GEREJE Corporate Finance Luxury Market Trends and Investment Opportunities April 2014

8/15/2019 GEREJE Corporate Finance Luxury Market Trends and Investment Opportunities April 2014

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LUXURY MARKET, INVESTMENT OPPORTUNITIES & TRENDSBETWEEN EUROPE & ASIA


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LUXURY MARKET , KEY FACTS & FIGURES


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According to World Airlines Awards,6 of the top 10 best airlines are Asian

Source: World Airlines Awards, Business Insider

Singapore Airlines Suites, N1 worldwide

Other top Asian Airlines: ANA All Nipon (Japan), Asiana Airlines (South Korea), Cathay Pacific (Hong Kong),

Thai Airline (Thailand), Malaysia Airlines

BEST AIRLINES ARE ASIAN


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Since 2014, there are more Starwood hotels on China’s Hainan Island than in theHawaiian Islands

Mandarin Oriental, Hainan, China

Sources: GCF Research & Analysis, Top hotels analytics

HIGH-END HOTEL BOOM IS IN ASIA


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2011 Design Award for the Marina Bay Sand in Singaporewith 2,560 hotel rooms, 74 000 m² of retail arcade, & a 150 m outdoor pool

Source: Design Awards

UNIQUE ARCHITECTURAL EXPERIENCE ARE IN ASIA


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LOUIS VUITTON opened its first “Maison” in mainland China inShanghai on July 2012

Louis Vuitton Shanghai, opened in 2012Louis Vuitton Singapore, opened in 2011

UNIQUE RETAIL EXPRESSION IS IN ASIA (1/2)


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7 of the 10 largest shopping malls in the worldare in Asia!

Hanjie Wanda Square shopping mall, Wuhan, China

UNIQUE RETAIL EXPRESSION IS IN ASIA (2/2)


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GROWING TREND OF EURO-ASIAN BRANDS

Source: GCF Research & Analysis

AKAR DE NISSIM, Luxury furniture & accessories Asian Lifestyle by French design


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GROWING TREND OF ASIAN SUCCESSFUL BRANDS

Source: GCF Research & Analysis, The Jewellery editor

First Chinese brand to be invited to the highly prestigious Antique DealersBiennial in Paris: WALLACE CHAN brand

Fine Jewellery Designer:Wallace CHAN


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GROWING TREND OF EURO-ASIAN BRANDS


Luxury Timepieces designed by Asian founders

& manufactured in Switzerland, center for the finest Watchmaking


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GROWING TREND OF ASIAN SUCCESSFUL BRANDS


HERBORIST: The first Chinese Cosmetics brand to succeed in Asia & in Europe,

Reviving the Chinese medical herb culture in 250 European points of sale


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CHINA IS A LUXURY « GIANT »

62,5

17,2 16,1 15,3 15,1 12,1 9,9 8,3 7,7 5,8

4%

-12%

-2%

4%3%

4%3%

1%

10%

5%

-15%

-10%

-5%

0%

5%

10%

15%

0

10

20

30

40

50

60

70

US Japan Italy China France UK Germany Korea HongKong

Russia

Personal Luxury Goods Ranking by Area in 2013e

EUR Bn Growth 2012-2013e

China (Mainland + HK) overtook France, the UK, Italy and Japan

as the 2nd biggest luxury market in the world after the US

Source: Bain & Co.

2013 Chinese consumers accounted for 30% of global luxury market (vs 20% in 2012)


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TOP EDUCATION DESTINATIONS

80% of Asian Parents wish to send their children study overseas

0%

10%

20%

30%

40%

50%

Top Education Destinations

US and UK are the top 2 favourite education destinations

Switzerland is the fastest grower

Source: HUNRUN Research 2014


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WINGS & WATER


Today, 300 jets and 200 luxury yachts in Greater China

Expect to grow to 500 within 5 years

GULFSTREAM BOMBARDIER DASSAULT

SUNSEEKER AZIMUT


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CHINA: WORLD N1 FOR SELF-MADE MILLIONAIRES


Known Wealth in 2013:

Globally: 1.867 USD Billionaires(+28 % vs 2012)

China: 358 USD Billionaires(+36 % vs 2012)

Hidden Wealth:Globally: 4000 USD Billionaires

China: 700 USD Billionaires

Size of market

USD billionaires globally: 4500 pax 63 years USD billionaires China: 750 pax 53 years Dollar millionaires: 2,8 M pax 39 years


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TOP TRAVEL DESTINATIONS


2013 2012

1 Australia ↑ 1 France

2 France 2 US

3 Dubai ↑ 3 Singapore

4 Switzerland 4 Switzerland

5 Maldives ↑ 5 UK

6 US 6 Italy

7 Japan 7 Australia

8 Germany ↑ 8 Dubai

9 Singapore 9 Germany

10 New Zealand 10 Maldives

Average travel duration: 7,5 days/month for millionaires

2 to 3 trips overseas a year


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FROM ULTRA TO AFFORDABLE LUXURY

The slow down of high end luxury will continue in 2014, but affordable luxury is

the growing segment.

