shipbuilding monthly 120731 final

1

Paths vary depending on earnings

Hope for European recovery in Aug bodes well for shipbuilders: SHI is our top pick In Jul, shipbuilding stocks underperformed the Kospi due to mounting concerns about earnings erosion at Hyundai Heavy Industries (HHI) and worsening macro conditions possibly slowing orders in 2H12. But in Aug, stocks should rebound on expectations that Europe’s debt crisis will ease. But given the lingering concern about earnings, stocks are expected to take different paths. We expect Samsung Heavy Industries (SHI) to be the most bullish backed by stable earnings and orders. As the weighting of high-margin offshore plants has posted the fastest growth among overall sales, SHI should deliver the healthiest 2Q12 earnings among Korea’s Big-3 shipyards that include HHI and Daewoo Shipbuilding & Marine Engineering (DSME). In addition, SHI holds a number of option contracts for drillships and is currently bidding for more offshore projects, including the Egina floating production storage and offloading (FPSO) unit in Nigeria. As such, the shipbuilder should continue to see a strong order inflow in 2H12. The stock’s valuation burden has eased, trading at 10.2x 2012F PE and 9.7x 2013F PE, after pulling back on recent macro concerns. Issue analysis: FID nears for US’ Sabine Pass LNG terminal The final investment decision (FID) draws near for Cheniere Energy’s Sabine Pass LNG receiving/export terminal, the first of its kind in the US. The site can accommodate up to four LNG trains to process 18mn tonnes p.a. At present, Cheniere Energy has long-term contracts with several companies including UK-based BG and Korea Gas Corp. (KOGAS) to supply a total of 16mn tonnes of LNG p.a. Thanks to a surge in US shale gas production and advanced technology, a long-term contract for the Sabine Pass project should offer a considerable edge in price, even after considering liquefaction and transportation costs, compared to the existing oil price-linked LNG contracts. The FID should soon be made for trains 1 and 2 whose financing is in the final phase and the trains will be ready for use beginning in 2015. Since the four trains can process enough gas to fill 20-30 LNG carriers, related shipbuilding orders are expected. Korean shipbuilders welcome the news of the imminent FID for the Sabine Pass as they virtually dominate the LNG carriers market. Key charts for the month 1) Newbuilding prices for containerships: In Jul, newbuilding prices were pulled down by HHI winning orders for 10 containerships (13,800 TEU capacity) from Evergreen. The deal was done at USD8,400/TEU, well below the average newbuilding price of USD12,701/TEU in Jun. 2) Second-hand ship sales volume and prices: Second-hand ship sales volume increased in 1H12, mostly for small and midsize ships. However, second-hand ship prices continued to fall and reached a record low. This is because ship owners are selling aged small and midsize ships at cheaper prices as more bulkers and containerships are being delivered. 3) International oil prices: After sliding at end-Jun and triggering concern about offshore plant orders, international oil prices rebounded in Jul and remained high. Financing for energy-related ships such as offshore plants are fairly unaffected by Europe’s debt woes. Thus, Korea’s Big-3 shipbuilders should continue to enjoy strong order momentum in 2H12.

Sector Monthly / Shipbuilding

Shipbuilding Monthly

July 31, 2012

Top picks

Company Rating TP (KRW)

SHI (010140) BUY 57,000

Contents

I. Issue analysis: FID is drawing near for US’ Sabine

Pass LNG terminal ................................................................ 2

1. Funding mostly completed; Now gearing up for FID

2. Concerns overblown regarding US LNG’s competition

against Australian LNG

II. Monthly trends and investment strategy ............... 4

1. Shipbuilding sector performance in Jul

2. Aug investment strategy

3. Coverage valuations and share prices

4. Important news stories in Jul

III. Orders and ship financing trends ...................... 8

1. Big-3’s order receipts as of 2012

2. Offshore plant orders in the pipeline

3. 2012 LNG carrier and drillship tender list

4. Recent ship financing market trends

IV. Sector-related charts ................................................. 14

1. Newbuilding prices

2. New contracting market

3. Second-hand ship market

4. Fleet capacity and orderbook

5. Freight rates/raw material prices/FX rates

6. Containership market

7. Share performance

Richard Park, CFA

82-2-3276-6175

[email protected]

Chulhee Cho

82-2-3276-6189

[email protected]


1

Key charts for the month

Drop in average newbuilding prices is due mainly to HHI winning orders to build 10

Evergreen 13,800 TEU containerships

10,000

14,000

18,000

22,000

26,000

30,000

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Containership av g. newbuilding price(USD/TEU)

Source: Clarkson, Korea Investment & Securities

Despite rise in second-hand ship sales in 1H12, second-hand prices have fallen to

record lows

0

50

100

150

200

250


120

160

200

240

280

320

Secondhand sales v olume (L)

Clarksons secondhand price index (R)(units) (index)

Source: Clarkson, Korea Investment & Securities

Crude oil prices remain high at ~USD100/bbl after rebounding from a sharp drop

0

20

40

60

80

100

120

140

160

Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

Crude Oil - Dubai

(USD/bbl)

Source: DataStream, Korea Investment & Securities

HHI won orders for 10 containerships; Each

with 13,800 TEU capacity and priced at

USD8,400/TEU

Despite rise in sales in 1H12, second-hand ship

prices have fallen to record lows

Oil prices remain high ~USD100/bbl, pushing

oil majors to develop offshore resources


2

Issue analysis: FID is drawing near for US’

Sabine Pass LNG terminal

1. Funding mostly completed; Now gearing up for FID

A final investment decision (FID) is drawing closer for the US’ Sabine Pass LNG receiving/export terminal. If the project goes ahead planned, it would be the US’ first such terminal. The site located in Cameron Parish, Louisiana, will feature four LNG trains capable of processing 18mn tonnes of natural gas p.a. The Sabine Pass LNG, owned by Cheniere Energy Partners, has concluded long-term supply contracts with the BG Group, KOGAS and others for 16mn tonnes p.a. after gaining approval from the US Department of Energy (DoE) and the Federal Energy Regulatory Commission (FERC). The funding for export trains 1 and 2 is in the final phase and a total of USD5.4bn (equity USD2bn, debt USD3.4bn) is in place. Final talks for an additional USD200mn loan are currently ongoing and the FID is drawing closer. When export trains 1 and 2 come on stream in 2015, LNG exports would start in earnest. In line with the LNG export schedule, new orders for LNG carriers should be placed as well. With four trains fully operational from 2017, 20 to 30 LNG carriers should be put into operation. LNG carriers to ship LNG would come from newbuilds or long-term charters of existing ships. For Korean shipbuilders who dominate in winning LNG carrier newbuilding orders, the impending FID for Sabine Pass is like a heavy rain in the LNG carrier order drought. So far in 2012, only 18 orders have been tendered due to a delay in gas field development that has occurred simultaneously worldwide. Given the total 52 LNG carrier tenders in 2011, the YTD orders for 18 is quite few.

Sabine Pass LNG terminal process

Source: Cheniere Energy, Korea Investment & Securities

FID imminent for the US’ first LNG export

terminal

Currently in the final funding phase for

export trains 1 and 2

20-30 LNG carriers to be put into operation;

Good news for Korean shipbuilders who

dominate LNG carrier newbuilding orders


3

2. Concerns overblown regarding US LNG’s competition

against Australian LNG

The prices of natural gas are much lower in the US than in Europe and Asia

because of soaring production volume and advanced technology. LNG supplied

from Cheniere Energy’s Sabine Pass project in a long-term contract will be priced

according to natural gas prices in the US. That means the Sabine Pass LNG will

offer a considerable price edge, even after considering liquefaction and

transportation costs, compared to the existing oil price-linked LNG contracts.

According to Cheniere Energy, LNG exported to Asia should be priced at

USD9.35/MMBtu (based on the Henry Hub price of USD3/MMBtu). Meanwhile,

Japan recently imported LNG at a much higher price of USD17/MMBtu. For that

reason, concerns are raised that the US-produced gas will replace Australian gas

and have negative effects on overall gas field development in Australia.

Sabine Pass: LNG export cost estimates LNG prices

0

2

4

6

8

10

12

14

16

18

20


Japan LNG import price

Henry Hub natural gas price

(USD/MMBtu)

Source: Cheniere Energy, Korea Investment & Securities Source: Bloomberg, Datastream, Korea Investment & Securities

But we believe the concerns are overblown. First, the Australian gas field projects

of late have a breakeven point at the USD6-8/MMBtu (free-on-board basis). Even

after considering the cost of transportation to Asia, Australian gas is price

competitive over US gas imported at USD9.35/MMBtu if the prices are set in the

range between USD8-10/MMBtu. Second, the US government will very likely rein

in exports to maintain domestic LNG prices lower. Thus, the US-based LNG

exporters will not likely secure LNG that is sufficient to replace Australian LNG.

