Global Head of Research, Smartkarma

Mark Artherton

Global Head of Research

LR Research

Thematic (Sector/Industry)

In this issue:Machine Learning as a  moat,  Mexico's lack of debt problem, JD.com surprising Q3, CIMB loses customer data, Jardine complicates Vinamilk, Data trading in Shanghai, a study on monetary leakage in the EU, Uber selling a stake?,  unwanted green lines for iPhone X,  and Seasteading.<div class="content-highlight">1.  Uber makes an announcement about <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group Corp (9984 JP)</a>  has agreed to take a stake in the company.  The amount is rumoured to be up to USD10bn, though Softbank retains the right to walk away…</div>

In this issue:Machine Learning as a  moat,  Mexico's lack of debt problem, JD.com surprising Q3, CIMB loses customer data, Jardine complicates Vinamilk, Data trading in Shanghai, a study on monetary leakage in the EU, Uber selling a stake?,  unwanted green lines for iPhone X,  and Seasteading.1.  Uber makes an announcement about Softbank Group Corp (9984 JP)  has agreed to take a stake in the company.  The amount is rumoured to be up to USD10bn, though Softbank retains the right to walk away…

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)

Switzerland

Dufry AG operates duty-free shops in countries such as Tunisia, Italy, Mexico, France, Russia, the United Arab Emirates, Singapore, the Caribbean and the United States.

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Dufry AG (DUFN SW)

21 Things Worth Knowing (#14)

In this issue:Machine Learning as a moat, Mexico's lack of debt problem, JD.com surprising Q3, CIMB loses customer data, Jardine complicates...

Mark Artherton

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

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