Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

LVMH Moet Hennessy Louis Vuitton SE / Equity Bottom-Up

LVMH Moet Hennessy Louis Vuitton SE (MC FP)

<ul>
<li>In this insight, we provide the income statement comparisons of the eight largest global luxury brand Korea operations including Louis Vuitton Korea, Prada Korea, Ralph Lauren Korea, and Moncler Korea.</li>
<li>In 2022, Korea spent $16.8 billion in luxury goods, representing per capita consumption of $325 per person, surpassing the United States ($280 per person) and China ($55 per person). </li>
<li>Luxury brand spending in Korea is often a leading indicator of global luxury brand spending. Luxury brand spending in Korea has been weak this year and this continued in 3Q23.</li>
</ul>


In this insight, we provide the income statement comparisons of the eight largest global luxury brand Korea operations including Louis Vuitton Korea, Prada Korea, Ralph Lauren Korea, and Moncler Korea.
In 2022, Korea spent $16.8 billion in luxury goods, representing per capita consumption of $325 per person, surpassing the United States ($280 per person) and China ($55 per person). 
Luxury brand spending in Korea is often a leading indicator of global luxury brand spending. Luxury brand spending in Korea has been weak this year and this continued in 3Q23.


Income Statement Analysis of Global Luxury Brand Korea Operations and Luxury Brand Spending Slowdown

<ul>
<li>Hotel Shilla, one of the largest operators of duty free shops in Korea, will be a major beneficiary of the return of the group tours from China to Korea.</li>
<li>We expect the consensus to raise the company's sales estimates in 2024 to 2025 by about 3-7% and net profit estimates by 20-25%+ in this period. </li>
<li>Currently, Hotel Shilla Pref/Common stock price ratio is 0.61 which is 22% below the five year average of 0.78. </li>
</ul>


Hotel Shilla, one of the largest operators of duty free shops in Korea, will be a major beneficiary of the return of the group tours from China to Korea.
We expect the consensus to raise the company's sales estimates in 2024 to 2025 by about 3-7% and net profit estimates by 20-25%+ in this period. 
Currently, Hotel Shilla Pref/Common stock price ratio is 0.61 which is 22% below the five year average of 0.78. 


Hotel Shilla Pref: Discount Vs Common to Narrow and Boost from Chinese Group Tours to Korea

<ul>
<li>We expect the consensus to increase their operating profit estimates for Hotel Shilla in 2023 and 2024 by as much as 10-20% in 2023 and 2024.  </li>
<li>Higher earnings will likely be driven by Hotel Shilla winning new licenses to operate duty free at the Incheon International Airport and much better than expected profits in 1Q 2023.</li>
<li>With improved momentum (both operationally and share price basis), we think that the Hotel Shilla (pref) could outperform Hotel Shilla (common) in the coming weeks. </li>
</ul>


We expect the consensus to increase their operating profit estimates for Hotel Shilla in 2023 and 2024 by as much as 10-20% in 2023 and 2024.  
Higher earnings will likely be driven by Hotel Shilla winning new licenses to operate duty free at the Incheon International Airport and much better than expected profits in 1Q 2023.
With improved momentum (both operationally and share price basis), we think that the Hotel Shilla (pref) could outperform Hotel Shilla (common) in the coming weeks. 


Hotel Shilla: Wins New License to Operate Duty Free at Incheon International Airport for 10 Years

<ul>
<li>Amid sharply rising interest rates and greater economic uncertainty, the subject of loan guarantees to affiliates among Korean companies has become more important. </li>
<li>In this insight, we discuss a pair trade between Shinsegae (long) and Hyundai Dept Store Co (short).</li>
<li>Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan guarantees), valuations, and economies of scale. </li>
</ul>


Amid sharply rising interest rates and greater economic uncertainty, the subject of loan guarantees to affiliates among Korean companies has become more important. 
In this insight, we discuss a pair trade between Shinsegae (long) and Hyundai Dept Store Co (short).
Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan guarantees), valuations, and economies of scale. 


Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store

Event-Driven

<ul>
<li>On 23 September, Hanwha Solutions announced a set of restructuring measures which are probably the biggest ever moves by the company in the past 50 years.</li>
<li>The spin-off of the Hanwha Galleria is a good move. Clearly, having both the renewable energy and a luxury department store business under one roof does not make much sense.</li>
<li>We also like the company's move expand its U.S. solar module production capacity. The total amount of potential benefit could be nearly US$2 billion over the next decade. </li>
</ul>


On 23 September, Hanwha Solutions announced a set of restructuring measures which are probably the biggest ever moves by the company in the past 50 years.
The spin-off of the Hanwha Galleria is a good move. Clearly, having both the renewable energy and a luxury department store business under one roof does not make much sense.
We also like the company's move expand its U.S. solar module production capacity. The total amount of potential benefit could be nearly US$2 billion over the next decade. 


Hanwha Solutions: Biggest Restructuring Measures in 50 Years

South Korea

Shinsegae Co., Ltd. operates department stores in South Korea.  The Company retails food, clothing, household goods, electronics, and other items through several branch stores.

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Shinsegae (004170 KS)

Income Statement Analysis of Global Luxury Brand Korea Operations and Luxury Brand Spending Slowdown

In this insight, we provide income statement comparisons of the eight largest global luxury brand Korea operations including Louis Vuitton Korea,...

Douglas Kim

Hotel Shilla Pref: Discount Vs Common to Narrow and Boost from Chinese Group Tours to Korea

Currently, Hotel Shilla Pref/Common stock price ratio is 0.61 which is 22% below the five year average of 0.78. Hotel Shilla is one of the biggest...

Douglas Kim

Hotel Shilla: Wins New License to Operate Duty Free at Incheon International Airport for 10 Years

Hotel Shilla winning new licenses to operate duty free at the Incheon International Airport and much better than expected profits in 1Q 2023 are...

Douglas Kim

Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store

Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan...

Douglas Kim

Hanwha Solutions: Biggest Restructuring Measures in 50 Years

On 23 September, Hanwha Solutions announced a set of restructuring measures which are probably the biggest ever moves by the company in the past 50...

Douglas Kim

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