Shinsegae Buy (004170 KS) (Maintain)
Total Page：16
File Type：pdf, Size：1020Kb
[Korea] Retail Shinsegae Buy (004170 KS) (Maintain) Additional negatives to be limited TP: W290,000 ▼ Upside: 31.5% Mirae Asset Daewoo Co., Ltd. Myoungjoo Kim [email protected] Minjeong Kyeong [email protected] 2Q20 review Operating loss due to COVID-19 For 2Q20, Shinsegae reported consolidated revenue of W1.01tr (-32.6% YoY) and an operating loss of W43.1bn (turning to loss YoY). For department stores (non-consolidated), operating profit plunged 56.3% YoY to W14.3bn. The duty-free division posted an operating loss of W37bn (turning to loss YoY). The results missed our estimates and the consensus, hurt by: 1) sluggish department store earnings due to sales mix deterioration; and 2) continued weakness at the duty-free division. In the department store division, the apparel/accessories segments have been slow to recover due to the rapid shift to online shopping amid the lingering impact of COVID-19. Additional negatives to be 2Q20 marked a bottom limited The pandemic weighed on all of Shinsegae’s businesses in 1H20, not just the department store and duty-free divisions. That said, we believe additional negatives are limited. Monthly same-store sales growth at department stores has recovered swiftly (to approximately 9% currently). Considering additional rent cuts for the Terminal 1 airport location (i.e., the temporary introduction of variable rent payments linked to sales), we expect the duty-free division to improve meaningfully in line with the recovery of revenue. Valuation and recommendation Lower TP to W290,000 (from W360,000) We revised down our 2021 EPS estimate by 5.1%, reflecting the decline in the value of Shinsegae’s stakes in subsidiaries (e.g., Shinsegae International [031430 KS/CP: W158,000]). Valuation looks undemanding. The stock is trading at a 2021F P/E of 8.7x, on par with the level in 2016, when the duty-free business was making losses and the department store business had yet to take off. Despite our target price cut, we reiterate our Buy rating, in light of: 1) the anticipated easing of pandemic concerns; and 2) stable and solid top-line growth at department stores. Key data Current price (8/12/20, W) 220,500 Market cap (Wbn) 2,171 160 Shinsegae KOSPI OP (20F, Wbn) 149 Shares outstanding (mn) 10 140 Consensus OP (20F, Wbn) 218 Free float (%) 71.3 120 100 EPS growth (20F, %) - Foreign ownership (%) 29.2 80 P/E (20F, x) - Beta (12M) 0.95 60 Market P/E (20F, x) 17.2 52-week low (W) 204,000 8.19 12.19 4.20 8.20 KOSPI 2,432.35 52-week high (W) 324,000 Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2016 2017 2018 2019 2020F 2021F Absolute 6.3 -26.5 -4.1 Revenue (Wbn) 2,947 3,871 5,186 6,394 4,918 6,379 Relative -6.1 -32.4 -23.4 OP (Wbn) 251 346 397 468 149 474 OP margin (%) 8.5 8.9 7.7 7.3 3.0 7.4 NP (Wbn) 227 182 239 526 -35 249 EPS (W) 23,071 18,513 24,274 53,472 -3,581 25,258 ROE (%) 7.3 5.5 6.9 14.2 -0.9 6.2 P/E (x) 7.6 16.2 10.5 5.4 - 8.7 P/B (x) 0.5 0.9 0.7 0.7 0.6 0.5 Dividend yield (%) 0.7 0.4 0.8 0.7 0.9 0.9 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. August 13, 2020 Shinsegae Table 1. 