BEP for recent gas field development projects: USD8-10/MMBtu (assuming 12% IRR)

0

2

4

6

8

10

12

MLNG

MLNG

Dua

NW

S

Qata

rgas

NLNG

Atla

ntic

RasG

as

OLNG

Atla

ntic

RasgG

as II

Atla

ntic

Qalh

at L

NG

MLNG

Tig

a

ELNG

1

Dam

ietta

Darw

in

EG

LN

G

Snohvit

Tangguh

Sakhalin

2

Yem

en L

NG

Qata

rgas 2

RL 3

Peru

LNG

Angola

LNG

Plu

to

Gorg

on

GLNG

PNG

LNG

QC

LNG

Ichth

ys

APLN

G

Wheats

tone

Pre

lude

LNG FOB breakeven price - 12%IRR

(USD/MMBtu)

Source: Wood Mackenzie, Korea Investment & Securities

Concern is that US’

development of low-

cost LNG will hamper

gas field development

in Australia

Australian gas field

development will

continue and more than

break even, even after

considering

transportation costs


4

II. Monthly trends and investment strategy

1. Shipbuilding sector performance in Jul

In Jul, the KIS Universe shipbuilding sector returned -9.5%, a much worse

performance than the -1.1% for the overall KIS Universe. Shipbuilding stocks

remained bearish as 2H12 orders are expected to slow on macro concerns in

Europe. HHI’s performance was especially poor in Jul. The stock’s return shed

12.0% in Jul alone. With 2H12 losses likely for Hyundai Oilbank, a key

consolidated operation, concern about poor 2Q12 earnings at HHI led to big

corrections.

KIS Universe returns by sector

(12)

(9)

(6)

(3)

0

3

6

9

12

Telecom Services

Oil Refining

Holding Companies

Trading Companies

Energy/Utilities

Machinery

Semiconductors

Pharm

aceuticals/Bio

Displays

Internet/Software

Chemicals

Telecom Equipment

Auto

Media/Ads

Steel & Nonferrous

Universe

Small Caps

Food, Beverages &

Insurance

Transportation

Hotels & Leisure

Securities

Electronic

Retail

Cosmetics

Construction

Banks

Shipbuilding

Fashion

(%)

Source: Korea Investment & Securities

2. Aug investment strategy

In Aug, SHI should be the most bullish among Korean shipbuilders. It has been

receiving steady orders that amount to USD6.5bn YTD. In particular, the weighting

of lucrative offshore plants has posted the fastest growth among overall sales.

Thus, SHI should deliver the healthiest 2Q12 earnings among Korea’s Big-3

shipyards. In addition, the company holds a number of drillship options and is

currently bidding for more offshore projects such as the Egina FPSO unit in Nigeria.

As such, the shipbuilder should continue to see a strong order inflow in 2H12.

Moreover, the stock’s valuation burden has eased, trading at 10.2x 2012F PE and

9.7x 2013F PE, after pulling back on recent macro concerns. We maintain SHI as

top pick in the shipbuilding sector as the company should enjoy the most stable

earnings and orders among the Big-3.

Shipbuilding viewpoints in Aug

Timing Topic Description

1 From early Aug

2Q12 earnings release by shipbuilders

- Shipbuilders will start to release 2Q12 earnings in Aug; SHI to deliver the healthiest earnings among the Big-3; Poor earnings expected for HHI as the commercial ship market continues to slow and Hyundai Oilbank will likely make a 2Q12 loss; DSME will likely see bigger losses at its subsidiary Daewoo-Mangalia Heavy Industries shipyard

2 Aug to 3Q12 Announcement of offshore project winners in Aug

- In Aug, final winners for the Nigeria Egina FPSO (USD2.5bn) and Angola Mafumeira Sul platform (USD2.3bn) should be announced; HHI and SHI are final competitors for the Egina FPSO; DSME will likely win the Mafumeira Sul platform



5

3. Coverage valuations and share prices

Coverage valuations

FY SHI DSME HHI HMD HHIC

Code 010140 042660 009540 010620 097230

Recommendation BUY BUY BUY BUY BUY

TP (KRW) 57,000 47,000 310,000 200,000 28,000

Current price (Jul 27, KRW) 36,000 23,300 226,500 112,500 11,700

Upside (%) 58.3 101.7 36.9 77.8 139.3

Market cap (Jul 27, W bn) 8,242 4,383 17,100 2,220 555

Sales 2010 13,146 12,989 37,342 4,138 3,190

(W bn) 2011 13,392 13,903 53,712 4,624 2,892

2012F 14,547 13,923 54,220 4,445 3,008

2013F 15,149 14,786 54,201 4,246 3,429

OP 2010 1,433 1,203 5,532 683 219

(W bn) 2011 1,160 1,104 4,536 378 108

2012F 1,066 655 2,620 202 147

2013F 1,133 827 2,368 184 195

OPM 2010 10.9 9.3 14.8 16.5 6.9

(%) 2011 8.7 7.9 8.4 8.2 3.7

2012F 7.3 4.7 4.8 4.5 4.9

2013F 7.5 5.6 4.4 4.3 5.7

EPS 2010 4,626 4,056 75,873 25,270 (1,077)

(KRW) 2011 3,930 3,631 46,337 10,201 (2,012)

2012F 3,538 1,750 25,593 8,529 (403)

2013F 3,712 2,310 22,712 7,817 655

ROE 2010 28.7 20.9 34.5 14.6 (2.5)

(%) 2011 19.4 15.9 16.7 5.5 (4.9)

2012F 15.4 7.1 9.2 5.1 (1.0)

2013F 14.2 8.9 7.6 4.5 1.7

PE 2010 8.9 9.0 5.8 8.9 NM

(x) 2011 7.1 6.7 5.5 11.0 NM

2012F 10.2 13.3 8.9 13.2 NM

2013F 9.7 10.1 10.0 14.4 17.9

PB 2010 2.0 1.7 2.1 1.1 0.9

(x) 2011 1.2 1.0 1.1 0.7 0.5

2012F 1.4 0.9 0.9 0.7 0.3

2013F 1.2 0.9 0.9 0.6 0.3

EV/EBITDA 2010 7.0 6.6 6.2 4.0 13.0

(x) 2011 5.0 6.4 5.0 3.7 16.1

2012F 7.7 10.6 8.0 7.1 12.3

2013F 6.3 8.2 8.0 7.4 8.7

Source: Company data, Korea Investment & Securities

Shipbuilding stock returns (KRW, %)

Share price Absolute returns Returns relative to Kospi

Jul 27 1w 1m 3m 6m YTD 1yr 1w 1m 3m 6m YTD 1yr

Kospi 1,829 0.3 0.6 (7.4) (6.9) 0.2 (15.9)

HHI 226,500 0.2 (11.7) (21.6) (26.2) (11.9) (45.7) (0.1) (12.3) (14.2) (19.3) (12.1) (29.8)

SHI 36,000 (0.3) 0.4 (8.6) 4.8 29.0 (19.1) (0.6) (0.2) (1.2) 11.7 28.8 (3.2)

DSME 23,300 (5.9) (10.7) (23.1) (11.2) (4.1) (39.7) (6.2) (11.4) (15.7) (4.3) (4.3) (23.9)

HMD 112,500 (3.9) (2.6) (7.0) (7.8) 0.5 (32.8) (4.2) (3.2) 0.4 (0.9) 0.3 (17.0)

HHIC 11,700 (5.3) (16.4) (29.3) (43.6) (36.9) (63.0) (5.6) (17.1) (21.9) (36.7) (37.1) (47.1)



6

Global peer group valuation (W bn, %, x)

Company Market

cap

Sales OPM PE PB EV/EBITDA ROE

11 12F 13F 11 12F 13F 11 12F 13F 11 12F 13F 11 12F 13F 11 12F 13F

HHI 17,100 53,712 54,220 54,201 8.4 4.8 4.4 5.5 8.9 10.0 1.1 0.9 0.9 5.0 8.0 8.0 16.7 9.2 7.6

DSME 4,383 13,903 13,923 14,786 7.9 4.7 5.6 6.7 13.3 10.1 1.0 0.9 0.9 6.4 10.6 8.2 15.9 7.1 8.9

SHI 8,242 13,392 14,547 15,149 8.7 7.3 7.5 7.1 10.2 9.7 1.2 1.4 1.2 5.0 7.7 6.3 19.4 15.4 14.2

HMD 2,220 4,624 4,445 4,246 8.2 4.5 4.3 11.0 13.2 14.4 0.7 0.7 0.6 3.7 7.1 7.4 5.5 5.1 4.5

HHIC 555 2,892 3,008 3,429 3.7 4.9 5.7 NM NM 17.9 0.5 0.3 0.3 16.1 12.3 8.7 (4.9) (1.0) 1.7

Korean shipbuilder avg. 7.4 5.3 5.5 7.6 11.4 12.4 0.9 0.8 0.8 7.2 9.2 7.7 10.5 7.2 7.4

Mitsui Engineering & Shipbuilding

1,208 8,399 7,926 8,274 5.8 4.9 3.4 5.4 6.2 9.2 0.5 0.5 0.4 4.0 4.6 6.1 12.5 9.8 7.6

Sumitomo Heavy Industries 2,822 7,728 8,847 8,966 7.8 7.4 7.1 8.5 9.3 8.2 0.7 0.7 0.7 3.6 3.5 3.8 3.7 8.9 7.7

Mitsubishi Heavy Industries 15,002 40,133 39,958 42,879 3.4 4.1 4.5 42.7 39.0 18.6 0.8 0.8 0.8 8.3 8.0 7.7 1.1 2.4 2.3

Japanese shipbuilder avg. 5.7 5.5 5.0 18.8 18.1 12.0 0.7 0.7 0.6 5.3 5.3 5.9 5.8 7.0 5.8

Guangzhou Shipyard Intl. -A 1,299 1,366 1,363 1,435 6.0 4.0 3.6 12.8 19.2 20.5 2.5 2.1 1.5 9.2 13.5 14.5 14.6 12.1 8.6

China CSSC Holdings –A 5,493 4,734 3,571 3,693 9.6 13.0 10.9 9.9 13.4 16.1 1.7 1.6 1.4 6.6 6.4 6.9 13.9 12.1 9.5

Chinese shipbuilder avg. 7.8 8.5 7.3 11.3 16.3 18.3 2.1 1.8 1.5 7.9 9.9 10.7 14.3 12.1 9.1

Sembcorp Marine 9,306 3,783 4,381 5,289 17.6 15.2 14.4 14.6 15.4 13.8 3.7 3.9 3.4 10.5 10.2 8.9 26.9 26.3 26.6

Keppel Corp. 18,215 8,752 11,874 11,868 18.7 17.9 15.9 13.8 11.2 12.6 2.5 2.3 2.2 12.7 10.4 11.4 20.1 21.8 17.5

STX OSV Holdings 1,682 2,410 2,274 2,355 14.6 12.9 11.5 7.2 8.0 8.5 2.7 2.2 1.9 3.2 3.6 3.8 42.4 29.5 24.0

Singaporean shipbuilder avg.

