  protected] om Three major catalysts in 2013 1) Increase in new orders despite depressed market conditions. 2) Improved cash flow and balance sheets. 3) Growing competitive gap between shipbuilders due to accelerated restructuring. Historic low P/B presents attractive valuations We expect Korean shipbuilders will be able to maintain their competitive edge regardless of the depressed shipbuilding market. Although shipbuilding shares currently trade at a P/B of 1. 0x, we believe they have the potential trade at a P/B of 1. 2x.We recommend Hyundai Heavy Industries (009540 KS/Buy/TP: W280,000), and Samsung Heavy Industries (010140 KS/Buy/TP: W46,200) out of the large shipbuilders. We find Hyundai Mipo Dockyard (010620 KS/Buy/TP: W148,000) to be the best among shipbuilders that focus on mid-to-small vessels. We raise our target price on Samsung Heavy Industries by 5% to W46, 200 to reflect its stable earnings and solid order flow; however, we downgrade our rating of Hanjin Heavy I&C (097230 KS/Hold) from Trading Buy to Hold. Three major domestic shipbuildersE cash flow and share performance (Wbn) 10,000 Avg. ash flow of major shipbuilders (L) Avg. share price of major shipbuilders (R) (1/31/2005=100) 1,000 6,000 800 600 2,000 400 -2,000 200 -6,000 05 06 07 08 09 10 11 12 13F 13 14 14F 0 Source: KDB Daewoo Securities Research Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U. S. January 17, 2013 Shipbuilding Figure 1. New orders and newbuilding price for commercial vessels (mnCGT) 100 New orders (L) Newbuilding price (R) 80 180 160 60 140 40 120 20 100 80 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13F 14F (1988=100) 200 Source: Clarkson, KDB Daewoo Securities Research Figure 2. Three major domestic shipbuildersE order trend and forecast (Wbn) 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 01 02 03 04 05 06 07 08 09 10 11 12 13F Shipbuilding Non-shipbuilding Source: Company data, KDB Daewoo Securities Research Figure 3. KOSPI and shipbuilding stock index trend (1/1999=100) 1,000 KOSPI Shipbuilding stock index 800 600 400 200 0 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13F 13 14F 14 Source: KDB Daewoo Securities ResearchKDB Daewoo Securities Research 2 January 17, 2013 Shipbuilding Three major catalysts in 2013 1. New orders for major Korean shipbuilders to increase sharply In 2013, we expect major Korean shipbuilders will see sharp increases in new orders. Despite intensifying competition, these companies have demonstrated competitive advantages in the construction of large commercial vessels and offshore plants. We expect demand for LNG carriers will remain sound, and anticipate orders for mega-containerships will also increase.We expect the latter to be driven by small- and mid-sized shipping companies improving their competitiveness through greater efficiency. We also expect shipbuilders will be forced to take new orders at lower-than-normal prices because of the dearth of order backlogs for commercial vessels. We forecast the number of bids and orders for large offshore-plant construction projects to increase for each company in 2013. In particular, we expect orders for certain high-priced vessels, including FPSO and LNG FPSO, to increase. 2.Improved cashflow and balance sheets Since 2009, shipbuilders have taken out more loans for more orders as the proportion of heavy-tail payments (characterized by small advance payments) has increased. On a positive note, however, we expect shipbuilder loans to decrease (thus improving cashflow) as these contracts are paid off toward late 2013. We believe share prices will improve (despite concerns about lower-priced orders) thanks to increasing orders, and improved cashflow. Share prices for shipbuilders will be influenced by cashflow.Despite intensifying market competition, we anticipa te Hyundai Mipo Dockyard will take an increasing amount of orders, even though some will be lower-priced. 3. Second phase of restructuring to further consolidate industry We anticipate the shipbuilding market will remain weak due to the global economic downturn, and the tightening of ship financing. We project the current, still-surviving shipbuilding companies will aggressively seek new orders to strengthen backlogs. We believe the winners of this second phase of restructuring will benefit significantly when the market recovers.Amid the current drop in vessel construction, the percentage of bulk carriers and tankers (out of total orders) has decreased significantly, while the percentage of megacontainerships and LNG carriers has increased. We expect these trends will continue in 2013. We also anticipate major Korean shipbuilders will be able to develop new types of vessels boasting improved efficiency, which will strengthen these companiesE competitiveness. Risk factors Earnings at shipbuilders will not recover easily, due to orders at lower-than-normal prices and won appreciation. In order to secure backlogs, hipbuilders will need to take low price orders. Another risk factor is won appreciation, but at current levels, we believe risks are limited, thanks to Korean shipbuildersE technological edge, and dollar denominated payment for raw materials, which accounts for 40% of total raw material purchase. KDB Daewoo Securities Research 3 January 17, 2013 Shipbuilding Figure 4. Three major domestic shipbuildersE cash flow and share performance (Wbn) 10,000 Avg. cash flow of major shipbuilders (L) Avg. share price of major shipbuilders (R) (1/31/2005=100) 1,000 6,000 800 600 2,000 400 -2,000 00 -6,000 05 06 07 08 09 10 11 12 13F 13 14 14F 0 Source: Company data, KDB Daewoo Securities Research Figure 5. Korean and Chinese shipbuildersE restructuring (No. of shipuilders) 200 Korea China 160 197 120 -88. 