Construction 090929

8/2/2019 Construction 090929

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The contents of this report accurately reflect the analysts views. Under no circumstances were there any external pressures or intervention during the analysis process or thepreparation of this report. Prepared by: Sang Hi Han, Song Hyun Nam

Construction September 29, 2009

Korean builders vie for Mid East market

Project overview (refer to Middle East map)The construction sector will be upgraded to Overweight if we identify: 1)renewed orders momentum from overseas, and 2) a full recovery of theprovincial housing market on the domestic front. We outlined the MiddleEast projects in the pipeline that will be a key earnings variable. Amongthe new Middle East projects on the scene, the potential biddings ofKorean builders could be 43, worth USD 120.6bn in total.

Limited growth potential, market sizeIf Korean builders are to deliver meaningful new orders growth: 1) themarket must get bigger, or 2) their global market shares must expand.International construction orders achieved a 2005-2007 CAGR of36.1%, while worlds nominal GDP increased 10.3% during the sameperiod. The construction market expanded three times faster than theeconomy. But the growth figure fell to 1x as the economic downturn setin. The status quo should remain unless the economy makes a fastrecovery.

Limited growth potential-market shareKoreas share of the global market jumped to 9.5% in 2007 from 5.5% in2006 and overseas order receipts gained a whopping 141.6% duringthe same period. The fast growth was possible because 1) overseasEPC rivals did not have enough capacity to meet the demand and, 2)Korean domestic housing market was robust. But Koreas global marketshare has slipped to 8.7% since 2008 due to intensifying competition.We do not believe the Middle East, a major market for Korean builders,will see as explosive growth as in the past. An in-depth analysis willfollow in our 2010 construction sector outlook.

Plunging world construction orders

growth/GDP growth

Overseas orders to Korean builders

rising faster than Middle East GDP

0

1

2

3

4

5

2002 2003 2004 2005 2006 2007 2008

(x)

250

300

350

400

450

500

2001

2002

2003

2004

2005

2006

2007

2008

0

5

10

15

20

25Middle East GDP (LHS)

Orders to Korean builders (RHS)

(USD bn) (USD bn)

Source: ENR, IMF Source: IMF, ICAK, Korea Investment & Securities

Neutral (Maintain)

Company (Code) Recommendation

Samsung C&T(000830) Hyundai E&C(000720)

GS E&C(006360)

Daewoo E&C(047040)

Samsung ENG(028050)

Hyundai Dev(012630)

Daelim Ind(000210)

Kumho Ind(002990)

Doosan E&C(011160)

Kyeryong Const(013580)

BUY (Maintain)BUY (Maintain)

Hold (Maintain)

Hold (Maintain)

BUY (Maintain)

Hold (Maintain)

Hold (Maintain)

Hold (Maintain)

BUY (Maintain)

Hold (Maintain)

Construction/construction materials

Sang Hi Han, CFA, 82-2-3276-6278

shhan @truefriend.com

Song Hyun Nam, 82-2-3276-6228

[email protected]


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

BUY: Expected to outperform the market by 15%p or more.

Hold: Expected to either outperform or underperform the market by less than 15%p.

Underweight: Expected to underperform the market by 15%p or more.

* As of June 2, 2008, Korea Investment & Securities Co., Ltd. has adopted a new stock rating system comprised of BUY, Hold and Underweight.

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

Overweight: Recommend increasing the sectors weighting in the portfolio compared to its respective weighting in the Kospi (Kosdaq) based on market capitalization.

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

Underweight: Recommend reducing the sectors 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 the securities of the companies mentioned in this report at the time that the research

report was published.

Korea Investment & Securities Co., Ltd. does not own over 1% shares of the companies mentioned in this report as of September 28, 2009. Korea Investment &

Securities Co., Ltd. has issued ELW with underlying stocks of Daelim Industrial, Daewoo E&C, Samsung C&T, Samsung Engineering, Hyundai E&C, Hyundai

Development and GS E&C, and is the liquidity provider. Korea Investment & Securities Co., Ltd. has provided this report to various third parties. Neither the analysts

covering these companies nor their spouses own any shares of the companies mentioned in this report as of September 28, 2009. The contents of this report

accurately reflect the analysts views. Under no circumstances were there any external pressures or intervention during the analysis process or the preparation of this

report. Prepared by: Sang Hi Han, Song Hyun Nam

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 liab ility 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 clients judgment, and this report cannot be used as evidence in any legal dispute related to

investment decisions.