Watches

Cosmetics,Perfume &

Personal Care

Leather goods

Menswear

Jewellery

ShoesWomen's wear

Accessories

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

China Mainland

China luxury market by category (2012)

Since Oct 2012: new gifts regulation - 25% spending in High end Luxury gifts

Red wine & watches are gifts of choice within RMB 20 thousands an item

Travel vouchers & healthcare products are fastest growing gifting categories

Source: Bain & Co. Greenbook


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LUXURY MARKET , THE KEY DRIVERS


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CUSTOMERS TARGETED – HNWI*

Source: GCF Research & Analysis, Asia Pacific Wealth Report 2013, World Federation of Exchange, World Wealth Report 2013

+9,4% HNWI in Asia - Pacific (~3,7M) in 2012 vs +7,5% in Europe (3,4 M)

Emerging Asian HNWI asset growth = +13% CAGR 2012-2016

Wealth of HNWI in Asia Pacific = +33% between 2012 and 2015 (from USD 12 T to 16 T)

China will contribute to 60% of the growth in wealth from 2011-2016

Asian tourists account for between 35 and 60% of luxury sales in Europe

HNWI = High Net Worth Individual ; assets > USD 1 M

China1,1 M

India0,2 M

Japan1,5 M

Emerging Asia

0,8 M

Europe3,3 M

USA5,2 M

MEA0,5 M

Latin America0,6 M

-5%

0%

5%

10%

15%

20%

25%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Asset under Management Forecast CAGR (2012 – 2016)

Global HNWI in 2012Historical Vs. Forecast CAGR

A u M H

i s t o r i c a l C A G R ( 2 0 0 7 - 2 0 1 6 )

European brands = 70% of the global luxury goods markets

Among the top 25 worldwide luxury brands, 18 are from Europe (mainly France & Italy)


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HOUSEHOLD SPENDING POWER IN MEGACITIES*

* Megacity: Population > 10 Mn** In PPP term

Source: GCF Research & Analysis, McKinsey, Morgan Stanley, The Diplomat

5,2

5,2

2,3

3,3

5,9

6,1

8,0

16,1

0 5 10 15 20

Germany: Rhein-Ruhr

France: Paris

India: Dehli, Mumbai, Kolkata

China: Beijing, Shanghai

2025e 2011

Number of households (in Mn) with annual incomes >EUR 15 K**in megacities in 2011 & 2025e

Main cities in booming Markets are catching up in household spending power

Middle Income Households in China and India x4 between 2011-2025

China : Rising Middle Class influence → Market opportunity for Affordable luxury

Chinese Middle class growth fast: 2/3 of population in 2012, 3/4 of population in 2022

Amount urban households, upper middle-class (incomes of $16-34K) will growth from14% in 2002 to 54% in 2022

Sophistication of the population: 34% have bachelor degree & 24% speak English


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RISING HOUSEHOLD SPENDING IN CHINA

Shanghai & Beijing will have about 16 M middle income households(>USD 20K/y) in 2025: x5 vs 2011

Source: GCF Research & Analysis, The Diplomat


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THE M&A TRENDS


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COMPARABLE MULTIPLES

Source: GCF Research & Analysis, Factset, S&P, Yahoo FInance

CompanyBusiness

Overview

Turnover*

(Bn EUR)

Turnover

Growth

(%)

EBITDA

Margin*

(%)

EV*

(Bn

EUR)

EV/

Sales*

EV/

EBITDA*

2013

EV/

EBITDA

2012

LVMH(FRA)

Apparel, Accessories& Luxury goods

29 0,34% 24% 71 2,4x 12,2x 10,9x

L’OREAL (FRA)

Cosmetics 23 2,4% 21% 68 3,2x 16x 13,5x

RICHEMONT(SWITZ)


13,4 29,% 27% 49 3,7x 13,5x 11,1x

KERING(FRA)


