Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

In this insight, we discuss <a href="https://www.smartkarma.com/entities/cj-cheiljedang-corp" target="_blank" data-smartkarma-citation="entities:1970:1" rel="noopener">CJ Cheiljedang (097950 KS)</a>'s 4Q 2020 and 2020 full year results and how this company is becoming one of the chief beneficiaries of Korean food going global.<a href="https://www.smartkarma.com/entities/cj-cheiljedang-corp" target="_blank" data-smartkarma-citation="entities:1970:1" rel="noopener">CJ Cheiljedang (097950 KS)</a> has benefited from a combination of improving earnings and higher valuation multiples. The company's shares have an average P/E and P/B of 17.4x and 1.3x, respectively. The company's current P/E and P/B valuation multiples in 2021 are currently 28% and 14% below the historical average valuation multiples of the company from 2015 to 2020.One could argue that the company's valuation multiples should be higher than the historical average which would result in higher implied valuations for CJ Cheiljedang. The company's Bibigo branded foods (such as dumplings), sauces, and other food products are becoming more popular in many key countries such as in the U.S., China, and Japan.

In this insight, we discuss CJ Cheiljedang (097950 KS)'s 4Q 2020 and 2020 full year results and how this company is becoming one of the chief beneficiaries of Korean food going global.CJ Cheiljedang (097950 KS) has benefited from a combination of improving earnings and higher valuation multiples. The company's shares have an average P/E and P/B of 17.4x and 1.3x, respectively. The company's current P/E and P/B valuation multiples in 2021 are currently 28% and 14% below the historical average valuation multiples of the company from 2015 to 2020.One could argue that the company's valuation multiples should be higher than the historical average which would result in higher implied valuations for CJ Cheiljedang. The company's Bibigo branded foods (such as dumplings), sauces, and other food products are becoming more popular in many key countries such as in the U.S., China, and Japan.

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

Whilst Q4's list posted strong price performance it was a case that a rising tide floated most boats. As in the previous few quarters, we are on the watch for the risk of deteriorating credit metrics, but in particular during H1 2021. In Q1, the Altman Z score is at a market-cap-weighted 1.03 times, a significant decrease on the 1.52 in Q4. This deterioration needs to be monitored since earnings continue to be adjusted by analysts and their limited visibility of any bottoming. 25 stocks appear in our Q1 2021 screen, versus 15 in Q4 2020.

Whilst Q4's list posted strong price performance it was a case that a rising tide floated most boats. As in the previous few quarters, we are on the watch for the risk of deteriorating credit metrics, but in particular during H1 2021. In Q1, the Altman Z score is at a market-cap-weighted 1.03 times, a significant decrease on the 1.52 in Q4. This deterioration needs to be monitored since earnings continue to be adjusted by analysts and their limited visibility of any bottoming. 25 stocks appear in our Q1 2021 screen, versus 15 in Q4 2020.

Screening the Silk Road: Q1 2021 High Risk Names to Avoid

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

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It's been a long time since we looked at and wrote about <a href="https://www.smartkarma.com/entities/cj-korea-express-corp" target="_blank" data-smartkarma-citation="entities:11557:1" rel="noopener">CJ Logistics (000120 KS)</a>. In a note we published here way back in June 2017, we said it was highly unlikely CJ Logistics would see the margin improvement needed to hit analysts' consensus forecast of 6,400 won per share in 2018.
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Specifically, we doubted that higher margins would be driven by growth of the company's Global segment, which includes CJ's international freight forwarding business and several overseas logistics units CJ had acquired in an effort to create a "Pan-Asian Logistics Network".
Since we last wrote about the company, CJ Logistics has apparently abandoned its push to become a major player in logistics outside of Korea, focusing instead on a disparate list of domestic initiatives. Overall profitability remains similar to depressed levels from 3-4 years ago. 
Since we last tracked them, CJ Logistics' shares haven't performed well: they're down about 24% compared to their 5-year high reached in mid-2016, though like many stocks they have risen from depressed Q120 levels. Unless CJ Logistics can articulate a winning long-term strategy, and then show consistent progress towards executing it successfully, we would avoid the shares.



It's been a long time since we looked at and wrote about CJ Logistics (000120 KS). In a note we published here way back in June 2017, we said it was highly unlikely CJ Logistics would see the margin improvement needed to hit analysts' consensus forecast of 6,400 won per share in 2018.

Specifically, we doubted that higher margins would be driven by growth of the company's Global segment, which includes CJ's international freight forwarding business and several overseas logistics units CJ had acquired in an effort to create a "Pan-Asian Logistics Network".
Since we last wrote about the company, CJ Logistics has apparently abandoned its push to become a major player in logistics outside of Korea, focusing instead on a disparate list of domestic initiatives. Overall profitability remains similar to depressed levels from 3-4 years ago. 
Since we last tracked them, CJ Logistics' shares haven't performed well: they're down about 24% compared to their 5-year high reached in mid-2016, though like many stocks they have risen from depressed Q120 levels. Unless CJ Logistics can articulate a winning long-term strategy, and then show consistent progress towards executing it successfully, we would avoid the shares. 