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Construction

1

Saudi Arabia & Oman

YanbuRefinery

ShaybahGas

Arabiyah

Gas

WaseaBulk plant

QurayyahPower

Ras TannuraRefinery &

Petro.

RabighPetro.

PP11 IPPPower

EDCPetro.

Rabigh 6Power

KaranGasJubail

Refinery

MarafiqPower

Ras Tanura Integratedrefinery and petrochemicalsComplex (USD 20bn)

Shaybah gas development

Project (USD 4.0bn)P1: Coker unit (USD 1.2bn)P2: Crude facility (USD 1.0bn)

P3: Gasoline (USD 2.3bn)P4: Hydro-cracker (USD 1.2bn)

P5: Tank farm (USD 0.9bn)

P6: Solids handling facility (USD 0.5bn)Qurayyah power plant(USD 1.85bn) / DHI

PP11 Independent

Power Project(USD 2.2bn)

Ethylene Dichloride

Plant (USD 0.4bn)

P1: Aromatic Units (USD 0.7bn) / Samsung ENG

P2: Coker Units (USD 4.5bn) / Samsung ENGP2B: Acid Gas Treatment (USD 8.2bn) / Daelim Ind.

P5: Plant Utilities (USD 4.3bn) / SK E&C

Karan Gas Field DevelopmentGas Facilities(USD 1.35bn) / Hyundai E&C

Cogeneration and utilities(USD 8bn) / Petrofac

Platforms and pipeline(USD 1.2bn) / Mcdermott

Arabiyah gas developmentProject (USD 3.0bn)

Wasea bulk plantProject (USD 0.3bn)

Rabigh 6 power plant(USD 3.5bn)

Rabigh PetrochemicalComplex project phase 2(USD 10bn)Phase 1 (USD 10bn) is

about to start production

Refinery Gas Water Power Petro. Civil/Building Order-placed

Amal

EOR project

Amal Enhanced oil recovery

Project (USD 0.3bn)

Bark&SoharPower

Barka 3 & Sohar 2Independent power project

(USD 2.0bn)

Marafiq STG Units 5 & 6

Project (USD 0.75bn)Hanhwa E&C

YanbuRefinery

ShaybahGas

Arabiyah

Gas

WaseaBulk plant

QurayyahPower


Petro.


Petro.

RabighPetro.

PP11 IPPPower

EDCPetro.

Rabigh 6Power

KaranGasJubail

Refinery

MarafiqPower

Ras Tanura Integratedrefinery and petrochemicalsComplex (USD 20bn)

Shaybah gas development

Project (USD 4.0bn)P1: Coker unit (USD 1.2bn)P2: Crude facility (USD 1.0bn)

P3: Gasoline (USD 2.3bn)P4: Hydro-cracker (USD 1.2bn)

P5: Tank farm (USD 0.9bn)

P6: Solids handling facility (USD 0.5bn)Qurayyah power plant(USD 1.85bn) / DHI

PP11 Independent

Power Project(USD 2.2bn)

Ethylene Dichloride

Plant (USD 0.4bn)

P1: Aromatic Units (USD 0.7bn) / Samsung ENG

P2: Coker Units (USD 4.5bn) / Samsung ENGP2B: Acid Gas Treatment (USD 8.2bn) / Daelim Ind.

