Korea Small Cap Gem #39: Messe ESANG

• We have found another gem in the Korean small cap industry. Messe ESANG is #39 in our Korea Small Cap Gem Series.

• Messe ESANG (408920 KS) is the number one player in South Korea’s exhibition and convention industry.

• The company has a combination of strong sales growth, excellent operating margins, improving ROE, sound balance sheet, and cheap valuations.

Messe Esang Exhibition Scale (Source: Messe Esang)

Messe Esang Venues (Source: Messe Esang)

Messe Esang Introduction (Source: Messe Esang)

We have found another gem in the Korean small cap industry. If you have been following our research in the past several years, we started to publish Korea Small Cap Gem Series since May 2020. Messe ESANG is #39 in our Korea Small Cap Gem Series.

Typically, many of our readers are more interested in mid-caps/large-caps so many small caps in Korea simply get left undiscovered/ignored. So in the past five years, we have tried to limit the Korea Small Cap Gems to about one report in one or two months.

There has been a lot more interest in Korean small caps this year so we plan to publish more interesting ideas on them. Curiously, this could also be a warning sign since we have seen repeated cases of how the small caps sometimes are the last ones to ride the boat. However, when the tides turn and boat leaves the dock, investors could get left stranded with small cap stocks with lack of liquidity. So caveat emptor!

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Why is Messe ESANG So Interesting?

Messe ESANG is so interesting due to the following six major reasons:

1) Number one player in exhibitions and convention industry in Korea - Messe ESANG (408920 KS) is the number one player in South Korea’s exhibition and convention industry.

2) Strong sales growth - The company's sales increased at a CAGR of 32.3% from 2022 to 2024.

3) Excellent profit margins - The company generates high profit margins. Its operating margin improved from 22% in 2023 to 25.5% in 2024.

4) Improving ROE - Messe ESANG's ROE improved from 10.3% in 2023 to 21% in 2024.

5) Sound balance sheet - The company has a sound balance sheet. Debt ratio was 36% at the end of 1Q 2025. It also had net cash of 47.3 billion won at the end of 1Q 2025, representing 45% of its market cap.

6) Cheap valuations - The company is currently trading at cheap valuations. It is trading at EV/EBITDA of 2.8x, P/E of 7.6x, and P/B of 1.5x, based on recent prices and LTM financials.

Typically, when we search for small caps in Korea, we look for many factors of which nine are most important which are as follows:

• Market share/business moat

• Sales growth

• Profit margins

• ROE

• Balance sheet strength

• Valuations

• Growing overseas business

• Industry catalyst

• Share buybacks/dividends

Messe Esang ranks highly for six of the most important factors above (except for growing overseas business, industry catalyst, and share buyback/dividends in which the company ranks modestly).