Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<p>It was announced after the market close on 10 November that <a href="https://www.smartkarma.com/entities/gs-retail-co-ltd" target="_blank" data-smartkarma-citation="entities:3867:1" rel="noopener">GS Retail (007070 KS)</a> will merge with <a href="https://www.smartkarma.com/entities/gs-home-shopping-inc" target="_blank" data-smartkarma-citation="entities:3916:1" rel="noopener">Gs Home Shopping (028150 KS)</a>. GS Retail and GS Home Shopping have market caps of  2.6 trillion won (US$2.3 billion) and 0.9 trillion won (US$0.8 billion), respectively. GS Retail's main businesses include offline retail supermarkets (GS THE FRESH), CVS stores (GS 25), and logistics warehouses. GS Home Shopping's main businesses include home shopping and online e-commerce services. After the merger date, 4.2236834 common stock of GS Retail will be issued for 1 share of GS Home Shopping shares listed in GS Homeshopping's shareholder list. </p><p>We believe that the merger between GS Retail and GS Home Shopping is a positive catalyst. Both companies have been negatively impacted by the barrage of heavy competition, especially among e-commerce driven companies such as Coupang, Naver, and Kurly in the past several years. The traditional brick and mortar competitors including Emart and Lotte Shopping have also made drastic moves to restructure their businesses and integrate their online and offline businesses. Finally, we believe this merger will have a positive impact on GS Holdings, the controlling shareholder of the combined entity.</p>

It was announced after the market close on 10 November that GS Retail (007070 KS) will merge with Gs Home Shopping (028150 KS). GS Retail and GS Home Shopping have market caps of  2.6 trillion won (US$2.3 billion) and 0.9 trillion won (US$0.8 billion), respectively. GS Retail's main businesses include offline retail supermarkets (GS THE FRESH), CVS stores (GS 25), and logistics warehouses. GS Home Shopping's main businesses include home shopping and online e-commerce services. After the merger date, 4.2236834 common stock of GS Retail will be issued for 1 share of GS Home Shopping shares listed in GS Homeshopping's shareholder list. We believe that the merger between GS Retail and GS Home Shopping is a positive catalyst. Both companies have been negatively impacted by the barrage of heavy competition, especially among e-commerce driven companies such as Coupang, Naver, and Kurly in the past several years. The traditional brick and mortar competitors including Emart and Lotte Shopping have also made drastic moves to restructure their businesses and integrate their online and offline businesses. Finally, we believe this merger will have a positive impact on GS Holdings, the controlling shareholder of the combined entity.

Korea M&A Spotlight: A Merger Between GS Retail and GS Home Shopping

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

<p>Aekyung was the only chaebol who publicly showed interest in Asiana. Now it looks like we have another chaebol chasing after Asiana. According to one local news report, Aekyung is asking GS to form a consortium. No further detail of this talking between the two chaebols was disclosed. But the news report speculates that Aekyung wants to take Asiana's LCCs (Air Seoul and Air Busan) and lets GS take Asiana. <a href="http://www.thebell.co.kr/free/Content/ArticleView.asp?key=201908200100032740002019" target="_blank" rel="noopener">Here is the link of this news report</a>. But to me, this report mis-speculates some of the important aspects surrounding the current situation. Here is my more factual view on this partnership.</p>

Aekyung was the only chaebol who publicly showed interest in Asiana. Now it looks like we have another chaebol chasing after Asiana. According to one local news report, Aekyung is asking GS to form a consortium. No further detail of this talking between the two chaebols was disclosed. But the news report speculates that Aekyung wants to take Asiana's LCCs (Air Seoul and Air Busan) and lets GS take Asiana. Here is the link of this news report. But to me, this report mis-speculates some of the important aspects surrounding the current situation. Here is my more factual view on this partnership.

More Factual View on Aekyung/GS Partnership for Asiana

Director | Exposing Creative Accounting, Bucephalus Research Partnership

Robert Medd

Director | Exposing Creative Accounting

Exposing Creative Accounting

Bucephalus Research Partnership

Bucephalus Research Partnership Limited. Exposing Creative Accounting.

At the Bucephalus Research Partnership (BRP) we analyse financial statements using our accountant's practical experience and our own quantitative algorithms for corporate governance, accounting risk and peer performance.

Our thematic research refines our unique algorithms while our single stock research focuses on examples where we discover a significant gap between published accounts and business reality.

