Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<div class="content-highlight">In this insight, we provide a sum-of-the-parts (SoTP) valuation analysis of <a href="https://www.smartkarma.com/entities/gs-holdings" target="_blank" data-smartkarma-citation="entities:18524:1" rel="noopener">Gs Holdings (078930 KS)</a>. Our SoTP valuation analysis suggests a target price of 50,783 won per share for GS Holdings, representing a 34% upside from the current levels. We are including GS Holdings in our model portfolio. </div>The SoTP valuation is broken down into 5 major components:A) Value of Public Companies (2.1 trillion won)B) Value of Private Companies (3.2 trillion won) C) Value of GS Holdings' Core Business (1.5 trillion won) D) Net Debt (571 billion won)E) Holdco Discount (25%)<div class="content-highlight">
The three key catalysts of GS Holdings are as follows:
<ul>
<li>The merger between GS Retail and GS Home Shopping</li>
<li>Insiders have been actively buying shares of GS Holdings in 2020</li>
<li>Turnaround of the GS Energy business in 2021</li>
</ul>
</div>

In this insight, we provide a sum-of-the-parts (SoTP) valuation analysis of Gs Holdings (078930 KS). Our SoTP valuation analysis suggests a target price of 50,783 won per share for GS Holdings, representing a 34% upside from the current levels. We are including GS Holdings in our model portfolio. The SoTP valuation is broken down into 5 major components:A) Value of Public Companies (2.1 trillion won)B) Value of Private Companies (3.2 trillion won) C) Value of GS Holdings' Core Business (1.5 trillion won) D) Net Debt (571 billion won)E) Holdco Discount (25%)
The three key catalysts of GS Holdings are as follows:

The merger between GS Retail and GS Home Shopping
Insiders have been actively buying shares of GS Holdings in 2020
Turnaround of the GS Energy business in 2021



