Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul><li>Honey Butter Chips is a category killer in the potato chips market in Korea.In less than two years, Honey Butter Chips has become have become the most sought after snack in Korea.</li><li>Our valuation scenarios analysis suggests that based on the 9-10x EV/EBITDA multiples for Crown Confectionery, there is a 8% to 36% upside range over the next one year.However, if the company is able to aggressively export its Honey Butter Chips in overseas markets such as US and China, there is likely to be even further increase in earnings estimates and valuations multiples expansion. </li><li>Honey Butter Chips was launched in August 2014 in Korea by Haitai-Calbee, a 50:50 JV between Haitai Confectionery and Calbee (this JV is a subsidiary of Haitai Confectionery).  Crown Confectionery owns a 85.2% stake in Haitai Confectionary which is planning an IPO in 2016. </li><li>We expect the potato chip market in Korea to increase from 210 billion won in 2014 to 280 billion won in 2015, and 320 billion won in 2016. We estimate Honey Butter Chips's share in the Korean potato chip market to increase from 27% in 2015 to 36% in 2016 (number one brand by estimated sales).</li><li>No other snack product has been promoted in Korea by various social media as Honey Butter Chips.  As a result of unprecedented word-of-mouth marketing through social network media, the company could reduce its own advertising and marketing expenses associated with Honey Butter Chips. </li><li>How did I buy my latest bags of Honey Butter Chips? I must have checked at least five convenience stores and two hypermarkets nearby where I live in Seoul and they were all sold out of them as a result I had to drive to Traders (which is Emart Co's imitation version of COSTCO, and located about 20 minutes from my house by car) and they were also close to being sold out but I grabbed some!</li></ul>

Honey Butter Chips is a category killer in the potato chips market in Korea.In less than two years, Honey Butter Chips has become have become the most sought after snack in Korea.Our valuation scenarios analysis suggests that based on the 9-10x EV/EBITDA multiples for Crown Confectionery, there is a 8% to 36% upside range over the next one year.However, if the company is able to aggressively export its Honey Butter Chips in overseas markets such as US and China, there is likely to be even further increase in earnings estimates and valuations multiples expansion. Honey Butter Chips was launched in August 2014 in Korea by Haitai-Calbee, a 50:50 JV between Haitai Confectionery and Calbee (this JV is a subsidiary of Haitai Confectionery).  Crown Confectionery owns a 85.2% stake in Haitai Confectionary which is planning an IPO in 2016. We expect the potato chip market in Korea to increase from 210 billion won in 2014 to 280 billion won in 2015, and 320 billion won in 2016. We estimate Honey Butter Chips's share in the Korean potato chip market to increase from 27% in 2015 to 36% in 2016 (number one brand by estimated sales).No other snack product has been promoted in Korea by various social media as Honey Butter Chips.  As a result of unprecedented word-of-mouth marketing through social network media, the company could reduce its own advertising and marketing expenses associated with Honey Butter Chips. How did I buy my latest bags of Honey Butter Chips? I must have checked at least five convenience stores and two hypermarkets nearby where I live in Seoul and they were all sold out of them as a result I had to drive to Traders (which is Emart Co's imitation version of COSTCO, and located about 20 minutes from my house by car) and they were also close to being sold out but I grabbed some!

Honey Butter Chips - Category Killer in Potato Chips

South Korea

Dongwon F&B Co., Ltd. manufactures various processed food products. The Company' s products include agricultural and marine products, beverages, dairy products, processed meat, fast food, frozen food, and ginseng. The company's main product in early stage was canned tuna and expanded their business into a variety of food production.

Daesang Corporation manufactures food seasonings, fermentations, sweeteners, starches, coffee, fodder, and bulk pharmaceutical ingredients.  The Company also constructs commercial buildings, infrastructures, and environmental facilities.

Naturecell Co Ltd manufactures fruit beverages, canned beverage, and health functional foods. The Company's prodcuts are tomato juices, peach juice, pineapple juice, orange juice, organic health conscious beverage, and canned yellow peach.  The Company was established in 1971, and its headquarters are located in Korea.

