Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>2021 has been a leapfrog year in terms of both major outbound and inbound M&amp;As in Korea.</li>
<li>Two of the biggest M&amp;A deals in 2021 include SK Hynix's acquisition of Intel's flash NAND and SSD business and Emart's purchase of Ebay Korea for $3 billion. </li>
<li>Some of the largest M&amp;A deals which could get completed in 2022 include Hanon Systems, Bodyfriend, Modern House, Hyundai LNG Shipping, and EMK.  </li>
</ul>


2021 has been a leapfrog year in terms of both major outbound and inbound M&amp;As in Korea.
Two of the biggest M&amp;A deals in 2021 include SK Hynix's acquisition of Intel's flash NAND and SSD business and Emart's purchase of Ebay Korea for $3 billion. 
Some of the largest M&amp;A deals which could get completed in 2022 include Hanon Systems, Bodyfriend, Modern House, Hyundai LNG Shipping, and EMK.  


Korea M&A Recap in 2021 - A Leapfrog Year

Private Capital Markets

<div class="content-highlight">
In this insight, we provide further details of Yanolja which has become the second largest investment for Softbank in Korea, after Coupang. In July 2021, Softbank Group Corp's Vision Fund II agreed to invest $1.7 billion in <a href="https://www.bloomberg.com/news/articles/2021-07-15/softbank-invests-1-7-billion-in-korea-s-yanolja-ahead-of-ipo" target="_blank" rel="noopener">Yanolja, </a>which is getting ready for an IPO in 2H 2021/2022.
Established in 2005, Yanolja is considered to be the second largest property management software provider in the world after Oracle. Yanolja plans to use the investment to expand overseas and further invest in improving its technologies. Softbank's investment in Yanolja valued the company at about <a href="https://www.edaily.co.kr/news/read?newsId=01095526629143384&amp;mediaCodeNo=257&amp;OutLnkChk=Y" target="_blank" rel="noopener">9 trillion won</a> ($8 billion). Currently, Yanolja has about 1,500 employees, including about 1,000 employees in Korea and 500 employees overseas. 
<a href="http://www.theinvestor.co.kr/view.php?ud=20190612000473" target="_blank" rel="noopener">Yanolja</a> became a unicorn in June 2019 when it received a $180 million Series D round investment valuing the company at more than $1 billion. It is astounding how this company's valuation has jumped nearly 8x in the past two years. In addition to Softbank, other investors in Yanolja include GIC, Booking Holdings, Skylake Investments, <a href="https://www.smartkarma.com/entities/sbi-investment-korea-co-ltd" target="_blank" data-smartkarma-citation="entities:17244:1" rel="noopener">Sbi Investment Korea (019550 KS)</a>, and Aju IB Investments.
Softbank's recent investment in Yanolja would suggest a P/S multiple of 31x, which is very high. In November 2020, Yanolja selected <a href="https://www.bloomberg.com/quote/006800:KS" target="_blank" rel="noopener">Mirae Asset Daewoo Co.</a> as a lead arranger along with <a href="https://www.bloomberg.com/quote/016360:KS" target="_blank" rel="noopener">Samsung Securities Co.</a> as a co-underwriter. The company has yet to determine whether it would list in the U.S. or in Korea.
</div>


In this insight, we provide further details of Yanolja which has become the second largest investment for Softbank in Korea, after Coupang. In July 2021, Softbank Group Corp's Vision Fund II agreed to invest $1.7 billion in Yanolja, which is getting ready for an IPO in 2H 2021/2022.
Established in 2005, Yanolja is considered to be the second largest property management software provider in the world after Oracle. Yanolja plans to use the investment to expand overseas and further invest in improving its technologies. Softbank's investment in Yanolja valued the company at about 9 trillion won ($8 billion). Currently, Yanolja has about 1,500 employees, including about 1,000 employees in Korea and 500 employees overseas. 
Yanolja became a unicorn in June 2019 when it received a $180 million Series D round investment valuing the company at more than $1 billion. It is astounding how this company's valuation has jumped nearly 8x in the past two years. In addition to Softbank, other investors in Yanolja include GIC, Booking Holdings, Skylake Investments, Sbi Investment Korea (019550 KS), and Aju IB Investments.
Softbank's recent investment in Yanolja would suggest a P/S multiple of 31x, which is very high. In November 2020, Yanolja selected Mirae Asset Daewoo Co. as a lead arranger along with Samsung Securities Co. as a co-underwriter. The company has yet to determine whether it would list in the U.S. or in Korea.


Why Did Softbank Invest $1.7 Billion in Yanolja in Korea?

