[Click eStock] "Lotte Rental, Business Expansion Expected with Private Equity Acquisition... Target Price Raised"

Affinity Equity Partners Acquires Lotte Rental Stake Worth 2.8 Trillion KRW
Business Expansion Highlighted... Synergy Expected Between No.1 and No.2 in Car Rental Industry
Benefits Anticipated from Interest Rate Cuts... Potential for Interest Expense Reduction

Daol Investment & Securities analyzed on the 9th that Lotte Rental's business expansion potential is expected to be highlighted following the acquisition by private equity fund (PEF) operator Affinity Equity Partners. They maintained a 'Buy' investment rating and raised the target price from the previous 42,000 KRW to 58,000 KRW. Lotte Rental's closing price on the previous trading day was 33,350 KRW.

According to Daol Investment & Securities, Lotte Group signed a memorandum of understanding (MOU) to sell 56.2% of its stake in Lotte Rental to Affinity Equity Partners. The sale price is 77,000 KRW per share, totaling approximately 2.8 trillion KRW. This reflects a premium of about 130% compared to the current stock price. Affinity Equity Partners already owns SK Rent-a-Car, the industry's second-largest player.

Yoo Ji-woong, a researcher at Daol Investment & Securities, stated, "The high premium appears to reflect the potential for economies of scale synergy," adding, "As the industry’s number one operator Lotte Rental and SK Rent-a-Car both exit large corporate groups, the business expansion potential is expected to be highlighted." He further analyzed that the trends in electric vehicles and the car-sharing business fundamentally enable these companies to aim for multiples as platform operators.

Additionally, Lotte Rental is emerging as a beneficiary in periods of interest rate cuts, a characteristic advantage for rental car companies. A 1 percentage point drop in interest rates could reduce annual interest expenses by approximately 20 billion KRW. With the recent acceleration of the interest rate cut trend, this aspect allows for a positive evaluation of the medium- to long-term direction.

Researcher Yoo said, "The combined market share of Lotte Rental and SK Rent-a-Car approaches 40%," and added, "Their market dominance could significantly increase in new car purchases, used car sales, and the newly formed online B2C (business-to-consumer) market."

This content was produced with the assistance of AI translation services.