Gmarket (Nasdaq: GMKT), the best value in Asian e-commerce

July 26, 2007 on 7:56 am | In Long Term Picks |

  • BUY GMKT near $20.05 (long term portfolio)

It’s no secret that e-commerce is on fire once again. This week Amazon (Nasdaq: AMZN) impressed investors with a second consecutive blow out quarter. It appears that the long awaited promise of e-commerce has finally materialized. Gmarket appears to be poised to benefit from the same e-commerce trends that sent shares of Amazon flying this week.

Gmarket has performed well since we first profiled the company in late April, but the recent strength in Asian internet stocks and e-commerce stocks combined with improving fundamentals, should help push shares of Gmarket considerably higher. Previously, we held Gmarket as a short term pick, but now we have decided to add Gmarket to our long term portfolio ahead of the second quarter earnings report next week.

Gmarket reports gross merchandise value (GMV) a few weeks before reporting earnings so we have some numbers to work with heading into next week. GMV represents the total value of all items sold on Gmarket’s website. For the second quarter of 2007, Gmarket reported a GMV of 780 billion won. This GMV represents an 8% sequential increase in revenue. Last quarter revenue from transaction fees came in at 30.2 billion won. Using the same ratio, transaction revenue should come in at 32.58 billion won for the second quarter of 2007.

Recently, advertising and other non-transaction revenues have been growing faster than transaction related revenues at Gmarket. Last quarter advertising and non-transaction fee related revenue came in at 17.8 billion won, an increase of 114% compared to Q1 2006. If we assume that non-transaction revenue will increase by 50% in Q2 2007 compared to Q2 2006, then non-transaction revenue will come in at about 19.28 billion won. Therefore, after making the preceding growth assumptions, total revenue would come in at 52.4 billion won.

The current won to US dollar exchange rate is 915 won for $1 US dollar. Last quarter the rate was 937 won for $1 US dollar. The weakening US dollar should help Gmarket’s numbers when reported in US dollars. Four US analysts follow Gmarket and all of them report estimates in US dollars. None of these analysts have updated their numbers in the last 90 days despite a weakening US dollar that should help Gmarket’s numbers compared to estimates when the company reports.

Second quarter revenue in US dollars would come in at $57.26 million if we assume a 50% increase in non-transaction revenues compared to Q2 2006 and an 8% sequential increase in transaction related revenues. We think a 50% increase in non-transaction related revenue is a conservative estimate, but even with this estimate, Gmarket would handily beat the consensus analyst estimate of $56.85 million. If Gmarket can increase non-transaction revenues by more than 50%, investors could be in for a Bidu or Amazon type surge in Gmarket shares.

Bidu (Nasdaq: BIDU) reported a great quarter yesterday with revenue coming in at 401.3 million Yuan ($52.7 million). Just like Gmarket, Bidu’s numbers were helped by the weakening US dollar. Last quarter $1 was worth 7.73 Yuan; today $1 is worth 7.56 Yuan.

For Bidu, $52.7 million in revenue was enough to send the stock flying higher, up 19% in the after hours alone. This move propelled Bidu’s market cap to a lofty $7.35 billion. Analysts expect Gmarket to have second quarter revenues of $56.85 million (we think it will be closer to $58 million) and Gmarket has a market cap of $1 billion. Let’s review, Bidu has a market cap that is seven times larger than Gmarket, but it has lower revenues. We all know that the market pays a big premium for growth stocks. Therefore, does Bidu have projected growth numbers that justify the divergence in market cap from Gmarket? Not according to the analysts. The analysts that cover Bidu expect 68.5% revenue growth this year and 48.3% per year growth for the next five years. The analysts covering Gmarket expect 78.4% growth this year and 42% growth per year for the next five years.

For this quarter, Gmarket is poised to benefit from strong demand for e-commerce and a favorable exchange rate. For the long run, Gmarket will benefit from a dominant position in Korean e-commerce and a planned expansion into other Asian markets. Gmarket’s valuation is favorable when compared to other e-commerce stocks and Asian internet stocks. In short, this looks like a great time to buy Gmarket.

Wall Street Mayhem is long Gmarket

53 Comments »

RSS feed for comments on this post. TrackBack URI

  1. I bought back in April as well, it has been a nice run since then up about 20%. I am a little scared to buy more on a day like today, but history tells us these are the best days to buy. I still can’t convince myself to buy more.

    Comment by Trader Joe — July 26, 2007 #

  2. I think Bidu’s quarter wasn’t really all that great, yet the stock exploded and it has managed to keep most of it’s gains on a day like today. Next week should be fun with GMKT.

    Comment by Paul — July 26, 2007 #

  3. I just got some at $19.60. This is the steal of the century. As long as the markets don’t drop 5% before GMKT’s earnings, this will be an easy $3 gain.

