Daiwa Investment Conference Summary | Hong Kong, 5 November 2013
Event Overview
- Date: 19-22 November 2013 (Tuesday to Friday)
- Location: Island Shangri-La, Hong Kong; Pacific Place, Supreme Court Road, Admiralty
- Purpose: The conference provided updates on various investment research topics and company-specific analyses.
Major Changes in Ratings
| Company |
Analyst |
Rating |
Page |
| Grand Korea Leisure (114090 KS) |
Thomas Y. Kwon |
Buy → Outperform |
P.2 |
| Ascott Residence Trust (ART SP) |
David Lum |
Outperform → Hold |
P.5 |
Key Company Updates
Grand Korea Leisure (GKL)
- Target Price: Increased by 12.0% to KRW42,000
- Upside: 7.3%
- Performance: Strong 3Q13 results driven by high hold ratio and lower labor costs
- 3Q13 Highlights:
- Operating profit: KRW67.2bn (up 82.4% YoY)
- Revenue: KRW155bn (up 30% YoY)
- Chinese visitors: 35.2% of total (up from 27.4% in 2012)
- Forecast Revisions:
- Revenue growth: 15.0% (2013E), 15.6% (2014E), 10.9% (2015E)
- Operating profit margin: 35.4% (2013E), 33.5% (2014E), 31.9% (2015E)
- Recommendation: Downgraded to Outperform due to concerns about future growth and uncertainties in business and capacity expansion plans.
- Key Risks: Sharp falls in hold ratio and Chinese VIP traffic
Ascott Residence Trust (ART)
- Target Price: Decreased by 12.0% to SGD1.25
- Downside: 4.2%
- Rights Issuance: SGD253.7m raised on 4 November 2013
- Purpose: To fund future acquisitions and pay down debt
- Impact: DPU forecasts for 2014-15E reduced by 13.8-14.1% due to dilution
- Recommendation: Downgraded to Hold due to loss of DPU growth momentum and concerns over the rights issuance being a dilutive and unsustainable method for growth
- Positive Risk: Potential for an accretive acquisition announcement
Other Research Highlights
- Euro Wrap-Up: Chris Scicluna (P.8)
- China Auto Sector: Jeff Chung (Positive, P.10)
- China Cement and Steel Weekly: Felix Lam (P.12)
- AAC Technologies (2018 HK): Kylie Huang (Underperform, P.13)
- RDA Microelectronics (RDA US): Eric Chen (Not Rated, P.17)
- Fubon Financial Holding (2881 TT): Jerry Yang (Buy, P.19)
Quick Updates
- Casetek (5264 TT): 3Q13 results in line with expectations; iPad strength expected to boost 4Q13 (Steven Tseng, P.23)
- Hyundai Hysco (010520 KS): 3Q13 results surprised on the upside, but not fundamental (Sung Yop Chung, P.25)
- Hyundai Motor Company (005380 KS): Gunning for a new product strategy (Sung Yop Chung, P.27)
Regional Indices
| Market |
1D Chg (%) |
1M Chg (%) |
YTD Chg (%) |
13E EPS Growth (%) |
14E EPS Growth (%) |
13E PER |
14E PER |
| TPX |
-0.9 |
1.7 |
37.6 |
67.2 |
9.0 |
14.9 |
13.7 |
| HSCEI |
0.1 |
1.6 |
-6.6 |
9.5 |
7.6 |
6.9 |
6.4 |
| HSI |
-0.3 |
0.2 |
2.4 |
10.3 |
6.8 |
10.9 |
10.2 |
| KOSPI |
-0.7 |
1.4 |
1.4 |
13.1 |
25.0 |
11.7 |
9.3 |
| TWSE |
-0.4 |
-0.1 |
8.5 |
34.6 |
10.7 |
15.9 |
14.4 |
| SENSEX* |
0.2 |
6.6 |
9.3 |
9.2 |
17.3 |