9,7 0,1% 26% 30 2,2x 10,5x 11,8x

ESTEE LAUDER

(USA)

High end

Cosmetics 10,4 31,5% 18% 26 2,5x 13,6x 12,5xLUXOTTICA

(ITA) Apparel, Accessories

& Luxury goods9,5 29,7% 20% 29 3,0x 15,3x 14,8x

RALPH LAUREN(USA)


7,2 36,4% 18% 13 1,8x 9,74x 10,6x

HERMES(FRA)


3,8 1,4% 37% 25 6,8x 20,6x 18,2x

PRADA(ITA)


4,6 32,6% 33% 19 4,2x 13,2x 16,6x

TIFFANY

(USA)Fine Jewellery 4,0 33,3% 23% 12 2,9x 12,2x 10,1x

Leading Luxury players are US & Europe based

Average +6,3% growth of 2013 EV/EBITDA multiples vs. 2012

Luxury global market to outperform global market:

S&P 5-year annual return of the top 80 top Luxury companies: +29%

vs. 12% the Global general Market (S&P 1200) & vs. +16% in Global F&B Market

*Figures: 2014 April LTM


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TRANSACTION MULTIPLES

Date Acquirer Target DescriptionDeal

Value(M EUR)

Stake

(%)

Sales

(M EUR)

EBITDA

Margin

EV/

EBITDA

Jan2014

L'OREAL(FRA)

MAGIC HOLDINGS(Hong Kong)

Cosmetics,skincare andfacial masks

620 100,0% 160 15,3% 3,8x

Aug2013

LVMH(FRA)

LORO PIANA(ITA)

Apparel,accessories and

luxury goods2 000 80,0% 490 20,0% 25,5x

May2013

SICHUAN LESSINDPT STORES

(China)

FEDONE(ITA)

Cashmeremaker

8,5 1,8% 280 15% 11,2x

Apr2013

KERING(FRA)

POMELLATO(ITA)

Fine jewellery 300 81% 146 17% 15x

Source: GCF Research & Analysis, Mergermarkets, Forbes, Capital IQ, Comité Colbert

Consolidation trend: individual brands are bought up by large luxury groups

Luxury brands owned by entrepreneur / family = 30% in 2011 vs 70% in 1995

As of S1 2013: 31 deals worth ~EUR 750 M globally in the luxury sector vs. 52 deals worth EUR 1,2 Bn on all of 2012

20% of these 31 deals are Asian (vs. 15% in 2012)


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ASIA TO EUROPE M&A DEALS BOOM

Source: GCF Research & Analysis,

Asian growing appetite for luxury western brands (50% of luxury total revenue

expected in 2025) coupled with the critical need for European luxury brandsto enter the fast growing Asian markets offers strong potential synergies.

June 2013

SUNSEEKER (UK) acquired

by DALIAN WANDA (CN)

May 2013

CLUB MED (CN)) acquired

by FOSUN (CN)

April 2012

GIVES & HAWKES (UK)

acquired by TRINITY (HK)

2007

MG (UK) acquired by

SAIC MOTOR (CN)

Feb 2013

SONIA RYKIEL (FR) acquired by

FUNG BRANDS (HK)

May 2013

CORUM (CH)) acquired

by FCHINA HAIDIAN (CN)


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INVESTMENT LANDSCAPE

Despite the apparent dominance of the MNCs, several brands are

still privately-owned: 3 type of potential targets

Source: GCF Research & Analysis,

VICOMTE ASince 2005

RUBY (Helmets)Since 2007

PIERRE HERMEsince1998

3. New luxury brands with innovative business model & unique competitive edge

PAIN DE SUCREsince 1985

LUBINS (Perfume)Since 1798

2. “Sleeping” stars 1. Independent “house” with international recognition

PARFUMS BERDOUESSince 1902

CORTHAYsince 1990

AUBERCYSince 1935

AURICOSTE (Horlogerie)Since 1854


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FRAGMENTED & REGIONAL INDUSTRY

In France, the luxury industry employs more than 200,000 people inmore than 40,000 companies

Source: GCF Research & Analysis, Comité Colbert/BCG

Key luxury manufacturers and subcontractors in France


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ASIAN APPETITE FOR EXCEPTIONAL WINE ESTATES

Source: GCF Research & Analysis, BBC

Since 2008: >30 French Chateaux acquired by Chinese investors& ~ 20 deals are currently in the pipeline

