Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

On 27 July, <a href="https://www.smartkarma.com/entities/e-mart-inc" target="_blank" data-smartkarma-citation="entities:6993:1" rel="noopener">E Mart Inc (139480 KS)</a> announced that it will take over the control of Starbucks Korea. Prior to this announcement, Emart and <a href="https://www.smartkarma.com/entities/starbucks-corp" target="_blank" data-smartkarma-citation="entities:7641:1" rel="noopener">Starbucks Corp (SBUX US)</a> owned 50% of Starbucks Korea, respectively. In this transaction, Emart will purchase an additional 17.5% stake in Starbucks Korea for 474.3 billion won (US$421 million) and GIC (Singapore) will purchase the remaining 32.5% stake in Starbucks Korea.<div class="content-highlight">
The implied valuation of 2.7 trillion won for Starbucks Korea in the acquisition of the additional 17.5% stake from <a href="https://www.smartkarma.com/entities/starbucks-corp" target="_blank" data-smartkarma-citation="entities:7641:1" rel="noopener">Starbucks Corp (SBUX US)</a> by Emart suggests a P/E of 23.5x, using the average annual net profit of Starbucks Korea in the past three years. Hence, this M&amp;A deal for Starbucks Korea was completed at nearly 50% discount to the valuation of <a href="https://www.smartkarma.com/entities/starbucks-corp" target="_blank" data-smartkarma-citation="entities:7641:1" rel="noopener">Starbucks Corp (SBUX US)</a>.
IPO of Starbucks Korea &amp; SSG.com/Ebay Korea in the Next 3 Years - In the next three years, Emart is likely to IPO its key affiliates including Starbucks Korea (67.5% ownership) and SSG.com/Ebay Korea. Emart has agreed to acquire an 80% in Ebay Korea. We believe that these IPOs are likely to have a positive impact on the Emart shares as more investors try to value them on their potential market values, rather than book values. 
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On 27 July, E Mart Inc (139480 KS) announced that it will take over the control of Starbucks Korea. Prior to this announcement, Emart and Starbucks Corp (SBUX US) owned 50% of Starbucks Korea, respectively. In this transaction, Emart will purchase an additional 17.5% stake in Starbucks Korea for 474.3 billion won (US$421 million) and GIC (Singapore) will purchase the remaining 32.5% stake in Starbucks Korea.
The implied valuation of 2.7 trillion won for Starbucks Korea in the acquisition of the additional 17.5% stake from Starbucks Corp (SBUX US) by Emart suggests a P/E of 23.5x, using the average annual net profit of Starbucks Korea in the past three years. Hence, this M&amp;A deal for Starbucks Korea was completed at nearly 50% discount to the valuation of Starbucks Corp (SBUX US).
IPO of Starbucks Korea &amp; SSG.com/Ebay Korea in the Next 3 Years - In the next three years, Emart is likely to IPO its key affiliates including Starbucks Korea (67.5% ownership) and SSG.com/Ebay Korea. Emart has agreed to acquire an 80% in Ebay Korea. We believe that these IPOs are likely to have a positive impact on the Emart shares as more investors try to value them on their potential market values, rather than book values. 


Starbucks Korea - Emart Takes Ownership Control & Prepares for an IPO

Cross Asset Strategy

South Korea recorded the highest daily cases (1,378) of COVID-19 on 9 July in the past 18 months. Despite enormous efforts to control COVID-19 through massive mask wearing, social distancing measures, and use of smartphone based tracing system, they have not prevented <a href="https://www.theguardian.com/world/2021/jul/10/seoul-heads-for-lockdown-as-infections-spiral-in-south-korea" target="_blank" rel="noopener">COVID-19</a> cases reaching new highs in South Korea. The chief culprit has been the Delta variant.

South Korea recorded the highest daily cases (1,378) of COVID-19 on 9 July in the past 18 months. Despite enormous efforts to control COVID-19 through massive mask wearing, social distancing measures, and use of smartphone based tracing system, they have not prevented COVID-19 cases reaching new highs in South Korea. The chief culprit has been the Delta variant. 