3% 80 40 24 23 -66. 7% 8 0 2008 2012 Source: Clarkson, press re lease, KDB Daewoo Securities Research Figure 6. Comparison of currency rates (10/2/2012=100) 105 US$/W JPY100/W EUR/W RMB/W 100 95 90 85 80 10/12 11/12 12/12 1/13 Source: KOSTAT, KDB Daewoo Securities Research KDB Daewoo Securities Research 4 January 17, 2013 Shipbuilding Investment strategy & valuationWe believe the P/B of KoreaEs top 3 shipbuilders, which is trading at around 1. 0x, should rebound to 1. 2x, a level seen historically as the low, thanks to the aforementioned three major catalysts. In addition, the ROE of shipbuildersE is projected to improve to 19%. And as most new orders are expected in 1H, shares are likely to show strong performance in the same period. The relative share performance of global shipbuilders has changed. Thanks to the rising proportion of offshore orders, Korean shipbuilders and Hyundai Mipo Dockyard are now grouped together with Keppl Corp. nd Sembcorp Marine (Singapore companies specialized in offshore plant). In light of the ongoing eurozone cris is and unstable global economy, shipbuilding shares are expected to trade between a P/B of 1. 0x~1. 3x. Although we believe the shares have bottomed, we do not expect a long term recovery until new building prices rebound in earnest. We suggest accumulating the shares near a P/B of 1. 0x. Shipbuilding shares will likely begin to recover full-swing from 2014, when the market starts to turnaround, along with increased orders for commercial vessels, improved cashflow, and earnings recovery.Figure 7. Major shipbuildersE ROE, P/B trends (Market cap, Wtr) 4. 0x (%) 50 3. 0x 40 90 60 2. 0x 30 20 30 1. 0x 10 0 05 07 09 11 13 13F 0 Source: Bloomberg, KDB Daewoo Securities Research Figure 8. Relative share performances of major shipbuilders (-1Y=100) 150 140 130 120 110 100 90 80 70 60 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 HHI DSME HMD Guangzhou Shipyard Keppel Corp. SHI STX Offshore & Shipbuilding Rongsheng Heavy Sembcorp Marine Source: Bloomberg, KDB Daewoo Sec urities Research KDB Daewoo Securities Research 5 January 17, 2013 Shipbuilding Figure 9.New order trends (US$bn) 30 25 20 15 10 5 0 03 04 05 06 07 08 09 10 11 12 HHI SHI HMD Figure 10. Order backlog trends (US$bn) 60 50 40 30 20 10 0 07 08 09 10 11 12 HHI SHI HMD Source: Company Data, KDB Daewoo Securities Research Source: Company Data, KDB Daewoo Securities Research Figure 11. Sales breakdown by business unit (Wtr) 70 60 50 40 30 20 10 0 10 HHI 11 10 SHI 11 Construction Other Refinery Finance Green energy Electro electric systems Construction equipment Engine & machinery Industrial plant & engineering Offshore & engineering Shipbuilding Figure 12. Hyundai Heavy IndustriesE P/B trend Market cap,Wbn) 42,000 35,000 28,000 21,000 14,000 7,000 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13F 13 3. 0x 2. 5x 2. 0x 1. 5x 1. 0x Source: Company Data, KDB Daewoo Securities Research Source: KDB Daewoo Securities Research Figure 13. Samsung Heavy IndustriesE P/B trend (Market cap,Wbn) 14,000 12,00 0 10,000 8,000 1. 0x 6,000 4,000 2,000 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 13F 2. 0x 6. 0x 4. 0x Figure 14. Hyundai Mipo DockyardEs P/B trend (Market cap,Wbn) 10,000 2. 5x 8,000 1. 5x 6,000 2. 0x 1. 5x 4,000 1. 0x 2,000 0. 5x 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 13F Source: KDB Daewoo Securities ResearchSource: KDB Daewoo Securities Research KDB Daewoo Securities Research 6 January 17, 2013 Shipbuilding Figure 15. Global new orders by vessel type (mnCGT) 25 LPG carrier LNG carrier Containership 20 Bulker Tanker 15 Figure 16. Newbuilding prices by vessel type (US$'000/TEU) 30 Containership (L) Tanker (R) Gas carrier (R) Bulker (R) (US$'000/DWT) 3 20 2 10 10 5 1 0 03 04 05 06 07 08 09 10 11 12 0 04 05 06 07 08 09 10 11 12F 12 13F 13 0 Source: Clarkson, KDB Daewoo Securities Research Source: Clarkson, KDB Daewoo Securities Research Figure 17. ROE-P/B comparison (P/B ,x) 3. 0 Figure 18.EPS growth-P/E comparison (P/E, x) 20 Keppel 2. 0 Sembcorp Mitsubishi HHI 1. 0 Guangzho u Sumitomo Mitsui (ROE, %) 0. 0 0 5 10 15 20 HMD S HI 15 Keppel 10 S HI Sumitomo Sembcorp HHI 5 (EPS growth, %) 0 -40 -30 -20 -10 0 10 20 30 40 Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research Figure 19. Global shipbuildersE share performances (-1Y=100) 160 HHI Mitsui SHI Guangzhou HMD Sembcorp CSSC Keppel Figure 20. KOSPI and shipbuilding stock index (index) 8,000 Shipbuilding stock index KOSPI 140 6,000 120 4,000 100 2,000 80 60 1/12 3/12 5/12 7/12 9/12 11/12 1/13 05 06 07 08 09 10 11 12 Source: Thomson Reuters, KDB Daewoo Securities Research Source: KDB Daewoo Securities Research KDB Daewoo Securities Research 7 January 17, 2013 Shipbuilding Hyundai Heavy Industries (009540 KS) Buy (Maintain) Target Price (12M, W) 280,000 Share Price (01/16/13, W) 227,500 Expected Return (%) 23. 1 EPS Growth (13F, %) 17. 6 Market EPS Growth (13F, %) 19. 1 P/E (13F, x) 8. 5 Market P/E (13F, x) 9. 0 KOSPI 1,977. 45 Market Cap (Wbn) 17,290 Shares Ou tstanding (mn) 76 Avg Trading Volume (60D, ‘000) 229 Avg Trading Value (60D, Wbn) 51 Dividend Yield (13F, %) 1. Free Float (%) 59. 3 52-Week Low (W) 193,500 52-Week High (W) 346,500 Beta (12M, Daily Rate of Return) 1. 46 Price Return Volatility (12M Daily, %, SD) 2. 1 Foreign Ownership (%) 19. 6 Major Shareholder(s) Mong-Jun Jung et al. (21. 31%) Treasury shares (19. 36%) NPS (5. 08%) Price Performance (%) 1M 6M 12M Absolute -1. 