information memorandum - 코웨이 ir memorandum december 2005 woongjin coway co., ltd. (021240) 1...
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0 Information Information MemorandumMemorandum
December 2005
WOONGJIN COWAY CO., LTD. (021240)
Information Information MemorandumMemorandum
December 2005
WOONGJIN COWAY CO., LTD. (021240)
1
Outstanding Shares
Listing Date (KSE)
Total Employees
Market Capitalization
: May 2, 1989
: KRW 39.0 billion
: 73,851,611 shares (ordinary shares only)
: August 7, 2001 (IPO), May 24, 2005 (re-listed post merger)
: 1,150 employees (excluding 13,032 contracted sales agents)
: KRW 1,647 billion (as of Dec. 5)
CCompany fact sheetompany fact sheet
Establishment
Paid-in Capital
2
20002000 2004200419941994 20052005
First air cleaner production and
sales
Launched system
kitchen brand
19891989 19901990
Entered into water purifier
business
19981998
Launched water purifier rental
service
Started bidet rental service
20012001
Started air cleaner rental
service
Listed on KSE
Started kitchen garbage processor
rental service
R&D and manufacturing
Rental and maintenance service
HHistory of istory of WoongjinWoongjin CowayCoway
Woongjin Coway is an integrated product and rental service provider focusing on high-end health and environmental products
Woongjin Coway is an integrated product and rental service provider focusing on high-end health and environmental products
Founded
NEW WOONGJIN COWAY
Integrated productand service provider focusing
on high-end health andenvironmental products
NEW NEW WOONGJIN COWAYWOONGJIN COWAY
Integrated productIntegrated productand serviceand service provider focusingprovider focusing
on highon high--end healthend health andandenvironmentalenvironmental productsproducts
3
Customers
Prod
ucts
Sale
s C
hann
els
Water PurifierAir cleanerWater Softener and IonizerBidetKitchen Garbage ProcessorOxygen Generator
Rental Purchase Customization
Kitchen FurnitureKitchen System Design & Installation
BBusiness model overviewusiness model overview
Living Designers
GalleryDisplay ShopsExport DoorDoor--toto--DoorDoor
SalesSales
Environment & Health System Kitchen
4
5.2%
0.01%
Subsidiaries
30.4%
28.3%
2.9%
0.2%
Foreign Investors29.2%
Seok-Kuem Yoon Woongjin Think Big (KRX listed)
36.0%
Source: Company Data. Foreign ownership as of December 5, 2005.
WoongjinCosmetics
Chinese subsidiaryfor cosmetics
business
42.9%
WoongjinJapan
Japanesesales subsidiary
WoongjinUSA INC
35.0%
US salessubsidiary
WoongjinThailand
98.9%
Thailandsales subsidiary
OOwnership structure and affiliateswnership structure and affiliates
Woongjin Food
Treasury Shares
ESOP
Woongjin Coway’s Share Ownership Structure
5
Maintain dividend payout ratio above 20% and continue share buyback programs
Health and environment-related products and system kitchen productsIncreasing customer demand for ‘well-being’ items
Broad customer base of over 3 million with stable cash flow from rental and membership servicesCross selling opportunities to penetrate customers with new product offerings backed by over 16,100 contracted door-to-door sales and customer care agents
1 Ranked no.1 in both customer satisfaction index (4 consecutive years) and brand power (6 consecutive years) by Korea Management Association Consulting
Leader in water purifier and air cleaner markets (No. 1 market share in both markets in Korea)Strong brand equity and track record of high customer satisfaction1
More efficient and transparent decision making under combined single leadershipSignificant cost-savings
KKey investment highlightsey investment highlights
1. Dominant Market Position in Korea
2. Broad Customer Base and Strong Sales Agents
3. Growing Product Line-up
4. Focus on Shareholder Value
5. Post-merger Synergies
6
Woongjin’s capability of generating strong revenue growth and stable cash flow is ultimately due to its successful Rental Program
Woongjin’s capability of generating strong revenue growth and stable cash flow is ultimately due to its successful Rental Program
Member-ship
service
ProductProduct
2
33
1
One-time lump sum payment
Membership Program
Rental Program Monthly rental charge ≈ ( + )/602 33
Rental program (78% of total 2004 revenues)Option to assume ownership after 5th yearFree periodical filter replacement and inspection by CODYRegistration fee: approx. KRW 58,000Monthly service fee: approx. KRW 22,000
