[Click eStock] "Emart, Significant Long-Term Corporate Value Increase Expected from eBay Acquisition"

The headquarters of eBay Korea in Gangnam-gu, Seoul, on the 17th, where Shinsegae Group is reported to acquire eBay Korea. / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Song Hwajeong] NH Investment & Securities forecasted on the 25th that Emart's corporate value will significantly increase in the mid to long term through the acquisition of eBay Korea's shares.

Emart announced the day before that it decided to acquire 80.01% of eBay Korea's shares for 3.4 trillion KRW.

It is analyzed that most of the acquisition funds can be covered by asset securitization and the sale of non-core businesses. Ji-young Lee, a researcher at NH Investment & Securities, said, "Currently, Emart has secured about 1 trillion KRW in cash through the sale of the Magok site, and an additional cash inflow of 900 billion KRW is expected from the recent sales of the Gayang branch, Byeollye branch parking lot, and Vietnam business," adding, "Thus, a significant portion of the acquisition funds can be covered, and the remaining amount will be raised through additional asset securitization."

In the short term, eBay Korea and SSG.com will operate separately, but in the mid to long term, the combination of eBay's platform influence and IT capabilities with Emart's logistics and merchandising (MD) capabilities is expected to lead to a leap into an end-to-end commerce business with vertically integrated commerce processes similar to Coupang. The researcher explained, "Currently, the Shinsegae Group is preparing to utilize its nationwide 7,300 stores as base logistics centers or dark stores, and plans to expand the Neo Center, an online-only logistics center, to more than double its current size within the next four years."

Listing momentum is also anticipated. Market expectations for the listing of Emart's SSG.com are currently high. The researcher said, "The possibility of a merger between SSG.com and eBay Korea in the mid to long term cannot be ruled out," and analyzed, "Emart's e-commerce transaction volume was 24 trillion KRW and sales were 2.6 trillion KRW as of 2020. Considering that global e-commerce companies are generally valued at a price-to-sales ratio (PSR) of over 3 times, Emart's current market capitalization of 4.4 trillion KRW is significantly undervalued." The researcher added, "If Emart's commerce business succeeds in transforming into an end-to-end commerce encompassing platform, logistics, IT, and sourcing, and evolves into a total commerce company combining direct purchase (1P) and marketplace (3P) models that connect consumers and sellers, the value of its subsidiaries is likely to increase further."

With this acquisition, the Shinsegae Group has become the second-largest domestic player with an e-commerce transaction volume of 24 trillion KRW as of 2020 (eBay Korea 20 trillion KRW, SSG.com 4 trillion KRW), following Naver (27 trillion KRW). Coupang falls to third place with 22 trillion KRW. The researcher said, "In the mid to long term, Emart's subsidiary value will greatly increase," and added, "The current point, where Emart's stock price is significantly undervalued, is a buying opportunity."