16.0** |
13.7** |
| FSSTI |
0.1 |
2.1 |
1.2 |
-1.9 |
8.9 |
15.0 |
13.7 |
| FBMKLCI* |
-0.2 |
1.7 |
7.0 |
-1.5 |
8.9 |
16.8** |
15.5** |
| SET* |
-2.8 |
-2.8 |
-0.3 |
12.3 |
14.2 |
13.5** |
11.8** |
| PCOMP* |
-0.6 |
5.6 |
12.6 |
8.9 |
7.7 |
20.4** |
18.9** |
| JCI* |
-0.2 |
0.8 |
2.5 |
9.0 |
14.5 |
15.6** |
13.6** |
| AS51 |
-0.4 |
3.5 |
16.0 |
8.1 |
9.4 |
15.6 |
14.2 |
*Valuation based on MSCI Universe
**MSCI index priced as of 1 Nov
Share Price Performance
-
GKL:
- 12-month range: 27,250-39,500
- Market cap: USD2.28bn
- 3m avg daily turnover: USD8.12m
- Shares outstanding: 62m
- Major shareholder: Korea Tourism Organization (51.0%)
-
ART:
- 12-month range: 1.185-1.500
- Market cap: USD1.60bn
- 3m avg daily turnover: USD1.20m
- Shares outstanding: 1,524m
- Major shareholder: CapitaLand (45.3%)
Financial Summary (GKL)
| Metric |
2013E (KRWbn) |
2014E (KRWbn) |
2015E (KRWbn) |
| Revenue |
575 |
665 |
738 |
| Operating profit |
203 |
223 |
236 |
| Net profit |
149 |
164 |
175 |
| Core EPS (fully-diluted) |
2,403 |
2,655 |
2,822 |
| DPS |
1,200 |
1,250 |
1,300 |
| PBR (x) |
5.4 |
4.5 |
3.8 |
| EV/EBITDA (x) |
9.3 |
8.2 |
7.4 |
| ROE (%) |
38.1 |
33.3 |
29.7 |
| EPS change (%) |
4.9 |
10.5 |
6.3 |
| Daiwa vs Cons. EPS (%) |
8.6 |
14.4 |
7.6 |
| PER (x) |
16.3 |
14.7 |
13.9 |
Financial Summary (ART)
| Metric |
2013E (SGDm) |
2014E (SGDm) |
2015E (SGDm) |
| Revenue |
322 |
345 |
357 |
| Net property income |
169 |
183 |
191 |
| Distribution |
119 |
121 |
126 |
| DPU |
0.094 |
0.079 |
0.082 |
| DPU change (%) |
7.6 |
-16.3 |
4.2 |
| Daiwa vs Cons. DPU (%) |
4.8 |
-14.2 |
-12.5 |
| DPU yield (%) |
7.2 |
6.0 |
6.3 |
| PER (x) |
13.0 |
16.6 |
16.0 |
| Core EPU (fully-diluted) |
0.100 |
0.079 |
0.081 |
| P/BV (x) |
1.0 |
1.0 |
1.0 |
| ROE (%) |
8.4 |
5.9 |
6.1 |
Key Assumptions
| Metric |
2008 |
2009 |
2010 |
2011 |
2012 |
2013E |
2014E |
2015E |
| Total drop amount (Wbn) |
2,306.5 |
2,814.9 |
3,479.6 |
3,494.4 |
3,877.7 |
4,051.8 |
4,514.4 |
5,026.6 |
| Hold ratio (%) |
15.8 |
16.2 |
13.6 |
14.9 |
14.4 |
14.0 |
13.7 |
13.5 |
| Chinese visitors (% of total) |
12.0 |
13.3 |
19.4 |
22.7 |
27.4 |
33.1 |
36.7 |
39.4 |
Profit and Loss (GKL)
| Metric |
2008 |
2009 |
2010 |
2011 |
2012 |
2013E |
2014E |
2015E |
| Seven Luck Gangnam |
185 |
222 |
251 |
269 |
267 |
307 |
333 |
360 |
| Seven Luck Hilton |
134 |
178 |
166 |
189 |
213 |
183 |
201 |
225 |
| Other Revenue |
169 |
128 |
108 |
57 |
21 |
85 |
131 |
153 |
| Total Revenue |
489 |
529 |
525 |
515 |
500 |
575 |
665 |
738 |
| Operating profit |
129 |
96 |
137 |
137 |
144 |
203 |
223 |
236 |
| Net profit |
101 |
72 |
63 |
63 |
142 |
149 |
164 |
175 |
| EPS (reported) |
1,682 |
1,174 |
1,023 |
1,023 |
2,290 |
2,403 |
2,655 |
2,822 |
| DPS |
1,200 |
1,250 |
1,300 |
1,300 |
1,300 |
1,200 |
1,250 |
1,300 |
Cash Flow (GKL)
| Metric |
2008 |
2009 |
2010 |
2011 |
2012 |
2013E |
2014E |
2015E |
| Profit before tax |