7 -3. 8 -20. 7 Relative -0. 9 -12. 6 -27. 1 One step back for two steps forward ? ? ? Targeting orders of US$29. 7bn and revenues of W26. 9tr (non-consolidated) in 2013 Implemented a self-rescue plan for the first time in 40 years. Maintain Buy with TP of W280,000Maintain Buy with TP of W280,000 We maintain our Buy call on Hyundai Heavy Industries (HHI) with a target price of W280,000. HHI displayed weak share performance due to poor earnings and orders in 2012. However, we expect the company to record robust orders in 2013, boosted by a pickup in the offshore/onshore plant market. The companyEs earnings are anticipated to turn around in 2H13, while its cash flow should improve on massive orders and an increase in heavy-tail payments. HHIEs shares are trading at a 2013F P/E of 8. 5x and a P/B of 1. 0x, the lowest levels in the companyEs peer group.This tepid performance signals that weak 2012 orders and earnings results have been fully reflected. However, HHI has strong investment merits in 2013, as it is projected to win massive orders. Investment summary 1) The company exhibited poor orders across all business units last year, posting disappointing earnings results. In 2013, however, the company will be able to achieve its order target of US$29. 7bn in light of its strong determination to revamp its business structure. 2) The company is anticipated to receive massive offshore/onshore plant orders.In particular, the company will likely win orders for the Egina project (US$2. 5bn) and the Brass LNG project (US$3. 5bn) in 1Q. In a ddition, HHI is expected to bid for additional projects worth US$1-4bn; indeed, we believe the company will be aggressive in its order-taking efforts. 3) Orders for merchant ships, including mega containerships, LNG carriers, and LNG FSRU, will likely increase markedly in light of their superior competitiveness. 4) Exports of construction equipment and ultra-high voltage transformers should also increase on recoveries in the US and Chinese economies. ) The company has recently implemented a self-rescue plan for the first time in 40 years. While the number of applications for HHIEs early retirement plan (pushed through at end-2012) missed expectations, the company has subsequently carried out structural reform measures. We expect the companyEs long-term restructuring efforts to positively affect earnings going forward. Share price 130 120 110 100 90 80 70 60 1/12 5/12 9/12 1/13 KOSPI Earnings & Valuation Metrics FY 12/10 12/11 12/12F 12/13F 12/14F Revenue (Wbn) 37,342 53,712 54,741 5 8,433 63,025 OP OP Margin (Wbn) (%) 5,532 14. 8 4,536 8. 4 2,485 4. 5 3,331 5. 7 3,782 6. NP (Wbn) 4,154 2,559 1,729 2,033 2,449 EPS EBITDA FCF ROE P/E (Won) (Wbn) (Wbn) (%) (x) 54,652 6,326 88 34. 5 8. 1 33,671 5,473 -504 16. 7 7. 6 22,750 3,469 -2,260 10. 2 10. 6 26,750 4,320 2,005 11. 1 8. 5 32,218 4,768 2,297 12. 2 7. 1 P/B (x) 2. 5 1. 3 1. 1 1. 0 0. 9 EV/EBITDA (x) 6. 5 5. 3 8. 5 6. 2 5. 2 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 Daewoo Securities Research 8 January 17, 2013 Shipbuilding Hyundai Heavy Industries (009540 KS/Buy/TP: W280,000) Comprehensive Income Statement (Summarized) Wbn) Revenues Cost of Sales Gross Profit SG Expenses Operating Profit (Adj) Operating Profit Non-Operating Profit Net Financial Income Net Gain from Inv in Associates Pretax Profit Income Tax Profit from Continuing Operations Profit from Discontinued Operations Ne t Profit Controlling Interests Non-Controlling Interests Total Comprehensive Profit Controlling Interests Non-Controlling Interests EBITDA FCF (Free Cash Flow) EBITDA Margin (%) Operating Profit Margin (%) Net Profit Margin (%) 12/11 53,712 46,784 6,927 2,392 4,536 4,536 -659 52 -148 3,876 1,133 2,743 0 2,743 2,559 184 2,617 2,498 118 5,473 -504 10. 8. 4 4. 8 12/12F 54,741 49,759 4,981 2,496 2,485 2,485 110 233 -240 2,595 766 1,829 0 1,829 1,729 100 1,568 1,458 110 3,469 -2,260 6. 3 4. 5 3. 2 12/13F 58,433 52,473 5,960 2,630 3,331 3,331 -448 248 -200 2,882 749 2,133 0 2,133 2,033 100 1,872 1,762 110 4,320 2,005 7. 4 5. 7 3. 5 12/14F 63,025 56,408 6,618 2,836 3,782 3,782 -338 188 -150 3,444 895 2,549 0 2,549 2,449 100 2,288 2,178 110 4,768 2,297 7. 6 6. 0 3. 9 Statement of Financial Condition (Summarized) Wbn) Current Assets Cash and Cash Equivalents AR & Other Receivables Inventories Other Current Assets Non-Current Assets Investments in Associates Property, Plant and Equipment Inta ngible Assets Total Assets Current Liabilities AP & Other Payables Short-Term Financial Liabilities Other Current Liabilities Non-Current Liabilities Long-Term Financial Liabilities Other Non-Current Liabilities Total Liabilities Controlling Interests Capital Stock Capital Surplus Retained Earnings Non-Controlling Interests Stockholders' Equity 12/11 23,076 1,610 9,525 6,478 2,359 25,924 973 15,565 2,324 49,001 25,491 14,339 8,903 2,249 5,334 3,224 1,954 30,824 16,379 380 1,100 15,399 1,797 18,177 12/12F 25,628 1,888 10,237 6,897 2,737 24,553 916 15,706 2,290 50,181 23,183 11,605 9,060 2,518 7,460 5,550 1,755 30,643 17,624 380 1,100 16,894 1,915 19,538 12/13F 28,538 3,517 10,927 7,304 2,922 24,365 716 15,703 2,264 52,903 24,136 12,388 9,060 2,688 7,602 5,550 1,896 31,737 19,141 380 1,100 18,682 2,025 21,166 12/14F 30,153 3,469 11,786 7,878 3,151 24,277 566 15,700 2,240 54,430 24,320 13,361 8,060 2,899 6,901 4,550 2,195 31,221 21,074 380 1,100 20,885 2,135 23,208 Cash Flows (Summariz ed) Wbn) Cash Flows from Op Activities Net Profit Non-Cash Income and Expense Depreciation Amortization Others Chg in Working Capital Chg in AR & Other Receivables Chg in Inventories