GS Holdings SoTP Valuation Analysis & Three Key Catalysts

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Event-Driven

GS announced a merger of Retail (007070) and Home Shopping (028150) at a swap ratio of 4.2236834.GS Holdings (078930) owns both subsidiaries.They set the purchase right ceiling at ₩350Bcombined, about 8% of the combined MC.<table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Overview (₩B)"}'>Overview (₩B)</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Type"}'>Type</td>
<td data-sheets-value='{"1":2,"2":"Stock swap"}'>Stock swap</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Acquirer"}'>Acquirer</td>
<td data-sheets-value='{"1":2,"2":"GS Retail Co Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>GS Retail Co Ltd</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ticker"}'>- Ticker</td>
<td data-sheets-value='{"1":2,"2":"007070"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="007070"'>007070</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - SO"}'>- SO</td>
<td data-sheets-value='{"1":3,"3":77000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[-1]C[0], "shares")'>77,000,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target company"}'>Target company</td>
<td data-sheets-value='{"1":2,"2":"GS Home Shopping Inc."}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>GS Home Shopping, Inc.</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ticker"}'>- Ticker</td>
<td data-sheets-value='{"1":2,"2":"028150"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula='="028150"'>028150</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - SO"}'>- SO</td>
<td data-sheets-value='{"1":3,"3":6562500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[-1]C[0], "shares")'>6,562,500</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering share type"}'>Offering share type</td>
<td data-sheets-value='{"1":2,"2":"Acquirer ordinary share"}' data-sheets-numberformat='{"1":2,"2":"#,##0.00000","3":1}'>Acquirer ordinary share</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering price"}'>Offering price</td>
<td data-sheets-value='{"1":3,"3":33800}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩33,800</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering volume"}'>Offering volume</td>
<td data-sheets-value='{"1":3,"3":27717922.312499996}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=sum(R[1]C[0]:R[2]C[0])">27,717,922</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Treasury"}'>- Treasury</td>
<td data-sheets-value='{"1":3,"3":2530831.0932799997}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=599200*R[7]C[0]">2,530,831</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ordinary"}'>- Ordinary</td>
<td data-sheets-value='{"1":3,"3":25187091.219219998}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[4]C[0]*R[6]C[0]-R[-1]C[0]">25,187,091</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering value"}'>Offering value</td>
<td data-sheets-value='{"1":3,"3":936.8657741624999}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula="=R[-4]C[0]*R[-3]C[0]/1000000000">936.9</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target share type"}'>Target share type</td>
<td data-sheets-value='{"1":2,"2":"Target company ordinary share"}' data-sheets-numberformat='{"1":2,"2":"#,##0.00000","3":1}'>Target company ordinary share</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target price"}'>Target price</td>
<td data-sheets-value='{"1":3,"3":142762}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩142,762</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target volume"}'>Target volume</td>
<td data-sheets-value='{"1":3,"3":6562500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-9]C[0]">6,562,500</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - % of SO"}'>- % of SO</td>
<td data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-10]C[0]">100.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap ratio"}'>Swap ratio</td>
<td data-sheets-value='{"1":3,"3":4.2236834}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}'>4.2236834</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock purchase ceiling condition"}'>Stock purchase ceiling condition</td>
<td data-sheets-value='{"1":2,"2":"If exceeds for both combined"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>If exceeds for both combined</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Amount"}'>- Amount</td>
<td data-sheets-value='{"1":3,"3":350}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>350.0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Exercise price - GS Retail Co Ltd"}' data-sheets-formula='="Exercise price - "&amp;R[-19]C[1]'>Exercise price - GS Retail Co Ltd</td>
<td data-sheets-value='{"1":3,"3":34125}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩34,125</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Exercise price - GS Home Shopping Inc."}' data-sheets-formula='="Exercise price - "&amp;R[-17]C[1]'>Exercise price - GS Home Shopping Inc.</td>
<td data-sheets-value='{"1":3,"3":138855}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩138,855</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>For purchase rights, today is the last day to become eligible.The ex-rights falls on April 16 next year, followed by the dissenting opinion notice on May 13~27. The shareholder meeting is on May 28.The new shares will be listed on July 16.<table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Timetable"}' data-sheets-note="Sang Hyun Park: We have to buy shares until BOD+1 to be eligible to receive stock purchase rights. We then have to notify our dissenting opinion until the end of dissenting opinion notice period.">Timetable</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BOD meeting"}'>BOD meeting</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44145}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2020. 11. 10</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Last day to own stock purchase rights"}'>Last day to own stock purchase rights</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44146}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2020. 11. 11</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights date"}'>Ex-rights date</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44302}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 4. 16</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Record date of shareholder register"}'>Record date - shareholder register</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44305}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 4. 19</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dissenting opinion notice begins"}'>Dissenting opinion notice begins</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44329}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 5. 13</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dissenting opinion notice ends"}'>Dissenting opinion notice ends</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44343}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 5. 27</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EGM"}'>EGM</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44344}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 5. 28</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock purchase right exercise begins"}'>Stock purchase right exercise begins</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44344}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 5. 28</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock purchase right exercise ends"}'>Stock purchase right exercise ends</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44364}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 6. 17</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension begins - GS Home Shopping"}'>Trade suspension begins - GS Home Shopping</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44376}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 6. 29</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension ends - GS Home Shopping"}'>Trade suspension ends - GS Home Shopping</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44392}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 15</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44393}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 16</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>GS Holdings retains 36.1% in Home Shopping and 65.8% in Retail.I don't see a reason for the NPS to vote against the merger. Combining the NPS and the friendly shareholders (Hanjin), the controlling stake reaches 72% for Retail and 50% for Home Shopping.A fierce proxy fight? It is unlikely.<table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Shareholding - target company"}'>Shareholding - target company (GS Home Shopping)</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GS Holdings Corp"}' data-sheets-formula='=googlefinance("078930", "name")'>GS Holdings Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.36097523809523807}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=2368900/R8C2">36.10%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Korea NPS"}'>Korea NPS</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0500728380952381}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=328603/R8C2">5.01%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bearing Asset Management"}'>Bearing Asset Management</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.05017005714285714}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(301839+25544+1858)/R8C2">5.02%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Korean Air Lines Co Ltd"}' data-sheets-formula='=googlefinance("003490", "name")'>Korean Air Lines Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.045008761904761906}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=295370/R8C2">4.50%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hanjin Transportation Co., Ltd."}' data-sheets-formula='=googlefinance("002320", "name")'>Hanjin Transportation Co., Ltd.</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.034991238095238096}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=229630/R8C2">3.50%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Treasury shares"}'>Treasury shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.007781818181818181}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=599200/R5C2">0.78%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: FnGuide"}'>Source: FnGuide</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Shareholding - acquirer"}'>Shareholding - acquirer (GS Retail)</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GS Holdings Corp"}' data-sheets-formula='=googlefinance("078930", "name")'>GS Holdings Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6575122077922078}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=50628440/R5C2">65.75%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Special affiliated persons"}'>Special affiliated persons</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.00025974025974025974}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=20000/R5C2">0.03%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Major shareholder"}'>- Major shareholder</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.657771948051948}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=sum(R[-2]C[0]:R[-1]C[0])">65.78%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Korea NPS"}'>Korea NPS</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.060418987012987015}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=4652262/R5C2">6.04%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: FnGuide"}'>Source: FnGuide</td></tr>
</tbody>
</table>

GS announced a merger of Retail (007070) and Home Shopping (028150) at a swap ratio of 4.2236834.GS Holdings (078930) owns both subsidiaries.They set the purchase right ceiling at ₩350Bcombined, about 8% of the combined MC.





