Singapore Press Holdings (SPH) - CGS-CIMB Research 2021-02-26: Potential Listing Of Coupang


Singapore Press Holdings (SPH) - Potential Listing Of Coupang

  • Local media has reported that SPH’s investment in Coupang, acquired in 2014, could grow by more than 10-fold with the latter’s planned NYSE listing.
  • No further details are available. Assuming SPH has a 1% stake in Coupang, our DDM-based target price will rise to S$1.60 if the listing goes ahead.
  • Reiterate HOLD for SPH, with an unchanged DDM-based target price of S$1.31.

Coupang going public on the New York Stock Exchange

  • Local media has reported that Coupang, in which SPH (SGX:T39) invested back in mid-2014 through a special purpose vehicle, is planning a listing on the New York Stock Exchange with a valuation of US$50bn. Coupang was valued at US$5bn in Jun 2015. The US$50bn valuation implies a more than 10-fold increase in SPH’s investment.
  • Our checks show that Coupang was valued at US$9bn in its last fundraising round in 2018 and SPH’s total investment in its FY14 annual report increased by S$159m (US$120m) y-o-y.

Who is Coupang?

  • Coupang is touted as the “Amazon” of South Korea. Since its founding in 2010, Coupang has become a dominant ecommerce player in Korea, capturing 24.6% of the total online retail transaction volume in Korea between 1 Jan and 1 Mar 2020. With its over-100 fulfillment and logistics centres in more than 30 cities in Korea, Coupang is also the second-largest B2C logistics company in the country.
  • Coupang’s revenue increased 72% CAGR from US$4.1bn in 2018 to US$12bn in 2020, while its operating loss has narrowed from US$1.1bn to US$0.47bn over the same period. This is thanks to its:
    1. large number of SKUs (it has the largest SKU count for both owned inventory products and third-party products listed on ecommerce apps and websites in Korea);
    2. “Rocket Delivery” (delivery within hours, same-day delivery and one-day delivery; some 70% of Korea’s population live within 7 miles of a Coupang logistics centre);
    3. effortless returns (no need to pack a box or print a label, simply tap a button on the app and leave the item outside their door for pickup);
    4. low prices (strategy is to provide the lowest prices in Korea); and
    5. deliveries without packaging (re-engineered fulfilment process eliminating cardboard boxes in > 75% of parcels and zero packaging for “Rocket Fresh”, which eliminates disposable packaging by delivering in eco-bags that are collected for reuse after each delivery).
  • Coupang expanded its core ecommerce offering to online groceries through Rocket Fresh, logistics food delivery services through Coupang Eats and digital financial services through Coupang Pay.
  • According to media reports, it has also launched a video-streaming service called Coupang Play in Dec and Coupang Logistics to bring its fulfillment network in-house in Jan 2021. It has also invested in Coupang Media Group, an in-house advertising platform.

Reiterate HOLD with an unchanged target price of S$1.31

  • There are no further details of SPH’s investment on Coupang. Assuming SPH has a 1% stake in Coupang and an IPO valuation of US$50bn, all else being constant, our target price for SPH will rise from S$1.31 to S$1.60 (25% upside vs last price).
  • Coupang aside, SPH has also invested in more than 40 early-growth technology companies via its subsidiary, SPH Ventures, which could potentially raise the value of SPH in time.
  • See SPH Share Price; SPH Target Price; SPH Analyst Reports; SPH Dividend History; SPH Announcements; SPH Latest News.
  • Upside/downside risks — value creation from investments/weaker media performance.

EING Kar Mei CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-02-26
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.310 SAME 1.310