133 |
95 |
135 |
135 |
149 |
197 |
216 |
230 |
| Depreciation and amortisation |
16 |
19 |
20 |
20 |
15 |
8 |
7 |
10 |
| Tax paid |
-32 |
-23 |
-72 |
-72 |
-7 |
-48 |
-52 |
-55 |
| Operating profit |
203 |
223 |
236 |
236 |
236 |
203 |
223 |
236 |
| Net interest cover (x) |
n.a. |
n.a. |
n.a. |
n.a. |
n.a. |
n.a. |
n.a. |
n.a. |
| Net dividend payout |
30.7 |
73.3 |
60.6 |
50.0 |
22.4 |
49.9 |
47.1 |
46.1 |
| Free cash flow yield |
5.1 |
2.8 |
4.5 |
4.5 |
5.2 |
9.2 |
6.4 |
9.9 |
Balance Sheet (GKL)
| Metric |
2008 |
2009 |
2010 |
2011 |
2012 |
2013E |
2014E |
2015E |
| Cash & short-term investment |
213 |
203 |
200 |
262 |
310 |
457 |
534 |
611 |
| Inventory |
5 |
6 |
3 |
3 |
3 |
7 |
8 |
9 |
| Accounts receivable |
10 |
14 |
8 |
8 |
11 |
0 |
0 |
0 |
| Other current assets |
24 |
27 |
64 |
2 |
23 |
26 |
30 |
34 |
| Total current assets |
254 |
250 |
275 |
275 |
346 |
490 |
573 |
654 |
| Fixed assets |
49 |
45 |
35 |
35 |
37 |
48 |
65 |
72 |
| Goodwill & intangibles |
7 |
5 |
14 |
14 |
10 |
11 |
11 |
11 |
| Other non-current assets |
29 |
36 |
52 |
52 |
95 |
154 |
173 |
194 |
| Total assets |
339 |
335 |
376 |
376 |
489 |
702 |
821 |
931 |
| Short-term debt |
0 |
0 |
0 |
7 |
4 |
0 |
0 |
0 |
| Accounts payable |
21 |
20 |
12 |
12 |
18 |
111 |
128 |
141 |
| Other current liabilities |
92 |
88 |
134 |
127 |
127 |
132 |
143 |
142 |
| Total current liabilities |
114 |
108 |
146 |
146 |
149 |
243 |
271 |
284 |
| Long-term debt |
44 |
32 |
19 |
4 |
0 |
3 |
3 |
3 |
| Other non-current liabilities |
-10 |
-9 |
-10 |
5 |
8 |
8 |
8 |
8 |
| Total liabilities |
148 |
130 |
155 |
155 |
157 |
254 |
283 |
295 |
| Share capital |
31 |
31 |
31 |
31 |
31 |
31 |
31 |
31 |
| Reserves/R.E./others |
160 |
174 |
190 |
190 |
301 |
417 |
507 |
605 |
| Shareholders' equity |
191 |
205 |
221 |
221 |
331 |
448 |
538 |
636 |
| EV |
2,252 |
2,251 |
2,241 |
2,170 |
2,116 |
1,968 |
1,891 |
1,814 |
| Net debt/(cash) |
-169 |
-171 |
-181 |
-251 |
-306 |
-453 |
-531 |
-608 |
| BVPS (KRW) |
3,183 |
3,308 |
3,578 |
3,578 |
5,358 |
7,249 |
8,704 |
10,276 |
Key Ratios (GKL)
| Metric |
2008 |
2009 |
2010 |
2011 |
2012 |
2013E |
2014E |
2015E |
| Sales (YoY) |
24.9 |
8.1 |
-0.7 |
-1.9 |
-2.8 |
15.0 |
15.6 |
10.9 |
| EBITDA (YoY) |
46.0 |
-21.3 |
36.8 |
0.4 |
0.6 |
33.4 |
8.6 |
6.8 |
| Operating profit (YoY) |
53.4 |
-26.1 |
43.8 |
0.0 |
4.8 |
41.2 |
9.5 |
5.8 |
| Net profit (YoY) |
67.7 |
-29.1 |
-11.5 |
0.0 |
123.8 |
4.9 |
10.5 |
6.3 |
| Core EPS (fully-diluted) (YoY) |
67.7 |
-30.2 |
-12.8 |
0.0 |
123.8 |
4.9 |
10.5 |
6.3 |
| Gross-profit margin |
100.0 |
100.0 |
100.0 |
32.7 |
36.8 |
41.4 |
41.2 |
41.8 |
| EBITDA margin |
29.8 |
21.7 |
29.9 |
30.6 |
31.7 |
36.8 |
34.5 |
33.3 |
| Operating-profit margin |
26.5 |
18.1 |
26.2 |
26.7 |
28.8 |
35.4 |
33.5 |
31.9 |
| Net profit margin |
20.6 |
13.5 |
12.1 |
12.3 |
28.3 |
25.9 |
24.7 |
23.7 |
| ROAE |
69.6 |
40.5 |
57.7 |
58.2 |
