Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

Estee Lauder Companies Cl A / Event-Driven

<p><strong><a href="https://www.smartkarma.com/entities/estee-lauder-companies-cl-a" target="_blank" data-smartkarma-citation="entities:8713:1" rel="noopener">Estee Lauder Companies Cl A (EL US)</a> announced on November 18th that it will purchase a 66.7% stake in Have &amp; Be Co.,</strong> a leading Korean cosmetics maker which was established in 2005.</p><p>Although the exact <a href="https://n.news.naver.com/article/015/0004243576" target="_blank" rel="noopener">purchase price</a> was not announced, the value of the total 100% stake in Have &amp; Be is estimated to be about 2 trillion won, which would result in the 66.7% stake in the company being valued at about 1.3 trillion ($1.1 billion). This is one of the biggest M&amp;A deals in the Korean cosmetics sector this year and it is the first major acquisition of an Asian brand cosmetics company in Asia by Estee Lauder. </p><p>The company has fantastic financials backed by strong revenue growth rate and high profit margins. In 2018, Have &amp; Be achieved revenue of 469.1 billion won (up 29.3% YoY), operating profit of 111.9 billion won (up 19.5% YoY), and operating margin of 23.8%).</p>

Estee Lauder Companies Cl A (EL US) announced on November 18th that it will purchase a 66.7% stake in Have &amp; Be Co., a leading Korean cosmetics maker which was established in 2005.Although the exact purchase price was not announced, the value of the total 100% stake in Have &amp; Be is estimated to be about 2 trillion won, which would result in the 66.7% stake in the company being valued at about 1.3 trillion ($1.1 billion). This is one of the biggest M&amp;A deals in the Korean cosmetics sector this year and it is the first major acquisition of an Asian brand cosmetics company in Asia by Estee Lauder. The company has fantastic financials backed by strong revenue growth rate and high profit margins. In 2018, Have &amp; Be achieved revenue of 469.1 billion won (up 29.3% YoY), operating profit of 111.9 billion won (up 19.5% YoY), and operating margin of 23.8%).

Korea M&A Spotlight: Estee Lauder Acquires Have & Be for More Than $1 Billion

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Equity Bottom-Up

Estee Lauder Companies Cl A / Equity Bottom-Up

<p>FQ1 2020 Estimates:</p><p>Based on our offline store checks in mainland China, we see continued sales growth momentum for  <a href="https://www.smartkarma.com/entities/estee-lauder-companies-cl-a" target="_blank" data-smartkarma-citation="entities:8713:1" rel="noopener">Estee Lauder Companies Cl A (EL US)</a>'s La Mer, Lauder, Tom Ford and MAC, driven by same store sales growth as well as new store expansion, in FQ1 2020.  La Mer and Tom Ford added ~8 new store locations, increasing from 74 to 82 and 14 to 22 offline store locations over past 12 months respectively.  Mac added 12 stores and now has 97 stores in mainland China.</p><p>Excluding ecommerce, we estimate that the key brands with EL, namely Lauder (~48% group sales in mainland China), La Mer (~20%),  and MAC (~13%) grew 55%, 30%+, and 35% in FQ1 2020 (July-September) year-over-year, driving ~33.5% YoY growth for the group’s offline sales growth in China.  Combining ecommerce (primarily Tmall), EL China growth is likely to reach ~35%-40% YoY in FQ1 2020.  Due to the low retail location penetration for the trending brands such as La Mer, Tom Ford, and MAC, many cities don’t have retail stores conveniently located, ecommerce represents the primary sales channel.  We estimate that La Mer sold ~65% total GMV in mainland online, only ~35% in off-line brick and mortar stores.</p>

FQ1 2020 Estimates:Based on our offline store checks in mainland China, we see continued sales growth momentum for  Estee Lauder Companies Cl A (EL US)'s La Mer, Lauder, Tom Ford and MAC, driven by same store sales growth as well as new store expansion, in FQ1 2020.  La Mer and Tom Ford added ~8 new store locations, increasing from 74 to 82 and 14 to 22 offline store locations over past 12 months respectively.  Mac added 12 stores and now has 97 stores in mainland China.Excluding ecommerce, we estimate that the key brands with EL, namely Lauder (~48% group sales in mainland China), La Mer (~20%),  and MAC (~13%) grew 55%, 30%+, and 35% in FQ1 2020 (July-September) year-over-year, driving ~33.5% YoY growth for the group’s offline sales growth in China.  Combining ecommerce (primarily Tmall), EL China growth is likely to reach ~35%-40% YoY in FQ1 2020.  Due to the low retail location penetration for the trending brands such as La Mer, Tom Ford, and MAC, many cities don’t have retail stores conveniently located, ecommerce represents the primary sales channel.  We estimate that La Mer sold ~65% total GMV in mainland online, only ~35% in off-line brick and mortar stores.

Estee Lauder China Q3 2019 Survey: Accelerating Momentum Aided by Unauthorized ReSeller Transactions

Thematic (Sector/Industry)

<p>Monthly surveys include the following store buyers and merchants: Sunshine DFS, Galeries Lafayette Beijing, Lane Crawford HK, Vivienne Westwood, Beijing Yintai Center, Shanghai IFC Malls, Daigou merchants, regional merchant associations; ecommerce service providers</p>

Monthly surveys include the following store buyers and merchants: Sunshine DFS, Galeries Lafayette Beijing, Lane Crawford HK, Vivienne Westwood, Beijing Yintai Center, Shanghai IFC Malls, Daigou merchants, regional merchant associations; ecommerce service providers

Luxury Brand Retail Survey in China – Q2 2019 (LVMH, Kering, NKE, EL)

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<p>In this report we outline important technical levels to watch for U.S. indexes and highlight several negative developments which lead us to a more cautious outlook. We also highlight attractive Groups and stocks within the Consumer Staples and Materials Sectors </p>

In this report we outline important technical levels to watch for U.S. indexes and highlight several negative developments which lead us to a more cautious outlook. We also highlight attractive Groups and stocks within the Consumer Staples and Materials Sectors 

U.S. Equity Strategy: Outlook Deteriorating; Upgrading Staples

Founder and Strategist, Entext Economics & Strategy

Sean Maher

Founder and Strategist

Entext Economics & Strategy

Entext provides institutional investors with distinctive, actionable asset allocation and thematic research, which typically challenges the market consensus. Our clients range from credit, equity and multi-asset hedge and pension funds to family offices and sovereign funds. 
 