Chg in AP & Other Payables Income Tax Paid Cash Flows from Inv Activities Chg in PP&E Chg in Intangible Assets Chg in Financial Assets Others Cash Flows from Fin Activities Chg in Financial Liabilities Chg in Equity Dividends Paid Others Increase (Decrease) in Cash Beginning Balance Ending Balance 12/11 276 2,743 3,078 853 85 -860 -4,072 -178 -1,442 -364 -1,474 -888 -1,583 -67 -34 796 347 1,206 0 -411 -448 -269 1,879 1,610 12/12F -1,972 1,829 1,907 899 85 107 -4,572 -512 -453 -3,197 -1,136 -544 -1,074 -60 406 184 2,806 3,484 0 -245 -444 278 1,610 1,888 12/13F 3,082 2,133 2,187 903 86 50 -489 -691 -407 783 -749 -770 -900 -60 0 190 -683 0 0 -245 -438 1,628 1,888 3,517 12/14F 3,345 2,549 2,220 903 84 50 -528 -859 -574 973 -895 -738 -900 -60 0 222 -2,654 -2,000 0 -245 -409 -48 3,517 3,469 Forecasts/Valuatio ns (Summarized)P/E (x) P/CF (x) P/B (x) EV/EBITDA (x) EPS (W) CFPS (W) BPS (W) DPS (W) Payout ratio (%) Dividend Yield (%) Revenue Growth (%) EBITDA Growth (%) Operating Profit Growth (%) EPS Growth (%) Accounts Receivable Turnover (x) Inventory Turnover (x) Accounts Payable Turnover (x) ROA (%) ROE (%) ROIC (%) Liability to Equity Ratio (%) Current Ratio (%) Net Debt to Equity Ratio (%) Interest Coverage Ratio (x) 12/11 12/12F 12/13F 12/14F 7. 6 10. 6 8. 5 7. 1 5. 6 6. 8 5. 7 5. 0 1. 3 1. 1 1. 0 0. 9 5. 3 8. 5 6. 2 5. 2 33,671 22,750 26,750 32,218 46,009 35,699 39,772 45,203 203,367 220,183 240,492 266,237 4,000 0 4,000 4,000 9. 6 0. 0 12. 1 10. 0 1. 6 0. 0 1. 8 1. 8 43. 8 1. 9 6. 7. 9 -13. 5 -36. 6 24. 5 10. 4 -18. 0 -45. 2 34. 0 13. 5 -38. 4 -32. 4 17. 6 20. 4 5. 9 6. 0 6. 1 6. 1 9. 3 8. 2 8. 2 8. 3 4. 1 4. 8 5. 7 5. 8 5. 7 3. 7 4. 1 4. 8 16. 7 10. 2 11. 1 12. 2 17. 3 7. 8 10. 0 11. 2 169. 6 156. 8 150. 0 134. 5 90. 5 110. 6 118. 2 124. 0 40. 8 45. 3 34. 1 22. 7 15. 7 6. 0 7. 6 9 . 2 Source: Company data, KDB Daewoo Securities Research estimates KDB Daewoo Securities Research 9 January 17, 2013 Shipbuilding Samsung Heavy Industries (010140 KS) Buy (Maintain) Target Price (12M, W) 46,200 Share Price (01/16/13, W) 37,850 Expected Return (%) 22. 1 EPS Growth (13F, %) 0. 6 Market EPS Growth (13F, %) 19. 1 P/E (13F, x) 9. Market P/E (13F, x) 9. 0 KOSPI 1,977. 45 Market Cap (Wbn) 8,739 Shares Outstanding (mn) 231 Avg Trading Volume (60D, ‘000) 938 Avg Trading Value (60D, Wbn) 34 Dividend Yield (13F, %) 0. 0 Free Float (%) 69. 5 52-Week Low (W) 31,650 52-Week High (W) 42,350 Beta (12M, Daily Rate of Return) 1. 57 Price Return Volatility (12M Daily, %, SD) 2. 3 Foreign Ownership (%) 32. 0 Major Shareholder(s) Samsung Electronics et al. (24. 42%) Treasury shares (6. 13%) Mirae Asset Global Investment (5. 05%) Price Performance (%) 1M 6M 12M Absolute -2. 7 4. 3 12. 3 Relative -1. 8 -4. 5 6. 0 Reliable again in 2013 ? ? ? 2013 orders and revenues forecast at US$1 4. 2bn and W14. tr Stable business operations and earnings to remain intact in 2013 Raise TP by 5% to W46,200; Maintain Buy Raise TP by 5% to W46,200; Maintain Buy We maintain our Buy call on Samsung Heavy Industries (SHI) and raise our target price 5% to W46,200. In deriving our target price, we applied a 5% premium to the companyEs lowest P/B level since 2005 (1. 3x). We believe that the 5% premium is undemanding, as the company is expected to win solid orders and display stable earnings in 2013. We expect SHI to win massive orders of US$14. 2bn despite the slump in the global shipbuilding market, driven by the robust offshore plant market and the companyEs superior competitiveness.SHIEs shares are trading at a 2013F P/E of 9. 4x and a P/B of 1. 3x. We think that SHI has strong investment merits in light of its competitive edge, stable earnings, robust growth potential, and cash flow improvement. Investment summary 1) Domestic institutions are most optimistic on SHI among the thre e largest domestic shipbuilders. SHI has proven its superior competitiveness in the offshore plant business, including FLNG and drillships. As such, the company has solid earnings relative to its competitors. 2) SHI is expanding into the subsea business, and we believe that the company will be able to bolster its competitiveness in the segment rapidly. ) The commercial vessel unit, which exhibited a tepid performance last year, is likely to recover in 2013 thanks to: 1) rising mega containership orders and 2) steady orders for LNG carriers and LNG FSRU. 4) SHI is expected to display the fastest cash flow improvement in its peer group this year, backed by: 1) a rise in orders for both offshore plants and commercial vessels and 2) an increase in heavy-tail payments. As such, the company will be able to repay its debt and strengthen its financial structure. 5) SHIEs earnings should gradually increase on rising revenue contributions from the offshore plant unit. Share price 150 140 130 120 110 100 90 80 1/12 5/12 9/12 1/13 KOSPI Earnings & Valuation Metrics FY 12/10 12/11 12/12F 12/13F 12/14F Revenue (Wbn) 13,146 13,392 14,875 14,980 15,751 OP OP Margin NP (Wbn) (%) (Wbn) 1,433 10. 1,000 1,160 8. 7 851 1,226 8. 2 929 1,198 8. 0 934 1,355 8. 6 1,015 EPS EBITDA FCF ROE (Won) (Wbn) (Wbn) (%) 4,330 1,504 598 28. 7 3,685 1,455 1,556 19. 4 4,021 1,551 282 18. 4 4,044 1,514 931 15. 8 4,396 1,667 978 14. 9 P/E (x) 9. 5 7. 6 9. 6 9. 4 8. 6 P/B (x) 2. 1 1. 2 1. 5 1. 3 1. 1 EV/EBITDA (x) 8. 2 5. 4 6. 1 5. 5 4. 