Eslite Spectrum (MV $259m): Asia’s Next Muji with Unique Retail Management Platform at Tipping Point of Expansion
ROE 24.7% and trading at EV/EBIT 17.8x, EV/EBITDA 11.6x
Eslite Spectrum (GTSM: 2926) is “Asia’s next Muji” as the pioneer in creating an innovative retail management platform leveraging upon the commercial value of Eslite Bookstore to attract customer flow and monetize the flow through retail management. Eslite seek to provide the unique Humanity, Art, Creativity shopping experience for customers and commands a strong brand equity with a huge loyal customer flow in which over 180m visitors visited their stores annually, out of which 15m+ are foreign tourists. Eslite Bookstore have become major tourist attractions for visitors from China/HK with strong brand recognition and its flagship 24-hour Eslite Dunnan Taipei store has become a cultural icon in Taiwan. Similarly to Muji, Eslite Spectrum is able to thrive despite the disruption of ecommerce. Notably, since FY2012 to TTM Mar 2016, Eslite’s sales, EBIT and EBITDA have grew 34.5%, 143.3% and 77.2% respectively, one of the rare few Asian departmental/specialty retail operators to be able to generate double-digit growth and with a visible long runway. The company has 41 stores in Taiwan, 3 in HK and 1 in China (Suzhou), with total floor space of over 83,000 pings (or 274,380 sqm), up 36% from 61,000 pings in 2011 and expected to increase 45% to 120,000 pings by 2020, setting the strong foundation to at least double profits in the next 5 years. Capex risk in its Greater China expansion is substantially lowered after execution success from its first overseas store in HK in 2012 and China in Nov 2015. Eslite Bookstore was established in 1989 by founder and Chairman Robert Wu, and daughter Mercy Wu is vice-Chairman and President. Eslite Spectrum was listed on the Taiwan GTSM market on 30 Jan 2013 at NT$160/share. The Wu family owns over 58% of the equity in Eslite Spectrum.
1) What Makes It a Wide-Moat Business? Fundamental Dynamics Behind 24.7% ROE
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About The Author: Koon Boon Kee
Koon Boon is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets.
Starting his career at a boutique hedge fund in Singapore and later, at Korea’s largest mutual fund company, Koon Boon started to make headway into the investment arena. In his early successes, Koon Boon was part of the core investment decision committee which achieved 700% in returns (net of fees), in its flagship Asian fund.
A prolific writer and thought leader, Koon Boon has contributed hundreds of articles to Bamboo Innovator and BeyondProxy, an acclaimed series of subscription-based, research-intensive publications for serious investors; and is Managing Editor of the Moat Report Asia, a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia. He had also presented in top banking and finance conferences in Sydney, Cape Town, HK and Beijing, as well as in the Emerging Value Summit and Wide Moat Investing Summit. His work has been featured in local and international media such as, TEDxWallStreet, Investopia, BeyondProxy, Greatinvestors.tv, Jakarta Post, Straits Times Singapore, TODAY Singapore, Business Times Singapore, as well as a publication in the BoğaziçiJournal.
With the wide occurrences of financial fraud committed by listed firms in China during 2015, Koon Boon went to further his studies, from which he saw a gap in the curriculum for accounting fraud. He went on to pioneer the first-of-its-kind course on Accounting Fraud in Asia, which is now an official course in the SMU curriculum.
Today Koon Boon is the Chief Investment Officer at 8I Holdings Limited, where he is responsible for the sustainable growth and outperformance of listed Asian equities investments in the Hidden Champions Fund.
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