Overview (₩B)

Type
Stock swap


Acquirer
GS Retail Co Ltd


- Ticker
007070


- SO
77,000,000


Target company
GS Home Shopping, Inc.


- Ticker
028150


- SO
6,562,500


Offering share type
Acquirer ordinary share


Offering price
₩33,800


Offering volume
27,717,922


- Treasury
2,530,831


- Ordinary
25,187,091


Offering value
936.9


Target share type
Target company ordinary share


Target price
₩142,762


Target volume
6,562,500


- % of SO
100.00%


Swap ratio
4.2236834


Stock purchase ceiling condition
If exceeds for both combined


- Amount
350.0


Exercise price - GS Retail Co Ltd
₩34,125


Exercise price - GS Home Shopping Inc.
₩138,855

Source: DART

For purchase rights, today is the last day to become eligible.The ex-rights falls on April 16 next year, followed by the dissenting opinion notice on May 13~27. The shareholder meeting is on May 28.The new shares will be listed on July 16.





Timetable

BOD meeting
2020. 11. 10


Last day to own stock purchase rights
2020. 11. 11


Ex-rights date
2021. 4. 16


Record date - shareholder register
2021. 4. 19


Dissenting opinion notice begins
2021. 5. 13


Dissenting opinion notice ends
2021. 5. 27


EGM
2021. 5. 28


Stock purchase right exercise begins
2021. 5. 28


Stock purchase right exercise ends
2021. 6. 17


Trade suspension begins - GS Home Shopping
2021. 6. 29


Trade suspension ends - GS Home Shopping
2021. 7. 15


Listing
2021. 7. 16

Source: DART

GS Holdings retains 36.1% in Home Shopping and 65.8% in Retail.I don't see a reason for the NPS to vote against the merger. Combining the NPS and the friendly shareholders (Hanjin), the controlling stake reaches 72% for Retail and 50% for Home Shopping.A fierce proxy fight? It is unlikely.





Shareholding - target company (GS Home Shopping)

GS Holdings Corp
36.10%


Korea NPS
5.01%


Bearing Asset Management
5.02%


Korean Air Lines Co Ltd
4.50%


Hanjin Transportation Co., Ltd.
3.50%


Treasury shares
0.78%

Source: FnGuide







Shareholding - acquirer (GS Retail)

GS Holdings Corp
65.75%


Special affiliated persons
0.03%


- Major shareholder
65.78%


Korea NPS
6.04%

Source: FnGuide



GS Retail/Home Shopping Merger Swap: Currently at 3.4% Div-Adj. Spread

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. 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.

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

It was announced after the market close yesterday that the minimum wage for 2021 has been determined at 8,720 won, up 1.5% YoY, which would be the lowest increase ever. From 2013 to 2021, the average annual increase in the minimum wage in Korea was 7.7% so this low increase in minimum wage rates is much lower than the historical average.There are several sectors that are clear beneficiaries of this low growth in minimum wages in 2021. One of them is the convenience stores sector, which includes <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> and <a href="https://www.smartkarma.com/entities/bgf-retail-co-ltd" target="_blank" data-smartkarma-citation="entities:26731:1" rel="noopener">BGF Retail (282330 KS)</a>.In addition to the CVS sector, the following companies should also benefit from the low minimum wage growth:<ul>
<li><a href="https://www.smartkarma.com/entities/6993" target="_blank" data-smartkarma-citation="entities:6993:1" rel="noopener">E Mart Inc (139480 KS)</a></li>
<li><a href="https://www.smartkarma.com/entities/2338" target="_blank" data-smartkarma-citation="entities:2338:1" rel="noopener">Lotte Shopping Co (023530 KS)</a></li>
<li><a href="https://www.smartkarma.com/entities/cj-korea-express-corp" target="_blank" data-smartkarma-citation="entities:11557:1" rel="noopener">Cj Logistics (000120 KS)</a></li>
<li><a href="https://www.smartkarma.com/entities/20987" target="_blank" data-smartkarma-citation="entities:20987:1" rel="noopener">Shinsegae Co Ltd (004170 KS).</a></li>
<li>
<a href="https://www.smartkarma.com/entities/cj-cheiljedang-corp" target="_blank" data-smartkarma-citation="entities:1970:1" rel="noopener">CJ Cheiljedang (097950 KS)</a> </li>
</ul>

