1Q Undervalued Despite Solid Performance
Duty-Free Shops Expected to Benefit from Increased Passenger Demand with Expanded Vaccine Rollout
On the 16th, when rain fell nationwide, a department store in downtown Seoul was bustling with shoppers. Weekend crowds sought refuge from the rain by flocking to indoor facilities such as department stores. On the same day, the Central Disease Control Headquarters announced that there were 610 new confirmed COVID-19 cases, bringing the total to 131,671. Photo by Moon Honam munonam@
[Asia Economy Reporter Minwoo Lee] Foreign investors, who have net sold more than 7 trillion won worth of domestic stocks this month alone, are showing interest in retail stocks such as Hotel Shilla and Shinsegae. It is analyzed that they have started investing early, expecting a full-scale performance improvement this year through the activation of consumption following the distribution of COVID-19 vaccines.
According to the Korea Exchange on the 17th, foreign investors have net sold a total of 7.1425 trillion won in the KOSPI market from the beginning of this month until the 14th. Amid this continued "selling spree," retail stocks such as Hotel Shilla and Shinsegae were steadily purchased.
In the case of Hotel Shilla, they bought a total of 94.7 billion won worth, ranking third among all net purchased stocks. This marked 12 consecutive trading days of net buying since April 28. It is the longest record since the 16 consecutive trading days of net buying from April to May 2018. Shinsegae also steadily accumulated shares. During this period, they purchased 74.9 billion won worth, ranking fourth among the most net purchased stocks. Except for one day (May 6) since April 24, they consistently net bought.
It is interpreted that they have begun full-scale preemptive investment as the annual performance is expected to be favorable this year due to the increase in COVID-19 vaccination rates. Hotel Shilla already recorded an operating profit of 26.6 billion won on a consolidated basis in the first quarter of this year, successfully turning to a profit compared to the same period last year. This was an excellent performance exceeding market consensus by 1980.89%. Shinsegae also posted solid results in the first quarter. It recorded an operating profit of 123.6 billion won on a consolidated basis, a 3644.91% increase compared to the extremely poor first quarter of last year. The department store division led the performance recovery, and the duty-free shop, Shinsegae International, Central City, Casamia, and equity-method affiliated investment companies all increased their profits.
The rise in COVID-19 vaccination rates is seen as the cause of the "revenge consumption" boom. Additionally, if international travel demand recovers, it is analyzed that the relatively slow-recovering duty-free shop sector's performance could sharply rebound. Sangjun Park, a researcher at Kiwoom Securities, said, "Not only was there a profit increase effect due to high sales growth from the easing of social distancing and expansion of revenge consumption, but also the cost reduction effect of duty-free shops, including rent reductions, overlapped," adding, "With the rise in COVID-19 vaccination rates and the normalization phase of international passengers, performance can greatly improve."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
