Equity Analyst focused on Korea Stock Market

Thomas Yi

Equity Bottom-Up

After company visit to <a href="https://www.smartkarma.com/entities/5093" target="_blank" data-smartkarma-citation="entities:5093:1">Zeus Co Ltd (079370 KS)</a>, we feel the company offers three positives and three negatives, in our view.Positives: (1) Highly likely to enjoy second straight year of double-digit growth in 2018/ (2) To benefit from capex at Korean companies through 2019 and Chinese firms from 2020/ (3) Subsidiary IPO on Tokyo Stock Exchange’s Mothers market in processNegatives: (1) Rapid increases in inventory eroded free cash flow in 2017 and 1Q18/ (2) Zeus’ core product segments (cleaning and etching equipment) do not require a high level of technology, so barriers to entry are low/ (3) Korea semiconductor and FPD equipment makers tend to be undervalued on a P/E basisOther than client capex plans, Zeus has two attractive points: likely double-digit growth in 2018 and a pending IPO of its core affiliate. We believe investors are watching these, even as increasing inventories weigh on the firm’s cash flowStock Information: Share price(18/06/15) KRW 19,650/ Market Cap(18/06/15) KRW 204 bn/ Trading Volume (@60days) 39,935 shares/ Historical price(52 weeks; Highest/Lowest) KRW 20,000/KRW 14,150/ Absolute Return (52 weeks) 13.26%/ Major shareholders - Jong W. Lee and others 49.6%, Korea Investment Management 5.0%

After company visit to Zeus Co Ltd (079370 KS), we feel the company offers three positives and three negatives, in our view.Positives: (1) Highly likely to enjoy second straight year of double-digit growth in 2018/ (2) To benefit from capex at Korean companies through 2019 and Chinese firms from 2020/ (3) Subsidiary IPO on Tokyo Stock Exchange’s Mothers market in processNegatives: (1) Rapid increases in inventory eroded free cash flow in 2017 and 1Q18/ (2) Zeus’ core product segments (cleaning and etching equipment) do not require a high level of technology, so barriers to entry are low/ (3) Korea semiconductor and FPD equipment makers tend to be undervalued on a P/E basisOther than client capex plans, Zeus has two attractive points: likely double-digit growth in 2018 and a pending IPO of its core affiliate. We believe investors are watching these, even as increasing inventories weigh on the firm’s cash flowStock Information: Share price(18/06/15) KRW 19,650/ Market Cap(18/06/15) KRW 204 bn/ Trading Volume (@60days) 39,935 shares/ Historical price(52 weeks; Highest/Lowest) KRW 20,000/KRW 14,150/ Absolute Return (52 weeks) 13.26%/ Major shareholders - Jong W. Lee and others 49.6%, Korea Investment Management 5.0%

Zeus (079370 KS) "The Other Two Things to Keep an Eye On"

South Korea

Zeus Co., Ltd. designs, develops, manufactures, and wholesales liquid-crystal display (LCD) manufacturing equipment.  The Company's products include LCD in-line transfer system, LCD inspection system, hot air oven system, and other miscellaneous LCD and semiconductor related products.

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Zeus (079370 KS) "The Other Two Things to Keep an Eye On"

After company visit to Zeus Co Ltd (079370 KS), we feel the company offers three positives and three negatives, in our view.Positives: (1) Highly...

Thomas Yi