Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

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Our base case valuation of Silicon2 Co is implied market cap of 436.5 billion won or 41,975 won per share, which is 54% higher than the high end of the IPO price range of 27,200 won per share. Given the attractive upside, we have a POSITIVE view of the Silicon2 Co IPO and we would subscribe to the IPO deal. 
Our base case valuation is based on 28.6x our estimated net profit of 15.3 billion won for the company in 2022. Our valuation multiple of 28.6x P/E is based on the average P/E valuation multiple of the peers in 2022. Our valuation sensitivity analysis suggests a low-high value of 30,222 won per share to 55,407 won per share.
Silicon2 Co has better metrics than its peers for operating margins, ROE, and sales growth. As such, one could make the case of higher valuation multiple for the company as compared to its peers. 
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Our base case valuation of Silicon2 Co is implied market cap of 436.5 billion won or 41,975 won per share, which is 54% higher than the high end of the IPO price range of 27,200 won per share. Given the attractive upside, we have a POSITIVE view of the Silicon2 Co IPO and we would subscribe to the IPO deal. 
Our base case valuation is based on 28.6x our estimated net profit of 15.3 billion won for the company in 2022. Our valuation multiple of 28.6x P/E is based on the average P/E valuation multiple of the peers in 2022. Our valuation sensitivity analysis suggests a low-high value of 30,222 won per share to 55,407 won per share.
Silicon2 Co has better metrics than its peers for operating margins, ROE, and sales growth. As such, one could make the case of higher valuation multiple for the company as compared to its peers. 


We have chosen to use EV/EBIT to value BrandX Corp mainly because this negates the differences in the capital structure of the different companies. Echo Marketing is currently trading at 14.7x EV/EBIT using 2020 EBIT estimates. We have applied a 20% premium valuation multiple on BrandX Corp (17.6x EV/EBIT 2020E), mainly due to much higher sales growth and returns on equity as compared to Echo Marketing.Applying a 17.6x EV/EBIT multiple to our estimated EBIT of 18.5 billion won in 2020 results in an EV of 327 billion won and an implied market cap of 363 billion won. This results in an implied price of 17,912 won, which is 29% above the mid-point of the IPO range (12,400 won to 15,300 won). Given the solid upside, we have a positive view of this IPO and we would take this deal. As we mentioned in our previous note, <a href="https://www.smartkarma.com/insights/brandx-corporation-ipo-preview" target="_blank" data-smartkarma-citation="insights:41084" rel="noopener">BrandX Corporation IPO Preview</a>,  a key risk that the company faces is whether it can become more than a "one-hit-wonder." The company's most successful brand Xexymix has been the major driver of its sales and profits in the past two years and for now, it is uncertain whether it can continue its success in other products such as cosmetics, men's apparel, and HMR F&amp;B product categories.

We have chosen to use EV/EBIT to value BrandX Corp mainly because this negates the differences in the capital structure of the different companies. Echo Marketing is currently trading at 14.7x EV/EBIT using 2020 EBIT estimates. We have applied a 20% premium valuation multiple on BrandX Corp (17.6x EV/EBIT 2020E), mainly due to much higher sales growth and returns on equity as compared to Echo Marketing.Applying a 17.6x EV/EBIT multiple to our estimated EBIT of 18.5 billion won in 2020 results in an EV of 327 billion won and an implied market cap of 363 billion won. This results in an implied price of 17,912 won, which is 29% above the mid-point of the IPO range (12,400 won to 15,300 won). Given the solid upside, we have a positive view of this IPO and we would take this deal. As we mentioned in our previous note, BrandX Corporation IPO Preview,  a key risk that the company faces is whether it can become more than a "one-hit-wonder." The company's most successful brand Xexymix has been the major driver of its sales and profits in the past two years and for now, it is uncertain whether it can continue its success in other products such as cosmetics, men's apparel, and HMR F&amp;B product categories. 

BrandX Corporation IPO Valuation Analysis

Established in August 2017, BrandX Corporation is a Korean company that is getting ready for an IPO in August. The IPO deal base size is from $39 million to $48 million. The IPO price range is from 12,400 won to 15,300 won. 
Although BrandX Corporation is best known for its Xexymix women's apparel brand, it initially started its business from a foundation in social network marketing know-how. The founders capitalized on its strengths to become a bigger media commerce company. 
Since the establishment of the company in 2017, the company has achieved the biggest success with its Xexymix brand (focus on athleisure, swimwear, and leggings). Xexymix accounted for 87% of the company's consolidated sales and 98% of its non-consolidated sales in 2019. Xexymix specializes in the leggings and athleisure apparel products. In the leggings and athleisure category, the company faces competition from numerous players including Lululemon Korea, Fila Korea, Andar, and Mulawear.

Established in August 2017, BrandX Corporation is a Korean company that is getting ready for an IPO in August. The IPO deal base size is from $39 million to $48 million. The IPO price range is from 12,400 won to 15,300 won. 
Although BrandX Corporation is best known for its Xexymix women's apparel brand, it initially started its business from a foundation in social network marketing know-how. The founders capitalized on its strengths to become a bigger media commerce company. 
Since the establishment of the company in 2017, the company has achieved the biggest success with its Xexymix brand (focus on athleisure, swimwear, and leggings). Xexymix accounted for 87% of the company's consolidated sales and 98% of its non-consolidated sales in 2019. Xexymix specializes in the leggings and athleisure apparel products. In the leggings and athleisure category, the company faces competition from numerous players including Lululemon Korea, Fila Korea, Andar, and Mulawear. 

BrandX (BRANDX KS)

Silicon2 Co IPO Valuation Analysis

Our base case valuation of Silicon2 Co is implied market cap of 436.5 billion won or 41,975 won per share, which is 54% higher than the high end of...

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BrandX Corporation IPO Valuation Analysis

We have chosen to use EV/EBIT to value BrandX Corp mainly because this negates the differences in the capital structure of the different companies....

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BrandX Corporation IPO Preview

Established in August 2017, BrandX Corporation is a Korean company that is getting ready for an IPO in August. The IPO deal base size is from $39...

Douglas Kim