Global travel agencies and private equity firms have shown interest in acquiring the South Korean travel agency Hanatour. After suffering a downturn during the covid-19 pandemic, Hanatour has successfully rebounded this year amid a post-pandemic travel and tourism boom.
Hanatour recently appointed Citigroup Global Markets Korea Securities as the lead sales advisor, according to market insiders on June 10. Both strategic investors, such as global travel companies, and financial investors, including overseas private equity firms, have expressed interest.
“A global travel company has shown interest,” said an industry insider. “Given that Hanatour is a domestic travel company, it will likely be sold to a global strategic investor.” Another source familiar with the matter added, “A global PEF manager recently expressed interest in acquiring the company, although it is unclear if they will participate in the final bid.”
Hanatour’s largest shareholder is IMM Private Equity (PE), a Korean private equity firm specializing in buyouts and growth capital investments. IMM PE holds a 16.68% stake in Hanatour through a special purpose entity called Harmonia 1. Around 27.7% of Hanatour’s shares are up for sale, including the shares of related parties, including Chairman Park Sang-hwan (6.53%) and Vice Chairman Kwon Hee-seok (4.48%). Besides IMM PE, Hanatour’s shareholders include the National Pension Service (8.64%), treasury stock (3.42%), and other minority shareholders.
Hanatour’s first-quarter revenue reached 183.3 billion won ($133 million), up 121% from a year ago. Operating profit increased 285% to 21.6 billion won during the same period, marking the best quarterly performance ever. Net profit rose 157% to 24.2 billion won.
IMM PE acquired Hanatour in late 2019, but the travel agency’s performance deteriorated during the covid-19 pandemic. Hanatour’s performance has since recovered as global travel rebounded. After incurring losses exceeding 100 billion won annually from 2020 to 2022, the company returned to profitability last year with an operating profit of 34 billion won.
Hanatour’s valuation is estimated at around 1.2 trillion won. This is based on its market capitalization of approximately 920 billion won, calculated from the closing share price of 57,500 won on June 7, plus a 20-30% management premium. IMM PE became the largest shareholder of Hanatour in 2020 by acquiring a 16.67% stake through a third-party allotment method, investing 128.9 billion won. The new shares were issued at 55,000 won each.
Hanatour’s market capitalization is considered “appropriate” compared to other domestic travel companies, meaning the stock is not undervalued. Based on last year’s performance, Hanatour’s market capitalization is 27 times its operating income, the highest among its peers, including Modetour Network at 24.5 times, Yellow Balloon Tour at 17.4 times, and Very Good Tour at 15.3 times. Hanatour has the largest market capitalization at 92 billion won, followed by Modetour Network (291.6 billion won), Yellow Balloon Tour (115.3 billion won), and Very Good Tour (97.9 billion won).
Some analysts argue that Hanatour deserves a premium as the industry leader. Comparisons have been drawn with booking platform Yanolja, which is gearing up for a Nasdaq listing with a valuation of 10 trillion won despite posting an operating profit of 1.7 billion won last year and 14.9 billion won in the first quarter of this year. The valuation gap is notable, even considering Yanolja’s cloud business potential.
Analysts are optimistic about Hanatour’s prospects, with Daeshin Securities forecasting a share price of 85,000 won within a year. Hana Securities, Hyundai Motor Securities, and BNK Securities have set share price targets of 80,000 won. If Hanatour’s share price reaches 85,000 won, combined with a 30% management premium, the company’s total valuation could exceed 1.7 trillion won.
