20171130-三星证券-NDR_Takeaways_7页_312kb

GS Home Shopping (028150) Summary

Core Content

This document provides an analysis of GS Home Shopping (GSHS) from Samsung Securities, including financial performance, investment strategies, and valuation insights. It outlines the current market situation, key financial figures, and the firm's outlook for the next few years.

Key Information

• Current Price: KRW220,900
• Target Price: KRW250,000 (132% upside)
• Market Cap: KRW1.4t/USD1.3b
• Shares (float): 6,562,500 (60.7%)
• 52-week High/Low: KRW245,200/KRW162,200
• Avg Daily Trading Value (60-day): KRW3.8b/USD3.5m

Investment Rating

• Rating: BUY
• Recommendation: 3.9 (on a scale)
• Buy/Sell/Hold/SELL★★★: 5/4/3/2/1

Key Changes

Financial Highlights

• Revenue (KRWb): Expected to grow from KRW1,098 in 2016 to KRW1,264 in 2019.
• Net Profit (adj): Expected to increase from KRW106 in 2016 to KRW134 in 2019.
• EPS (adj): Expected to grow from KRW16,958 in 2016 to KRW21,451 in 2019.
• EPS Growth (% y-y): Expected to be 35.0% in 2016, then decline to -5.7% in 2017, followed by 23.2% and 8.8% in 2018 and 2019 respectively.
• EBITDA Margin (%): Expected to range from 13.8% in 2016 to 15.1% in 2019.
• ROE (%): Expected to range from 11.0% in 2016 to 11.2% in 2019.
• P/E (adj) (x): Expected to range from 10.1% in 2016 to 10.3% in 2019.
• P/B (x): Expected to range from 1.1 in 2016 to 1.2 in 2019.
• EV/EBITDA (x): Expected to range from 1.7 in 2016 to 1.5 in 2019.
• Dividend Yield (%): Expected to range from 4.1% in 2016 to 3.2% in 2019.

Performance Outlook

• 4Q 2017 Performance: Expected to lag behind local peers due to Chuseok effects, inefficient marketing, and a high base from one-off gains in 4Q16.
• DPS for 2017: May decline from KRW7,000 in 2016 due to a 6% contraction in full-year net profit.
• Dividend Payout Ratio: Expected to remain between 30-40% in the long term.
• Investments: The company is investing in startups and equity stakes, with a total of KRW15ob invested in startups and KRW5ob in NHN Payco.
• Overseas Operations: Restructuring ended in 1H17, but losses are expected to continue in 2017.
• 2017 Equity Method Losses: Expected to increase to KRW6b from KRW4.4b.

Valuation Analysis

• Sum-of-the-Parts Valuation:
  • Operating value: KRW1,063b
  • Value of cash holdings: KRW582b
  • Fair market cap: KRW1,646b
  • Fair per-share value: KRW250,783

Dividend and Payout

• DPS (common): Expected to be KRW6,500 in 2017, KRW7,000 in 2018, and KRW7,000 in 2019.
• Payout Ratio: Expected to be 40.6% in 2017, 35.5% in 2018, and 32.6% in 2019.

Financial Ratios

Investment Strategy

• Direct Investments: Includes investments in subsidiaries such as 10 x 10, A plus B, and others.
• Equity Method Investments: Includes investments in Tap on Books, Buzzni, Spoqa, and others.
• Available-for-Sale Investments: Includes investments in Vingle, Pixlee, ROOY, GiftUP, and Bitfinder.

Investment Returns

• Direct Investment Returns:

  • Nomad Connection: Profit of KRW0.5b
  • Buzzni: Profit of KRW0.8b
  • Hello Nature: Profit of KRW2.1b

• Indirect Investment Returns:

  • Altos Korea Fund I: Profit of KRW0.2b
  • BRV Lotus Fund: Profit of KRW1.7b
  • BRV Lotus Fund (Qufengi): Profit of KRW8.3b
  • BRV Lotus Fund (Daesung Industrial Gases): Profit of KRW0.3b

Summary of Financial Statements

• Operating Profit: Expected to range from KRW32.1b in 2016 to KRW143.8b in 2017E.
• Net Profit: Expected to range from KRW78b in 2015 to KRW134b in 2019E.
• EBITDA: Expected to range from KRW129b in 2015 to KRW191b in 2019E.

Compliance Notice

• The analyst did not own any shares or convertible debt instruments of the company as of Nov 29, 2017.
• Samsung Securities' holdings would not exceed 1% of any company's outstanding shares if debt instruments were converted.
• The report reflects the views of the analyst and is not intended as investment advice.
• The report is not to be altered, reproduced, distributed, or transmitted without prior written permission.

Investment Rating Overview

• Company Rating: BUY
• Industry Rating: OVERWEIGHT, NEUTRAL, UNDERWEIGHT
• Percentage of Ratings (12 months prior to Sep 30, 2017):
  • BUY: 82.2%
  • HOLD: 17.8%
  • SELL: 0%

Conclusion

GS Home Shopping is expected to maintain its dividend yield and continue its investment in startups and equity stakes. Despite a potential drop in DPS and continued losses in overseas operations, the company is considered undervalued relative to its cash-generating ability and growth prospects. The firm's market cap and position to benefit from government policies make it an attractive investment option, although it lacks clear share-price catalysts compared to other home-shopping players.