50.7 |
51.7 |
44.8 |
39.9 |
| ROIC |
386.9 |
260.4 |
173.7 |
1,218.2 |
-6,507.1 |
1,477.0 |
12,360.8 |
1,003.3 |
| Net debt to equity |
net cash |
net cash |
net cash |
net cash |
net cash |
net cash |
net cash |
net cash |
| Effective tax rate |
24.3 |
24.3 |
53.1 |
53.1 |
4.8 |
24.4 |
24.1 |
24.1 |
| Accounts receivable (days) |
6.5 |
8.4 |
7.4 |
5.3 |
6.7 |
3.4 |
0.0 |
0.0 |
| Current ratio (x) |
2.2 |
2.3 |
1.9 |
1.9 |
2.3 |
2.0 |
2.1 |
2.3 |
| Net dividend payout |
30.7 |
73.3 |
60.6 |
50.0 |
22.4 |
49.9 |
47.1 |
46.1 |
| Free cash flow yield |
5.1 |
2.8 |
4.5 |
4.5 |
5.2 |
9.2 |
6.4 |
9.9 |
Company Profile
- Grand Korea Leisure (GKL): Leading foreigner-only casino operator in Korea, operates three Seven Luck casinos in Seoul and Busan
- 3Q13 Visitors: 1.52m total
- 3Q13 Drop Amount: KRW3.8tn
- New CEO: Mr. Lim Byung-Soo, who aims to drive growth through new business initiatives, including casino cruise liners, additional tables at the Hilton hotel, and a multiplex resort in Jeju
Company Roadshows
| Date |
Company |
Event |
Venue |
| 5 Nov |
Origin Energy (ORG AU) |
NDR |
Tokyo |
| 7 Nov |
AWE Limited (AWE AU) |
NDR |
Tokyo |
| 11-15 Nov |
China Zhengtong Auto (1728 HK) |
NDR |
US |
| 12 Nov |
Johnson Electric (179 HK) |
Luncheon |
HK |
| 12 Nov |
Johnson Electric (179 HK) |
Video Con. |
SG |
| 18-21 Nov |
Kia Motors (000270 KS) |
NDR |
EU |
| 20-26 Nov |
SK Telecom (017670 KS) |
NDR |
US |
| 25-26 Nov |
Thaicom PCL (THCOM TB) |
NDR |
Tokyo |
| 27 Nov |
Skyworth Digital (751 HK) |
NDR |
HK |
| 27-28 Nov |
CP ALL PCL (CPALL TB) |
NDR |
Tokyo |
| 28 Nov |
Skyworth Digital (751 HK) |
Video Con. |
SG |
| 29 Nov |
Haitong Securities (6837 HK) |
NDR |
HK |
| 2-4 Dec |
Haitong Securities (6837 HK) |
NDR |
US |
| 2-3 Dec |
CIMC Enric (3899 HK) |
NDR |
Tokyo |
| 11-12 Dec |
Cathay Financial (2882 TT) |
NDR |
EU |
| 11-12 Dec |
Cathay Financial (2882 TT) |
NDR |
Tokyo |
| 12-13 Dec |
Skyworth Digital (751 HK) |
NDR |
Tokyo |
| 16-18 Dec |
Cheung Kong Infrastructure (1038 HK) |
NDR |
Tokyo |
| 19-20 Dec |
China Suntien (956 HK) |
NDR |
Tokyo |
Summary of Key Points
- GKL reported strong 3Q13 results, attributed to high hold ratios and lower labor costs, but the outlook is tempered due to expected declines in traffic and hold ratios in the coming quarters.
- ART announced a major rights issuance, which led to a reduction in DPU forecasts and a downgrade to Hold, as it may not be a sustainable method for growth.
- Regional Indices show mixed performance, with some markets experiencing significant gains and others facing losses.
- Key Financial Metrics indicate a positive outlook for GKL with rising revenue and operating profits, but with caution due to potential risks.
- ART is focused on future acquisitions and has a strong pipeline, but the rights issuance may dilute unitholder value and raise concerns about the company's financial strategy.
