Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul><li>This is part 2 of our report on the <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a>, which is expected to be the largest IPO in the world in 1H 2016. In this report, we provide a more in-depth analysis of the global duty free market benchmarks, comparable companies valuations, and the growth of the arrival duty free shops in China. </li><li>In valuing <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> , a sum-of-the parts (SOTP) will be appropriate. There are only a few pure play, publicly listed duty free companies, so some of the key valuation multiples benchmarks will be as follows:</li></ul><ol><li><a href="https://www.smartkarma.com/entities/107" target="_blank" data-smartkarma-citation="entities:107">Hotel Shilla Co Ltd</a> - This is perhaps the closest valuation comp to <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> 's duty free shops. </li><li><a href="https://www.smartkarma.com/entities/22344" target="_blank" data-smartkarma-citation="entities:22344">Dufry AG</a> - This is the largest duty free company in the world. </li><li><a href="https://www.smartkarma.com/entities/22344" target="_blank" data-smartkarma-citation="entities:22344">Dufry AG</a> 's acquisition of World Duty Free (Italy) in 2015. </li><li><a href="https://www.smartkarma.com/entities/22344" target="_blank" data-smartkarma-citation="entities:22344">Dufry AG</a> acquisition of The Nuance Group in 2014. </li><li>Asian/global comps for high-end hotels.</li><li>Asian/global comps for amusement parks.</li></ol><ul><li>Foreign visitors to Korea drive the growth of the duty free shops. We expect 15.4 million foreign visitors to Korea in 2016, up 16.2% YoY and 17.1 million in 2017, up 11.3% YoY.</li><li>We estimate duty free shops sales in Korea to increase to 11.4 trillion won in 2016, up 24% YoY and to 13.2 trillion won in 2017, up 15.5% YoY.</li><li>There have been five new duty free shops opened in Seoul in the past six months, including HDC-Shilla (Jangchoongdong), Shinsegae DFS (Myeongdong), Hanwha Galleria (Yeouido), Doosan DFS (Dongdaemun), and SM DFS (Insadong). The result has been a spike of more than 100% of the floor space of duty free shops in Seoul. </li><li>We believe that <a href="https://www.smartkarma.com/entities/21072" target="_blank" data-smartkarma-citation="entities:21072">Lvmh Moet Hennessy Louis Vuitton</a> (owner of DFS, the second largest duy free shop stores globally) and <a href="https://www.smartkarma.com/entities/22344" target="_blank" data-smartkarma-citation="entities:22344">Dufry AG</a> are the two benchmarks for <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> . LVMH has been able to capitalize on its luxury brands to further expand its DFS duty free shops globally. Acquisition of well known global luxury brands could also reduce business risks associated with its duty free shops, which are concentrated in Korea.</li><li>In December 2015, Chinese regulators approved 30 new duty free arrival shops in China.The growing number of duty free arrival shops in China is likely to pose a major threat to the duty free shops in Korea.</li></ul>

This is part 2 of our report on the Hotel Lotte Co Ltd, which is expected to be the largest IPO in the world in 1H 2016. In this report, we provide a more in-depth analysis of the global duty free market benchmarks, comparable companies valuations, and the growth of the arrival duty free shops in China. In valuing Hotel Lotte Co Ltd , a sum-of-the parts (SOTP) will be appropriate. There are only a few pure play, publicly listed duty free companies, so some of the key valuation multiples benchmarks will be as follows:Hotel Shilla Co Ltd - This is perhaps the closest valuation comp to Hotel Lotte Co Ltd 's duty free shops. Dufry AG - This is the largest duty free company in the world. Dufry AG 's acquisition of World Duty Free (Italy) in 2015. Dufry AG acquisition of The Nuance Group in 2014. Asian/global comps for high-end hotels.Asian/global comps for amusement parks.Foreign visitors to Korea drive the growth of the duty free shops. We expect 15.4 million foreign visitors to Korea in 2016, up 16.2% YoY and 17.1 million in 2017, up 11.3% YoY.We estimate duty free shops sales in Korea to increase to 11.4 trillion won in 2016, up 24% YoY and to 13.2 trillion won in 2017, up 15.5% YoY.There have been five new duty free shops opened in Seoul in the past six months, including HDC-Shilla (Jangchoongdong), Shinsegae DFS (Myeongdong), Hanwha Galleria (Yeouido), Doosan DFS (Dongdaemun), and SM DFS (Insadong). The result has been a spike of more than 100% of the floor space of duty free shops in Seoul. We believe that Lvmh Moet Hennessy Louis Vuitton (owner of DFS, the second largest duy free shop stores globally) and Dufry AG are the two benchmarks for Hotel Lotte Co Ltd . LVMH has been able to capitalize on its luxury brands to further expand its DFS duty free shops globally. Acquisition of well known global luxury brands could also reduce business risks associated with its duty free shops, which are concentrated in Korea.In December 2015, Chinese regulators approved 30 new duty free arrival shops in China.The growing number of duty free arrival shops in China is likely to pose a major threat to the duty free shops in Korea.

Hotel Lotte - World's Largest IPO in 1H 2016 (Part 2)

Freelance Research Analyst

Tay Hock Meng

Thematic (Sector/Industry)

Developers managed to sell 384 new units, excluding executive condominiums (ECs) in December 2015, compared to 759 units in November 2015, and 230 units in December 2014. Including ECs, developers sold a total of 508 new units in December 2015, compared to 945 new units in November 2015, and 406 new units in December 2014. The December 2015 results brings the total number of new private residential units sold by developers to around 7,460 to 7,490 in 2015, about 2% higher than 2014 (Comprehensive property sales results for 4Q and whole of 2015  is scheduled to be released by the government on January 22, 2016).

Developers managed to sell 384 new units, excluding executive condominiums (ECs) in December 2015, compared to 759 units in November 2015, and 230 units in December 2014. Including ECs, developers sold a total of 508 new units in December 2015, compared to 945 new units in November 2015, and 406 new units in December 2014. The December 2015 results brings the total number of new private residential units sold by developers to around 7,460 to 7,490 in 2015, about 2% higher than 2014 (Comprehensive property sales results for 4Q and whole of 2015  is scheduled to be released by the government on January 22, 2016). 

Singapore

Mandarin Oriental International Limited is an owner and operator of luxury hotels, resorts, and residences. The Group now operates, or has under development, hotels in the Americas, Europe, Middle East, and North Africa. Mandarin Oriental International also operates, or has under development, residences at Mandarin Oriental.

Mandarin Oriental International (MAND SP)

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Mandarin Oriental International (MAND SP)

Hotel Lotte - World's Largest IPO in 1H 2016 (Part 2)

This is part 2 of our report on the Hotel Lotte Co Ltd, which is expected to be the largest IPO in the world in 1H 2016. In this report, we...

Douglas Kim

Modest Rise in New Home Sales in 2015

Developers managed to sell 384 new units, excluding executive condominiums (ECs) in December 2015, compared to 759 units in November 2015, and 230...

Tay Hock Meng

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