5 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 Daewoo Securities Research 10 January 17, 2013 Shipbuilding Samsung Heavy Industries (010140 KS/Buy/TP: W46,200) Comprehensive Income Statement (Summarized) Wbn) Revenues Cost of Sales Gross Profit SG Expenses Operating Profit (Adj) Operating Profit Non-Operating Profit Net Financial Income N et Gain from Inv in Associates Pretax Profit Income Tax Profit from Continuing Operations Profit from Discontinued Operations Net Profit Controlling Interests Non-Controlling Interests Total Comprehensive Profit Controlling Interests Non-Controlling Interests EBITDA FCF (Free Cash Flow) EBITDA Margin (%) Operating Profit Margin (%) Net Profit Margin (%) 12/11 13,392 11,628 1,763 681 1,083 1,160 -10 -25 -32 1,150 299 851 0 851 851 0 616 616 0 1,455 1,556 10. 9 8. 7 6. 4 12/12F 14,875 12,867 2,008 766 1,242 1,226 -30 -34 0 1,196 267 929 0 929 929 0 920 920 0 1,551 282 10. 4 8. 2 6. 2 12/13F 14,980 13,017 1,962 764 1,198 1,198 4 -44 0 1,202 268 934 0 934 934 0 925 925 0 1,514 931 10. 1 8. 0 6. 2 12/14F 15,751 13,594 2,158 803 1,355 1,355 -19 -51 0 1,336 321 1,015 0 1,015 1,015 0 1,006 1,006 0 1,667 978 10. 6 8. 6 6. 5 Statement of Financial Condition (Summarized) Wbn) Current Assets Cash and Cash Equivalents AR & Other Receivables Inventories Other Current Assets Non-Current Assets Inv estments in Associates Property, Plant and Equipment Intangible Assets Total Assets Current Liabilities AP & Other Payables Short-Term Financial Liabilities Other Current Liabilities Non-Current Liabilities Long-Term Financial Liabilities Other Non-Current Liabilities Total Liabilities Controlling Interests Capital Stock Capital Surplus Retained Earnings Non-Controlling Interests Stockholders' Equity 12/11 9,617 806 4,132 540 1,905 6,797 0 5,408 86 16,414 10,539 4,425 3,232 2,883 1,231 1,004 88 11,770 4,644 1,155 423 3,610 0 4,644 12/12F 9,112 1,115 3,793 550 1,711 6,316 5 5,434 38 15,428 7,758 3,882 1,570 2,306 2,213 1,881 138 9,971 5,457 1,155 423 4,430 0 5,457 12/13F 9,229 1,264 3,820 554 1,648 6,372 5 5,506 21 15,601 7,301 3,910 1,070 2,322 1,918 1,481 188 9,219 6,382 1,155 423 5,364 0 6,382 12/14F 9,720 1,445 4,017 583 1,733 6,439 5 5,573 13 16,159 7,223 4,111 670 2,442 1,656 1,081 271 8,878 7,280 1,155 423 6,272 0 7,281 Cash Flows (Summarized) Wbn) Cash Flows from Op Activitie s Net Profit Non-Cash Income and Expense Depreciation Amortization Others Chg in Working Capital Chg in AR & Other Receivables Chg in Inventories Chg in AP & Other Payables Income Tax Paid Cash Flows from Inv Activities Chg in PP&E Chg in Intangible Assets Chg in Financial Assets Others Cash Flows from Fin Activities Chg in Financial Liabilities Chg in Equity Dividends Paid Others Increase (Decrease) in Cash Beginning Balance Ending Balance 12/11 1,341 1,150 189 294 78 75 549 1,284 150 164 -548 332 -242 -1 309 265 -1,306 -1,090 1 -108 -109 359 447 806 12/12F 351 1,131 558 297 11 -268 -1,061 34 39 -541 -276 -274 -368 -1 3 92 240 416 1 -108 -68 309 806 1,115 12/13F 1,376 934 580 299 17 -50 130 -27 -4 27 -268 -310 -370 -1 0 61 -917 -900 0 -108 -17 149 1,115 1,264 12/14F 1,408 1,015 651 302 10 -50 62 -197 -29 201 -321 -307 -370 -1 0 64 -921 -800 0 -108 -13 181 1,264 1,445 Forecasts/Valuations (Summarized)P/E (x) P/CF (x) P/B (x) EV/EBITDA (x) EPS (W) CFPS (W) BPS (W) DPS (W) Payout rati o (%) Dividend Yield (%) Revenue Growth (%) EBITDA Growth (%) Operating Profit Growth (%) EPS Growth (%) Accounts Receivable Turnover (x) Inventory Turnover (x) Accounts Payable Turnover (x) ROA (%) ROE (%) ROIC (%) Liability to Equity Ratio (%) Current Ratio (%) Net Debt to Equity Ratio (%) Interest Coverage Ratio (x) 12/11 7. 6 5. 3 1. 2 5. 4 3,685 5,296 22,582 500 12. 7 1. 8 1. 9 -3. 3 -19. 0 -14. 9 2. 8 23. 3 3. 2 4. 8 19. 4 15. 5 253. 4 91. 3 25. 8 57. 5 12/12F 9. 6 7. 2 1. 5 6. 1 4,021 5,358 26,307 0 0. 0 0. 0 11. 1 6. 6 5. 7 9. 1 3. 8 27. 3 3. 7 5. 8 18. 4 18. 9 182. 7 117. 5 7. 2 57. 9 12/13F 9. 7. 0 1. 3 5. 5 4,044 5,410 30,381 0 11. 6 0. 0 0. 7 -2. 4 -2. 2 0. 6 4. 0 27. 1 4. 0 6. 0 15. 8 16. 9 144. 5 126. 4 -10. 3 69. 5 12/14F 8. 6 6. 6 1. 1 4. 5 4,396 5,747 34,309 0 0. 0 0. 0 5. 2 10. 1 13. 0 8. 7 4. 1 27. 7 4. 1 6. 4 14. 9 19. 1 121. 9 134. 6 -22. 5 106. 2 Source: Company data, KDB Daewoo Securities Research estimates KDB Daewoo Securities Research 11 January 17, 2013 Sh ipbuilding Hyundai Mipo Dockyard (010620 KS) Buy (Maintain) Target Price (12M, W) 148,000 Share Price (01/16/13, W) 125,000 Expected Return (%) 18. 4 EPS Growth (13F, %) 45. 2 Market EPS Growth (13F, %) 19. 1 P/E (13F, x) 13. 1 Market P/E (13F, x) 9. 0 KOSPI 1,977. 5 Market Cap (Wbn) 2,500 Shares Outstanding (mn) 20 Avg Trading Volume (60D, ‘000) 121 Avg Trading Value (60D, Wbn) 14 Dividend Yield (13F, %) 1. 6 Free Float (%) 51. 6 52-Week Low (W) 102,500 52-Week High (W) 167,000 Beta (12M, Daily Rate of Return) 1. 58 Price Return Volatility (12M Daily, %, SD) 2. 4 Foreign Ownership (%) 18. 1 Major Shareholder(s) Hyundai Samho Heavy Industries et al. (46. 4%) NPS (7. 38%) Price Performance (%) Absolute Relative Shining in the dark ? ? ? 2013 target: US$3. 2bn in orders and W3. 6tr in revenues Stands to benefit most from industry restructuring Maintain Buy and TP of W148,000 Maintain Buy and TP of W148,000We maintain our Buy recommendation on Hyundai Mipo Dockyard (HMD) and our target price of W148,000. We expect HMD to maintain stable growth in orders and earnings, despite the global economic slowdown and eurozone fiscal crisis. Indeed, among small- to mid-sized shipbuilders, HMD is the company most favored by shipowners. Amid an expected further slowdown in the shipbuilding market, the company is anticipated to display distinguished share performance in 2013. Given HMDEs cash holdings of W450bn and the value of its stake in Hyundai Heavy Industries (W1. 4tr; 8. 0% of outstanding shares), we believe that the companiesE shares are currently undervalued (trading at a 2013F P/E of 13. 