17.0 15.3 13.9 11.9 11.6 11.6 3.0 2.8 2.5 8.8 8.1 8.0 29.8 25.8 22.7

Note: Japanese firms are the year ended Sep; Valuation indicators are Bloomberg consensus Source: Bloomberg, Korea Investment & Securities

Shipbuilder performance relative to Kospi (2012) Relative returns of five shipbuilders over the past year

-50

-40

-30

-20

-10

0

10

20

30

40

Kospi

Hyundai Heavy

Ind.

Samsung

Heavy Ind.

DSME

Hyundai Mipo

Dockyard

Hanjin Heavy

Ind.

Share price performance Relative performance to Kospi

(%)

0

25

50

75

100

125

150

Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

Kospi HHI SHI DSME

HMD HHIC

(2011.07.26=100)

Source: Datastream, Korea Investment & Securities Source: Datastream, Korea Investment & Securities


7

4. Important news stories in Jul

Summary of key monthly headlines

Date Event Details and implications

1 Jun 29, 2012 Petronas shortlisted two consortiums that include SHI to build its floating LNG (FLNG) production unit

- Petronas chose two consortiums – SHI with JGC and IHI Shipbuilding Corp. with CB&I, Modec and Toyo Engineering – to build its second FLNG production unit - The two consortiums will start working on front-end engineering and design (FEED) - Consortiums that included DSME and HHI were eliminated

2 Jul 10, 2012 Competitive edge in ship financing market is no longer exclusive to European banks

- Recently, ship financing banks in Europe lifted their interest rates as they find themselves with rather more flexibility after several leading banks withdrew from the ship financing business - But now, Chinese and Asian ship financing players are simplifying lending procedures and offering attractive lending terms, which is threatening the competitive advantages held by existing European banks - In particular, participation by export credit agencies (ECA) is noteworthy

3 Jul 13, 2012 Asian refineries are flourishing, which should be positive for the production carrier (PC) market

- More products from refineries in China, India and Pakistan are being exported to the US and Europe, which is positive for the PC market - Increase in refining capacities in the Middle East and Asia is good news for companies that make carriers used for transporting petroleum products (e.g., Hyundai Mipo Dockyard or HMD)

4 Jul 16, 2012

The Export-Import Bank of Korea (Korea Eximbank) increased ship financing aid by an additional W1trn to help offshore plant exports

- Korea Eximbank CEO Kim Yong-hwan announced a plan to increase ship financing aid by an additional W1trn to help shipbuilding and shipping industries suffering from the Europe’s debt crisis - The plan includes lowering the refund guarantee fee rate by ~5bp - At present, global ship financing market is polarized toward massive ship owners and shipbuilders - Active participation by ECAs is positive for the depressed ship financing market

5 Jul 16, 2012 Car carrier market is gaining attention for newbuilding tenders

- HMD won orders for 2+2 pure car/truck carriers (PCTC) from Greece-based Neptune Line - Clarkson also said Hyundai Glovis’ plan to tender PCTC newbuilds will be positive for the car carrier market - Beneficiaries should be Hyundai Samho Heavy Industries (HSHI) and HMD whose forte lies in building PCTCs

6 Jul 16, 2012 Mega-containership deliveries could face a bitter end

- Including options, there are 122 mega-containerships with more than 10,000 TEU capacity that will be delivered before end-2015 - With European demand falling and the eurozone crisis persisting, the market could again fall victim to an increase in fleet capacity - Moreover, 42 ships that were tendered before the financial crisis have not yet been delivered - Given that these ships are much more expensive and less fuel-efficient than those currently being tendered, the fate of the 42 ships remains uncertain

7 Jul 17, 2012 Hyundai Motor stake sale to bolster financials

- HHI announced it will sell 3.2mn (worth W732bn at Jul 16 closing price) of its 7.6mn shares in Hyundai Motor, which lowers its stake from 3.45% to 2.0%, to improve its financial health - The funds will likely be used for drillship construction and to ease the working capital burden - The stake sale is positive given that it frees investment securities that were tied up - HHI could also sell additional shares if necessary

8 Jul 17, 2012 Plunging newbuilding prices and brisk sales of used ships

- Newbuilding prices have plummeted amid a prolonged market slump; While shipbuilding tenders fell sharply on concern about fleet capacity surplus, news reports indicate sales of used ships remain brisk - The transaction volume of second-hand ships increased in 1H12 but it failed to raise charter rates; Thus, it is still too early to say when the commercial ship market will pick up

9 Jul 19, 2012 HHI’s unprecedented hits in the newbuilding market

- HHI reported the strongest order momentum entering 2H12 with new orders worth USD2bn in Jul alone (USD420mn gas pressuring platform for Carigali Hess, a joint venture between Petronas and Hess, and three car carriers worth USD360mn)

10 Jul 20, 2012 Korean shipbuilders claim 38% of global order receipts

- Korean shipbuilders continued to post the world’s largest order receipts in 1H12 for a second year backed by the selective order taking of drillships, FPSO units and LNG/LPG carriers for E&P and offshore plant businesses - Korea’s Big-3 also focused on offshore plant-related deals - The offshore order momentum should remain intact in 2H12 despite the delayed recovery for commercial ship market conditions - As such, Korean shipbuilders should continue to dominate

11 Jul 20, 2012 HMD received first of two options for LPG carriers from Geogas

- Switzerland-based Geogas has exercised the first of two options for midsize LPG carriers (355,000cbm) to be built at HMD - Among its target vessels, margins from LPG carriers are the fattest - Thus, the additional exercise of options or new orders for LPG carriers would contribute to better profitability for the shipbuilder

12 Jul 25, 2012 Seadrill inked a USD4bn charter deal for drillships

- Seadrill concluded a USD4bn long-term charter deal for three drillships (two being built by SHI and one in operation) - Seadrill has tendered six drillships to SHI; With a charter deal for two ships already signed, further charter deals for the remaining four ships should follow gradually

Source: News reports, Korea Investment & Securities


8

III. Orders and ship financing trends

1. Big-3’s order receipts as of 2012

1) HHI

2012 orders

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD

(units) Drillship 1 1

Semi-rig 1 1

Containership 10 10

Tanker 1 2 3

LPG carrier 1 2 3

LNG carrier 3 1 1 5

Special-purpose vessel 0

VLGC 2 2

PCTC 2 2 4

FSRU 0

Platform 1 1 2

Offshore transporter 0

FPSO 0

Others 2 2

Total 1 3 3 5 3 5 13 0 0 0 0 0 33

(USD bn) Drillship 0.6 0.6

Semi-rig 0.6 0.6

Containership 1.2 1.2

Tanker 0.2 0.1 0.3

LPG carrier 0.1 0.2 0.3

LNG carrier 0.7 0.2 0.2 1.1

Special-purpose vessel 0.0

VLGC 0.2 0.2

PCTC 0.1 0.1 0.3

FSRU 0.0

Platform 0.4 0.4 0.9

Offshore transporter 0.0

FPSO 0.0

Others 0.0 0.1 0.0 0.0 0.2 0.3

Total 0.1 0.8 0.4 0.5 1.6 0.6 1.7 0.0 0.0 0.0 0.0 0.0 5.6

Note: Data from news reports; May differ from official data provided by companies Source: HHI, news reports, Korea Investment & Securities


9

2) SHI

2012 orders

Jan Feb Mar Apr May Jun Jul Aug Sec Oct Nov Dec YTD

(units) Drillship 3 1 1 1 6

Tanker 0

LNG carrier 2 2

FPSO/LNG FPSO 0

Containership 0

Wind power installation vessel 0

CPF 1 1

Total 1 5 1 1 0 1 0 0 0 0 0 0 9

(USD bn) Drillship 1.7 0.6 0.6 0.6 3.4

Tanker 0.0

LNG carrier 0.4 0.4

FPSO/LNG FPSO 0.0

Containership 0.0

Wind power installation vessel 0.0

CPF 2.7 2.7

Total 2.7 2.1 0.6 0.6 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 6.5

Note: Data from news reports; May differ from official data provided by company Source: SHI, news reports, Korea Investment & Securities

3) DSME

2012 orders

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD

(units) Semi-rig 2 2

Drillship 0

FPSO 1 1 2

Containership 0

Tanker 5 5

LNG carrier 2 2

Platform 1 1

Defense 4 1 5

Total 5 5 1 2 2 2 0 0 0 0 0 0 17

(USD bn) Semi-rig 1.1 1.1

Drillship 0.0

FPSO 2.0 0.8 2.8

Containership 0.0

Tanker 0.6 0.6

LNG carrier 0.4 0.4

Platform 0.2 0.2

Defense 0.7 0.1 0.8

Total 0.6 0.9 2.0 0.4 1.1 0.9 0.0 0.0 0.0 0.0 0.0 0.0 5.8

Note: Data from news reports; May differ from official data provided by company Source: DSME, news reports, Korea Investment & Securities