P5: Plant Utilities (USD 4.3bn) / SK E&C

Karan Gas Field DevelopmentGas Facilities(USD 1.35bn) / Hyundai E&C

Cogeneration and utilities(USD 8bn) / Petrofac

Platforms and pipeline(USD 1.2bn) / Mcdermott

Arabiyah gas developmentProject (USD 3.0bn)

Wasea bulk plantProject (USD 0.3bn)

Rabigh 6 power plant(USD 3.5bn)

Rabigh PetrochemicalComplex project phase 2(USD 10bn)Phase 1 (USD 10bn) is

about to start production

Refinery Gas Water Power Petro. Civil/Building Order-placed

Amal

EOR project

Amal Enhanced oil recovery

Project (USD 0.3bn)

Bark&SoharPower

Barka 3 & Sohar 2Independent power project

(USD 2.0bn)

Marafiq STG Units 5 & 6

Project (USD 0.75bn)Hanhwa E&C

Note 1: Orders-placed are for Korean contractors

2: Planned projects are shortlisted by order placement possibilitiesSource: Company data, Press, Korea Investment & Securities

Major projects schedule 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17Ras Tanura refinery&petro. complex

Yanbu refinery

Rabigh petrochemical complex Phase 2

Rabigh 6 project

PP11 IPP(Independent Power Project)

Shah gas project

Al Bayyaa nuclear power plant project phase 1

Ruwias refinery

Hassyan power and water desalination P2

Al-Shaheen refinery

Al-Zour power and water plant

FEED Bidding Construction


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Construction

3

Country Area Project TypeAmounts(USD bn)

Details Bidders

Arabiyah Arabiyah gas development project Gas 3.0 SNC Lavalin received FEED

Shaybah Shaybah gas development project Gas 4.0 KBR received FEED

Wasea Wasea bulk plant project (oil storage and distribution) Refinery 0.3 Tender deadline till Nov

Jubail EDC project Petrochemical 0.4 Constract in OctoberDaelim Ind., GSE&C, Hyundai E&C, SamsungENG

Ras Tanura Ras Tanura oil&petrochemical complex Refinery+petrochemcal 20.0 FEED till June 2010FEED till June 2010 by KBR and FosterWheeler

Package 1: Coker unit 1.2 Tender deadline on Jan 31, 2010Technip, TR, Saipem, JGC, Chiyoda, Sinopec,Samsung ENG, Hyundai E&C

Package 2: Crude facility 1.0 Tender deadline on Jan 31, 2010Technip, Saipem, Chiyoda, Sinopec, SamsungENG, Daelim Ind., Hyundai E&C

Package 3: Gasoline 2.3 Tender deadline on Jan 31, 2010Technip, TR, Saipem, JGC, Sinopec, SamsungENG, Daelim Ind.

Package 4: Hydro-cracker 1.2 Tender deadline on Jan 31, 2010

Technip, Saipem, JGC, Chiyoda, GSE&C,Daelim Ind., CBI Lummus Petrofac

Consortium

Package 5: Tank farm 0.9 Tender deadline on Jan 31, 2010CB&I, Sinopec, Punj Lloyd, L&T, Petrosteel,Hyundai Heavy, SKE&C, Daewoo E&C

Yanbu

Package 6: Soilds handling facility

Refinery

0.5 Tender deadline on Jan 31, 2010Saipem, Techint, FL Smithe, JGC, Petrofac,Daelim Ind., GSE&C, Hyundai E&C

Rabigh Rabigh petrochemical complex phase 2 Petrochemical 10.0 FEED till 2Q10 FEED till 3Q10 by JGC

Riyadh PP11 IPP(Independent Power Project) Power 2.2 Commercial bid deadline on Dec 75 Consortium (Samsung C&T, Hyundai Heavy,DoosanHeavy and Daelim Ind. in eachconsortium)

Saudi

Rabigh Rabigh 6 project Power 3.0 Technical bid deadline on Oct 31

DoosanHeavy, Hyundai Heavy, Alstom,Siemens, Arabian Bemco,National Contracting Company, MitsubishiHeavy, Marubeni Corp.