    Comment by Mary — July 26, 2007 #

  4. Wow, this thing is really tanking today. I don’t think this move has anything to do with GMKT, I am loading up at $19.30. Good luck everyone.

    Comment by Jerry — July 26, 2007 #

  5. Crap, this thing is getting destroyed. You guys had great timing on TASR, but equally bad timing on GMKT.

    Comment by Ollie — July 26, 2007 #

  6. I decided to pull the trigger after all, but man am I glad I waited. I got in at $18.80 after I almost bought more this morning at $20.20

    Comment by Trader Joe — July 26, 2007 #

  7. Wow, that was nerve racking. I almost bailed when it went well under $18, I sure am glad I didn’t. Still down on the day, but not the disaster it was shaping up to be.

    Comment by Mary — July 26, 2007 #

  8. That was intense. I’ve become so used to wmayhem picks going up right after I buy them that it was a real shocker to see GMKT crash today. I still like it as an earnings play. Good things are coming next week.

    Comment by JJ — July 26, 2007 #

  9. Thanks. I got in at 18.14 after your alert.

    Comment by aa — July 27, 2007 #

  10. Does anyone know what time earnings come out on Wednesday? Before the bell, after the bell?

    Comment by Jorge — July 30, 2007 #

  11. I am just hoping for a little bit of a bounce back before Wednesday so the GMKT earnings are reported in a positive environment. If GMKT can get close to $58 in revenue, then it doesn’t matter the market does, but if revenues come in between $56 and $57 mil then it will depend on the mood of the market. Good luck everyone.

    Comment by Jerald — July 30, 2007 #

  12. No resistence from a TA viewpoint if GMKT can get back above $22.50 after earnings. The next stop would likely be the 52 week high near if we can pass $22.50 on Wednesday.

    Comment by Hal — July 30, 2007 #

  13. This is one of the very very few lucky picks during the last week’s drop. Got in at $17.80, now I wish I had bought more than just 110! Damn, I am greedy! :-D

    Comment by Krishna — July 30, 2007 #

  14. I love money and I love to make money, save money, and roll my big fat butt around in it.

    Comment by Sheldon — July 30, 2007 #

  15. This is one of the tastiest fundamental and technical pick that I have not seen for a long time. If GMKT can show the steady and potential growth in its report on Wednesday, then GMKT might even become an excellent takeover target by a major e-commerce or online auction player like E-bay and Amazon. Yahoo already owns 10% of GMKT / definitely exciting pick- can’t wait!!!

    Comment by Jay — August 1, 2007 #

  16. GMKT beats estimates by $4 mil on the top line and .04 cents on the bottom line (profits about 25% higher than expected). $23.50 in the after hours, thanks again wmayhem, this could turn into another CREE type profit.

    Comment by Trader Joe — August 1, 2007 #

  17. Wow, those are some impressive numbers for GMKT. Thanks again for the pick, I got in at $18.50, not bad in 4 days.

    Comment by Pligg — August 1, 2007 #

  18. I just finished observing the conference call of GMKT. Great numbers and performences all around- all the analysts who participated in the call sounded pretty satisfied with the Q.2 results. well I guess we can expect the GMKT to be upgraded soon….. Goodjob W Mayhem! impressive-

    Comment by pam — August 1, 2007 #

  19. TARGET RAISED TO $27 AND $28 RESPECTIVELY AT GOLDMAN SACH&RBC CAPITAL-

    Comment by ben — August 2, 2007 #

  20. I think this is a great price to buy at. I just made 17% in 3 trading days in BIDU.

    Comment by Seth — August 21, 2007 #

  21. Bought at 18.50 this morning. Ladies and Gentlemen it is game time.

    Comment by Seth — August 22, 2007 #

  22. Nice timing Seth, I was thinking about adding some more this morning, but I didn’t pull the trigger. Hopefully there will not be another chance to buy under $19 ever. With blowout earnings GMKT should really be trading above $25 right now.

    Comment by Pligg — August 22, 2007 #

  23. Thanks for the kind words
    I for one believe completely but didn’t have the funds to buy when the reccomendation first came out. I found a site that uses this article as a source and is also bullish on GMKT.
    http://sharefolio.wordpress.co.....er-growth/

    Comment by Seth — August 24, 2007 #

  24. Cheap xanax.

    Buy 180 xanax 2mg. Xanax dosage. Cheap xanax. Xanax withdrawal. Xanax addiction. Xanax. Buy cheap xanax without prescription.

    Trackback by No rx online xanax. — July 13, 2008 #

  25. How to remove pseudo ephedrine.

    Pseudo ephedrine. Ephedrine. Ephedrine in salt licks and chicken feed. Dangers of ephedrine. Changes ephedrine causes in the body. Ephedrine chicken feed.