10

2. Offshore plant orders in the pipeline

2012 offshore plant orders in the pipeline

Project name Amount (USD bn)

Contract timeframe

Bidders Oil major Participants

Winners/favored

Australia Ichthys CPF 2.3 Jan-Feb HHI, SHI, DSME Inpex, Total SHI (confirmed)

Australia Ichthys FPSO 2 Feb-Mar HHI, SHI, DSME Inpex, Total DSME (confirmed)

Dong Fixed Platform 0.19 1Q12-2Q12 Technip (DSME), Kvaerner, Ramboll (Heerema Fabrication Group)

Dong DSME (confirmed)

Malaysia Petronas FLNG 0.77 2Q12 DSME Petronas DSME (confirmed)

Alaska Hebron CPF 0.4 2Q12 HHI, SHI, DSME ExxonMobil HHI (confirmed)

Carigali Hess A-18 0.42 Jul SHI, DSME, 5 local firms Petronas HHI (confirmed)

Spar Platform 0.65 Jul Statoil HHI (confirmed)

Angola Mafumeira Sul Platform 2.3 3Q12 HHI, SHI, DSME, Saipem Chevron DSME promising

Nigeria Egina FPSO 2.5 3Q12 HHI, SHI, Technip (DSIC) Total SHI, HHI competing

Vietnam Block B Platform 2 4Q12 SHI (Technip), DSME (Kvaerner), McDermott Chevron SHI, DSME competing

UAE Upper Zakum EPC 2 1 4Q12~1Q13 DSME (Petrofac), HHI, SHI (Samsung Eng.) Zadco

UAE Umm al Lulu EPC 2 1 4Q12~1Q13 Technip, McDermott, HHI, DSME, SHI (Samsung Eng.)

Adma-Opco

Cat-J Jackup Rig 1 4Q12~1Q13 HHI, DSME, SHI, Keppel, Jurong Statoil

Indonesia Jangkrik FPU 2 1Q13 Technip (McDermott), Saipem (Tripatra, Chiyoda, HHI), Petrofac (DSME)

Eni FID early 2013

Indonesia Gendao-Gehem 1 1Q13

Saipem (HHI, Indonesia's Tripatra), McDermott (Indonesia's Singgar Mulia, STX O&S or SHI), Petrofac (Indonesia Inti Karya Persada Tehnik, DSME)

Chevron Pre-FEED completed

Australia Equus semi-submersible platform

2Q13~3Q13 Kvaerner, Modec, SBM Offshore, Technip FID mid-2013

Indonesia Donggi-Senoro gas production facilities

2013 IKPT (Petrofac), Adhi Karya (HHI), Tripatra (SHI), Rekaya (DSME)

UK North Sea FPSO (Mariner Project)

2013 Kvaerner (Heerema Fablication Group), DSME (CB&I), DHI (with KBR), HHI (with WorleyParsons)

Statoil

Israel Tamar FLNG 3-4 2013 DSME DSME participating as co-developer

PNG FLNG 3-4 2013 DSME DSME participating as co-developer

Gazprom Shtokman FPU 1.5 2013 SHI, DSME Delayed

Malaysia Rotan FLNG 1-1.5 2013 JGC (SHI), Toyo (CB&I, IHI), Technip (HHI), Chiyoda (Saipem, DSME)

Petronas SHI (JGC), IHI (Toyo) FEED

Excelerate FLNG 2013 Pre-FEED, SHI promising

ConocoPhillips FLNG 2013 ConocoPhillips Pre-FEED, SHI promising

Note: Data from news reports; May differ from official data provided by companies Source: News reports, Korea Investment & Securities


11

3. 2012 LNG carrier and drillship tender list

LNG carrier tenders

Contract Units Amount (USD mn)

Optional units

Delivery Shipyard Ship owner Charterer status

1 Mar 31, 2011 1 223 - Jul 2013 DSME Angelicoussis Group Charter secured (BG group)

2 Apr 11, 2011 1 200

4

2013- SHI Fredriksen Group

3 Apr 11, 2011 1 200 2013- SHI Fredriksen Group



6 Apr 11, 2011 1 200 - 2014- SHI Fredriksen Group

7 Apr 11, 2011 1 200 - 2014- SHI Fredriksen Group

8 Apr 15, 2011 1 200 2

Jul 2014 SHI GasLog Charter secured (BG Group)

9 Apr 15, 2011 1 200 Apr 2014 SHI GasLog Charter secured (BG Group)

10 May 4, 2011 1 223 - Jun 2015 DSME Angelicoussis Group Charter secured (BG Group)

11 May 4, 2011 1 223 - Jun 2014 DSME Angelicoussis Group Currently negotiating (Shell, max. 10yrs)

12 May 26, 2011 1 200 2

2014- DSME Awilco AS

13 May 26, 2011 1 200 2013- DSME Awilco AS

14 May 30, 2011 1 200 1

2013- HHI Dynacom Tankers Mgmt Charter secured (Gazprom)

15 May 30, 2011 1 200 2013- HHI Dynacom Tankers Mgmt Charter secured (Gazprom)

16 Jun 12, 2011 2 250 2 2013-2014 HHI Hoegh (FSRU)

Charter secured (Indonesia, Lithuania) Citigroup and others to provide USD290mn in financing

17 May 31, 2011 1 200 2

2014- STX SCF Group Charter secured (Gazprom Global LNG, min. 15yrs)

18 May 31, 2011 1 200 2013- STX SCF Group Charter secured (Gazprom Global LNG, min. 15yrs)

19 Jun 29, 2011 1 200 2

Feb 2014 DSME Angelicoussis Group Currently negotiating (Shell, max. 10yrs)

20 Jun 29, 2011 1 200 Oct 2013 DSME Angelicoussis Group Currently negotiating (Shell, max. 10yrs)

21 Jun 30, 2011 1 200 - Jan 2015 SHI GasLog Charter secured (BG Group)

22 Jun 30, 2011 1 200 - Oct 2014 SHI GasLog Charter secured (BG Group)

23 Jul 4, 2011 1 200 2

Apr 2014 Hyundia-Samho Angelicoussis Group Charter secured (BG Group)

24 Jul 4, 2011 1 200 Dec 2013 Hyundia-Samho Angelicoussis Group Charter secured (BG Group)

25 Jul 8, 2011 1 200 - Feb 2014 SHI Thenamaris (Mgmt)

26 Jul 8, 2011 1 200 - Oct 2013 SHI Thenamaris (Mgmt)

27 Jul 8, 2011 1 200 - 2014- SHI Fredriksen Group

28 Jul 8, 2011 1 200 - 2014- SHI Fredriksen Group

29 Jul 29, 2011 4 850 2 2014- DSME George Economou

30 Aug 18, 2011 1 200 - 2014- HHI Dynacom Tankers Mgmt Charter secured

31 Sep 14, 2011 1 200 - 2H14 SHI Thenamaris (Mgmt)

32 Sep 18, 2011 2 400 2 2014-, 2015- HHI BW

33 Oct 19, 2011 2 400 - 2014- DSME Stena AB

34 Dec 19, 2011 2 400 - 2014-, 2015- Hyundia-Samho Angelicoussis Group

35 Feb 6, 2012 1 250 - - HHI Hoegh (FSRU)

36 Feb 14, 2012 2 400 2 2015- HHI Dynacom Tankers Mgmt

37 Feb 14, 2012 2 400 - 2014- Hyundia-Samho Fredriksen Group

36 Feb 14, 2012 2 400 - 2014-, 2015- STX SCF Group

37 Feb 28, 2012 2 400 - 2Q14, 2015 SHI Fredriksen Group

38 Mar 9, 2012 1 200 - 2014 HHI Oman Shipping

39 Apr 12, 2012 2 400 - 2015 DSME Maran Gas Maritime

Note: Data from news reports; May differ from official data provided by companies Source: Company data, Korea Investment & Securities

Drillship tenders


12

Contract Amount (USD mn)

Delivery Shipyard Ship owner Financing Charter status

1 Jan 3, 2011 590 Jun 2013 HHI Diamond Offshore Charter secured (5yr contract, USD495,000/day)

2 Jan 28, 2011 600 Sep 2013 DSME Atwood Oceanics Raised USD450mn via 8yr bonds (2020 maturity)

3 Jan 30, 2011 600 Mar 2014 DSME Transocean (acquired Aker Drilling)

Raised USD3bn via bonds + equities

4 Jan 30, 2011 600 Jun 2014 DSME Transocean (acquired Aker Drilling)

Raised USD3bn via bonds + equities

5 Jan 30, 2011 605 Jun 2013 HHI Noble Corp. Raised USD1.2bn via bonds (5yr USD0.3bn, 10yr USD0.4bn, 30yr USD0.5bn)

Charter secured (5.5yr contract, USD410,000/day)

6 Jan 30, 2011 605 Dec 2013 HHI Noble Corp. Raised USD1.2bn via bonds (5-yrs USD0.3bn, 10-yrs USD 0.4bn, 30-yrs USD 0.5bn)

Charter secured (Anadarko Petroleum, 3yr contract, USD618,000/day)

7 Feb 3, 2011 590 Dec 2013 HHI Diamond Offshore Charter secured (5-yr contract, USD495,000/day)

8 Mar 7, 2011 535 May 2014 HHI Noble Corp. Raised USD1.2bn via bonds (5yr USD0.3bn, 10yr USD0.4bn, 30yrs USD0.5bn)

9 Mar 16, 2011 550 Sep 2013 SHI Pacific Drilling Raised USD0.65bn via stocks & USD0.5bn via 3yr bonds

Charter secured (Chevron, 5yr contract, USD1bn)

