Packer16 Posted June 9, 2014 Share Posted June 9, 2014 This is an interesting cheap "double-double". The company itself trades at a significant discount to other peers. Lotte Chilsung is the largest beverage producer in Korea. It also sells beer and other Korean alcoholic beverages along with a large stakes Pepsi Cola Philippines and Myanmar and has a large RE development in Korea along with listed securities. If you don't pull out the non-op assets, it sells for 7.0x EBITDA and 4.0x EBITDA with the assets pulled out a substantial discount to FMV (30 % for securities and JV and 50% for real estate). Other comps in Korea CJ Chilsung and LG H&H sell for 13x EBITDA. US and international comps range from 12 to 20x EBITDA. This is not a small company either it has a market cap of US $1.9b. On top of this the preferred shares at a 56% discount to the common. Lotte Chilsung also has good growth record of growing BV by 10% per year for the past 10 years versus. CJ Chilsung has grown by 9% per year while LG H&H by 15% per year over the past 10 years. If Lotte Chilsung sold at the values of the other Korean comps (13x EBITDA), the other assets had a discount of 20% vs. 30% to market and the preferred sold a 15% discount for lack of voting, the upside is close to 350%. Packer Link to comment Share on other sites More sharing options...
writser Posted June 9, 2014 Share Posted June 9, 2014 Packer, what resources do you use to investigate this company? The English website seems quite sparse, do you just use Morningstar & Bloomberg or did you find translations / hire a translator? Link to comment Share on other sites More sharing options...
Packer16 Posted June 9, 2014 Author Share Posted June 9, 2014 I used Bloomberg for some data but Googled for analyst reports which provided the rest. Packer Link to comment Share on other sites More sharing options...
bizaro86 Posted June 9, 2014 Share Posted June 9, 2014 Looks like this trade OTC as LTTTF. I couldn't find the ratio of korean shares to OTC shares however. Link to comment Share on other sites More sharing options...
phil_Buffett Posted June 10, 2014 Share Posted June 10, 2014 interesting packer thanks for the idea. i can only buy lotte gdr. which is the preferred share i think from the mother Company of lotte chilsung preffered. does someone look at the mother Company? Link to comment Share on other sites More sharing options...
investor-man Posted June 10, 2014 Share Posted June 10, 2014 Anybody read the full version of this: http://pdf.marketpublishers.com/bac_swot/lotte_chilsung_beverage_co_ltd_swot_analysis_bac.pdf worth purchasing? Link to comment Share on other sites More sharing options...
yadayada Posted June 10, 2014 Share Posted June 10, 2014 it is already trading at 10x earnings, and debt load is quite heavy. But I am assuming that is not much of a problem with a company like this. How did you figure out the minority interests, and arent they already reflected in profit statement? Financial statements are a pain to read with google translate. Link to comment Share on other sites More sharing options...
Packer16 Posted June 11, 2014 Author Share Posted June 11, 2014 If you add together the listed and listed securities along with the real estate you get about W1.248 t per Samsung analyst report. The debt is only W394.7bn. I have reduced the discount on the securities from 30% to 20% (as this appears high) and increased the real estate to W333t based upon a BOT estimate from KIH (it more detailed than Samsung's estimate). The company actually has a net assets/cash position. In addition, one of the Lotte sons is purchasing Lotte Chilsung shares to secure a position in the company when his dad passes away. Packer Link to comment Share on other sites More sharing options...
skanjete Posted June 11, 2014 Share Posted June 11, 2014 This is an interesting cheap "double-double". The company itself trades at a significant discount to other peers. Lotte Chilsung is the largest beverage producer in Korea. It also sells beer and other Korean alcoholic beverages along with a large stakes Pepsi Cola Philippines and Myanmar and has a large RE development in Korea along with listed securities. If you don't pull out the non-op assets, it sells for 7.0x EBITDA and 4.0x EBITDA with the assets pulled out a substantial discount to FMV (30 % for securities and JV and 50% for real estate). Other comps in Korea CJ Chilsung and LG H&H sell for 13x EBITDA. US and international comps range from 12 to 20x EBITDA. This is not a small company either it has a market cap of US $1.9b. On top of this the preferred shares at a 56% discount to the common. Lotte Chilsung also has good growth record of growing BV by 10% per year for the past 10 years versus. CJ Chilsung has grown by 9% per year while LG H&H by 15% per year over the past 10 years. If Lotte Chilsung sold at the values of the other Korean comps (13x EBITDA), the other assets had a discount of 20% vs. 30% to market and the preferred sold a 15% discount for lack of voting, the upside is close to 350%. Packer Packer, thanks for the idea. Do you see any clear reason for the undervaluation compared to the Korean comps? And do you see anything that could cause the relative undervaluation (to the Korean comps and pref to common) to disappear ? Link to comment Share on other sites More sharing options...
redhots Posted June 25, 2014 Share Posted June 25, 2014 Where can I find the Samsung analyst report ? Link to comment Share on other sites More sharing options...
