Woowa Brothers Corp - An Ideal Acquisition Target for Uber?

In this report, we discuss about the surging operational improvement at Woowa Brothers Corp, which operates the most popular food delivery service in Korea (both online and mobile). Woowa Brothers Corp is best known for its food delivery app Baedal Minjok, which was launched in June 2010. We believe that Woowa Brothers Corp represents an ideal potential acquisition target for Uber Eats. In the midst of declining sales growth rates for Uber (UBER US), an acquisition of a highly growing, profitable company such as Woowa Brothers Corp by Uber could potentially be very value enhancing for both companies.

The food delivery app market in Korea was about 20 trillion won in size in 2018, up from about 15 trillion won in 2017. Woowa Brothers' Baedal Minjok is the biggest player with nearly 25% market share of the total food delivery service market in Korea. The second and third largest players in this market include RGP Korea’s YoGiYo and Baedaltong. It is estimated that Baedal Minjok is nearly double the size of YoGiYo, the second leading player in this segment. There have been a few well known companies such as WeMakePrice and Coupang Eats which have entered the food delivery app market this year.

Woowa Brothers Corp's sales and profit margins increased significantly in the past five years. From 2014 to 2018, the company's sales increased 82% CAGR. The company's sales actually accelerated in the past two years (up 91.5% YoY in 2017 and up 96.4% YoY in 2018). The improvement in profit margins is even more impressive. After generating operating losses in 2014 and 2015, the company started to turn operating profit positive in 2016 and operating margins improved further to 13.3% in 2017 and 18.4% in 2018.