10 Mar 16, 2011 550 Apr 2013 SHI Pacific Drilling Raised USD0.65bn via stocks & USD0.5bn via 3yr bonds

11 Apr 6, 2011 650 Oct 2013 SHI A.P. Moller (Maersk Drilling)

Charter secured (ExxonMobil, 3yr contract)

12 Apr 6, 2011 650 Jan 2014 SHI A.P. Moller (Maersk Drilling)

13 Apr 11, 2011 600 Sep 2013 SHI Seadrill Raised USD550mn via loans (10yr loan with 5yr grace period)

14 Apr 15, 2011 615 Oct 2013 HHI Fred Olsen Energy AS

Charter secured (Anadarko Petroleum, 4yr contract, USD618,000/day)

15 Apr 19, 2011 638 Jul 2013 SHI Dryships (Ocean Rig) Raised USD0.8bn via loans & USD0.5bn via 3yr bonds Established funding source via IPO in 3Q11

16 Apr 28, 2011 638 Oct 2013 SHI Dryships (Ocean Rig) Raised USD0.8bn via loans & USD0.5bn via 3yr bonds Established funding source via IPO in 3Q11

17 May 1, 2011 607.6 Jul 2013 SHI Oceania Shipholding

18 May 10, 2011 590 May 2013 DSME Vantage Drilling Raised USD230mn via 4yr bonds (2015 maturity)

19 May 19, 2011 610 May 2014 HHI Diamond Offshore

20 Jun 1, 2011 655 Dec 2013 HHI Rowan Companies To raise funds via operating cash flow and short-term loans

21 Jun 1, 2011 655 Jun 2014 HHI Rowan Companies To raise funds via operating cash flow and short-term loans

22 Jun 24, 2011 638 Nov 2013 SHI Dryships (Ocean Rig) Raised USD0.8bn via loans & USD0.5bn via 3yr bonds Established funding source via IPO in 3Q11

23 Jul 6, 2011 650 Apr 2014 SHI A.P. Moller (Maersk Drilling)

24 Jul 6, 2011 650 Jul 2014 SHI A.P. Moller (Maersk Drilling)

25 Aug 1, 2011 630 Aug 2014 HHI Noble Corp. Raised USD1.2bn via bonds (5yr USD300mn, 10yr USD400mn, 30yr USD500mn)

26 Sep 7, 2011 600 2H14 DSME Songa Offshore (Semi-rig)

Raised USD250mn via 5yr bonds Charter secured (Statoil, 8yr contract)

27 Sep 7, 2011 600 2H14 DSME Songa Offshore (Semi-rig)

Raised USD250mn via 5yr bonds Charter secured (Statoil, 8yr contract)

28 Oct 18, 2011 600 Jun 2014 DSME Atwood Oceanics Raised USD 450mn via 8yr bonds

29 Nov 1, 2011 655 Sep 2014 HHI Rowan Companies To raise funds via operating cash flow and short-term loans

30 Feb 24, 2012 1,100 (2 units)

3Q14 SHI Seadrill

31 Mar 19, 2012 550 2014 SHI Pacific Drilling To raise funds via commercial paper, long-term loans and cash on hand

32 Apr 5, 2012 550 2014 SHI Ensco

33 May 2, 2012 550 2014 SHI Seadrill

34 May 3, 2012 1,100 (2 units)

2014 DSME Songa Offshore (Semi-rig)

Charter secured (Statoil, 8yr contract)

35 May 29, 2012 700 2015 HHI Fred Olsen (Semi-rig)

36 Jun 29, 2012 550 2014 SHI Ensco

Note: Data from news reports; May differ from official data provided by companies Source: Company data, Korea Investment & Securities


13

4. Recent ship financing market trends

Recent bank debt deal table

Updated Company Bank Amount (USD mn)

Remarks

Jul 12 Lewek Constellation Pte DNB, DBS 273

Jul12 Vestland PSV AS DNB, GIEK 129 Funds to tender four PSV units

Jul 12 AMC Connector AS DNB, GIEK 215 Funds to tender ships

Jul 12 SeaCube Container Leasing 225 Funds to buy containerships

Jun 28 Sovcomflot (SCF) Group Citi, BofA Merrill Lynch 140 Funds to tender two VLCC units

Jun 28 Bourbon 8 French banks, 6 foreign banks 535

Jun 21 Angelicoussis Shipping Group Citi, Commonwealth Bank of Australia, Credit Suisse, Deutsche Bank, DNB, Nordea

1,250 Funds to tender nine LNG carriers (scheduled to be delivered through 2013 to 2015 )

May 24 SinOceanic Shipping ASA 100

May 24 Fairstar Heavy Transport NV ING 247

May 3 Textainer Group Holdings Wells Fargo, ABN AMRO, Bank of America, Credit Suisse, Deusche Bank, etc.

1,200

Apr 26 Pacific Drilling Citi, DNB, Credit Agricole, ABN AMRO, Nordea, SEB, DVB, Fokus Bank, NIBC

200 Funds to buy two drillships

Apr 26 Delek Drilling HSBC, Barclays 400 Funds for equity participation in Tamar project

Apr 27 Avner Oil Exploration HSBC, Barclays 400 Funds for equity participation in Tamar project

Apr 28 Dor Gas Exploration HSBC, Barclays 102 Funds for equity participation in Tamar project

Apr 5 GasLog DNB, KEXIM 273 Funds to tender two LNG carriers (USD192mn by KEXIM)

Jan 5 GasLog DnB NOR Bank ASA, SEB, ING, Danish Ship Finance, Commonwealth Bank of Australia

435 Funds to tender three LNG carriers

Jan 5 Seadrill DnB NOR Bank ASA, ABN AMRO, Nordea Bank, Citi, Swedbank

550 Funds for drillship delivery

Source: Marine Money, Korea Investment & Securities

Recent equity deal table

Updated Company Underwriters/advisors Amount (USD mn)

Status Remarks

Jul 19 Golar LNG Partners Citi, BofAML, Morgan Stanley, Wells Fargo, Goldman Sachs, UBS, RBC, BNP Paribas, DNB

196 Completed Funds to tender FSRUs

Jul 12 Seadrill Partners - In process Funds to tender

drillships

Jun 28 Universal Maritime DNB, Fearnley Fonds, RS Platou - In process

Jun 14 Frontline 2012 RS Platou Markets, Arctic Securities, DNB, Carnegie 210 Completed

May 17 Capital Product Partners Evercore Partners, Kayne Anderson, Oaktree, Swank Capital, Salient Partners, etc.

140 Completed

May 10 DHT Holdings UBS, Dino Capital 73 Completed

May 10 Navios Maritime Partners Citi, JP Morgan, Wells Fargo, S. Goldman Capital, RBC, Commerzbank, DVB

72 Completed Funds for fleet expansion

Apr 26 Sebras. BTG Pactual Bank, Morgan Stanley, Citi, BBInvestimentos, HSBC, Arctic Securities, DNB

590 In process

Apr 19 Dryships Deutsche Bank, Credit Suisse, Evercore, ABN AMRO, Commerzbank, Dahlman Rose, DVB, Nordea, etc.

187 Completed


Recent bond deal table

Updated Company Arrangers/advisors Amount (USD mn)

Interest rate

Maturity

Status Remarks

Jul 12 Navios Maritime Holdings Morgan Stanley, JP Morgan, S. Goldman Capital, Commerzbank, DVB, DNB, ABN AMRO

88 8.88% 5 Completed

Jul 12 Ocean Yield AS DNB, Pareto 99 5 Completed

Jun 14 Songa Offshore SE Pareto, SEB, Swedbank First Securities 124 3 Completed For refunds

May 24 TAL International Group 250 3.86% 10 Completed Funds to buy

containerships

Apr 26 Teekay LNG Partners Pareto, Swedbank First Securities 116 5 Completed



14

IV. Sector-related charts

1. Newbuilding prices

Clarkson newbuilding prices Bulker newbuilding prices

100

120

140

160

180

200


Clarksons newbuilding price index(index)

Weak newbuilding prices

continue - commercial ship

market recovery is still some

way off

400

500

600

700

800

900

1,000


Bulker avg. newbuilding price

(USD/DWT)

Source: Clarksons, Korea Investment & Securities Source: Clarksons, Korea Investment & Securities

Tanker newbuilding prices Containership newbuilding prices

400

450

500

550

600

650

700

750

800


Tanker avg. newbuilding price(USD/DWT)

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000


Containership avg. newbuilding prcie(USD/TEU)

HHI contracted ten 13,800TEU

containerships

- price per TEU: USD8,400


Gas carrier newbuilding prices Clarkson second-hand prices

1,500

1,700

1,900

2,100

2,300

2,500

2,700


Gas carrier avg. newbuilding price(USD/DWT)

150

170

190

210

230

250

270

290

310

330


Clarksons secondhand price index(index)

Although the sales volume

increased, the price is keep

decreasing


15


Bulker second-hand prices Tanker second-hand prices

200

400

600

800

1,000

1,200

1,400

1,600


Bulker avg. secondhand price(USD/DWT)

300

400

500

600

700

800

900


Tanker avg. secondhand price(USD/DWT)


Containership second-hand prices Bulker newbuilding prices by ship type

5,000

7,000

9,000

11,000

13,000

15,000

17,000

19,000

21,000

23,000


Containership avg. secondhand price(USD/TEU)