1x and a P/B of 0. 9x). Investment points ) We believe HMD will continue to display outstanding performance among small- to mid-sized Korean shipbuilders in 2013. Even amid intensifying competition due to limited orders and low ship prices, the company is expected to enjoy stable orders, earnings, and cash flow this year. 2) HMDEs competitiveness comes from its productivity, fi nancing capability, and the quality of its products. It also boasts strong cost competitiveness as the company purchases raw materials at relatively lower prices from the Hyundai Heavy Industries Group. 3) In the small- to mid-sized merchant ship market, the product carrier (P/C) segment, in which HMD has the strongest competitive edge, is expected to be relatively robust in 2013. ) If the shipbuilding market remains in a slump for a protracted period of time, HMD should be able to widen its gap with its peers. The company stands to benefit most from a second industry restructuring that is expected to end sometime in 2014. 1M 2. 5 3. 3 6M 6. 4 -2. 4 12M 11. 6 5. 3 Share price 160 150 140 130 120 110 100 90 80 1/12 5/12 9/12 1/13 KOSPI Earnings & Valuation Metrics FY 12/10 12/11 12/12F 12/13F 12/14F Revenue OP OP Margin NP EPS EBITDA FCF ROE P/E (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (x) 4,138 683 16. 5 493 24,629 741 431 14. 7 9. 1 4,624 378 8. 2 200 9,992 441 -633 5. 5 11. 2 4 ,404 126 2. 9 131 6,556 192 -563 4. 3 19. 4 4,624 191 4. 1 190 9,518 256 397 6. 4 13. 1 4,855 230 4. 235 11,770 293 416 7. 4 10. 6 P/B EV/EBITDA (x) (x) 1. 2 4. 4 0. 8 4. 2 1. 0 13. 8 0. 9 8. 6 0. 8 6. 0 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 Daewoo Securities Research 12 January 17, 2013 Shipbuilding Hyundai Mipo Dockyard (010620 KS/Buy/TP: W148,000) Comprehensive Income Statement (Summarized) (Wbn) Revenues Cost of Sales Gross Profit SG Expenses Operating Profit (Adj) Operating Profit Non-Operating Profit Net Financial Income Net Gain from Inv in Associates Pretax Profit Income Tax Profit from ContinuingOperations Profit from Discontinued Operations Net Profit Controlling Interests Non-Controlling Interests Total Comprehensive Profit Controlling Interests Non-Controlling Interests EBITDA FCF (Free Cash Flow) EBITDA Margin (%) Operating Profit M argin (%) Net Profit Margin (%) 12/11 4,624 3,975 649 272 378 378 -63 -24 0 315 112 202 0 202 200 3 -821 -823 2 441 -633 9. 5 8. 2 4. 3 12/12F 4,404 4,002 402 276 126 126 41 -8 -2 167 41 126 0 126 131 -5 -274 -265 -9 192 -563 4. 4 2. 9 3. 0 12/13F 4,624 4,143 481 290 191 191 52 -9 -2 243 58 185 0 185 190 -5 185 194 -9 256 397 5. 5 4. 1 4. 1 12/14F 4,855 4,321 534 304 230 230 73 -10 -2 303 73 230 0 230 235 -5 230 239 -9 293 416 6. 0 4. 7 4. 9 Statement of Financial Condition (Summarized) Wbn) Current Assets Cash and Cash Equivalents AR & Other Receivables Inventories Other Current Assets Non-Current Assets Investments in Associates Property, Plant and Equipment Intangible Assets Total Assets Current Liabilities AP & Other Payables Short-Term Financial Liabilities Other Current Liabilities Non-Current Liabilities Long-Term Financial Liabilities Other Non-Current Liabilities Total Liabilities Controlling Interests Capital Stock Capital Surplus Retained Earnings Non-Controlling Interest s Stockholders' Equity 12/11 4,134 564 975 283 427 3,691 34 889 340 7,825 3,914 1,774 1,779 361 502 56 420 4,416 3,217 100 91 2,081 191 3,409 12/12F 4,994 418 1,814 231 352 3,632 35 928 341 8,626 4,499 1,850 2,253 396 999 191 781 5,498 2,912 100 90 2,172 215 3,127 12/13F 4,919 468 1,568 243 462 3,675 33 964 344 8,593 4,274 1,905 1,953 416 1,046 141 878 5,320 3,067 100 90 2,323 206 3,273 12/14F 4,878 532 1,427 255 486 3,650 31 933 347 8,527 4,071 1,991 1,643 437 993 101 865 5,063 3,267 100 90 2,519 197 3,464 Cash Flows (Summarized) Wbn) Cash Flows from Op Activities Net Profit Non-Cash Income and Expense Depreciation Amortization Others Chg in Working Capital Chg in AR & Other Receivables Chg in Inventories Chg in AP & Other Payables Income Tax Paid Cash Flows from Inv Activities Chg in PP&E Chg in Intangible Assets Chg in Financial Assets Others Cash Flows from Fin Activities Chg in Financial Liabilities Chg in Equity Dividends Paid Others Increase (Decrease) in Cash Beginning Balan ce Ending Balance 12/11 -697 202 311 62 1 -213 -1,075 -190 -54 -593 -135 441 -100 -4 400 145 93 245 0 -93 -59 -168 732 564 12/12F -816 126 78 65 2 -12 -969 -220 52 66 -50 150 -112 -4 79 186 516 601 0 -39 -46 -146 564 418 12/13F 489 185 71 64 1 10 291 247 -12 56 -58 -47 -100 -4 0 57 -392 -350 0 -39 -2 50 418 468 12/14F 432 230 62 62 1 30 212 140 -12 86 -73 23 -30 -4 0 57 -391 -350 0 -39 -2 64 468 532 Forecasts/Valuations (Summarized)P/E (x) P/CF (x) P/B (x) EV/EBITDA (x) EPS (W) CFPS (W) BPS (W) DPS (W) Payout ratio (%) Dividend Yield (%) Revenue Growth (%) EBITDA Growth (%) Operating Profit Growth (%) EPS Growth (%) Accounts Receivable Turnover (x) Inventory Turnover (x) Accounts Payable Turnover (x) ROA (%) ROE (%) ROIC (%) Liability to Equity Ratio (%) Current Ratio (%) Net Debt to Equity Ratio (%) Interest Coverage Ratio (x) 12/11 12/12F 12/13F 12/14F 11. 2 19. 4 13. 1 10. 6 8. 5 12. 9 9. 8 8. 4 0. 8 1. 0 0. 9 0. 8 4. 2 13. 8 8. 6 6. 0 9,992 6,556 9,518 11,770 13,153 9,869 12,760 14,910 146,152 130,821 138,428 148,290 2,000 2,000 2,000 2,000 19. 6 29. 9 20. 6 16. 6 1. 8 1. 6 1. 6 1. 6 11. 7 -4. 8 5. 0 5. 0 -40. 5 -56. 5 33. 4 14. 3 -44. 7 -66. 8 52. 2 20. 3 -59. 4 -34. 4 45. 2 23. 7 6. 1 4. 2 3. 9 5. 0 18. 1 17. 1 19. 5 19. 5 2. 5 3. 2 3. 8 3. 8 2. 3 1. 5 2. 2 2. 7 5. 