Peter Zaldivar, CFA, Portfolio Manager of Kabouter Management LLC presentation on Hotel Shilla Co Ltd (KRX:008770) (OTCMKTS:HSLLF) From Invest For Kids 2013 Conference.
The Stock: Hotel Shilla, 008770 KS
- South Korea-listed company ($2B in sales)
- $2.4B market cap, $18M daily value traded
- 2 Hotels (10% of sales) in Korea
- Duty-Free Shops (90% of sales) in Korea
- 2 city locations; 4 airport locations
Korean Duty-Free: Safe and Growing
- Duopoly: 35% share versus 50% Lotte (private)
- Barriers: scale and government licenses
- Fast Growth: 15% and ACCELERATING
Chinese Driving Asian Tourism Growth
- Growing income levels
- Low-cost airlines
- Easing travel restrictions
Accelerating Growth for Hotel Shilla
- Chinese now half of customer base and growing at over 30% per year
- More Chinese getting passports – still <10%!
Why Stock Looks Cheap
- Higher Quality, Faster Growth, Low PE relative to Peers
Projected Return – Case 1
Hotel Shilla Co Ltd (KRX:008770) (OTCMKTS:HSLLF) should trade at over 22x PE
- In line with 10-year historical average
- Deserves premium over European peers
- At low-end of similar growing company valuations
Over 28% upside from multiple expansion alone
Projected Return – Case 2
Projected Return – Case 3
- Duty-free peers trade at 1.2x PE to growth on average
If Hotel Shilla trades at same level, implied PE would be 28x (60% upside)
See full Slides in PDF format here.