2Q20 review (Wbn, %, %p) 2Q20 Growth 2Q19 1Q20 Mirae Asset Actual Consensus YoY QoQ Daewoo Revenue 1,506 1,197 1,014 1,148 1,198 -32.6 -15.2 OP 68 3 -43 15 14 TTR TTR OP margin (%) 4.5 0.3 -4 1 1 -8.8 -4.5 NP 17 -2 -112 -13 -8 TTR RR Note: NP is attributable to owners of the parent. Source: DataGuide; company data, Mirae Asset Daewoo Research Table 2. Earnings forecast revisions (Wbn, %, %p) Previous Revised % chg. Notes 2020F 2021F 2020F 2021F 2020F 2021F Revenue 5,595 6,447 4,918 6,379 -12.1 -1.1 Reflected 2Q20 results OP 286 497 149 474 -48.1 -4.6 OP margin (%) 5.1 7.3 3.0 7.4 -2.1 0.1 NP 110 258 -35 249 TTR -5.1 Note: NP is attributable to owners of the parent. Source: DataGuide, Mirae Asset Daewoo Research Table 3. Earnings and forecasts (consolidated) (Wbn) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20F 4Q20F 2018 2019 2020F 2021F Gross revenue 2,004 2,020 2,177 2,510 2,305 2,293 2,385 2,687 1,845 1,732 2,069 2,427 8,710 9,671 8,073 9,897 Net revenue 1,095 1,183 1,366 1,541 1,517 1,506 1,603 1,769 1,197 1,014 1,256 1,451 5,186 6,394 4,918 6,379 Shinsegae 426 414 432 468 375 367 385 430 331 354 383 450 1,739 1,558 1,518 1,634 Shinsegae International 304 283 312 364 366 302 360 397 323 287 380 434 1,263 1,425 1425 1,568 Central City 45 47 57 71 66 67 71 68 56 53 61 67 220 272 236 295 Shinsegae Duty Free 340 445 579 645 703 770 787 868 489 311 416 475 2,009 3,128 1,691 2,800 Shinsegae Dongdaegu 42 40 43 49 46 45 47 54 33 39 49 58 174 191 180 213 Other -61 -46 -80 -82 -38-1 -25 -9 -69 -68 -68 -68 -270 -73-274 -272 Gross profit 631 657 753 892 796 783 797 892 611 539 653 764 2,933 3,268 2570 3211 OP 113 80 70 134 110 68 95.9 194 3 -43 44 145 397 468 149 474 Shinsegae 59 42 47 94 53 33 50.6 85 23 14 46 91 242 222 174 215 Shinsegae International 12 14 11 18 29 15 19.0 22 12 -3 15 20 56 85 44 89 Central City 16 5 17 26 21 10 23.6 19 12 -3 9 14 64 74 32 92 Shinsegae Duty Free 24 23 -3.2 -5.3 13 17 10.7 71 -32 -37 -25 16 39 112 -78 79 Shinsegae Dongdaegu 2 -1 2 7 5 2 5 10 -3 -1 7 13 10 21 16 37 Other 0 -4 -4 -1 -10-5 -8 -5 -5 -11 -7 -7 -9 -28-29 -27 Pretax profit 106 66 55 128 893 33 82 -211 4 -135 8 96 355 798 -27 332 NP 76 50 29 85 667 17 34 -191 -2 -112 6 72 239 526 -35 249 YoY growth (%) Gross revenue 13.2 18.8 20.0 20.5 15.0 13.5 9.6 7.1 -20.0 -24.5 -13.2 -9.7 18.2 11.0 -16.5 22.6 Net revenue 19.5 34.9 38.7 41.0 38.5 27.3 17.3 14.8 -21.1 -32.6 -21.6 -18.0 33.9 23.3 -23.1 29.7 Gross profit 12.3 22.0 34.4 36.9 26.1 19.2 5.9 0.1 -23.2 -31.2 -18.1 -14.4 26.8 11.4 -21.4 24.9 OP 45.9 93.1 -5.5 -12.0 -3.2 -14.7 36.6 44.8 -97.0 TTR -54.6 -25.3 14.9 17.9 -68.2 218.1 NP 203.9 4.6 -27.5 20.8 779.4 -66.0 17.8 TTR TTR TTR -81.3 TTB TTB 121.9 TTR TTB Notes: NP is attributable to owners of the parent.; a non-operating loss of W779bn related to the fair value recognition of SSG.com holdings was recorded in 1Q19. Source: Company data, Mirae Asset Daewoo Research estimates Mirae Asset Daewoo Research 2 August 13, 2020 Shinsegae Table 4. TP calculation (Wbn, x, %) 1) Operating value 3,140 Target multiple of 11.4x (equivalent to the P/E in 2014, when there were Department store value 1,839 no new store openings and the duty-free business had yet to be launched); based on 2021F NOPLAT Target multiple of 22x (equivalent to the P/E in 2019) to reflect our Duty-free business value 1,301 assumption of duty-free market normalization; based on 2021F NOPLAT 2) Value of investment assets 2,544 Shinsegae Int’l 362 30% discount to market value (Aug. 12, 2020) x stake Samsung Life 183 30% discount to market value (Aug. 12, 2020) x stake Gwangju Shinsegae 17 30% discount to market value (Aug. 12, 2020) x stake Central City 922 30% discount to net asset value (1Q20) x stake 30% discount to 2021F revenue x P/S (1x for direct sourcing; 5x for SSG.com 583 platform-related revenue) x stake Other affiliates 476 30% discount to 1Q20 book value 3) Net debt 2,866 Consolidated (1Q20) Fair market cap 2,818 No. of shares outstanding (‘000) 9,836 TP 290,000 Current price 220,500 As of Aug.