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Daiwa Consumer and Gaming Conference 2014 Summary

Core Content

The Daiwa Consumer and Gaming Conference 2014 was held from 15 to 17 April 2014 in Hong Kong, with a focus on Asian markets and their performance, as well as specific company analyses. The conference included updates on various sectors and stocks, such as Amorepacific, Hang Lung Properties, and the China Railway Sector, alongside macroeconomic research and financial summaries.

Key Companies and Ratings

• Amorepacific (090430 KS)

  • Analyst: Sang Hee Park
  • Rating Change: Downgraded from Outperform to Hold
  • Target Price: KRW 1,200,000 (unchanged)
  • Current Price (3 Apr): KRW 1,272,000
  • Downside Risk: 5.7%
  • 1Q14 Forecast:
    • Sales growth: 10% YoY to KRW 884bn
    • Operating profit growth: 12% YoY to KRW 157bn
    • Duty-free sales growth: 40% YoY
    • Online sales growth: 20% YoY
    • Domestic sales growth in China: 30% YoY
    • Overseas sales contribution: 22% of total sales
    • Operating profit margin in China: 3.2% (up 0.3pp YoY)
  • Recommendation: The stock is trading at a 2014E PER of 23.4x, which is close to its all-time high and similar to global peers like Estee Lauder and Shiseido. However, the analyst prefers LG Household & Health Care due to its lower 2014E PER of 19x and potential for stronger earnings growth.

• Hang Lung Properties (101 HK)

  • Analyst: Jonas Kan
  • Rating: Buy (unchanged)
  • Target Price: HKD 34.40 (unchanged)
  • Current Price (3 Apr): HKD 23.20
  • Upside Risk: 48.3%
  • Reasons for Buy: Expected to catch up due to rebound in retail sales, potential for continued share purchases from its parent, and positive outlook for the sector.

• China Railway Sector

  • Analyst: Winston Cao
  • Rating: Positive
  • Key Points:
    • Premier Li's initiatives to accelerate railway FAI and establish a Railway Development Fund with a scale of CNY200-300bn
    • Expected to receive further boost from these developments

Macro Research Highlights

• Regional Indices Performance:
  • TPX: 1D +0.4%, 1M +1.7%, YTD -6.6%
  • HSCEI: 1D +0.7%, 1M +3.5%, YTD -6.7%
  • HSI: 1D +0.2%, 1M +0.3%, YTD -3.2%
  • KOSPI: 1D -0.2%, 1M +1.5%, YTD -0.9%
  • TWSE: 1D -0.2%, 1M +3.3%, YTD +3.2%
  • SENSEX: 1D -0.2%, 1M +7.5%, YTD +6.3%
  • FSSTI: 1D +0.9%, 1M +4.3%, YTD +1.7%
  • FBMKLCI: 1D +0.2%, 1M +1.7%, YTD -0.6%
  • SET: 1D -0.4%, 1M +3.9%, YTD +7.1%
  • PCOMP: 1D -0.0%, 1M +2.8%, YTD +11.8%
  • JCI: 1D +0.4%, 1M +6.7%, YTD +14.4%
  • AS51: 1D +0.1%, 1M +0.5%, YTD +1.1%

Financial Summary of Amorepacific

• Revenue (2014E): KRW 3,465bn
• Operating Profit (2014E): KRW 420bn
• Net Profit (2014E): KRW 317bn
• Core EPS (2014E): KRW 54,257
• PER (2014E): 23.4x
• PBR (2014E): 2.6x
• EV/EBITDA (2014E): 12.2x
• ROE (2014E): 11.7%
• DPS (2014E): KRW 6,500

Key Ratios and Assumptions

• Sales Growth (YoY): 11.8% for 2014E
• EBITDA Growth (YoY): 16.2% for 2014E
• Operating Profit Growth (YoY): 13.5% for 2014E
• Net Profit Growth (YoY): 18.6% for 2014E
• Gross Profit Margin (2014E): 70.2%
• EBITDA Margin (2014E): 16.5%
• Operating Profit Margin (2014E): 12.1%
• Net Profit Margin (2014E): 9.1%
• ROAE (2014E): 11.7%
• ROAA (2014E): 8.9%
• ROCE (2014E): 14.9%
• ROIC (2014E): 13.3%
• Free Cash Flow Yield (2014E): 3.2%

Company Profile

Amorepacific is the leading cosmetics company in Korea, with a 31.6% market share in 2012. The cosmetics business accounted for 85% of sales, with the remaining 15% coming from Mass Beauty & Sulloc. The company distributes products through discount stores, specialty stores, department stores, and door-to-door sales.

Events and Roadshows

• Daiwa Asian Events:

  • 15-17 Apr: Daiwa Consumer and Gaming Conference 2014 (Hong Kong)
  • 21-23 May: Daiwa Small/Mid Cap Corporate Day (Hong Kong)
  • 26-27 May: Daiwa ASEAN Conference - Thailand Corporate Day 2014 (Tokyo)
  • 27-28 May: Daiwa Investment Conference New York 2014 (New York)
  • 30 May: Daiwa Investment Conference San Francisco 2014 (San Francisco)
  • 2-3 Jun: Daiwa Investment Conference London 2014 (London)
  • 24-25 Jun: Hong Kong China Investment Seminar Tokyo 2014 (Tokyo)

• Company Roadshows:

  • 3-4 Apr: Chaowei Power (951 HK)
  • 4 Apr: Jiangnan Group (1366 HK)
  • 8-10 Apr: Lai Sun (488 HK) / Lai Fung (1125 HK)
  • 7-10 Apr: Mega Financial Holdings (2886 TT)
  • 8 Apr: Goldpac (3315 HK)
  • 9-10 Apr: SIUD (563 HK), CP ALL (CPALL TB)
  • 9-10 Apr: Beijing Jingneng (579 HK)
  • 14 Apr: Beijing Jingneng (579 HK)
  • 15 Apr: Beijing Jingcheng Machinery (187 HK)
  • 16-17 Apr: Cathay Financial (2882 TT)
  • 24-25 Apr: CT Environmental (1363 HK), Biostime (1112 HK)
  • 28 Apr: CIMC Enric (3899 HK)

Key Points

• Amorepacific's share price has increased significantly due to improved earnings growth.
• The analyst believes that the stock is overvalued compared to global peers and prefers LG H&H due to its potential for better performance.
• Hang Lung Properties is seen as a Buy due to its potential for recovery and growth in the property sector.
• The China Railway Sector is expected to benefit from government initiatives and investments.
• The report includes detailed financial forecasts and comparisons with global peers, highlighting key performance ratios and market share.