Daily Industrials: Samsung C&T: A Restructuring of Fashion Business Is Likely After the Stepping Down of Lee Seo-Hyun and more

In this briefing:

1. Samsung C&T: A Restructuring of Fashion Business Is Likely After the Stepping Down of Lee Seo-Hyun
2. Chengdu Expressway (成都高速) Post-IPO – Low Liquidity and Tiny Adjusted Free Float
3. Full List of Korea’s Single-Sub Holdcos with Current Sigma % – Quick Thought on Amorepacific
4. Prored Partners (7034) – A Fast Growing Recent Listing in Japan.
5. HK Connect Discovery Weekly: China Tower, Tencent, New China Life (2019-01-11)

1. Samsung C&T: A Restructuring of Fashion Business Is Likely After the Stepping Down of Lee Seo-Hyun

Lee Seo-Hyun (age 46), the billionaire second daughter of the Samsung Group Lee Gun-Hee, recently stepped down from her position as the CEO of Samsung C&T (028260 KS)‘s fashion business. After resigning from Samsung C&T, Lee Seo-Hyun will become a chairperson of the Samsung Foundation, focusing on corporate social responsibility activities.

Among the various fashion brands, the most problematic has been the 8 Seconds SPA brand, which has been continuing to lose money. Despite big ambitions to make 8 Seconds as one of the leading global SPA brands, this plan has fluttered, especially in the overseas markets such as China. This strongly suggests that there could be a big restructuring of the company’s fashion business in the coming months. 

Our NAV analysis of Samsung C&T suggests a range of 122k won to 139k won, which would represent an upside of 11% to 27%. In our NAV analysis, the investment stakes in affiliates were 19.2 trillion won, core business operating value was estimated at 9.9 trillion won (using 8x consensus OP in 2019), net cash of 2.2 trillion won, and Samsung Everland land value (post 50% taxes) of 1.8 trillion won. The range of value reflects the different discount for the quasi-holdco structure (20-30% discount).

2. Chengdu Expressway (成都高速) Post-IPO – Low Liquidity and Tiny Adjusted Free Float

Chengdu Expressway Company Limited (1785 HK) raised US$112m at the fixed price of HK$2.20 per share. We have previously looked at the IPO in Chengdu Expressway (成都高速) IPO Review – Well-Managed but Unexciting.

In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.

3. Full List of Korea’s Single-Sub Holdcos with Current Sigma % – Quick Thought on Amorepacific

• This is the complete list of Korea’s single-sub holdcos with current sigma %. Three local holdcos are currently standing out: Amorepacific Group (002790 KS): +231.84% of σ, Hanjin Kal Corp (180640 KS): -113.10% of σ and Youngone Holdings (009970 KS): +86.63% of σ.
• Amorepacific appears very tempting for stub trade. The Amore duo now has the widest price divergence on a 20D MA among Korea’s single-sub holdcos. But I would wait on this name. Locally, signals of improving fundamentals are being heard on the local cosmetics stocks. Holdco has traditionally been more susceptible to fundamentals changes. It is very possible that Amore duo leads to upwardly mean reversion in favor of Holdco in the short-term.

4. Prored Partners (7034) – A Fast Growing Recent Listing in Japan.

Prored Partners is a business consulting company founded in 2009 by the CEO, Mr Satani (who retains 60% of the equity). Prior to setting up Prored, he worked as a business consultant at a consultancy firm subsequently acquired by PwC Consulting. The shares were registered on the Mother’s exchange at the end of July 2018. Unfortunately, it is a micro-cap (market cap Y24bn) but should be of interest to those looking for a very fast growing small cap name. It trades on 17x our forecasts for this year to 10/19.  The company has been growing at a fast pace over the last few years. We expect this strong rate of growth to continue, see below.

5. HK Connect Discovery Weekly: China Tower, Tencent, New China Life (2019-01-11)

In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.

We split the stocks eligible for the Hong Kong Connect trade into three groups: those with a market capitalization of above USD 5 billion, those with a market capitalization between USD 1 billion and USD 5 billion, and those with a market capitalization between USD 500 million and USD 1 billion.

We see the Financials sector led the outflow by mainland investors last week with 201 million USD of net selling. We also highlight a few companies this week: China Tower (788 HK), Tencent Holdings (700 HK), New China Life Insurance (1336 HK), and Ping An Good Doctor (1833 HK).