An Operator of Welfare Mall
The author is an analyst of NH Investment & Securities. He can be reached at hyundong.lee@nhqv.com. -- Ed.
In December, Ezwel was purchased by the HDS Group. In 2021, we expect the firm to grow based on synergies (including supply and distribution benefits) with group members. Ezwel is undervalued among domestic non-face-to-face consumer-related plays, and the firm plans to actively implement shareholder-friendly policies using its abundant cash holdings.
Expect synergy effects with HDS Group
In Jun 2020, Ezwel announced the planned stake disposal by its major shareholder. Amid rising expectations, the company’s share price rallied to W14,800; however, it fell 38% from its highest point after the sale to Hyundai Department Store (HDS) Group was confirmed at W18,626 per share in December. On Jan 25, the largest shareholder changed to Hyundai Green Food, and Jang Young-soon, the CEO of Hyundai Dream Tour, was appointed as Ezwel’s CEO.
With a 50% market share, Ezwel holds an oligopolistic position in the domestic outsourced employee benefit service market, and the firm is strengthening its welfare shopping platform by offering: 1) a greater number of products compared to competitors; and 2) the lowest online prices. Expected synergy effects with HDS include: 1) the securing of HDS Group members as clients; 2) enhanced in-house merchandise items via utilization of the HDS Group’s offline retail network; and 3) new investment, including sales force expansion. Currently, only HHI Holdings companies use Ezwel’s welfare mall, while other Hyundai groups use competing services or their own in-house malls. Assuming that Ezwel secures orders from additional group affiliates and other conglomerate companies in 2021, further earnings growth is likely.
Shares undervalued; expectations rise for higher dividend payout
We forecast 2021 sales of W104.9bn (+9.9% y-y) and OP of W17.1bn (+42.5% y-y). As the firm will sell three loss-making subsidiaries (accumulated 2020 operating losses of W1.83bn as of end-3Q20) to the former largest shareholder, its OPM is expected to increase to 16.3% (+3.8%p y-y) in 2021.
Ezwel is currently trading at a 2021 P/E of 17.9x, which is lower than the average P/E of 34.9x for domestic non-face-to-face consumption-related plays. It currently has W31.9bn in cash holding and will receive W19.6bn from the sale of its subsidiaries. Backed by its abundant cash liquidity, active implementation of shareholder-friendly policies (including increased dividends) is expected in the future.