Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

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<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>
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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

United States

Sotheby's auctions fine arts, antiques, and collectibles, offering property in a wide variety of collecting categories.  The Company conducts auctions in the United States and other countries.  Sotheby's also purchases and resells art, brokers art, markets and brokers luxury residential real estate, provides art-related financing, and restores art.

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Sotheby's (BID US)

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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52-week Range

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