Packer16 Posted August 10, 2014 Author Share Posted August 10, 2014 As to reasons for undervaluation, I see two. First, is limited access to the market as some of the comments on this board show and second the inclusion of Korea as an emerging market. I see Korea as a developed market due to regulation enforcement and a pension system to provide a backstop for the equity market and to dampen capital flows. What will make these discounts converge is realization of the governance changes and the recognition of Korea as a third economic power in the region. Packer Link to comment Share on other sites More sharing options...
matjone Posted August 10, 2014 Share Posted August 10, 2014 What broker are you using for these korean stocks? I looked around when they were first mentioned and I didn't find any good way to buy them. Link to comment Share on other sites More sharing options...
Packer16 Posted August 10, 2014 Author Share Posted August 10, 2014 Fidelity is the only one I know of. Packer Link to comment Share on other sites More sharing options...
plato1976 Posted August 5, 2016 Share Posted August 5, 2016 Packer this one traced all the way back to where it was in 2014 Do you still like this idea? Either the fundamentals don't support, or the converging to its value has been very slow b/c of the lack of a catalyst I think these korean companies don't return cash to investors actively... Fidelity is the only one I know of. Packer Link to comment Share on other sites More sharing options...
Packer16 Posted August 8, 2016 Author Share Posted August 8, 2016 I still like it as fundamentals have improved but the fight amongst the family has gotten worse and a related party is under investigation for "slush" funds. The Lotte Group's top level entity Lotte Hotel's IPO was put on hold due to the investigation. So you have better fundamentals but family events uncertainty is higher. Packer Link to comment Share on other sites More sharing options...
plato1976 Posted August 9, 2016 Share Posted August 9, 2016 I would think the problem is not Lotte specific, in fact most of the Korea preferred I tracked traced back to 2014, like 009415 I guess it's just the catalyst is not there I still like it as fundamentals have improved but the fight amongst the family has gotten worse and a related party is under investigation for "slush" funds. The Lotte Group's top level entity Lotte Hotel's IPO was put on hold due to the investigation. So you have better fundamentals but family events uncertainty is higher. Packer Link to comment Share on other sites More sharing options...
Spekulatius Posted September 1, 2016 Share Posted September 1, 2016 HOw do you trade these Korean stocks using Fidelity for example? I have signed up for International trading, but the Korean exchange is not supported for online trading apparently? Do I need to call a broker to do a trade? Link to comment Share on other sites More sharing options...
Packer16 Posted September 1, 2016 Author Share Posted September 1, 2016 Yes you need to call a broker for access to countries not on their online platform. Packer Link to comment Share on other sites More sharing options...
spartansaver Posted September 1, 2016 Share Posted September 1, 2016 It's looking pretty hairy. Being probed http://www.bbc.com/news/business-36496248 Finance VP commits suicide http://www.wsj.com/articles/lotte-vice-president-found-dead-amid-corruption-probe-1472179019 Definitely has reasons to be worried. Link to comment Share on other sites More sharing options...
rich379 Posted November 29, 2017 Share Posted November 29, 2017 I spent a few minutes revisiting this company and saw that there was a restructuring. It seems like there were some cross-holdings that were spun out via an issuance of shares in the Lotte Holding Co? Can anyone confirm? Thanks! Rich Link to comment Share on other sites More sharing options...
bobozou Posted January 5, 2018 Share Posted January 5, 2018 I don't have a detailed answer to your question, but 'yes' there was a restructuring. In addition to my Lotte Chilsung prefs, I now hold Lotte Corp prefs as well (which I believe originated from my ownership of the Lotte Chilsung prefs) Link to comment Share on other sites More sharing options...
Packer16 Posted January 5, 2018 Author Share Posted January 5, 2018 Yes, you are holding Lotte Corp preferred. Lotte Corp is a holding company that was formed from the investment holdings of all the Lotte companies. Last time I looked the preferred was trading at a premium to the common & the price was pretty close to NAV. Packer Link to comment Share on other sites More sharing options...
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