5 4. 3 6. 4 7. 4 53. 8 8. 1 10. 7 15. 6 129. 6 175. 8 162. 5 146. 2 105. 6 111. 0 115. 1 119. 8 -18. 0 -4. 9 -16. 9 -27. 9 689. 5 45. 6 78. 1 109. 7Source: Company data, KDB Daewoo Securities Research estimates KDB Daewoo Securities Research 13 January 17, 2013 Shipbuilding Hanjin Heavy I&C (097230 KS) Hold (Downgrade) Target Price (12M, W) Share Price (01/16/13, W) 10,000 Expected Return (%) 0. 0 EPS Growth (13F, %) RR Market EPS Growth (13F, %) 19. 1 P/E (13F, x) Market P/E (13F, x) 9. 0 KOSPI 1,977. 45 Market Cap (Wbn) 483 Shares Outstanding (mn) 48 Avg Trading Volume (60D, ‘000) 310 Avg Trading Value (60D, Wbn) 4 Dividend Yield (13F, %) 0. 0 Free Float (%) 62. 6 52-Week Low (W) 10,00 0 52-Week High (W) 23,850 Beta (12M, Daily Rate of Return) 1. 43 Price Return Volatility (12M Daily, %, SD) 2. 7 Foreign Ownership (%) 9. Major Shareholder(s) Hanjin Heavy I Holdings et al (37. 38%) KB Asset Management (5. 13%) Price Performance (%) 1M Absolute -23. 4 Relative -22. 5 Unlikely to weather market slump ? ? ? Earnings unlikely to recover due to shipbuilding market slump and protracted strike Cash flow to deteriorate due to excessive debt and weak orders Downgrade to Hold Downgrade to Hold We lower our rating on Hanjin Heavy I (HHIC) to Hold from Trading Buy. We believe that the companyEs earnings and cash flow will not improve for the time being, given its tepid order performance amid the sluggish commercial vessel market, and the suspension of its Youngdo shipyard due to a strike.Although the company has recently embarked on the development of an industrial site near the Incheon port, the project is unlikely to boost operating profit markedly due to high capital requir ements and increased interest expenses. As such, the companyEs shares are unlikely to recover in the near term, in our view Although the companyEs shares are trading at a 2013F P/B of just 0. 4x, we believe that their investment merits are low. Indeed, efforts to dispose of property amid a lackluster real estate market should meet with difficulty, and continued net losses and excessive interest expenses should leave cash flow from operations uncertain. Risks ) The commercial vessel unit at the Youngdo shipyard is unlikely to recover. The slump in the global commercial vessel market is leading to a fall in orders, while intensifying competition among shipbuilders are prompting shipowners to demand discounts on ship prices. . 2) There is a growing possibility that the Subic shipyard will take new orders, as it possesses strong price competitiveness. However, as it is difficult to build highend vessels at the Subic shipyard, the companyEs earnings are unlikely to recover in the near fu ture. 3) There are many labor-management issues yet to be resolved, including one related to employees who are currently on leave due to a lack of work. ) Although HHIC is meeting its short-term capital needs through real estate disposal, the company will likely find it difficult to sell large-scale real estate assets due to the real estate market slump. Indeed, the company needs more capital to engage in the development project near the Incheon port. Given that the project is not progressing rapidly, uncertainties over the companyEs cash flow will likely persist in the long term. 5) HHIC holds massive debt (W2. 8tr). Proceeds from the companyEs planned rights offering (estimated to at W180bn) should be only equivalent to its annual interest expenses. 6M -26. 7 -35. 5 12M -47. 9 -54. 3 Share price 120 110 100 90 80 70 60 50 40 1/12 5/12 9/12 1/13 KOSPI Earnings & Valuation MetricsFY 12/10 12/11 12/12F 12/13F 12/14F Revenue OP OP Margin NP (Wbn) (Wbn) (%) (Wbn) 3,168 120 3. 8 -72 2,8 92 108 3. 7 -97 2,547 63 2. 5 -103 2,795 76 2. 7 -10 3,071 83 2. 7 -32 EPS EBITDA FCF ROE (Won) (Wbn) (Wbn) (%) -1,496 312 487 -3. 6 -2,006 200 -224 -5. 1 -2,123 148 243 -5. 7 -158 195 182 -0. 6 -466 184 146 -1. 8 P/E (x) P/B (x) 1. 0 0. 5 0. 4 0. 4 0. 4 EV/EBITDA (x) 14. 5 19. 9 24. 0 16. 9 18. 0 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 Daewoo Securities Research 14 January 17, 2013 Shipbuilding Hanjin Heavy I (097230 KS/Hold) Comprehensive Income Statement (Summarized) Wbn) Revenues Cost of Sales Gross Profit SG Expenses Operating Profit (Adj) Operating Profit Non-Operating Profit Net Financial Income Net Gain from Inv in Associates Pretax Profit Income Tax Profit from Continuing Operations Profit from Discontinued Operations Net Profit Controlling Interests Non-Controlling Interests Total Comprehensive Profit Controlling Interests Non-Controllin g Interests EBITDA FCF (Free Cash Flow) EBITDA Margin (%) Operating Profit Margin (%) Net Profit Margin (%) 12/11 2,892 2,665 227 140 87 108 -190 171 -2 -82 15 -97 0 -97 -97 0 -90 -90 0 200 -224 6. 9 3. 7 -3. 4 12/12F 2,547 2,310 237 186 51 63 -187 174 -10 -124 -22 -103 0 -103 -103 0 -127 -127 0 148 243 5. 8 2. 5 -4. 0 12/13F 2,795 2,516 280 204 76 76 -89 159 -5 -13 -3 -11 0 -11 -10 0 -35 -34 0 195 182 7. 0 2. 7 -0. 4 12/14F 3,071 2,764 307 224 83 83 -125 150 0 -42 -9 -33 0 -33 -32 0 -57 -56 0 184 146 6. 0 2. 7 -1. 