GSCO notes Gmarket's GMV guidance miss in 4Q06 disturbed them. However they view Gmarket's enterprise value of $0.6 bn as unduly small relative to the franchise value of being Korea's largest e-commerce business growing at 2X-3X the pace of the e-commerce industry with the 7th most visited website in Korea, 11 mn active users, turnover last year of $2.4 bn, revenue last year of $164 mn, revenue growth last quarter of 67% yoy, and earnings growth last quarter of 78% yoy.
Firm believes that Gmarket can fundamentally earn its way back to a $20-plus stock price by reporting GMV consistent with its guidance, starting with 1Q07 GMV out either in April or upon full results on May 9.
GSCO sees 3 non-earnings developments which might assist the stock:
1) Yahoo! (YHOO) or eBay (EBAY) could buy stock in Gmarket: eBay acquired prior market leader Internet Auction, and Yahoo! paid $13.30 per share for 4.5 mn Gmarket shares in June 2006. With GMV around one third that of Yahoo Japan and 3X faster growing, and GMV slightly larger than Taobao, the firm views Gmarket as complementary to Yahoo's Asian marketplaces.
2) Gmarket could boost its e-commerce share and leverage its platform by acquiring smaller Korean marketplaces.
3) Gmarket could coordinate any overseas expansion with Yahoo!, which controls the largest marketplaces in Japan, China, and Taiwan.
Notablecalls: Must say I view GMKT as one of the more interesting e-commerce plays outside of the U.S. The stock got schmeissed on Friday after reporting weaker than expected results but managed to bounce nicely during the day.
I'm not going to call this one outright actionable but the stock is worth keeping on the radar -- even for investors. Note that GSCO has a Buy and $21 tgt on the stock.