Highest Daily Cases of COVID-19 in Korea Driven by the Delta Variant - Impact on the Stock Market

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Thematic (Sector/Industry)

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:<a href="https://www.smartkarma.com/entities/saudi-aramco" target="_blank" data-smartkarma-citation="entities:27317:1" rel="noopener">Saudi Aramco (ARAMCO AB)</a>, <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, GlobalFoundries, <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/e-mart-inc" target="_blank" data-smartkarma-citation="entities:6993:1" rel="noopener">E Mart Inc (139480 KS)</a>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:Saudi Aramco (ARAMCO AB), Hyundai Motor Co (005380 KS), GlobalFoundries, Samsung Electronics (005930 KS), E Mart Inc (139480 KS)

Global Emerging Markets Weekly: 25 June 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. 
Companies mentioned this week:
<a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a>, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/baidu-inc-a55ca720-5968-48f0-8194-ac94390d065c" target="_blank" data-smartkarma-citation="entities:32212:1" rel="noopener">Baidu (9888 HK)</a>, <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1460967D CH)</a>, <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a>, <a href="https://www.smartkarma.com/entities/e-mart-inc" target="_blank" data-smartkarma-citation="entities:6993:1" rel="noopener">E Mart Inc (139480 KS)</a>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. 
Companies mentioned this week:
Prosus (PRX NA), Alibaba Group (9988 HK), Baidu (9888 HK), ByteDance (1460967D CH), Naver Corp (035420 KS), E Mart Inc (139480 KS) 

Global Emerging Markets Weekly: 18 June 2021

This insight has two parts.<ul>
<li>First, we discuss about the deal involving Ebay Korea which is set to be sold to the <a href="https://www.smartkarma.com/entities/e-mart-inc" target="_blank" data-smartkarma-citation="entities:6993:1" rel="noopener">E Mart Inc (139480 KS)</a> consortium for $<a href="https://www.ft.com/content/4aef059c-d5dc-4d8f-86e0-afd9e09c3ccc" target="_blank" rel="noopener">3.1 billion,</a> according to Financial Times.</li>
<li>Second, we discuss about the recent decision by founder of <a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US) </a>Bom Kim to resign from his positions as chairman of the board and as a registered director of Coupang Corp, the wholly-owned Korean subsidiary of Coupang Inc. (U.S.).   </li>
</ul><div class="content-highlight">
Emart is a deep value stock as it is trading at 0.5x P/B whereas Coupang is a clear growth stock. Going forward, this trade of long Emart and short Coupang could be an interesting opportunity. With the potential closing of the Ebay Korea deal by the Emart consortium, Emart will aim to become the second largest e-commerce player in Korea and in terms of GMV, it could even be ahead of Coupang.
On the other hand, Coupang's market cap is $68.8 billion versus Emart's market cap of $4 billion. Many more value investors will spot this big discrepancy and they are likely to put a net long position on Emart versus Coupang in the coming months. 
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This insight has two parts.
First, we discuss about the deal involving Ebay Korea which is set to be sold to the E Mart Inc (139480 KS) consortium for $3.1 billion, according to Financial Times.
Second, we discuss about the recent decision by founder of Coupang (CPNG US) Bom Kim to resign from his positions as chairman of the board and as a registered director of Coupang Corp, the wholly-owned Korean subsidiary of Coupang Inc. (U.S.).   

Emart is a deep value stock as it is trading at 0.5x P/B whereas Coupang is a clear growth stock. Going forward, this trade of long Emart and short Coupang could be an interesting opportunity. With the potential closing of the Ebay Korea deal by the Emart consortium, Emart will aim to become the second largest e-commerce player in Korea and in terms of GMV, it could even be ahead of Coupang.
On the other hand, Coupang's market cap is $68.8 billion versus Emart's market cap of $4 billion. Many more value investors will spot this big discrepancy and they are likely to put a net long position on Emart versus Coupang in the coming months. 


Ebay Korea To Be Sold to Emart Consortium & Why Did Bom Kim Resign as the Director of Coupang Corp?

South Korea

Dongsuh Companies Inc. imports, manufactures, processes, markets and distributes general food products such as vegetable cooking oils. The Company also produces packaging materials and ceramic products including food and oil containers. Dongsuh has a cooperative relationship with Kraft Foods Inc.

BGF Retail Co., Ltd. operates convenience stores. The Company retails delicatessen, sweets, snacks, beverages, tobacco, and other related products. BGF Retail markets its products throughout South Korea.

GS Retail Co., Ltd. operates a chain of retail stores. The Company provides beauty and skincare products, candles, gifts, perfumes, ornaments, bathroom accessories, and other products. GS Retail serves its customers in the Republic of South Korea.

Hyundai G.F. Holdings Co., Ltd. operates as a office furniture distribution company. The Company produces built in furniture, upcycling waste materials bottles furniture, wood furniture, and other related products. Hyundai G.F. Holdings also offers food, information and technology, groceries sale, and food materials distribution services.