Membership program (6% of total 2004 revenues)Same level of maintenance service provided as partof the Rental Program while the customer keeps the
ownershipMonthly membership fee: approx. KRW 13,400
One-time lump sum payment (9% of total 2004 revenues)
ASP for water purifier: approx. KRW 2,000,000ASP for air cleaner: approx. KRW 950,000
2
33
1
Membership fee
Membership fee
Purchase price
Purchase price
KKey sources of revenuesey sources of revenuesRental Program and Alternative Sales Methods
7
10%
15%
15%
60%
FY04 Rental RevenueKRW 708.8 billion
FY04 Rental RevenueKRW 708.8 billion
Water Purifiers
* Source: Company Data
Bidets Air Cleaners Water Softeners
Rental Registration FeeRental Fee Membership Fee D2D Sales Home Appliances Others
Forecasted FY05Forecasted FY05
SSales breakdownales breakdown
10%
14%
16%
59%
1%
3%3%9%
6%78%
FY04 Revenue: KRW 902.4 billionFY04 Revenue: FY04 Revenue:
KRW 902.4 billionKRW 902.4 billion
2%7% 81%
4% 4%1%
Forecasted FY05Forecasted FY05Forecasted FY05
2004 Actual 2005 Forecast
8
DDominant market position in Koreaominant market position in Korea
Source: Company data
2005 Market Size (Forecast) : 952 thousand units 2005 Market Size (Forecast) : 688 thousand units
Company A9%
Others37%
Company B8%
WoongjinCoway46%
WoongjinCoway42%
Company Y12%
Company Z8%
Others22%
Company X16%
Woongjin Coway maintains its metropolis market leadership in both the Korean water purifier and air cleaner market with 46% and 42% market shares respectively
Woongjin Coway maintains its metropolis market leadership in both the Korean water purifier and air cleaner market with 46% and 42% market shares respectively
Water Purifier Market Share Air Cleaner Market Share
9
2,6722,965
3,423
3,958
18% 19% 22% 25%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
'02 '03 '04 '05(F)0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Source: National Statistical Office, Korea Water Purifier Industry Cooperative and Company Data¹ Accumulated shipment/total number of household in Korea
CAGR 14.0%
CAGR 35.4%
Accumulated Shipment (’000 units) Penetration Rate1 (%)
MMarket overviewarket overview
603
938
1,227
1,497
4% 6% 8% 9%
0
500
1,000
1,500
2,000
2,500
'02 '03 '04 '05(F)0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Water Purifier Market Share Air Cleaner Market Share
10
897
1,715
2,664
3,246
3,829
'01 '02 '03 '04 '05(F)
Subscribers(Rental +Membership)
Subscriber CAGR 43%
BBroad customer baseroad customer base
The merger with Woongjin Coway Development will bring in a stable flow of cash, generated by its broad rental customer base
The merger with Woongjin Coway Development will bring in a stable flow of cash, generated by its broad rental customer base
507
897
1,715
2,664
3,246
3,829
'00 '01 '02 '03 '04 '05(F)
BidetWater SoftenerAir CleanerWater Purifier
Total Subscriber Accounts (’000 units) Product Mix and Account Growth (’000 units)
11
¹ ARPU = Revenue/Average Number of Total Accounts
ARPU has recently declined due to diversification of rental product offerings with lower rental fees, but starting in 2005, as rental customers begin to transition into
membership customers, we expect our profitability to improve
ARPU has recently declined due to diversification of rental product offerings with lower rental fees, but starting in 2005, as rental customers begin to transition into
membership customers, we expect our profitability to improve
AARPU trend of service RPU trend of service
298,797284,665
259,501
187,195
'02 '03 '04 3Q'05
297,362
157,302
116,925
272,473296,534
197,721
160,355
195,256
'02 '03 '04 3Q'05
Rental Membership
Total ARPU (KRW)¹ Rental ARPU and Membership ARPU
12
Woongjin Coway started a unique network marketing campaign in 1998, building up a direct and personalized sales agent program “CODY” (COway laDY)
Evidenced by the success of our recent brand LooLoo, the Cody program gives us the leverage that we need in effectively penetrating into new businesses
LooLoo’s bidets and water softeners has gained instant market leadership (56% market share as of YE2004) through the constant on-sight customer coverage provided by the Cody program
UUnparalleled sales network nparalleled sales network –– ““CODYCODY””
