[Click eStock] "BrainContents Seizes Growth Opportunity Through M&A"

[Asia Economy Reporter Yoo Hyun-seok] SangSangIn Securities analyzed on the 2nd that BrainContents has seized a new growth opportunity through mergers and acquisitions (M&A). No investment opinion or target price was provided.

BrainContents' core business is content providing lottery information. Its major subsidiaries include Global Tax Free, which offers tax refund services; FingerStory, which provides webtoons; and Swanicoco, a natural cosmetics company. Additionally, NetCruise, which provides IT security solutions, is also a subsidiary.

Nam Min-sik, a researcher at SangSangIn Securities, said, "Subsidiary Swanicoco is targeting sales of 25.1 billion KRW based on plans to launch new product lines and enter the Asian market this year, aiming for a resurgence." He added, "The importance of Swanicoco's growth to the company lies in its high OPM (average 19% from 2018 to 2019), as the proportion of sales through its own online mall is high compared to offline and other companies' online channels, resulting in lower commission fees." He continued, "This year, they plan to increase the proportion of sales through their own online mall to 50%, expecting to raise the OPM to the mid-20% range."

He explained, "Subsidiary FingerStory operates the content platform 'Mutoon,' and the increase in 'number of payments' rather than the number of subscribers will be important for future sales." He noted, "The number of payments rose from 180,000 in 2018 to 420,000 last year, more than doubling."

Researcher Nam said, "'Mutoon' mainly provides male-oriented content, but to diversify its customer base, it plans to launch a female-oriented specialized platform 'Qtoon' in 2020." He emphasized, "Although advertising expenses are expected to increase this year due to the launch of the new platform, the growth rate of sales increase is higher, so the cost burden will be short-term."

He evaluated, "BrainContents is pursuing the acquisition of the bio company MediphronDivity to enter the cosmeceutical (cosmetics + pharmaceuticals) market." He added, "They plan to solidify their position as a natural bio-cosmetics company by synergizing with Swanicoco, and the leap to a cosmeceutical company aligns positively with the market trend emphasizing natural ingredients in cosmetics." He further noted, "Since the acquisition is ongoing, it is necessary to observe until the second quarter when the business model will become visible."