It was announced after the market close yesterday that the minimum wage for 2021 has been determined at 8,720 won, up 1.5% YoY, which would be the lowest increase ever. From 2013 to 2021, the average annual increase in the minimum wage in Korea was 7.7% so this low increase in minimum wage rates is much lower than the historical average.There are several sectors that are clear beneficiaries of this low growth in minimum wages in 2021. One of them is the convenience stores sector, which includes GS Retail (007070 KS) and BGF Retail (282330 KS).In addition to the CVS sector, the following companies should also benefit from the low minimum wage growth:
E Mart Inc (139480 KS)
Lotte Shopping Co (023530 KS)
Cj Logistics (000120 KS)
Shinsegae Co Ltd (004170 KS).

CJ Cheiljedang (097950 KS) 


A Surprising Low Increase of Minimum Wages in Korea in 2021

Private Capital Markets

Wemakeprice Inc / Private Capital Markets

In this insight, we provide an in-depth analysis of WeMakePrice, which is a leading e-commerce platform in Korea. Nexon Korea is one of the major investors of the company. Currently, WeMakeprice is the fourth most widely used mobile shopping app in Korea, behind Coupang, Danggeun Market, and 11st.Back in August 2015, NXC Corp (the holding company of the Nexon Group) and IMM Investments invested 100 billion won and 6 billion won in Wemakeprice, respectively. Four years later in October 2019, <a href="http://m.theinvestor.co.kr/view.php?ud=20191010000661" target="_blank" rel="noopener">WeMakePrice</a> (Wonder Holdings) received an additiona<a href="http://plus.hankyung.com/apps/newsinside.view?aid=201912185833i" target="_blank" rel="noopener">l 370 billion won</a> from existing investors including Nexon Korea (250 billion won) and IMM Investment (120 billion won). As of 2019, WeMakePrice was valued at about 2.5 trillion won.WeMakePrice's key strategy is the low pricing as it tries to provide the lowest prices for many of its products sold on its platform. WeMakePrice consistently tries to provide slightly lower prices for the products than its leading competitors such as Coupang. On April 16th, 2020, WeMakePrice introduced the "lowest prices on the Internet" for nearly<a href="https://www.yna.co.kr/view/AKR20200416053000030?input=1195m" target="_blank" rel="noopener"> 0.72 million products. </a>

In this insight, we provide an in-depth analysis of WeMakePrice, which is a leading e-commerce platform in Korea. Nexon Korea is one of the major investors of the company. Currently, WeMakeprice is the fourth most widely used mobile shopping app in Korea, behind Coupang, Danggeun Market, and 11st.Back in August 2015, NXC Corp (the holding company of the Nexon Group) and IMM Investments invested 100 billion won and 6 billion won in Wemakeprice, respectively. Four years later in October 2019, WeMakePrice (Wonder Holdings) received an additional 370 billion won from existing investors including Nexon Korea (250 billion won) and IMM Investment (120 billion won). As of 2019, WeMakePrice was valued at about 2.5 trillion won.WeMakePrice's key strategy is the low pricing as it tries to provide the lowest prices for many of its products sold on its platform. WeMakePrice consistently tries to provide slightly lower prices for the products than its leading competitors such as Coupang. On April 16th, 2020, WeMakePrice introduced the "lowest prices on the Internet" for nearly 0.72 million products. 

WeMakePrice - What's Next After Major Investment by Nexon Korea?

South Korea

GS Retail Co., Ltd. operates a chain of retail stores. The Company provides beauty and skincare products, candles, gifts, perfumes, ornaments, bathroom accessories, and other products. GS Retail serves its customers in the Republic of South Korea.

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GS Retail (007070 KS)

GS Holdings SoTP Valuation Analysis & Three Key Catalysts

Our SoTP valuation analysis suggests a target price of 50,783 won per share for GS Holdings, representing a 34% upside from the current levels.

Douglas Kim

GS Retail/Home Shopping Merger Swap: Currently at 3.4% Div-Adj. Spread

GS announced yesterday a merger of Retail and Home Shopping. The current swap spread (at nominal values) sits at less than 1%, but the year-end div...

Sanghyun Park

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

A Surprising Low Increase of Minimum Wages in Korea in 2021

It was announced after the market close yesterday that the minimum wage for 2021 has been determined at 8,720 won, up 1.5% YoY, which would be the...

Douglas Kim

WeMakePrice - What's Next After Major Investment by Nexon Korea?

In this insight, we provide an in-depth analysis of WeMakePrice, which is a leading e-commerce platform in Korea. Nexon Korea is one of the major...

Douglas Kim

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