18119
294460
581712
'00 '01 '02 '03 '04 '05(F)
26
1,487
3,085
4,828
7,7458,561
10,600
'99 '00 '01 '02 '03 '04 3Q'05
Woongjin Coway’s unique CODY agent system enables the company to maintain its dominant leadership in the rental service markets in Korea
Woongjin Coway’s unique CODY agent system enables the company to maintain its dominant leadership in the rental service markets in Korea
Number of Cody Agents “CODY” – Direct and Personalized Sales Agents
Net Increase in Bidet Rental Subscribers
13
FFocus on shareholdersocus on shareholders’’ valuevalue
Maintain minimum dividend payout ratio above 20%
2004 DPS: KRW 250 (vs. KRW150 in 2003)
2004 dividend payout ratio: 34%
Purpose: to stabilize stock price and to increase shareholder’s value
Share buyback programs in 2003 and 2004
Elimination of related party transactions with Woongjin Coway Development will enhance transparency
Conservative approach to new accounting rules throughout accounting steps of consolidation
Focus on Enhancing
Shareholder Value
Woongjin Coway management is focusing on enhancing shareholders’ value by continuously addressing investors’ concerns and returning value to shareholders Woongjin Coway management is focusing on enhancing shareholders’ value by
continuously addressing investors’ concerns and returning value to shareholders
Woongjin Coway EPS
458635
742
2003 2004 3Q2005
Dividend Payout Policy Profit-oriented Management
Share Buyback & Cancellation Increase Company Transparency
14
SSales & profit trendales & profit trend
1 Excluding KRW49bn of deferred registration revenue
CAGR 5.9%(’02-’04)
CAGR 11.4% (’02-’04)ㅋ
Prof
orm
aD
ata
Prof
orm
aPr
ofor
ma
Dat
aD
ata
Including the deferred sales effects (after 2004) Excluding the deferred sales effects
The combined company will benefit from the stellar financial performance of Woongjin Coway Development with higher top line and bottom line growth
The combined company will benefit from the stellar financial performance of Woongjin Coway Development with higher top line and bottom line growth
738888 903
738888 953
514493
'02 '03 '04 1H'05
81
123 113
81
123 129
6756
10.9% 13.9% 13.5% 13.0%
11.4%12.5%
'02 '03 '04 1H'05
Act
ual D
ata
Act
ual D
ata
Act
ual D
ata
739
827 828
738
'02 '03 '04 3Q'05
91 87113
63
8.5%13.7%12.2% 10.5%
'02 '03 '04 3Q'05
Sales Trend (KRW bn) EBIT and Margin (KRW bn)
15
KKey financial ratiosey financial ratios
Woongjin Coway (before merger) Woongjin Coway Development Woongjin Coway (post-merger)
We expect our key financial ratios to improve after the mergerby integrating manufacturing and distribution
We expect our key financial ratios to improve after the mergerby integrating manufacturing and distribution
58 42 49
152146 173218
'02 '03 '04 3Q'05
1079
458 635 7428741,159
1,439
'02 '03 '04 3Q'05
2315
30
1622
'03 '04 3Q'05
26.010.8
19.1 18.6
37.3 40.3 34.7
'02 '03 '04 3Q'05
EPS (KRW) EBITDA (KRW billion)
ROE (%) EBITDA/Interest Coverage (x)
16
OOther financial information ther financial information
We expect our financial and operational efficiencies in terms of asset and capital utilization will improve following the merger
We expect our financial and operational efficiencies in terms of asset and capital utilization will improve following the merger
Classification FY 2003 FY 2004 3Q FY2005 1. Borrowings
Borrowings 231 127 155
2. Cash
Cash 19 22 39
Net cash (212) (105) (116)
3. CapEX
R&D/Facility 41 16 15
Rental Asset 173 196 137
Total 214 212 152
KRW billion
17
PProduct portfolio diversificationroduct portfolio diversification
Product Line Product Line CompositionComposition
Brand NameBrand Name
Kitchen furniture design and installation
200120020011199819919988 200420020044
Water softener, bidet, etc bathroom appliances
Air cleaners, oxygen
generators, etc
Water purifiers, other kitchen appliances
health-related electronics
With more diversified product portfolio targeting the same customers, there are plenty of cross selling opportunities for our future growth as 80% of our customers use only one rental productWith more diversified product portfolio targeting the same customers, there are plenty of cross selling opportunities for our future growth as 80% of our customers use only one rental product
200020020000
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