BGF Retail Co. Ltd. operates convenience store chains called CU in South Korea. The Company, through company owned stores or franchise, sells general groceries such as food and beverage.  The Company also offers ticketing, parcel pick-up, ATM machine and bill payment service.

CJ Freshway Corp. markets and provides various groceries to food service companies and restaurants.  The Company also caters to company's restaurants, schools, airports, and private restaurants and processes agricultural products.

Cosmax, Inc. is a cosmetics manufacturer. The Company develops and produces a variety of cosmetics for men and women, such as basic and special skin care, makeup, hair care, and other beauty products. Cosmax manufactures its products on original equipment manufacturing (OEM) basis.

Lotte Chilsung Beverage Co., Ltd. manufactures alcoholic and non-alcoholic beverages such as carbonic acid drinks, fruit juices, soybean drinks, teas, and traditional health beverages.

Ottogi Corporation manufactures food seasonings and instant food, such as mayonnaise, ketchup, salad dressing, sesame and cooking oils, and instant curry. The Company also produces frozen salads, fruit preservatives, instant noodles, and canned tuna.

Hite Jinro Co., Ltd. specializes in manufacturing Soju, vodka-like distilled Korean liquor. The Company also produces and sells other alcoholic beverages, such as wine, whiskey, and ginseng liquors as well as non-alcoholic beverages including mineral water and soft drinks. In addition, Jinro also provides information processing and financial services as well as construction services.

LIFE CORPORATION operates a supermarket chain mainly in Kansai and Kanto areas. The Company sells mainly groceries, and also clothing, and household utensils.

Shenzhen Agricultural Products Co., Ltd. operates chain supermarkets and wholesale markets for agricultural products.  The Company also provides agricultural products processing and other related services.

Shenzhen Agricultural Products Co, Ltd. (000061 CH)

KANSAI SUPER MARKET LTD. is a food supermarket chain operator which mainly deals in foodstuffs, daily products, and miscellaneous goods.  The Company has markets in Hyogo and Osaka areas.

SAN-A CO., LTD. operates supermarkets, restaurants, and hotels in the Okinawa area.  The Company sells groceries, clothing, and household items.  San-A also operates restaurants, including Japanese and Italian restaurants, coffee shops, and food courts.

COFCO Joycome Foods Limited engages in animal meat production. The Company produces, processes, distributes, and sells fresh pork, pork products, and animal feeds. COFCO Joycome Foods also operates and manages slaughterhouse throughout China.

HelloFresh SE provides online food services. The Company offers a subscription service in which customers receive a weekly box of recipes and meal ideas. HelloFresh also provides ice packs, plastic packaging, meat packing, insulation materials, and other related products. HelloFresh serves customers worldwide.

The Spar Group Limited is a wholesale distributor of goods and services to independently owned SPAR, TOPS and Build It stores. The Company is also involved in the management of voluntary trading groups.

Yixintang Pharmaceutical Group Co., Ltd. operates pharmaceutical stores. The Company retails Chinese medicines, western medicines, and other products. Yixintang Pharmaceutical Group also provides medical equipment.

Yixintang Pharmaceutical Group (002727 CH)

VALOR HOLDINGS CO., LTD. is a chain store operator which handles perishables, general foods, and daily-use sundry goods.  The Company is active to diversify into new business including home centers, restaurants, fitness clubs, and pet shops. Valor is based in Gifu area and moving into Aichi, Kanagawa, and Tokyo.

PT Midi Utama Indonesia Tbk operates a chain of retail stores.  The Company operates convenience stores in Indonesia.

E-MART Inc. operates E-Mart discount stores. The Company retails food, clothing, household goods, electronics, and other items through several branch stores.

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E Mart Inc (139480 KS)

Starbucks Korea - Emart Takes Ownership Control & Prepares for an IPO

Emart announced that it will take over the control of Starbucks Korea. In the next three years, Emart is likely to IPO its key affiliates including...

Douglas Kim

Highest Daily Cases of COVID-19 in Korea Driven by the Delta Variant - Impact on the Stock Market

South Korea recorded the highest daily cases (1,378) of COVID-19 on 9 July in the past 18 months. The chief culprit has been the Delta variant.

Douglas Kim

Global Emerging Markets Weekly: 25 June 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

Global Emerging Markets Weekly: 18 June 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

Ebay Korea To Be Sold to Emart Consortium & Why Did Bom Kim Resign as the Director of Coupang Corp?

We discuss about the deal involving Ebay Korea which is set to be sold to the E Mart Inc consortium for $3.1 billion. Coupang founder Bom Kim also...

Douglas Kim

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