* Ample cash and stable earnings

- Attractive investment opportunity  

We maintain BUY with a six-month price target of W232,000. Despite stable earnings growth, Gwangju Shinsegae’s share price has shed 47.3% from the previous peak in 2007 and has started to bottom out recently. We believe the company is a good investment opportunity with little risk based on the following.

First, the company’s earnings are stable. The 2Q08 net profit rose 17.6% YoY and the trend should continue in 2H08. Despite the expected consumption downturn, we view the company in a positive light with its superior location, the opening effect of E-Mart Gwangju, changes to the product mix at the department store and expected redevelopment project (about 4,000 households) in the vicinity of Gwangju Shinsegae.

Second, the company’s valuation is the lowest among retailers. The company trades at respective 12-month-forward PER, EV/EBITDA and PBR of 5.9x, 1.6x and 1x, while the ROE is a whopping 16.9% (sector averages: PER 16x, PBR 1.3x, EV/EBITDA 8.4x).

Third, it holds ample cash and there is the possibility of new business. The company’s net cash holdings are expected to reach W90bn in 2008, which equals 45% of its current market cap. In addition, we expect its net cash holdings to exceed its market cap in 2011. With this ample cash, the company will likely start a new business similar to the opening of E-Mart Gwangju in 2006.