Ruwais UAE fertilizer factory project Industrial 1.2 Contract in SepSaipem, Technimont, Uhde & Samsung ENGconsortium

Shah gas project package 1 (Gas extraction plant) 1.0 Technical bid deadline on Dec 21Samsung ENG, GSE&C, SKE&C, HyundaiE&C

Shah gas project package 2 (Main process plant) Technical bid deadline on Nov 3 Samsung ENG, Hyundai E&C, Hyundai Heavy

Shah gas project package 3 (Sulphur-recovery unit ) Technical bid deadline on Nov 3 Samsung ENG, GSE&C, SKE&C

Shah gas project package 4 (Offsite & utilities facility) Technical bid deadline on Nov 3 SK E&C, Hyundai Heavy

Shah gas project package 5 (Gas pipeline) Technical bid deadline on Oct 11Technip, Saipem, CCC, CAT, NPCC, Dodsal,Punj Lloyd

Shah gas project package 6 (Sulphur pipeline) Technical bid deadline on Sep 28Fluour, working on the detailed design, is likely totake EPC

Shah gas project package 7 (Sulphur process plant) Technical bid deadline on Oct 28 NA

Shah gas project package 8 (Dredging work) Technical bid deadline on Oct 11 NA

Shah gas project package 9 (Civil engineering ) Technical bid deadline on Oct 11 NA

Shah

Shah gas project package 10 (Building)

Gas11.0

Technical bid deadline on Oct 11 NA

Al Bayyaa Al Bayyaa nuclear power plant project phase 1 Power 5.0Contract scheduled in Sep but likely to bedelayed

Korea Consortium (KEPCO, Doosan Heavy,Hyundai E&C, Samsung E&C), FranceConsortium, US/Japan Consortium

Ruwais refinery expansion project package 1(Crude distillation units)

2.0 Commercial bid deadline on Sep 30Tecnimont, Tecnicas Reunidas, ToyoENG/Hyundai E&C, SKE&C

Ruwais refinery expansion project package 2(Residue fluid-cracking unit)

Commercial bid deadline on Sep 30 Technip, Saipem, JGC, Petrofac, GSE&C

Ruwais refinery expansion project package 3(Offsites and utilities)

Commercial bid deadline on Oct 23Techint, Petrofac, Daelim Ind., Samsung ENG,Hyundai E&C, Hyundai Heavy

Ruwais refinery expansion project package 4(Tank farm element)

Commercial bid deadline on Oct 23NPCC, Punj Lloyd, Daewoo E&C, HyundaiHeavy, Samsung C&T

Ruwais

Ruwais refinery expansion project package 5(Marine facilities)

Refinery8.0

Commercial bid deadline on Oct 23 Saipem, Besix, Hyundai E&C, GSE&C

Bab Bab oil field upgrade project Refinery 1.0 Commercial bid deadline on Nov 24Technip, Saipem, Tecnicas Reunidas, Petrofac,NPCC, L&T, GSE&C, SK E&C

Qusawirah Qusawirah oil field upgrade project Refinery 1.0 Contract in SepTechnip, Saipem, Tecnicas Reunidas, NPCC,L&T, GSE&C, SK E&C

Jebel Ali Hassyan power&desalination project phase 2 Power/Water 4.0 Tender deadlin on Nov 8

UAE

Abu Dhabi Abu Dhabis Cleveland Clinic hospital Building 1.4 Constract in end-October 6 consortiums (Samsung C&T with Besix)

Ras Laffan Ras Laffan refinery Expansion project Refinery 0.7 Tender deadline in 2H10

Al-shaheen Al Shaheen refinery Refinery 10.0 Tender deadline in October

Ras Laffan LNG Plateau Maintenance Project Gas 1.2 Tender deadline on Sep 30Technip, Saipem,Consortium of JGC&GS E&C,Consortium of Toyo ENG&Hyundai E&C

Qatar

Doha New Doha International Airport phase 3a Civil 1.0 Technical bid deadline in mid-OctoberHyundai E&C, Samsung C&T, Besix&MidmacJV, Vinci&Qatar Diar JV

Kuwait North Gas booster station 132 project Gas 0.8 Technical bid deadline in Sep 29SK E&C, GSE&C, Daelim Ind., Hyundai E&C,Hyundai Heavy, Saipem, Petrofac, TecnicasReunidas, SNC Lavalin

