SM Group is highlighting the profitability of Oxfield Country Club (Oxfield CC) as it seeks a buyer for the golf course, but bidders will probably still try to close the valuation gap.

A preliminary round of bidding for Oxfield CC is due to be staged by SM Group on Wednesday (November 25), industry sources said. Potential buyers are currently studying the target based on an information memorandum issued by the seller.

Located in Hoengsung, Gangwon Province, Oxfield CC is an 18-hole public golf course that originally opened as a private course. Public golf courses are exempt from paying individual consumption tax, and property tax rates are sharply lower than those for private golf courses.

The number of visiting golfers increased 9.8% in the first nine months of this year on the same period last year. Average revenue rose 15.1% in the same period because of the higher number of users and an increase in green fees, according to SM Group.

An improvement in the golf course’s financial performance is fueling SM Group’s hopes of a high valuation. Revenue increased to 7.9 billion won last year from 6.5 billion won in 2018, and amounted to nearly 7.8 billion won during the first nine months of this year, which is equivalent to about 98% of revenue in the whole of 2019.

Earnings before interest, tax, depreciation and amortization reached 4.1 billion won in the third quarter of 2020, up from 3.3 billion won in 2019 and 2.5 billion won in 2018. The golf course’s operating margin improved to 50% from a mid-30% range.

An industry source said that narrowing the gap in valuations sought by SM Group and potential buyers will be the key to striking a deal.

The golf course is located 98 kilometers from downtown Seoul, or about 1.5 hours. (Reporting by Hye-ran Kim)

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