Château de Gevrey-Chambertain (Bourgogne)

Estimated price before transaction:

~EUR 3,5M (castle + 2 Ha of vineyards)

Purchase price in August 2012

EUR 8M (~EUR 4M/Ha) + 130%

Château Les Carmes Haut Brion (Bordeaux)

Estimated price before transaction:

~EUR 10M (castle + 5 Ha of vineyards)

Purchase price in January 2011

EUR 18M (~EUR 3M/Ha) + 80%

Gevrey-Chambertain

Les Carmes Haut Brion


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CHATEAU LAGREZETTE = UNIQUE WINE ESTATE & WINES


The "Original MALBEC” noted 95/100 by Robert Parker in 2005500 years history, 100 ha of premium vineyardsThe wine of the kings of France!

Built in the 15th century, LAGREZETTE is classified as an Historical Monument withRenaissance decoration and « Jardins à la Française »


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“This is arguably the best Rosé on earth!”

James SUCKLING, world famous wine critic

CHATEAU D’ESCLANS = THE WORLD’S BEST ROSÉ

Rebuilt in the 19th century, the domain is located in French Provence and is surrounded by267 ha of lands


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We are a Euro-Asian M&A firm with a “boutique” culture providing

both strategic and financial advisory services ensuringexcellence of execution thanks to our 100% in house offices and team

ABOUT GEREJE Corporate Finance

25 multi-cultural professionals between Europe and Asia acting as a “single” team

7 Management Committee members leading the company

10 Research & Analysis team members & 8 Senior Advisors bringing sector, country andfinancial expertise

Origination & Execution Paris Singapore

Origination Bangkok, Berlin Shanghai, Mumbai


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Fabrice LOMBARDO Founder & CEO, based in Paris

20 years’ cross border experience working with Asia (ASEAN, India, China)

Passionate entrepreuneur, he founded GEREJE in 2007 at 35 years old

Specific expertise in the Buy side / Joint Venture and Fund Raising transactionsbetween Europe & Asia

Advised both corporates (small, mid cap and MNCs such as BEL, DANONE orLACTALIS) as well as financial investors (family offices, HNWI or PE funds)

External teacher at ESSEC

BBA at Oxford Brookes Univ, Grenoble Business School, Exec MBA at ESSEC

Thierry SMADJA Managing Director & Co-Founder, based in Singapore

20 years’ experience in finance and industry

Started in the M&A industry in the mid 90's US by managing the sale process of

a OEM multinational manufacturing group to a NYSE listed company

Managed a Swiss Family Office active in private equity activities and leadseveral transactions of various sizes and industry sectors.

Executive & Shareholder in an ASEAN cosmetics and fragrances distributiongroup. Joined GEREJE in 2011 post divestment of this investment

IBA in Business Administration from the American University of Paris

OUR CROSS BORDER TEAM


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11 years’ international experience in M&A

Former Manager at ADM, notably in charge ofM&A and Strategy

Bus. Dev. Director for MOD-ELEC, Frenchhigh-end electrical appliances producer &Former Bus Dev director-Perle Noire (caviar)

MS in Mech. Eng. & Auditor of the CHEDE

7 years’ experience in cross border M&Abetween Europe and Asia.

Co-leader of a team of 10 analysts across Asia & Europe.

MSc in Corporate Finance & FinancialEngineering, Paris Dauphine.

Paul VALIN, Associate Partner

20 years’ experience in Bus Dev.

Ex MD of DANONE in India and ex VPInternational for SPOTLESS

Trade Advisor to the French government.

MBA, INSEAD.

Stéphane ILIADES, Senior Partner

7 years’ experience in cross border M&Abetween Europe and Asia.

Co-leader of a team of 10 analysts across Asia & Europe.

MSc in Management, ESCEM BusinessSchool.

Pierre-André MONTJOVET, Senior Advisor

OUR TEAM

Pisit JEUNGPRADITPHAN, Senior Advisor

Specific expertise in sell-side transactions

President of CFA Society in Thailand

Anil RAI, Junior Partner

4 years’ experience in cross border M&A

between Europe and Asia

BBA in Finance, NTU, Singapore

Antoine ALEMANY, Associate Partner


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PE Funds55%

HNWI24%

Others2%

Family Offices14%

France37%

ASEAN21%

China13%

Others Asia13%

W. Europe17%

OUR PROPRIETARY DATABASES OF INVESTORS

We have a direct access and strong relationships with 500+ Private Equityfunds, 100+ Family offices and 200+ Private Investors / HNWI

