Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>
<strong><a href="https://www.smartkarma.com/entities/15684" target="_blank" data-smartkarma-citation="entities:15684">Seoul Auction Co Ltd</a> </strong>reported decent results in 1Q16. We continue to have a positive view on <a href="https://www.smartkarma.com/entities/15684" target="_blank" data-smartkarma-citation="entities:15684">Seoul Auction Co Ltd</a>, which is the dominant art auction company in Korea with a 57% market share in 2015. </li>
<li>Its sales increased 52.4% YoY (27% higher than consensus) in 1Q16. Operating profit rose 17.5% YoY to 2.4 billion won in 1Q16 (5% higher than consensus). However, net profit declined 12.6% YoY to 1.5 billion won in 1Q16 (26% lower than consensus). The decline in net profit was impacted by 0.26…</li>
</ul>



Seoul Auction Co Ltd reported decent results in 1Q16. We continue to have a positive view on Seoul Auction Co Ltd, which is the dominant art auction company in Korea with a 57% market share in 2015. 
Its sales increased 52.4% YoY (27% higher than consensus) in 1Q16. Operating profit rose 17.5% YoY to 2.4 billion won in 1Q16 (5% higher than consensus). However, net profit declined 12.6% YoY to 1.5 billion won in 1Q16 (26% lower than consensus). The decline in net profit was impacted by 0.26…


Korean Art Goes Global - Decent 1Q16 Results

<ul><li>Seoul Auction is the dominant art auction company in Korea, with a 57% market share in 2015.</li><li>Korean art was virtually invisible in the global art market until two years ago when the global art collectors started to buy Korean Dansaekhwa paintings in significant volume. </li><li>The company's sales increased by 131% YoY to 54.7 billion won and net income increased by 258% YoY to 12.9 billion won in 2015. We expect the company to continue its strong sales and net income growth, albeit at a slower rate, in the next two years. </li><li>Unlike the global art auction market which has been relatively flat in the past several  years, the Korean art auction market has been one of the fastest growing in the world, driven by Dansaekhwa.</li><li>Our valuation range for Seoul Auction is 21,800 won (base case) to 24,000 won per share (high case), representing 17% to 29% upside from current levels. Base case valuation is derived from 20x P/E using our estimated net profit estimate of 18.4 billion won in 2017. Seoul Auction shares have been trading at an average P/E multiple of 20x from 2014 to 2016. We believe that the more recent valuation multiples (since 2014) is more appropriate for the company since the stock has been re-rated due to its strong revenue and earnings growth, especially from higher global demand for Dansaekhwa paintings. </li></ul>

Seoul Auction is the dominant art auction company in Korea, with a 57% market share in 2015.Korean art was virtually invisible in the global art market until two years ago when the global art collectors started to buy Korean Dansaekhwa paintings in significant volume. The company's sales increased by 131% YoY to 54.7 billion won and net income increased by 258% YoY to 12.9 billion won in 2015. We expect the company to continue its strong sales and net income growth, albeit at a slower rate, in the next two years. Unlike the global art auction market which has been relatively flat in the past several  years, the Korean art auction market has been one of the fastest growing in the world, driven by Dansaekhwa.Our valuation range for Seoul Auction is 21,800 won (base case) to 24,000 won per share (high case), representing 17% to 29% upside from current levels. Base case valuation is derived from 20x P/E using our estimated net profit estimate of 18.4 billion won in 2017. Seoul Auction shares have been trading at an average P/E multiple of 20x from 2014 to 2016. We believe that the more recent valuation multiples (since 2014) is more appropriate for the company since the stock has been re-rated due to its strong revenue and earnings growth, especially from higher global demand for Dansaekhwa paintings. 

Seoul Auction - Dominant Art Auction Company in Korea; Open Your Eyes for Dansaekhwa

South Korea

MegaStudy Co., Ltd. offers on-line and off-line educational programs to high school students.  The Company provides college entrance test preparatory courses, e-learning, and college admission advisory services.

Chungdahm Learning Inc. operates foreign language schools through off-line and on-line.  The Company provides online one-to-one tutoring for educational institutions and students.

Kukbo Design Co., Ltd. provides interior design services for hotels, office buildings, residential buildings, and special facilities.  The Company's services include planning design, detail design, remodeling, and construction.

Digital Daesung Co., Ltd. provides on-line and off-line educational programs to primary and high school students.  The Company offers college entrance test preparatory courses, testing, e-learning, and college admission advisory services.

JLS Co., Ltd. operates both off-line and on-line language schools. The Company manufactures and sells educational material used in its institutes. JLS manufactures network devices, such as fiber optic multiplexer, data transmission units, and community antenna television (CATV) transmission units.

Credu Corporation provides web-based e-learning services for business, such as, finance, language, computer, management, informational technology.  The Company also offers Internet contents, network system management.

Daekyo Co., Ltd. an educational information service provider.  The Company publishes learning materials and provides learning programs to preschool and primary school students.

NE Neungyule, Inc produces and publishes English learning materials, such as books, cassettes, and video tapes.  The Company also operates English education facility and provides on-line education through Internet.

Visang Education Inc. designs, publishes, and distributes educational books. The Company's products include reference books for students and teachers and both online and offline classes from elementary to high-school students.

YBM NET, Inc. develops, markets, and operates various e-businesses, such as an English education service, an agency for foreign language on-line tests, and game software publishing. The Company also supports localization and programming development for overseas companies. YBM NET publishes English dictionaries and textbooks.

China Maple Leaf Educational Systems Limited is a Chinese international school operator. The Company operates high schools, middle schools and elementary schools across various Chinese cities.

China Maple Leaf Educational Systems (1317 HK)

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WW International, Inc. provides weight control programs. The Company offers subscriptions for commitment plans that give their clients access to meetings and online subscriptions, as well as gives their members guidance and access to a supportive community to help enable them for healthy habits. WW International serves customers worldwide.

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Youji Corporation provides infant and school children with physical education guidance. The Company's services include business consulting for kindergarten and nursery school.

Career Point Ltd. offers courses to prepare for examinations.  The Company prepares students who intend to study engineering and medicine.

Virscend Education Company Limited is a K-12 private education company. The Company provides foreign exchange programs, mandates English to be taught, and provides different schools with different focuses.

Huali University Group Limited provides educational services. The Company offers private higher education, private vocational education, and other related services. Huali University Group provides services in China.

QB Net Holdings Co.,Ltd. offers hair salons services. The Company provides hair cutting, washing, setting, dyeing, tinting, straightening, and other related services. QB Net Holdings provides its services in Japan.

SPRIX, Ltd. offers online educational services. The Company provides educational software that enables user to learn various courses and programs. SPRIX offers services in Japan.

Seoul Auction Co., Ltd. operates auctions to trade art works of paint. The Company has galleries over the country, and purchases and sells various art works. Seoul Auction also makes loan for auction trading.

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Seoul Auction (063170 KS)

Korean Art Goes Global - Decent 1Q16 Results

Seoul Auction Co Ltd reported decent results in 1Q16. We continue to have a positive view on Seoul Auction Co Ltd, which is the dominant art...

Douglas Kim

Seoul Auction - Dominant Art Auction Company in Korea; Open Your Eyes for Dansaekhwa

Seoul Auction is the dominant art auction company in Korea, with a 57% market share in 2015. Korean art was virtually invisible in the global art...

Douglas Kim

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