Bamboo Innovator Weekly Insight – Baking Up a Korean Unification: The Globalization of Wide-Moat Compounder Samlip

Baking Up a Korean Unification: The Globalization of Wide-Moat Compounder Samlip

“‘Wir sind ein Volk!’ The day will soon come when these powerful words that united the people of East and West Germany echoes across the Korean Peninsula.” 

– Korean President Park Geun-hye at the Dresden’s Technical University on Mar 28, 2014

“Thirty years later, when I am 90, I will come to Seoul, and then I will be able to go to Pyongyang and Kaesong on the KTX. In Pyongyang, I will drink coffee at Paris Baguette or Starbucks. I can at least predict that will happen.”

– Hans-Ulrich Seidt, German Ambassador to Korea

In her speech, President Park recalled her father’s visit:

“The Korean president who visited Germany at the time felt that Germany’s rise from the ashes of the Second World War and its Miracle on the Rhine were feats that could be replicated in Korea. As he was driven on the autobahn and shown the steel mills of German industry, he became convinced that Korea too would need its own autobahn and its own steel industry to effect an economic take-off.  When that president sought to build expressways and steel mills upon his return to Korea, he was met with widespread resistance. “What use is an expressway when we don’t have cars? Building an expressway is a recipe for failure.” “What’s the point of a steel mill when we’re struggling just to get by?”- went the argument. But the highways that were eventually paved against such opposition became the solid bedrock on which the Korean economy would rise. Those long stretches of concrete helped remove bottlenecks in the nation’s distribution and logistical networks..The desperate country that 50 years ago had been hard-pressed even to obtain loans, has now come of age as the 8th largest trading nation in the world.” 

At the Ministry of National Development (MND) auditorium in Singapore on Mar 28, we were presenting to a group of over 200 private investors, professionals and executives about wide-moat innovators in Asia and the Bamboo Innovator framework. Interestingly, one of them was born in Hwanghae province in what is now North Korea. That company also mentioned by the German Ambassador to Korea Hans-Ulrich Seidt is Samlip General Foods (005610 KS, MV $586m, sales $1bn), part of the unlisted SPC Group that include the dominant Paris Baguette bakery franchise with over 3,200 stores in Korea with over 70% domestic share and now has over 170 outlets in China, Singapore, Vietnam and America in less than a decade since its first overseas store opened in Shanghai in 2004. Given the increasing prominence of Paris Baguette in Singapore since its first entry in Sep 2012 with outlets in Orchard Wisma and recently in Changi Airport Terminal 2, we were highlighting how once we put on the wide-moat value investing glasses, we will look at everyday observations differently. We will be able to experience the uncanny: the raw sensual data reaching your eyes before and after are the same, but without the pertinent framework of meaning, the features of the wide-moat company are invisible. We discussed briefly how the focused Samlip has a market value that’s more than twice that of Singapore’s Breadtalk (BREAD SP, MV $270m) and that Breadtalk itself is more valuable than the glamorous SocGen private bank in Singapore which has asset under management (AUM) of $12.6 billion and was sold to DBS for $220 million at the valuation of 1.75% of its AUM. We also briefly commented on “Asia’s Middleby” which has a market value of $257m and trading at an undemanding EV/EBIT 10.1x and EV/EBITDA 9.5x. We pointed out how its bakery equipment are increasingly used in many of Singapore’s neighborhood independent bakery chains such as Baker’s Talent where many elderly folks buy their 60 cents bun to replace the usual proper meals whose costs are pushed up by the food operators because of escalating rentals. This family business also commands a dominant market share of over 80% in hypermarkets, 50% in chain outlets, 30% in 4- to 5-star hotels in China and an overall 30% in its home market. We will be presenting this Middleby of Asia at the upcomingAsian Investing Summit 2014 on April 8-9. The story of both Samlip and “Asia’s Middleby” are relevant because they illuminate how artisan products can scale up with their dedication in striving for technological innovations to become niche local and global champions without losing that authenticity and values.

The SPC Group with the dominant Paris Baguette brand franchise began life as a humble little bakery shop called Sangmidang (赏美堂) in 1945 in Ongjin-gun, Hwanghae-do (North Korea) which later moved to Seoul in 1948. Ever the tinkerer and innovator, the late patriarch Hur Chang-sung developed in 1949…

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To read the exclusive article in full to find out more about the fascinating story of SPC Group with its dominant brand franchise Paris Baguette and Samlip and its globalization strategy; please visit:

• Baking Up a Korean Unification: The Globalization of Wide-Moat Compounder Samlip,Mar 31, 2014 (Moat Report Asia, BeyondProxy)