We focus on identifying key inflection points in macro data and relative asset performance amid the 'groupthink'  and confirmation bias that characterizes most investment bank analysis.

Macro Driven Investment Insight

<div style="text-align: left;" class="content-caption"><blockquote><p><em>‘“I try to use a facial pack every night,” says Mr. Kim, 28 years old, who now works at an office in Seoul. “It’s been a daily routine since my time in the military.” South Korea is a force in the global beauty industry and its carefully groomed pop idols have become global stars. And for many guys here, the gateway to face serums and 10 step skin care regimens is their time as military conscripts. During his service, Mr. Kim developed a routine while posted at an observation post along the barbed wire fences of the inter-Korean demilitarized zone.’ </em></p></blockquote></div><div class="content-remarks"><p><a href="https://www.wsj.com/articles/the-secret-to-surviving-military-service-moisturizer-foam-cleanser-cucumber-face-mask-1535034194" target="_blank">WSJ article</a> on the elaborate skincare rituals of S. Korean men</p></div><blockquote>
<em>“Fiscal year 2018 was an outstanding year for our company. By focusing on strategic priorities and investing in our multiple engines of growth, we delivered double-digit sales and earnings per share gains in all four quarters. In constant currency full year sales rose 13%, nearly twice the rate of global prestige beauty and diluted EPS increased 24%. What made our performance particularly strong were our over achievements in Asia and in Skin Care globally. </em><em>” </em>
</blockquote><div class="content-remarks"><p>Fabrizio Freda, CEO Estee Lauder</p></div><div class="content-remarks">
<blockquote><p><em>‘But the market and gender norms are changing, with cosmetics no longer seen as exclusively for women and male celebrities showing that it is OK for men to dab on a bit of blush. Jiang says a firm that manages bloggers pays him about 5,000 yuan (US$730) per month to feature products from cosmetics companies. Increasingly, foreign firms like La Mer and Aesop work with video bloggers such as Lan Haoyi, to promote their products to his nearly 1.4 million followers.</em>’</p></blockquote>
<p>From a recent SCMP article</p>
</div>

‘“I try to use a facial pack every night,” says Mr. Kim, 28 years old, who now works at an office in Seoul. “It’s been a daily routine since my time in the military.” South Korea is a force in the global beauty industry and its carefully groomed pop idols have become global stars. And for many guys here, the gateway to face serums and 10 step skin care regimens is their time as military conscripts. During his service, Mr. Kim developed a routine while posted at an observation post along the barbed wire fences of the inter-Korean demilitarized zone.’ WSJ article on the elaborate skincare rituals of S. Korean men
“Fiscal year 2018 was an outstanding year for our company. By focusing on strategic priorities and investing in our multiple engines of growth, we delivered double-digit sales and earnings per share gains in all four quarters. In constant currency full year sales rose 13%, nearly twice the rate of global prestige beauty and diluted EPS increased 24%. What made our performance particularly strong were our over achievements in Asia and in Skin Care globally. ” 
Fabrizio Freda, CEO Estee Lauder
‘But the market and gender norms are changing, with cosmetics no longer seen as exclusively for women and male celebrities showing that it is OK for men to dab on a bit of blush. Jiang says a firm that manages bloggers pays him about 5,000 yuan (US$730) per month to feature products from cosmetics companies. Increasingly, foreign firms like La Mer and Aesop work with video bloggers such as Lan Haoyi, to promote their products to his nearly 1.4 million followers.’
From a recent SCMP article


Korean Men Leading Next Asian Skincare Boom

United States

The Estee Lauder Companies Inc. manufactures and markets a wide range of skin care, makeup, fragrance, and hair care products.  The Company's products are sold in countries and territories around the world.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Estee Lauder Companies Cl A (EL US)

Korea M&A Spotlight: Estee Lauder Acquires Have & Be for More Than $1 Billion

Estee Lauder Companies Cl A (EL US) announced on November 18th that it will purchase a 66.7% stake in Have & Be Co., a leading Korean cosmetics...

Douglas Kim

Estee Lauder China Q3 2019 Survey: Accelerating Momentum Aided by Unauthorized ReSeller Transactions

FQ1 2020 Estimates:Based on our offline store checks in mainland China, we see continued sales growth momentum for Estee Lauder Companies Cl A (EL...

JL Warren Capital

Luxury Brand Retail Survey in China – Q2 2019 (LVMH, Kering, NKE, EL)

Monthly surveys include the following store buyers and merchants: Sunshine DFS, Galeries Lafayette Beijing, Lane Crawford HK, Vivienne Westwood,...

JL Warren Capital

U.S. Equity Strategy: Outlook Deteriorating; Upgrading Staples

In this report we outline important technical levels to watch for U.S. indexes and highlight several negative developments which lead us to a more...

Vermilion Research

Korean Men Leading Next Asian Skincare Boom

WSJ article on the elaborate skincare rituals of S. Korean men “Fiscal year 2018 was an outstanding year for our company. By focusing on strategic...

Sean Maher

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)