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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