    Trackback by Changes ephedrine causes in the body. — July 14, 2008 #

  26. Seroquel xr.

    Seroquel xr.

    Trackback by Seroquel xr. — July 17, 2008 #

  27. Here we go archive car audio forum.

    Car audio forum. Sounddomain com car audio forum. Car audio message forum carstereo com.

    Trackback by Car audio forum. — July 19, 2008 #

  28. america casinos online

    inflicting phosphates?decadently

    Trackback by america casinos online — July 20, 2008 #

  29. kort sju stud

    toasted.cycles censure:emergent,form lilacs

    Trackback by kort sju stud — July 20, 2008 #

  30. Nicloe kidman valtrex.

    Valtrex. Valtrex and achne. Nicole kidman valtrex. Valtrex als.

    Trackback by Valtrex. — July 21, 2008 #

  31. Tit torture.

    Sexual torture. Celebrities in torture and bondage videos. Torture gallery. Breast torture. Pussy torture.

    Trackback by Breast torture. — July 23, 2008 #

  32. Percocet withdrawal symptoms.

    Percocet. Long term percocet withdrawal symptoms.

    Trackback by Percocet. — July 23, 2008 #

  33. Bullima nervosa wellbutrin.

    Wellbutrin dosage. Wellbutrin xl no prescription. Wellbutrin.

    Trackback by Wellbutrin effects depression rxlist. — July 24, 2008 #

  34. Levaquin tablets.

    Levaquin tablets.

    Trackback by Levaquin tablets. — July 28, 2008 #

  35. Animal sex stories.

    Free animal sex.

    Trackback by Animal sex video. — July 28, 2008 #

  36. Free rape sex videos.

    Http great-rape-sex.info. Rape sex. Rape sex stories.

    Trackback by Gay rape sex site. — July 31, 2008 #

  37. Ephedrine.

    Ephedrine faq.

    Trackback by Biotek ephedrine. — August 1, 2008 #

  38. Dog sex.

    Girl dog sex video. Free dog sex videos. Free dog sex galleries.

    Trackback by Animal porn selected horse ass dog sex free. — August 1, 2008 #

  39. Women sex with dog info.

    Dog sex. Bestiality porn dog sex private photo and movies.

    Trackback by Dog sex. — August 3, 2008 #

  40. Hardcore lesbian sex.

    Hot girls having hardcore sex free pictures. Free pictures of hardcore sex. Hardcore sex.

    Trackback by Hardcore lesbians sex with strap-on. — August 12, 2008 #

  41. Moms fucking blackzilla.

    Hott moms fucking. Moms fucking blackzilla leeza. Moms and boys fucking. Trailers on moms fucking sons best friend. Moms fucking daughters.

    Trackback by Mature fucking moms. — August 17, 2008 #

  42. Buy phentermine click here.

    Buy phentermine. Mg buy phentermine. Buy phentermine online. Buy phentermine diet pill.

    Trackback by Buy cheap phentermine online. — August 18, 2008 #

  43. Phentermine.

    Phentermine. Phentermine cod. Phentermine ingredient.

    Trackback by Phentermine. — August 18, 2008 #

  44. Buy xanax online.

    Xanax. Geniric xanax. Xanax side effects. Xanax effect.

    Trackback by Xanax. — August 19, 2008 #

  45. Buy cheap phentermine.

    Buy phentermine. Buy phentermine online with paypal. Buy phentermine on line. Buy cheap phentermine.

    Trackback by Phentermine buy phentermine online. — August 20, 2008 #

  46. casino freedom online

    frazzle attains singularities accolade clutching.sorrowfully

    Trackback by casino freedom online — September 8, 2008 #

  47. cash casino

    blurted Pitt inventiveness,instrumentalists honey

    Trackback by cash casino — September 13, 2008 #

  48. mississippi auto insurance

    Appia sonny rhythms conglomerate pluck

    Trackback by mississippi auto insurance — October 8, 2008 #

  49. starting bets

    noticing residents distresses contract recalls Savoyard

    Trackback by starting bets — November 9, 2008 #

  50. injcgbn6ncgpxv0w

    Comment by Leeann Woodward — November 12, 2008 #

  51. www racingpostcasino com

    partnered:duly,Runyon:cops?ringer ribs

    Trackback by www racingpostcasino com — November 17, 2008 #

  52. www 777baby com

    resigns causality,unique,

    Trackback by www 777baby com — November 26, 2008 #

  53. www eurocazinocasino com

    ! !.

    Trackback by www eurocazinocasino com — December 15, 2008 #

Leave a comment

XHTML: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>

Enter your e-mail address to receive notifications when there are new posts

Finance Blogs - Blog Top Sites

Powered by WordPress with Pool theme design by Borja Fernandez.
Entries and comments feeds. Valid XHTML and CSS. ^Top^