CJ Logistics: Still Lacking Focus, Still Unlikely to Reach 6,000+ EPS Any Time Soon

CEO, A. Stotz Investment Research

Dr. Andrew Stotz, CFA

Quantamental Investing to beat Benchmarks

A. Stotz Investment Research

We pick stocks. We construct portfolios. All our effort is focused on how to better pick stocks and construct portfolios. We serve fund management companies, family offices, and high net worth individuals.

Thematic (Sector/Industry)

We highlight 14 stocks in Asia that look interesting to us based upon our FVMR Methodology. Our research team constantly reviews the Asian markets to try to find interesting ideas based on Fundamentals or Valuation or Momentum or Risk or some combination thereof.

We highlight 14 stocks in Asia that look interesting to us based upon our FVMR Methodology. Our research team constantly reviews the Asian markets to try to find interesting ideas based on Fundamentals or Valuation or Momentum or Risk or some combination thereof.

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<a href="https://www.smartkarma.com/entities/korea-kolmar-co-ltd" target="_blank" data-smartkarma-citation="entities:7985:1" rel="noopener">Korea Kolmar (161890 KS)</a> is the seventh company we introduce in our 'Korea Small Cap Gem' series. We define small cap as companies with market cap of less than US$1 billion. Korea Kolmar has a market cap of $0.9 billion (1 trillion won). Korea Kolmar is one of the leading cosmetics ODM companies in Korea. It was the first company in Korea to introduce the ODM business for the cosmetics industry in 1993. Korea Kolmar currently owns a 50.7% stake in a private company called HK inno.N. This company was previously called CJ HealthCare which Korea Kolmar purchased in April 2018 for 1.3 trillion won ($1.2 billion) (100% stake) from CJ Cheiljedang.
The local media have mentioned that the estimated value of HK inno.N has risen to nearly 2 trillion won. A 50.7% stake of this would be worth nearly 1 trillion won, which would represent nearly the entire market cap of Korea Kolmar.
In other words, if the assessment of the value of HK inno.N is indeed about 2 trillion won, then investors would be getting the remaining Korea Komar's core businesses for free. Over the next one year, Korea Kolmar could be a major turnaround play with improving cosmetics operations along with an increasing focus on the IPO of HK inno.N in 2021.
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Korea Kolmar (161890 KS) is the seventh company we introduce in our 'Korea Small Cap Gem' series. We define small cap as companies with market cap of less than US$1 billion. Korea Kolmar has a market cap of $0.9 billion (1 trillion won). Korea Kolmar is one of the leading cosmetics ODM companies in Korea. It was the first company in Korea to introduce the ODM business for the cosmetics industry in 1993. Korea Kolmar currently owns a 50.7% stake in a private company called HK inno.N. This company was previously called CJ HealthCare which Korea Kolmar purchased in April 2018 for 1.3 trillion won ($1.2 billion) (100% stake) from CJ Cheiljedang.
The local media have mentioned that the estimated value of HK inno.N has risen to nearly 2 trillion won. A 50.7% stake of this would be worth nearly 1 trillion won, which would represent nearly the entire market cap of Korea Kolmar.
In other words, if the assessment of the value of HK inno.N is indeed about 2 trillion won, then investors would be getting the remaining Korea Komar's core businesses for free. Over the next one year, Korea Kolmar could be a major turnaround play with improving cosmetics operations along with an increasing focus on the IPO of HK inno.N in 2021.


Korea Small Cap Gem #7: Korea Kolmar - Get the Core Cosmetics Business for Free (Ex HK Inno.N)

South Korea

CJ CheilJedang Corp. manufactures processed food products.  The Company's products include refined sugar, monosodium glutamate (MSG), condiment, wheat powder, flour, cooking oil, processed meats, and animal feed.  CJ CheilJedang also manufactures pharmaceutical and household products.

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CJ Cheiljedang (097950 KS)

CJ Cheiljedang - Korean Food Goes Global

In this insight, we discuss CJ Cheiljedang (097950 KS)'s 4Q 2020 and 2020 full year results and how this company is becoming one of the chief...

Douglas Kim

Screening the Silk Road: Q1 2021 High Risk Names to Avoid

As in the previous few quarters, we are on the watch for the risk of deteriorating credit metrics, but in particular during H1 2021. 25 stocks...

David Lepper

CJ Logistics: Still Lacking Focus, Still Unlikely to Reach 6,000+ EPS Any Time Soon

We check in on CJ Logistics, which appears to have pivoted away from its much-hyped international expansion plan from a few years ago. What hasn't...

Tracking Traffic

The Stocks to Own in Asia – Vol. 31

The Stocks to Own in Asia – Vol. 31. We highlight 14 stocks in Asia that look interesting to us based upon our FVMR Methodology.

A. Stotz Investment Research

Korea Small Cap Gem #7: Korea Kolmar - Get the Core Cosmetics Business for Free (Ex HK Inno.N)

Over the next one year, Korea Kolmar could be a major turnaround play with improving cosmetics operations along with an increasing focus on the IPO...

Douglas Kim

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