0

20

40

60

80

100

120


Handysize 32-35K DWT

Handymax 56-58K DWT

Panamax 75-77K DWT

Panamax 80-82k DWT

Panamax 91-93k DWT

Capesize 100-115k DWT

Capesize 176-180K DWT

(USD mn)


Tanker newbuilding prices by ship type Containership newbuilding prices by ship type

0

20

40

60

80

100

120

140

160

180


Products 47-51K DWT

Panamax 73-75K DWT

Aframax 113-115K DWT

Suezmax 156-158K DWT

VLCC 315-320K DWT

(USD mn)

0

20

40

60

80

100

120

140

160

180

200


1000-1100 TEU 1600 TEU

1850-2100 TEU 3600-3800 TEU

4,800 TEU 6600-6800 TEU

8500-9100 TEU 12,800-13,500 TEU

(USD mn)



16

Bulker second-hand prices by ship type Tanker second-hand prices by ship type

0

20

40

60

80

100

120

140


Handysize 32K 10yr

Handymax 52K 10yr

Panamax 75K 10yr

Capesize 170K 10yr

(USD mn)

Weak secondhand

price trend continues

0

20

40

60

80

100

120

140

160


Products D/H 35K DWT 10yr

Panamax D/H 70K DWT 10yr

Aframax D/H 105K DWT 10yr

Suezmax D/H 150K DWT 10yr

VLCC D/H 300K DWT 10yr

(USD mn)


Containership second-hand prices by ship type Bulker second-hand price YoY changes by ship type

0

10

20

30

40

50

60


300 TEU 10yr

700/750TEU 10yr

1000/1100 TEU 10yr

1650/1750 TEU 10yr

1850/2100 TEU 10yr

2600/2900 TEU 10yr

3200/3600 TEU 10yr

(USD mn)

-35

-30

-25

-20

-15

-10

-5

0

Apr-12 Apr-12 May-12 May-12 May-12 Jun-12 Jun-12 Jul-12

Handy Supra Panamax Cape

(% YoY)

Source: Clarksons, Korea Investment & Securities Source: Marine Money, Korea Investment & Securities

Bulker second-hand prices by ship type Tanker second-hand price YoY changes by ship type

15

20

25

30

35

40

45


Handy Supra Panamax Cape

(USD mn)

-35

-30

-25

-20

-15

-10

-5

0


MR LR1 Aframax

Suezmax VLCC

(% YoY)

Source: Marine Money, Korea Investment & Securities Source: Marine Money, Korea Investment & Securities


17

Tanker second-hand prices by ship type Containership second-hand price YoY changes by ship

type

15

25

35

45

55

65

75

85

95


MR LR1 Aframax

Suezmax VLCC

(USD mn)

-50

-45

-40

-35

-30

-25

-20

-15

-10

-5

0


Feedermax Handy Sub Pmax

Panamax P-Panamax

(% YoY)

Source: Marine Money, Korea Investment & Securities Source: Marine Money, Korea Investment & Securities

Containership second-hand prices by ship type

15

25

35

45

55

65

75

85


Feedermax Handy Sub Pmax

Panamax P-Panamax

(USD mn)



18

2. New contracting market

Global new contracting Bulker new contracting

0

2

4

6

8

10

12


Global new orders

(CGT mn)

New orders

volume sharply

decreased

0

1

2

3

4

5

6


Bulker new orders(CGT mn)


Tanker new contracting Containership new contracting

0

1

2

3

4

5


Tanker new orders(CGT mn)

0

100

200

300

400

500

600


Containership new orders('000 TEU)

New order boom on mega

containerships (over 10,000TEU)

in 2011


LNG carrier new contracting Global deliveries

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000


LNG carrier new orders('000 cu.m.)

0

1

2

3

4

5

6

7


Global deliveries(CGT mn)



19

Bulker deliveries Tanker deliveries

0

2

4

6

8

10

12

14


Bulker deliveries

(DWT mn)

Bulk carrier supply-demand balance

was negatively affected as Chinese

shipbuilders delivered the orders

received from 2009 to 2010 in earnest

0

1

2

3

4

5

6

7


Tanker deliveries(CGT mn)


Containership deliveries LNG carrier deliveries

0

50

100

150

200

250

300


Containership deliveries('000 TEU)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800


LNG carrier deliveries('000 cu.m.)


Bulker delivery, fleet and seaborne trade YoY growth Tanker delivery, fleet and seaborne trade YoY growth

0

20

40

60

80

100

120

2001 2003 2005 2007 2009 2011 2013F

(5)

0

5

10

15

20

25Bulker deliveries (L)

Bulker fleet YoY growth (R)

Bulker seaborne trade YoY growth (R)

(DWT mn) (%)

0

10

20

30

40

50

60

70

2001 2003 2005 2007 2009 2011 2013F

(9)

(6)

(3)

0

3

6

9

12Tanker deliveries (L)

Tanker fleet YoY growth (R)

Tanker seaborne trade YoY growth (R)

(DWT mn) (%)

Note: Fleet capacity as of end-Jun; Annualized YTD Jun figures for throughput (seasonally adjusted by Clarksons)

Source: Clarksons, Korea Investment & Securities

Note: Fleet capacity as of end-Jun; Annualized YTD Jun figures for throughput (seasonally adjusted by Clarksons)



20

Containership delivery, fleet and seaborne trade YoY

growth

0

5

10

15

20

25

2001 2003 2005 2007 2009 2011 2013F

(20)

(10)

0

10

20

30Containership deliveries (L)

Containership fleet YoY growth (R)

Containership seaborne trade YoY growth (R)

(DWT mn) (%)

Note: Fleet capacity as of end-Jun; Annualized YTD Jun figures for throughput (seasonally adjusted by Clarksons) Source: Clarksons, Korea Investment & Securities


21

3. Second-hand ship market

Bulker second-hand sales volume (DWT) Tanker second-hand sales volume (DWT)

0

1

2

3

4

5

6

7

8


Total Handysize

Handymax Panamax

Capesize

(DWT mn)

Ship transaction volume

increased, but

secondhand ship prices

fell

0

1

2

3

4

5


Total Small

Handysize Panamax

Aframax Suezmax

(DWT mn)


Containership second-hand sales volume (TEU) Bulker second-hand sales volume (units)

0

10

20

30

40

50

60

70

80


Total

Handy

Sub Panamax

Panamax

Post Panamax

(000, TEU)

Secondhand ship

transaction volume

increased led by small

size vessels

0

20

40

60

80

100

120


Total Handysize

Handymax Panamax

Capesize

(units)

Ship transaction volume

increased,

but secondhand ship

prices fell


Tanker second-hand sales volume (units) Containership second-hand sales volume (units)

0

10

20

30

40

50

60

70

80


Total Small Handysize

Panamax Aframax Suezmax

VLCC

(units)

0

5

10

15

20

25

30

35


Feedermax

Handy

Sub Panamax

Panamax

Post Panamax

Total

(units) Secondhand ship

transaction volume

increased led by small

size vessels



22

Bulker demolitions Tanker demolitions

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Capesize

Panamax

Handymax

Handysize

Total

(DWT mn) Demolitions surged but

supply/demand still unbalanced

due to rush delivery of ships

ordered in 2010

0.0

0.5

1.0

1.5

2.0

2.5

3.0


VLCC Suezmax Aframax

Panamax Handysize Total

(DWT mn)


Containership demolitions PC tanker demolitions

0

10,000

20,000

30,000

40,000

50,000

60,000


Handy

Sub-Panamax

Panamax

Post-Panamax

3K-8K TEU

8K+ TEU

Total

(TEU)

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0


Handysize Products

Panamax Products

Aframax Products

Suezmax Products

Total

(DWT mn)


Bulker demolitions/fleet Tanker demolitions/fleet

0

1

2

3

4

5

6

7

8

9

10

1Q00 1Q02 1Q04 1Q06 1Q08 1Q10 1Q12

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8Bulker demolitions (L)

Demolitions/fleet (R)

(DWT mn) (%)

Demolition surged in 2012. Positive to

supply and demand, but the market

unlikely to recover in the near term

0

1

2

3

4

5

6

7

8

1Q00 1Q02 1Q04 1Q06 1Q08 1Q10 1Q12

0

0.5

1

1.5

2

2.5

3Tanker demolitions (L)


(DWT mn) (%)



23

Containership demolitions/fleet PC tanker demolitions/fleet

0

20

40

60

80

100

120

1Q00 1Q02 1Q04 1Q06 1Q08 1Q10 1Q12

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1Containership demolitions (L)


('000 TEU) (%)

Small-size containership led demolition

surged in 2012. Positive to

supply and demand, but the market

unlikely to recover in the near term

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

1Q00 1Q02 1Q04 1Q06 1Q08 1Q10 1Q12

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8PC tanker demolitions (L)


(DWT mn) (%)



24

4. Fleet capacity and orderbook

Bulker orderbook/fleet Tanker orderbook/fleet

0

200

400

600

800


0

25

50

75

100Bulker fleet (L)

Orderbook/fleet (R)

Bulker orderbook (L)

(DWT mn) (%)

0

150

300

450

600


0

25

50

75

100

Tanker fleet (L)

Orderbook/fleet (R)

Tanker orderbook (L)

(DWT mn) (%)


Containership orderbook/fleet LNG carrier orderbook/fleet

0

4

8

12

16

20


0

20

40

60

80

100Containership fleet (L)

Orderbook/fleet (R)

Containership orderbook (L)

(TEU mn) (%)

0

20

40

60

80


0

25

50

75

100

LNG carrier fleet (L)