Al-Ahmadi 4th gas train project Gas 1.3 Tender deadline on Dec 31Technip, Saipem, Petrofac, Sinopec, GSE&C,Hyundai E&C, Daelim Ind., Hyundai Heavy

Minaal-Ahmadi

Oil&Gas pipline project to Doha&Subiyah Refinery 0.8 Tender deadline on February 7, 2010Hyundai E&C, Hyundai Heavy, Daelim Ind.,GSE&C, SKE&C, Saipem, Technip, Petrofac

Minaal-Ahmadi

Oil&Gas pipline project to Al-Zour&Shuaiba Refinery 0.4 Tender deadline on February 7, 2010Hyundai E&C, Hyundai Heavy, Daelim Ind.,GSE&C, SKE&C, Saipem, Technip, Petrofac

Kuwait North Gas booster station 171 project Gas 0.8 Tender deadline on February 7, 2010

Al-Zour Al Zour WDC II Project Water 3.0 Tender deadline on Sep 8

SK E&C/Hitachi/Mushirif, ABB/Ahmadiah, CCC,SNC Lavalin, DoosanHeavy,Marubeni/Combined, Snamprogetti/Kharafi,

Arab contractor, GSE&C

Al-Zour North power and water plant at Al-Zour North Power&desalination 4.0 Tender within months

Doha East power and water plant Power&desalination 2.0 Technical bid deadline in February 7, 2010

Shuaiba power and water plant Power&desalination 1.0 Technical bid deadline in February 7, 2010

Al-Ahmadi Mina al-Ahmadi refinery Refinery 0.7 Technical bid deadline in Dec 13

Al-Zour Al-Zour independent water and power project Power&desalination 1.0 Consrulting proposal deadline on Oct 27

New Refinery Project at Al-Zour PKG 2 2.1 Cancelled SK E&C

New Refinery Project at Al-Zour PKG 5 1.1 Cancelled Hyundai E&C

New Refinery Project at Al-Zour PKG 1 2.0 Cancelled GSE&C

Kuwait

Al-Zour

New Refinery Project at Al-Zour PKG 4

Refinery

1.2 Cancelled Daelim Ind.


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HEAD OFFICE

WON-JAE RHEE, Executive Managing Director ([email protected] +822 3276 5660)

SIMON MUN, Managing Director ([email protected] +822 3276 5662)

MIKE SHIN, Sales Trading ([email protected] +822 3276 5685)

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

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DY LEE, Sales ([email protected] +1 201 592 9161)

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Korea Investment & Securities America, Inc.400 Kelby Street, 11th Floor

Fort Lee, NJ 07024 USA

Fax: 1 201 592 1409

HONG KONG

STEVE KIM, Managing Director ([email protected] +852 2530 8900)

SANG ME LEE, Head of Asia sales ([email protected] +852 2530 8910)

JEONG HEE LEE, Sales ([email protected] +852 2530 8912)

Korea Investment & Securities Asia, Ltd.

Room Suite 2110 Jardine House

1 Connaught Place, Central, Hong Kong

Fax: 852-2530-1516

SINGAPORE

SIMON MUN, Managing Director ([email protected] +65 6501 5610)SUNG NAMGOONG, Sales ([email protected] +65 6501 5601)

STEFFI KIM, Sales ([email protected] +65 6501 5602)

Korea Investment & Securities Singapore Pte Ltd

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048616 Singapore

Fax: 65 6501 5617

LONDON

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

BRANDON JUNE, Sales ([email protected] +44 207 065 2767)

Korea Investment & Securities Europe, Ltd.

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London EC2R 6AR

Fax: 44-207-236-4811

Telex: 8812237

TOKYO

SK SHIN, Chief Representative ([email protected] +813 5363 5376)

Tokyo Representative Office

10F Yotsuya Orchid Building, 23-3,

Daikyo-cho, Shinjuku-ku, Tokyo, 160-0015, Japan

Fax: 813-3358-8401

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 companyaccepts 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.

2009. All rights reserved. No part of this report may be reproduced or distributed in any manner without permission of Korea Investment & Securities Co.,Ltd.

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Construction 090929