<div class="content-highlight">
In this report, we provide an analysis of 11st and other major Korean e-commerce companies that are likely to have record results in 1H 2020. 
Due to the Wuhan virus, there has been a surge in traffic among major e-commerce sites including 11st, an affiliate of <a href="https://www.smartkarma.com/entities/sk-telecom" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS) </a>in recent weeks. Many people in Korea are avoiding going to the crowded supermarkets and other retail shops but instead increasing their shopping online. 
<a href="https://biz.chosun.com/site/data/html_dir/2020/02/02/2020020200549.html?utm_source=naver&amp;utm_medium=original&amp;utm_campaign=biz" target="_blank" rel="noopener">According to 11st</a>, there has been a significant increase in shopping through its online website since the last week of January. In the six days (1/27 ~ 2/1), fresh food purchases on 11st increased 46%, daily necessities 104% and processed foods 53%. Korean ginseng and vitamin purchases also increased by 73% and 45%, respectively. Some products such as masks and hand cleaners experienced exponential increases in demand (up 37,169% and 6,679%, respectively versus the same period in the previous month). 
</div>


In this report, we provide an analysis of 11st and other major Korean e-commerce companies that are likely to have record results in 1H 2020. 
Due to the Wuhan virus, there has been a surge in traffic among major e-commerce sites including 11st, an affiliate of SK Telecom (017670 KS) in recent weeks. Many people in Korea are avoiding going to the crowded supermarkets and other retail shops but instead increasing their shopping online. 
According to 11st, there has been a significant increase in shopping through its online website since the last week of January. In the six days (1/27 ~ 2/1), fresh food purchases on 11st increased 46%, daily necessities 104% and processed foods 53%. Korean ginseng and vitamin purchases also increased by 73% and 45%, respectively. Some products such as masks and hand cleaners experienced exponential increases in demand (up 37,169% and 6,679%, respectively versus the same period in the previous month). 


Record Results for 11st & Other Major Korean E-Commerce Players Likely in 1H 2020

In this report, we provide a detailed update on Coupang, which is the largest E-commerce company and a chief rival of <a href="https://www.smartkarma.com/entities/e-mart-inc" target="_blank" data-smartkarma-citation="entities:6993:1" rel="noopener">E Mart Inc (139480 KS)</a>. Coupang has received the biggest amount of funding among all Korean companies from Softbank, which has so far invested 3.4 trillion won ($3.0 billion) in the company in the past four years (since the first investment of $1 billion announcement in June 2015).
In this same period, Emart's market cap has declined more than 3.0 trillion won. This is a reflection of the huge amount of excessive competition in the Korean e-commerce/retail hypermarkets and supermarkets industry with Coupang leading the way in driving down the retail product prices even further.
It is estimated that Softbank has about 60% stake in Coupang whose cash burn rate was about 71 billion won per month in 2018. It had 803 billion won in cash and short term investments at end of 2018. Most recently in 2018, Coupang was valued at about <a href="https://techcrunch.com/2018/11/20/coupang-raises-2-billion-from-softbanks-vision-fund/" target="_blank" rel="noopener">$9 billion </a> with $2 billion investment from the Softbank Vision Fund. Although we do not have the company's financials in 2019, we estimate that its cash burn rate is close to 60 billion won to 80 billion won per month in 2019. Coupang is not likely to have much cash on its balance sheet towards the end of 2Q 2020. Therefore, it faces three difficult scenarios including:
<ul>
<li>IPO</li>
<li>Strategic sale</li>
<li>Additional capital infusion from Softbank or other major investors. </li>
</ul>

In this report, we provide a detailed update on Coupang, which is the largest E-commerce company and a chief rival of E Mart Inc (139480 KS). Coupang has received the biggest amount of funding among all Korean companies from Softbank, which has so far invested 3.4 trillion won ($3.0 billion) in the company in the past four years (since the first investment of $1 billion announcement in June 2015).
In this same period, Emart's market cap has declined more than 3.0 trillion won. This is a reflection of the huge amount of excessive competition in the Korean e-commerce/retail hypermarkets and supermarkets industry with Coupang leading the way in driving down the retail product prices even further.
It is estimated that Softbank has about 60% stake in Coupang whose cash burn rate was about 71 billion won per month in 2018. It had 803 billion won in cash and short term investments at end of 2018. Most recently in 2018, Coupang was valued at about $9 billion  with $2 billion investment from the Softbank Vision Fund. Although we do not have the company's financials in 2019, we estimate that its cash burn rate is close to 60 billion won to 80 billion won per month in 2019. Coupang is not likely to have much cash on its balance sheet towards the end of 2Q 2020. Therefore, it faces three difficult scenarios including:

IPO
Strategic sale
Additional capital infusion from Softbank or other major investors. 