Geographical split Typology


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F&B40%

ASEAN38%

India8%

China8%

France33%

OUR PROPRIETARY DATABASES OF CORPORATES

We have established direct and privileged relationships with 6,500+ companies(small, mid cap, MNCs) in Europe and Emerging Asia including 350+ in the

luxury industry only

Geographical split Sectors split

Health & Beauty40%

NewTech

5%

Industry &Cleantech

15%W. Europe

14%

Direct access to key shareholders/management of luxury companies mainly in: Wine & Fine Foods:

Jewelry & Haute Horlogerie

Cosmetics & Fragrances

Apparels, Furniture & Accessories…


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SAMPLE OF GEREJE ASSIGNMENTS

OUR EXCLUSIVE MANDATES

OTHER INVESTMENT OPPORTUNITIES

Fragrances – France based (EV EUR 12 M)EUR 2.5 M minority stake to boost the development of oneof the most legendary luxury perfumery house (>200 yearshistory)

Haute Horlogerie – Euro-Asia based (EV EUR 3 M)EUR 2 M minority stake to boost the development of the only AsianSwiss-made watch brand designed to target Asian market

Jewellery – Europe based (EV EUR 10 M)

EUR 4.5 M minority stake to boost the development of one of theoldest (>100 years old) European high end jewelry house.

High-end cigars – Europe based (EV EUR 2 M)The owner is planning to retire and is looking for a strategicbuyer capable to boost the company’s international expansionwith a focus on Asia

Swimwear – Euro Asia based (EV EUR 1.6 M)

~EUR 1 M minority stake to finance the opening of 2 flagshipsin China and boost the distribution

Caviar – Europe basedThe N3 producer of caviar worldwide, The caviar comes fromfarm sturgeons and is considered as one of the world’s finest.

Furniture & Accessories – Euro-Asia based (EV EUR 15 M)

An exclusive luxury / lifestyle brand for furniture & accessories,founded by a French renowned designer based in Asia

Premium Alcohol – Europe based

Producer of an award winning premium vodka which is distributed in

more than 10 countries globally

Dermo-cosmetic brand – Europe based

EUR 30 M Health& Beauty group formulating, producing and distributing its

own brands of premium natural & organic cosmetics and food supplements

Fashion – Europe basedEUR 20 M renowned french fashion house established in the60’s. The company launhed its own perfume collection.

Fashion – Europe basedEUR 15 M fashion brand dedicated to women and childrensecuring 70% of its sales overseas.

Accessories – Europe basedEUR 5 M renowned brand specialised in handcrafted luxuryproducts such as cabinets, cigar, humidors, watches &

jewellry boxes, ashtrays…


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The information contained in the presentation has been provided collated from publicly available sources or other sources that GCF(GEREJE CORPORATE FINANCE) deems reliable. GCF makes no representation warranty or undertaking, express or implied, andconsequently shall not accept any responsibility of any kind whatsoever with respect to the accuracy or completeness of theInformation and / or the information contained in it or any further information applied in connection with the matters described in it.

This presentation is being distributed solely for the benefit of the persons to whom it is distributed. Consequently, it shall not be shownor given to, copied by or discussed by, in whole or in part, with any other person without the prior written approval of GCF. ThisPresentation may not be photocopied, reproduced or distributed to others at any time without the prior written consent of GCF.

GCF designate the companies, whilst legally they are independent entities, sharing GEREJE corporate identity, logo, documents,working methodology & ethical rules. All GCF offices are working as an integrated group of companies under the governance of an exclusive agreement for the interest ofthe clients. GCF offices are privately owned and independent structures. GEREJE Advisory Asia Pte Ltd Singapore is formerly knownas “Arpels” Advisory Pte ltd.

GCF solely offers advisory services in connection with corporate financial transactions or evaluations. In no way whatsoever does GCFitself underwrite, acquire or place any securities, or lend any sums or hold funds on behalf of its clients.

GEREJE Advisory Asia & GEREJE Corporate Finance are registered companies with MAS (Monetary Authority of Singapore) and AMF(The France Financial Markets Authority) - ORIAS n° 13004146 – Member of ACIFTE as Conseil en Investissement Financier(Financial Investment Adviser)

DISCLAIMERS

GEREJE Corporate Finance Luxury Market Trends and Investment Opportunities April 2014

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Transcript of GEREJE Corporate Finance Luxury Market Trends and Investment Opportunities April 2014