1 Statement of Financial Condition (Summarized) Wbn) Current Assets Cash and Cash Equivalents AR & Other Receivables Inventories Other Current Assets Non-Current Assets Investments in Associates Property, Plant and Equipment Intangible Assets Total Assets Current Liabilities AP & Other Payables Short-Term Financial Liabilities Other Current Liabilities Non-Current Liabilities Long-Term Financial Liabilities Other Non-Current Liabilities Total Liabilities Controlling Inter ests Capital Stock Capital Surplus Retained Earnings Non-Controlling Interests Stockholders' Equity 12/11 2,392 854 917 361 237 4,645 66 3,144 89 7,037 2,483 811 1,603 69 2,687 2,317 329 5,170 1,864 241 644 814 2 1,867 12/12F 2,058 686 868 280 209 4,535 81 2,980 89 6,592 2,286 802 1,421 63 2,566 2,177 336 4,852 1,738 241 644 712 2 1,740 12/13F 2,077 617 925 294 228 4,487 76 2,871 89 6,564 2,384 895 1,421 69 2,369 1,977 338 4,753 1,809 346 644 701 2 1,810 12/14F 2,025 422 1,016 322 250 4,412 76 2,780 89 6,437 2,479 983 1,421 76 2,204 1,777 373 4,683 1,752 346 644 669 2 1,754 Cash Flows (Summarized) Wbn) Cash Flows from Op Activities Net Profit Non-Cash Income and Expense Depreciation Amortization Others Chg in Working Capital Chg in AR & Other Receivables Chg in Inventories Chg in AP & Other Payables Income Tax Paid Cash Flows from Inv Activities Chg in PP&E Chg in Intangible Assets Chg in Financial Assets Others Cash Flows from Fin Activities Chg in Financial Liabilities Chg in Equi ty Dividends Paid Others Increase (Decrease) in Cash Beginning Balance Ending Balance 12/11 -228 -97 246 113 0 44 -379 -192 -42 -150 2 68 -15 0 -43 126 -106 91 1 0 -198 -262 1,116 854 12/12F 316 -103 265 97 0 16 131 23 77 33 22 9 -21 0 -14 44 -488 -297 0 0 -192 -168 854 686 12/13F 194 -11 206 120 0 25 -4 -57 -13 92 3 11 -10 0 0 21 -275 -200 105 0 -180 -70 686 617 12/14F 165 -33 216 101 0 25 -28 -91 -29 88 9 10 -10 0 0 20 -370 -200 0 0 -170 -194 617 422 Forecasts/Valuations (Summarized)P/E (x) P/CF (x) P/B (x) EV/EBITDA (x) EPS (W) CFPS (W) BPS (W) DPS (W) Payout ratio (%) Dividend Yield (%) Revenue Growth (%) EBITDA Growth (%) Operating Profit Growth (%) EPS Growth (%) Accounts Receivable Turnover (x) Inventory Turnover (x) Accounts Payable Turnover (x) ROA (%) ROE (%) ROIC (%) Liability to Equity Ratio (%) Current Ratio (%) Net Debt to Equity Ratio (%) Interest Coverage Ratio (x) 12/11 57. 4 0. 5 19. 9 -2,006 323 36,806 0 0. 0 0. 0 -8. 7 -35. 9 -9. 8 RR 3. 3 8. 9 3. 2 -1. 3 -5. 1 2 . 4 276. 9 96. 3 163. 0 0. 5 12/12F -112. 3 0. 4 24. 0 -2,123 -111 34,182 0 0. 0 0. 0 -11. 9 -25. 9 -41. 8 RR 3. 3 8. 0 3. 9 -1. 5 -5. 7 1. 4 278. 9 90. 0 166. 5 0. 3 12/13F 5. 9 0. 4 16. 9 -158 1,691 24,843 0 0. 0 0. 0 9. 8 31. 8 20. 1 RR 3. 6 9. 8 4. 1 -0. 2 -0. 6 2. 1 262. 6 87. 1 152. 8 0. 4 12/14F 10. 1 0. 4 18. 0 -466 989 24,030 0 0. 0 0. 0 9. 9 -5. 8 9. 9 RR 3. 6 10. 0 4. 0 -0. 5 -1. 8 2. 4 267. 0 81. 7 157. 4 0. 5 Source: Company data, KDB Daewoo Securities Research estimates KDB Daewoo Securities Research 15January 17, 2013 Shipbuilding Important Disclosures & Disclaimers Disclosures As of the publication date, Daewoo Securities Co. , Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of Hyundai Heavy Industries and Samsung Heavy Industries as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies. As of the publication date, Daewoo Securities Co. , Ltd. has been acting as a financi al advisor to Hyundai Mipo Dockyard for its treasury stock trust, and other than this, Daewoo Securities has no other special interests in the companies covered in this report.As of the publication date, Daewoo Securities Co. , Ltd. issued equity-linked warrants with Hyundai Heavy Industries and Samsung Heavy Industries as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies. Stock Ratings Buy Trading Buy Hold Sell Relative performance of 20% or greater Relative performance of 10% or greater, but with volatility Relative performance of -10% and 10% Relative performance of -10% Industry Ratings Overweight Neutral Underweight Fundamentals are favorable or improving Fundamentals are steady without any material changes Fundamentals are unfavorable or worsening Ratings and Target Price History (Share price (—-), Target price (—-), Not covered ( ¦), Buy (^), Trading Buy ( ¦), Hold (? ), Sell (? )) * Our inves tment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analystEs estimate of future earnings. The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions. W) 800,000 600,000 400,000 200,000 0 1/11 7/11 1/12 7/12 1/13 Hyundai Heavy Industries (W) 60,000 50,000 40,000 30,000 20,000 10,000 0 1/11 7/11 1/12 7/12 1/13 Samsung Heavy Industries (W) 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 1/11 7/11 1/12 7/12 1/13 Hyundai Mipo Dockyard (W) 50,000 40,000 30,000 20,000 10,000 0 1/11 7/11 1/12 7/12 1/13 Hanjin Heavy I&C Analyst Certifica tion The research analysts who prepared this report (the „Analysts†°) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof.Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. Daewoo Securities Co. , Ltd. policy prohibits its Analysts and members of their households from owning securities of any company in the AnalystEs area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report.No part of t he compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Daewoo Securities Co. , Ltd. except as otherwise stated herein. Disclaimers This report is published by Daewoo Securities Co. , Ltd. 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Daewoo Securities Research 16 January 17, 2013 Shipbuilding Distribution United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. n the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the „Order†°), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as „Relevant Persons†°). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: This report is distributed in the U. S. by Daewoo Securities (America) Inc. , a member of FINRA/SIPC, and is only intended for major institutional investors as defined in Rule 15a-6(b)(4) under the U. S. Securities Exchange Act of 1934. All U. 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