Shinsegae’s omnichannel strategy drives up share prices of key affiliates

South Korean retail conglomerate Shinsegae Group’s key affiliates are enjoying upward revaluation of share prices. Not only the market is facing a big rebound in retail consumption, but Shinsegae’s own M&A deals and strengthening of both online and offline channels are also drawing more investors.

According to the market data provider FnGuide Inc. on Aug. 16, analyst consensus estimates for Shinsegae Co. was 387,833 won ($330.15) a share, 42% higher than last Friday’s closing price at 271,500 won ($231.09). Analysts explained that the estimates are based on the positive earnings surprise by the group in the second half of this year.

Some market watchers have highlighted that the ongoing recovery in consumption may slow down in the third quarter. However, Korean securities firms are still saying that Shinsegae’s stock price is in the low range.

Hana Financial Investment Co. said that while the market is unlikely to see another strong momentum for Shinsegae’s stock due to concerns for weaker third-quarter performance, the securities firm maintained its target price at 350,000 won a share and selected Shinsegae as the weekly “top pick” to buy in the retail sector. Hana Financial also highlighted that Shinsegae’s low price-earnings ratio of 8.3 is another reason to invest in the stock now.

Moreover, the so-called “revenge shopping,” a post-lockdown spending spree to purchase luxury goods and fashion items, as well as China’s recovery in consumption helped its fashion unit Shinsegae International to record the highest earnings last quarter. The average target price of Shinsegae International set by the analysts as of Aug. 15 was 271,000 won ($230.24) a share, up by 1.4% from July and by 27.9% compared to six months ago.  

As Shinsegae Group is accelerating its online channel, its digital and IT service provider Shinsegae I&C Inc.’s stock price has also skyrocketed this year by 72% year-to-date. Shinsegae I&C has helped Shinsegae International last year in setting up its online mall to offload unsold inventory of duty-free items.

Shinsegae I&C will also enter the electric vehicle (EV) charging business. The financial analysts highlight that fast growth is expected in Shinsegae I&C in this area as the South Korean government is planning to raise the ratio of land that buildings, including supermarkets, must use for EV charging. Some highlight that Shinsegae I&C can even be categorized under the metaverse theme, as it plans to sell virtual reality (VR) devices.  

OUTLOOK FOR E-MART IS ALSO POSITIVE WITH SSG.COM’S GROWTH

Shinsegae Group’s supermarket chain E-Mart Inc. has also rebounded back to the stock price level of 170,000 won ($144.37) for the first time in five months since March. E-Mart has achieved its first second-quarter profit in three years after a series of losses, and also lately expanded SSG.COM, its e-commerce unit. SSG.COM is planning to go public, a move that will further drive E-Mart’s share prices upwards.  

“While SSG.COM’s losses in the second quarter were 12.8 billion won ($10.9 million) higher than that during the same period last year, now is the time to look at revenue figures and market share. Investment in the company is recommended for long-term investors,” said analyst Park Shin-ae of KB Securities.

E-Mart is also swiftly reshuffling its assets. The company from last year has been selling a number of key real estate properties to raise cash to acquire eBay Korea, Starbucks Korea and the fashion company W Concept.

“E-Mart’s corporate identity is rapidly undergoing a transformation through a series of M&As and restructuring efforts,” said Samsung Securities in raising E-Mart’s target price by 10%.

South Korea’s political landscape is also becoming more favorable to E-Mart. Multiple bills have been proposed at the National Assembly, the legislative branch, to allow large supermarket chains to conduct online deliveries during their compulsory shutdown of offline stores, a system that is currently in place to protect smaller businesses.

Write to Eun-seo Koo at koo@hankyung.com
Daniel Cho edited this article.