Orderbook/fleet (R)

LNG carrier orderbook (L)

(Cu. M. mn) (%)


Bulker (Handysize) orderbook/fleet Bulker (Handymax) orderbook/fleet

0

10

20

30

40

50

60

70

80

90

Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11

0

5

10

15

20

25

30

35

40

45

50

Bulker (Handysize) fleet (L)

Orderbook/fleet (R)

Bulker (Handysize) orderbook (L)

(DWT mn) (%)

0

20

40

60

80

100

120

140

160


0

10

20

30

40

50

60

70

80

Bulker (Handymax) fleet (L)

Orderbook/fleet (R)

Bulker (Handymax) orderbook (L)

(DWT mn) (%)



25

Bulker (Panamax) orderbook/fleet Bulker (Capesize) orderbook/fleet

0

20

40

60

80

100

120

140

160

180


0

10

20

30

40

50

60

70

Bulker (Panamax) fleet (L)

Orderbook/fleet (R)

Bulker (Panamax) orderbook (L)

(DWT mn) (%)

0

50

100

150

200

250

300


0

20

40

60

80

100

120

140Bulker (Capesize) fleet (L)

Orderbook/fleet (R)

Bulker (Capesize) orderbook (L)

(DWT mn) (%)


Tanker (Handysize) orderbook/fleet Tanker (Panamax) orderbook/fleet

0

20

40

60

80

100

120


0

10

20

30

40

50

60

Tanker (Handysize) fleet (L)

Orderbook/fleet (R)

Tanker (Handysize) orderbook (L)

(DWT mn) (%)

0

5

10

15

20

25

30

35


0

10

20

30

40

50

60

70

Tanker (Panamax) fleet (L)

Orderbook/fleet (R)

Tanker (Panamax) orderbook (L)

(DWT mn) (%)


Tanker (Aframax) orderbook/fleet Tanker (Suezmax) orderbook/fleet

0

20

40

60

80

100

120


0

5

10

15

20

25

30

35

40

45

50

Tanker (Aframax) fleet (L)

Orderbook/fleet (R)

Tanker (Aframax) orderbook (L)

(DWT mn) (%)

0

10

20

30

40

50

60

70

80


0

10

20

30

40

50

60Tanker (Suezmax) fleet (L)

Orderbook/fleet (R)

Tanker (Suezmax) orderbook (L)

(DWT mn) (%)



26

Tanker (VLCC) orderbook/fleet Containership (Handysize) orderbook/fleet

0

20

40

60

80

100

120

140

160

180

200


0

10

20

30

40

50

60Tanker (VLCC) fleet (L)

Orderbook/fleet (R)

Tanker (VLCC) orderbook (L)

(DWT mn) (%)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0


0

5

10

15

20

25

30

35

40Containership (Handysize) fleet (L)

Orderbook/fleet (R)

Containership (Handysize) orderbook (L)

(TEU mn) (%)


Containership (sub-Panamax) orderbook/fleet Containership (Panamax) orderbook/fleet

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0


0

5

10

15

20

25

30

35

40Containership (sub-Panamax) fleet (L)

Orderbook/fleet (R)

Containership (sub-Panamax) orderbook (L)

(TEU mn) (%)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5


0

10

20

30

40

50

60

Containership (Panamax) fleet (L)

Orderbook/fleet (R)

Containership (Panamax) orderbook (L)

(TEU mn) (%)


Containership (post-Panamax) orderbook/fleet Containership (3K-8K TEU) orderbook/fleet

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0


0

20

40

60

80

100

120

140

160

180

200Containership (post-Panamax) fleet (L)

Orderbook/fleet (R)

Containership (post-Panamax) orderbook (L)

(TEU mn) (%)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5


0

50

100

150

200

250

300

350

400Containership (3K-8K TEU) fleet (L)

Orderbook/fleet (R)

Containership (3K-8K TEU) orderbook (L)

(TEU mn) (%)



27

Containership (8K+ TEU) orderbook/fleet

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0


0

100

200

300

400

500

600

700

800

900Containership (8K+ TEU) fleet (L)

Orderbook/fleet (R)

Containership (8K+ TEU) orderbook (L)

(TEU mn) (%)



28

5. Freight rates/raw material prices/FX rates

BDI HRC index

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000


BDI(index)

Bulker market unlikely to

recover in the near-term

0

500

1,000

1,500

2,000

2,500


HRC Index

(index)

Note: BDI – Baltic Dry Exchange Index Source: Clarksons, Korea Investment & Securities

Note: HRC – Howe Robinson Container Index Source: Datastream, Korea Investment & Securities

CCFI LNG carrier 1yr timecharter rates (138K-145K cu.m.)

600

700

800

900

1,000

1,100

1,200

1,300

1,400


CCFI (China Containerized Freight Index)

(index)

Historical high in May 2012

40

60

80

100

120

140

160

180

Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

LNG carrier 1yt TC: 138-145k cu.m.(USD'000/day)

Strong demand for LNG carriers

should continue

Source: Clarksons, Korea Investment & Securities Source: Fearnley, Korea Investment & Securities

Bulker timecharter rates Containership timecharter rates

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000


1yr 30,000 DWT

1yr 45,000 DWT

1yr 52,000 DWT

1yr 65,000 DWT

1yr 75,000 DWT

3yr 150,000 DWT

3yr 170,000 DWT

(USD/day)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000


Feedermax 725 TEU grd 6-12mth

Handy 1000 TEU grd 6-12mth

Sub-Panamax 2000 TEU 6-12mth

Sub-Panamax 2750 TEU 6-12mth

Panamax 3500 TEU 6-12mth

(USD/day)



29

Tanker timecharter rates PC tanker timecharter rates

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000


1yr 15-yr-old 97,000 DWT D/H Aframax

1yr 110,000 DWT D/H

1yr 15-yr-old 145,000 DWT D/H Suezmax

1yr 150,000 DWT D/H

1yr 15-yr-old 285,000 DWT D/H VLCC

1yr 310,000 DWT D/H

(USD/day)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000


1yr 37,000 DWT Modern

1yr 47-48,000 DWT Modern

1yr 74,000 DWT Modern

(USD/day)


US Gulf of Mexico 250’-300’ Jackup Day Rate Index Northwest Europe Standard Jackup Day Rate Index

0

250

500

750

1,000

1,250

Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12

0

20

40

60

80

100Day rate index (L)

Fleet % utilization (R)

(1994=100) (%)

0

250

500

750

1,000

1,250


0

20

40

60

80

100

Day rate index (L)


(1994=100) (%)

Source: HIS, Korea Investment & Securities Source: HIS, Korea Investment & Securities

2,001’-5,000’ Semi-Rig Day Rate Index 5,001’+ Floating Rig Day Rate Index

0

250

500

750

1,000

1,250


0

20

40

60

80

100

Day rate index (L)


(1994=100) (%)

0

250

500

750

1,000

1,250


0

20

40

60

80

100

Day rate index (L)


(1994=100) (%)

Source: HIS, Korea Investment & Securities Source: HIS, Korea Investment & Securities


30

Bunker price index Dubai oil prices

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Sep-07 Sep-08 Sep-09 Sep-10 Sep-11

Bunkerworld Index

(Index)

0

20

40

60

80

100

120

140

160


Crude Oil - Dubai(USD/bbl)

High oil prices continues -

stimulating oil majors' E&P

activities

Source: Bunkerworld, Korea Investment & Securities Source: Datastream, Korea Investment & Securities

WTI oil prices Brent oil prices

0

20

40

60

80

100

120

140

160


Crude Oil - WTI(USD/bbl)

High oil prices continues -


activities

0

20

40

60

80

100

120

140

160


Crude Oil - Brent(USD/bbl)

High oil prices continue -


activities


Japan LNG import prices Henry Hub (natural gas) prices

0

2

4

6

8

10

12

14

16

18


Japan LNG import price(USD/MMBtu)

Still high

0

2

4

6

8

10

12

14

16

18


Henry Hub (natural gas)

(USD/MMBTU)

Source: Bloomberg, Korea Investment & Securities Source: Datastream, Korea Investment & Securities


31

Domestic heavy steel plate prices Average scrap prices

70

75

80

85

90

95

100

105

1Q11 2Q11 3Q11 4Q11 2Q12 3Q12

Heavy steel plate price per tonne(KRW'0,000)

Down from 2Q11; Good for

shipbuilders to cut costs

0

100

200

300

400

500

600

700

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

Avg. price(W,000/tonne)

Source: News reports, Korea Investment & Securities Source: Steel Daily, Korea Investment & Securities

KRW/USD KRW/JPY100

1,000

1,050

1,100

1,150

1,200

1,250

1,300

Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

KRW/USD

(KRW)

1,100

1,150

1,200

1,250

1,300

1,350

1,400

1,450

1,500

1,550

1,600


KRW/JPY100

(KRW)


KRW/EUR USD/EUR

1,300

1,350

1,400

1,450

1,500

1,550

1,600

1,650

1,700


KRW/EUR(KRW)

1.0

1.1

1.2

1.3

1.4

1.5

1.6


USD/EUR

(USD)



32

6. Containership market

Idle containerships Delivery breakdown by size (TEU)

0

200

400

600

800

1,000

1,200

1,400

1,600

Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12

Idle containerships('000 TEU)

Idle containerships

to shrink on peak-

demand effect

(summer)

500,000 1,000,000 1,500,000 2,000,000

2011

2012F

2013F

2014F

2015Fbelow 3,000 3,000-5,099

5,100-9,999 above 10,000

(TEU)

Source: Alphaliner, Korea Investment & Securities Source: Alphaliner, Korea Investment & Securities