Coupang - What's Next? An IPO, M&A, or Another Capital Infusion from Softbank?

It has been reported in numerous media sources that the <a href="https://www.bloomberg.com/quote/9984:JP" target="_blank">SoftBank Group Corp.</a>’s Vision Fund will invest $2 billion in Coupang (Korea), putting the value of the company at $9 billion after this additional injection of capital. This would represent nearly 3.3x P/S (using 2017 sales) and 5.1x P/gross profit (using 2017 gross profit). After the $1 billion investment in Coupang by Softbank in 2015, this huge $2 billion investment in Coupang is an enormous boost for Coupang and it really shows the deep commitment Softbank has for the company. According to Coupang, it estimates that its 2018 sales are likely to come in at about 5 trillion won in 2018, which would represent nearly 86% higher sales growth YoY. This would be much faster sales growth than the company's sales growth in 2016 and 2017. It remains to be seen how close Coupang will be able to achieve its revenue target of 5 trillion won in 2018. The financial details of Coupang's 2018 results are not yet available but we estimate that the company is burning about 50 billion won per month (about US$45 million) this year. The additional $2 billion investment will likely carry Coupang further for at least the next four years.As a result of this investment by Softbank, the smaller competitors are now in dire straits, especially TicketMonster and Wemakeprice, which are private companies that compete in the social commerce sector. Other companies that will also be negatively impacted by the greater competition from Coupang include all other major e-commerce/retail companies in Korea including Emart, SSG.com, and <a href="https://www.smartkarma.com/entities/2338" target="_blank" data-smartkarma-citation="entities:2338:1">Lotte Shopping Co</a>.

It has been reported in numerous media sources that the SoftBank Group Corp.’s Vision Fund will invest $2 billion in Coupang (Korea), putting the value of the company at $9 billion after this additional injection of capital. This would represent nearly 3.3x P/S (using 2017 sales) and 5.1x P/gross profit (using 2017 gross profit). After the $1 billion investment in Coupang by Softbank in 2015, this huge $2 billion investment in Coupang is an enormous boost for Coupang and it really shows the deep commitment Softbank has for the company. According to Coupang, it estimates that its 2018 sales are likely to come in at about 5 trillion won in 2018, which would represent nearly 86% higher sales growth YoY. This would be much faster sales growth than the company's sales growth in 2016 and 2017. It remains to be seen how close Coupang will be able to achieve its revenue target of 5 trillion won in 2018. The financial details of Coupang's 2018 results are not yet available but we estimate that the company is burning about 50 billion won per month (about US$45 million) this year. The additional $2 billion investment will likely carry Coupang further for at least the next four years.As a result of this investment by Softbank, the smaller competitors are now in dire straits, especially TicketMonster and Wemakeprice, which are private companies that compete in the social commerce sector. Other companies that will also be negatively impacted by the greater competition from Coupang include all other major e-commerce/retail companies in Korea including Emart, SSG.com, and Lotte Shopping Co.

Softbank Plans to Invest $2 Billion in Coupang: Impact on the Korean E-Commerce Market

South Korea

Interpark Corp, an on-line retailer, operates an Internet-based shopping mall. The Company markets and sells a broad range of products such as books, clothes, computers and peripherals, live event tickets, computer game software, flowers, tour packages, and home appliances.  Interpark also provides web-based hosting services and electronic commerce solutions.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Interpark Corp (108790 KS)

Korea M&A Recap in 2021 - A Leapfrog Year

2021 has been a leapfrog year in terms of major M&As in Korea. Some of the largest M&A deals in 2022 could include Hanon Systems, Bodyfriend,...

Douglas Kim

Why Did Softbank Invest $1.7 Billion in Yanolja in Korea?

We provide further details of Yanolja which has become the second largest investment for Softbank in Korea. In July 2021, Softbank Group Corp's...

Douglas Kim

Record Results for 11st & Other Major Korean E-Commerce Players Likely in 1H 2020

In this report, we provide an analysis of 11st and other major Korean e-commerce companies that are likely to have record results in 1H 2020. Due...

Douglas Kim

Coupang - What's Next? An IPO, M&A, or Another Capital Infusion from Softbank?

In this report, we provide a detailed update on Coupang, which is the largest E-commerce company and a chief rival of E Mart Inc (139480 KS)....

Douglas Kim

Softbank Plans to Invest $2 Billion in Coupang: Impact on the Korean E-Commerce Market

It has been reported in numerous media sources that the SoftBank Group Corp.’s Vision Fund will invest $2 billion in Coupang (Korea), putting the...

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)