Korea Small Cap Gem #4: Ezwelfare Co

Ezwelfare (090850 KS) ("Ezwel Co") the fourth company we introduce in our "Korea Small Cap Gem" series.

Among the foreign investors, Scion Asset Management (headed by Dr. Michael Burry) had a 7.2% stake in the company as of 23 March 2020.

The company's main business is in the software development & solutions (Ezwelfare) which it has been providing since 2003. Ezwelfare provides software, solutions, e-commerce, and other services focusing on the flexible benefits plan which was first introduced in 1997 in Korea. The company has a 50% market share in this segment in Korea. The company also launched the Ezwellness business in 2015 which is involved in providing EAP (employee assistance programs) related to employees' psychological consultation and other comprehensive healthcare information services.

Going forward, as the company continues to improve its earnings and the Ezwelfare's software solutions/platform business becomes more noticeable, there is a good chance that this company enjoys valuation multiples expansion. The Korean software companies currently are trading at nearly 33x P/E based on their 2020 net profit, and this suggests Ezwelfare (090850 KS) shares are trading at nearly 50% discount to the domestic software comps. If we assume a 30% discount to the comp's multiples in 2020 (23x) and apply to the company's estimated net profit of 9 billion won in 2020, this would suggest an implied market cap of 205 billion won or 18,400 won per share (45% upside from current levels).