Fleet capacity breakdown by size (TEU) Orderbook capacity breakdown by size (TEU)

7,500-9,999

17%

5,100-7,499

18%4,000-5,099

20%

3,000-3,999

7%

2,000-2,999

11%

1,500-1,999

6%

1,000-1,499

5%

100-999

4%above 10,000

12%

(total:16,050,206TEU)

7,500-9,999

25%

above 10,000

48%

100-999

0%

1,000-1,499

1%1,500-1,999

2%2,000-2,999

2%

4,000-5,099

12%

5,100-7,499

6%

3,000-3,999

4%

(total: 3,672,489TEU)

Source: Alphaliner, Korea Investment & Securities Source: Alphaliner, Korea Investment & Securities

Scrapped containerships and avg. age Alphaliner estimated world fleet size & avg. ship size

0

50

100

150

200

250

300

350

400

2000 2002 2004 2006 2008 2010 2012 YTD

24

25

26

27

28

29

30

31

32

Scrapped (L)

Average age of scrapped units (R)

('000 TEU) (yrs)

0

1,000

2,000

3,000

4,000

5,000

6,000

2000 2002 2004 2006 2008 2010 2012 2014F

0

1,000

2,000

3,000

4,000

5,000

6,000Containership fleet (L)

Average ship size (R)

(units) (TEU)

Size of containerships to

continue growing

Source: Alphaliner, Korea Investment & Securities

Note: Figures as of Jan 1 each year Source: Alphaliner, Korea Investment & Securities


33

7. Share performance

Oil major share performances

80

90

100

110

120


60

80

100

120

140

SHELL (L) BP (L) EXXON MOBIL (L)

CHEVRON (L) WTI oil price (R)

(2011. 07. 27 = 100) (USD/BBL)

Source: Datastream, Korea Investment & Securities

Major drillship operator share performances

25

50

75

100

125

150

Jul-11 Oct-11 Jan-12 Apr-12

40

60

80

100

120

140

SEADRILL (L) DIAMOND (L) SONGA (L)

TRANSOCEAN (L) NOBLE (L) WTI oil price (R)

(2011. 07. 27 = 100) (USD/BBL)


Major offshore engineering and facility maker share performances

50

75

100

125

150


60

80

100

120

140SAIPEM (L) TECHNIP (L)

SEMBCORP MARINE (L) KEPPEL (L)

SCHLUMBERGER (L) WTI oil price (R)

(2011. 07. 27 = 100) (USD/BBL)



34

Changes to recommendation and price target

Company (Code) Date Recommendation Price target Company (Code) Date Recommendation Price target

Hyundai Heavy 09-10-10 BUY W330,000 08-16-11 Hold W160,000

Industries (009540) 11-23-10 BUY W450,000 09-15-11 Hold W140,000

03-17-11 NM W0 02-20-12 BUY W200,000

05-23-11 BUY W600,000 Daewoo Shipbuilding 03-17-11 NM W0

09-15-11 BUY W400,000 & Marine 05-23-11 BUY W55,000

06-28-12 BUY W310,000 Engineering (042660) 07-29-11 BUY W45,000

Samsung Heavy Ind. 03-17-11 NM W0 09-15-11 BUY W33,000

(010140) 05-23-11 Hold W48,000 11-18-11 BUY W40,000

09-15-11 Hold W33,000 02-20-12 BUY W47,000

11-02-11 Hold W37,000 Hanjin Heavy 08-26-10 Hold W29,000

01-11-12 BUY W40,000 Industries & 03-17-11 NM W0

02-03-12 BUY W50,000 Construction(097230) 05-23-11 Hold W40,000

02-20-12 BUY W57,000 09-15-11 Hold W20,000

Hyundai Mipo 03-17-11 NM W0 02-20-12 BUY W28,000

Dockyard (010620) 05-23-11 Hold W200,000

Hyundai Heavy Industries (009540) Samsung Heavy Ind. (010140) Hyundai Mipo Dockyard (010620)

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12

0

10,000

20,000

30,000

40,000

50,000

60,000


0

50,000

100,000

150,000

200,000

250,000


Daewoo Shipbuilding &

Marine Engineering (042660)

Hanjin Heavy Industries &

Construction (097230)

0

10,000

20,000

30,000

40,000

50,000

60,000


0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000


■ Guide to Korea Investment & Securities Co., Ltd. stock ratings based on absolute 12-month forward share price performance

� BUY: Expected to give a return of +15% or more

� Hold: Expected to give a return between -15% and +15%

� Underweight: Expected to give a return of -15% or less

■ Guide to Korea Investment & Securities Co., Ltd. sector ratings for the next 12 months

� Overweight: Recommend increasing the sector’s weighting in the portfolio compared to its respective weighting in the Kospi (Kosdaq) based on market

capitalization.

� Neutral: Recommend maintaining the sector’s weighting in the portfolio in line with its respective weighting in the Kospi (Kosdaq) based on market capitalization.

� Underweight: Recommend reducing the sector’s weighting in the portfolio compared to its respective weighting in the Kospi (Kosdaq) based on market

capitalization.

■ Analyst Certification

I/We, as the research analyst/analysts who prepared this report, do hereby certify that the views expressed in this research report accurately reflect my/our personal

views about the subject securities and issuers discussed in this report. I/We do hereby also certify that no part of my/our compensation was, is, or will be directly or

indirectly related to the specific recommendations or views contained in this research report.

■ Important Disclosures

As of the end of the month immediately preceding the date of publication of the research report or the public appearance (or the end of the second most recent

month if the publication date is less than 10 calendar days after the end of the most recent month), Korea Investment & Securities Co., Ltd., or its affiliates does

not own 1% or more of any class of common equity securities of the companies mentioned in this report.

There is no actual, material conflict of interest of the research analyst or Korea Investment & Securities Co., Ltd., or its affiliates known at the time of publication of

the research report or at the time of the public appearance.

Korea Investment & Securities Co., Ltd., or its affiliates has not managed or co-managed a public offering of securities for the companies mentioned in this report

in the past 12 months;

Korea Investment & Securities Co., Ltd., or its affiliates has not received compensation for investment banking services from the companies mentioned in this

report in the past 12 months; Korea Investment & Securities Co., Ltd., or its affiliates does not expect to receive or intends to seek compensation for investment

banking services from the companies mentioned in this report in the next 3 months.

Korea Investment & Securities Co., Ltd., or its affiliates was not making a market in securities of the companies mentioned in this report at the time that the research

report was published.

Prepared by: Jonggil Hong

This report was written by Korea Investment & Securities Co., Ltd. to help its clients invest in securities. This material is copyrighted and may not be copied, redistributed,

forwarded or altered in any way without the consent of Korea Investment & Securities Co., Ltd. This report has been prepared by Korea Investment & Securities Co., Ltd.

and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. We make no

representation as to its accuracy or completeness and it should not be relied upon as such. The company accepts no liability whatsoever for any direct or consequential

loss arising from any use of this report or its contents. The final investment decision is based on the client’s judgment, and this report cannot be used as evidence in any

legal dispute related to investment decisions.

HEAD OFFICE

CHUN SOO LIM, Executive Vice President, Head of Global Institutional Group ([email protected] +822 3276 5800)

PAUL CHUNG, Sales Trading ([email protected] +822 3276 5843)

27-1 Yoido-dong, Youngdeungpo-ku, Seoul 150-745, Korea

Toll free: US 1 866 258 2552 HK 800 964 464 SG 800 8211 320

Fax: 822 3276 5681~3

Telex: K2296

NEW YORK

DONG KIM, Managing Director ([email protected] +1 212 314 0681)

ELAINE LIM, Head of Sales ([email protected] +1 212 314 0686)

JU KIM, Sales ([email protected] +1 212 314 0683)

Korea Investment & Securities America, Inc.

1350 Avenue of the Americas, Suite 1110

New York, NY 10019

Fax: 1 201 592 1409

HONG KONG

DANIEL KIM, Managing Director, Head of HK Sales ([email protected] +852 2530 8950)

SANGME LEE, Merchandising Director ([email protected] +852 2530 8910)

DAN SONG, Sales ([email protected], +822-3276-5621)

JUN HWAN KIM, Sales ([email protected], +852-2530-8912)

Korea Investment & Securities Asia, Ltd.

Suite 2201-2, Jardine House

1 Connaught Place, Central, Hong Kong

Fax: 852-2530-1516

SINGAPORE

SUNG NAMGOONG, Managing Director, Head of Singapore Sales ([email protected] +65 6501 5601)

ALEX JUN, Sales ([email protected] +65 6501 5602)

Korea Investment & Securities Singapore Pte Ltd

1 Raffles Place, #43-04, One Raffles Place

Singapore 048616

Fax: 65 6501 5617

LONDON

JJ MOON, Managing Director ([email protected] +44 207 065 2765)

MINGOO KANG, Sales ([email protected], +44 207 065 2760)

Korea Investment & Securities Europe, Ltd.

2nd Floor, 35-39 Moorgate

London EC2R 6AR

Fax: 44-207-236-4811

Telex: 8812237

This report has been prepared by Korea Investment & Securities Co., Ltd. and is provided for information purposes only. Under no circumstances is it to be used or

considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue

or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. This report is provided

solely for the information of professional investors who are expected to make their own investment decisions without undue reliance on this report and the company

accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. This report is not intended for the use of private

investors.

2012. All rights reserved. No part of this report may be reproduced or distributed in any manner without permission of Korea Investment & Securities Co.,Ltd.

shipbuilding monthly 120731 final

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