Korea’s SSG.com Deserves Attention
The author is an analyst of NH Investment & Securities. She can be reached at jy.lee@nhqv.com. -- Ed.
Boasting high sales growth, strong customer loyalty, and bright business expansion potential, Coupang offers an attractive investment vehicle. And, its valuations are less demanding than those for peers. Eyeing the domestic landscape, we advise paying attention to Emart’s SSG.com (appropriate value of W3tn~5tn when applying Coupang’s valuation).
Coupang: EV of W33tn~55tn being discussed
Coupang is to be listed on the NYSE as early as 1Q21. There are no details as of yet regarding the set number of listed stocks, IPO price, schedule, etc. Overall EV is being discussed in the US$30bn~50bn range—the size of the public offering is nominally US$1bn, but in reality there is a possibility that it will be several times more than this figure.
High corporate value justified
We see a high EV for Coupang as being justified for the following three reasons. First, Coupang offers remarkable earnings growth potential. The firm’s sales leaped 91% y-y last year (significantly exceeding Amazon’s 38% and eBay’s 19%), helped by the strategic category/service expansions such as Rocket Fresh and Coupang Eats. Second, the firm is showing a vertical increase in customer loyalty. The GMV of Coupang customers is increasing in proportion to the annual subscription period, and 32% of active customers are Rocket Wow members (who purchase 4x more frequently than normal customers). Third, over the mid/long term, we expect Coupang to grow into a total platform player combining OTT, AI, and IT.
The EV of US$30bn~50bn is equivalent to 2021E P/S of 1.8~3.1x. Considering Amazon’s 2021E P/S of 3.5x, eBay’s 3.6x, and Alibaba’s 6.6x, Coupang’s valuation is at or slightly lower than the average of e-commerce companies.
E-commerce industry primed to expand; pay attention to Korea’s SSG.com
Over the near term, domestic e-commerce market competition will likely intensify in response to financing and investment expansion for Coupang. But, over the longer haul, this development is to further increase the market penetration rate of e-commerce and act as a catalyst to accelerate the growth of the domestic e-commerce market. Given such, while there exist concerns that Coupang could eat away at other e-commerce players’ market shares, we advise focusing on the anticipated expansion for the overall domestic e-commerce market. Moving ahead, companies are expected to survive intensifying competition via forming partnerships, eventually leading to the incorporation of small-sized operators (which currently account for 45% of the market) into large platforms.
We draw attention to Emart as a listed retail player well capable of surviving domestic retail industry changes. Representing a B2C based platform similar to Coupang’s, SSG.com plans to triple its daily delivery volume within five years. Based on Coupang’s valuation, the fair value of SSG.com is sized at W3tn~5tn.