​Bucephalus Research Partnership:
- Is an independent fee-based research service
- Does not take proprietary positions, long or short
- Does not solicit business or fees from the corporates we review

Thematic (Sector/Industry)

<h2>Introducing the Bucephalus Operating Return on Utilised Capital</h2><p>We created BORUC, to reveal the true operating performance of businesses because ‘traditional’ measures (ROE, ROCE etc.) are easy to manipulate. Struggling companies often resort to creative accounting to obscure their problems and hide their decline. This alters the numerator in ROE, ROCE etc. and disguises their investment and capex cycles.</p>

Introducing the Bucephalus Operating Return on Utilised CapitalWe created BORUC, to reveal the true operating performance of businesses because ‘traditional’ measures (ROE, ROCE etc.) are easy to manipulate. Struggling companies often resort to creative accounting to obscure their problems and hide their decline. This alters the numerator in ROE, ROCE etc. and disguises their investment and capex cycles.

<h2><strong>Introducing the Bucephalus Operating Return on Utilised Capital</strong></h2><p>We created BORUC, the Bucephalus Operating Return on Utilised Capital, to reveal the true operating performance of businesses because ‘traditional’ measures (ROE, ROCE etc.) are easy to manipulate. Struggling companies often resort to creative accounting to obscure their problems and hide their decline. This alters the numerator in ROE, ROCE etc. and disguises their investment and capex cycles.</p>

Introducing the Bucephalus Operating Return on Utilised CapitalWe created BORUC, the Bucephalus Operating Return on Utilised Capital, to reveal the true operating performance of businesses because ‘traditional’ measures (ROE, ROCE etc.) are easy to manipulate. Struggling companies often resort to creative accounting to obscure their problems and hide their decline. This alters the numerator in ROE, ROCE etc. and disguises their investment and capex cycles.

Equity Bottom-Up

<p><strong>It was reported in the Korean media today that the government may regulate the Korean holding companies' brand royalty revenues.</strong> Currently, one of the major revenue sources of Korean holding companies such as <a href="https://www.smartkarma.com/entities/393" target="_blank" data-smartkarma-citation="entities:393:1">SK Holdings Co Ltd (034730 KS)</a>, <a href="https://www.smartkarma.com/entities/6653" target="_blank" data-smartkarma-citation="entities:6653:1">LG Corp (003550 KS)</a>, and <a href="https://www.smartkarma.com/entities/18524" target="_blank" data-smartkarma-citation="entities:18524:1">Gs Holdings (078930 KS)</a> is the brand royalties from their affiliates. For example, the annual brand royalty revenues of <a href="https://www.smartkarma.com/entities/393" target="_blank" data-smartkarma-citation="entities:393:1">SK Holdings Co Ltd (034730 KS)</a> , <a href="https://www.smartkarma.com/entities/6653" target="_blank" data-smartkarma-citation="entities:6653:1">LG Corp (003550 KS)</a> , and <a href="https://www.smartkarma.com/entities/18524" target="_blank" data-smartkarma-citation="entities:18524:1">Gs Holdings (078930 KS)</a> have typically ranged 200…</p>

It was reported in the Korean media today that the government may regulate the Korean holding companies' brand royalty revenues. Currently, one of the major revenue sources of Korean holding companies such as SK Holdings Co Ltd (034730 KS), LG Corp (003550 KS), and Gs Holdings (078930 KS) is the brand royalties from their affiliates. For example, the annual brand royalty revenues of SK Holdings Co Ltd (034730 KS) , LG Corp (003550 KS) , and Gs Holdings (078930 KS) have typically ranged 200…

Government May Regulate Korean Holding Companies' Brand Royalty Revenues

South Korea

GS Holdings is a holding company, which operates subsidiaries including GS Caltex Oil, GS Power, GS Home Shopping, GS Retail, and GS Sports.

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GS Holdings (078930 KS)

Korea M&A Spotlight: A Merger Between GS Retail and GS Home Shopping

We believe that the merger between GS Retail and GS Home Shopping is a positive move and also it will likely have a positive impact on GS Holdings,...

Douglas Kim

More Factual View on Aekyung/GS Partnership for Asiana

Aekyung was the only chaebol who publicly showed interest in Asiana. Now it looks like we have another chaebol chasing after Asiana. According to...

Sanghyun Park

Using BORUC to Pick Asian Growth Stocks

Introducing the Bucephalus Operating Return on Utilised CapitalWe created BORUC, to reveal the true operating performance of businesses because...

Bucephalus Research Partnership

Using BORUC to Pick Asian Value Stocks

Introducing the Bucephalus Operating Return on Utilised CapitalWe created BORUC, the Bucephalus Operating Return on Utilised Capital, to reveal the...

Bucephalus Research Partnership

Government May Regulate Korean Holding Companies' Brand Royalty Revenues

It was reported in the Korean media today that the government may regulate the Korean holding companies' brand royalty revenues. Currently, one of...

Douglas Kim

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