Binggrae Co., Ltd. manufactures dairy food products.  The Company has cold-storage and frozen divisions.  Bonggrae's main items include Banana Flavoured Milk, yogurts, snacks and various types of ice cream.

Dongwon Industries Co., Ltd. is a deep-sea fishing company.  The Company produces and distributes fish can goods and processed seafood products including tuna sashimi.

Sajodaerim Corporation specializes in deep sea fishing of pollack, cod, tuna, mackerel, and squid.  The Company's fishing territories cover domestic coastal areas, the North Pacific, South Atlantic, Western Africa, and Southeast Asia. Sajodaerim also manufactures, wholesales, and resells raw fish and processed frozen seafood.

Samyang Holdings Corp manufactures a wide range of food, such as sugar, cooking oil, wheat flour, and livestock feed.  The Company also operates trading business and produces industrial fibers and chemical products, such as engineering plastics, PET bottles and ion exchange resin.

Pulmuone Co., Ltd. is an investment holding company.  The Company, through its subsidiaries, produces natural health food.

SPC Samlip Ltd. manufactures variety of breads, snacks, frozen sweets, and noodles.

Namyang Dairy Products Co., Ltd. produces dairy products, such as milk, baby formula, yogurt, cheese, and ice cream.  The Company provides its products mainly to domestic market.

KIDO Group Corp produces baked goods and candy. The Company produces cookies, crackers, pies, cakes, and bread, along with chocolate and other candy.

Gansu Yasheng Industrial (Group) Co., Ltd. is an investment holding company. Through its subsidiaries, the Company operates in chemical engineering, agricultural production, textile products printing and dyeing, commercial trading, as well as beverage and inorganic salt manufacturing.

Shanghai Maling Aquarius Co., Ltd. manufactures and markets canned food, bottled water, flavorings, frozen food, and other related products.

Mitsui Sugar Co., Ltd. produces and sells sugar and related processed products including sweetener and syrup.  The Company produces its products for commercial use and home use.

Vitasoy International Holdings Limited, through its subsidiaries, manufactures and distributes food and beverages.

Australian Agricultural Company Limited is a cattle producer and breeder.  The Company operates grazing and farming properties along with wholesale meat marketing. Australian Agricultural operates an integrated cattle production system across cattle stations, feedlots and farms located throughout Queensland and the Northern Territory.

Yashili International Holdings Ltd. produces dairy products.  The Company operates milk processing plants in Guangdong, Heilongjiang, Shanxi and Henan Provinces in China.

Sinar Mas Agro Resources and Technology Tbk PT and its subsidiaries develops oil palm and tea plantations.  The Company produces and trades crude palm oil, palm kernel oil, tea, and refined palm products such as cooking oil and margarine.  Sinar Mas also manufactures packaging products such as bottles and caps as well as provides management services.

Sinar Mas Agro Resources and Technology Tbk PT (SMAR IJ)

Sinar Mas Agro Resources and Technology Tbk PT

PT Astra Agro Lestari Tbk operates rubber plantations and manufactures cooking oil. Through its subsidiaries,  the Company also operates a variety of other plantations such as palm oil, tea, and cocoa plantations.

The Hain Celestial Group, Inc. is a natural and organic beverage, snack, specialty food, and personal care products company.  The Company's product line include grocery store foods such as organic cookies, cooking oils, sugar free products, kosher foods, snacks, and frozen foods, as well as organic skin, hair, and body products. Hain Celestial sells and markets in North America and Europe.

Orion Holdings Corp. manufactures snacks products. The Company produces and sells candies, gums, chocolates, pies, and other products. Orion Holdings also develops smart systems. Orion Holdings serves customers worldwide.

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Orion Holdings (001800 KS)

Honey Butter Chips - Category Killer in Potato Chips

Honey Butter Chips is a category killer in the potato chips market in Korea.In less than two years, Honey Butter Chips has become have become the...

Douglas Kim

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