Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Korea Investment Holdings Co, Ltd. / Equity Capital Markets

<div class="content-highlight">According to K-Bank, it gained 1.72 million new customers in 1Q 2021. This was more than the 1.57 million customers that K-Bank gained from 2018 to 2020. It is estimated about 70% of K-Bank's new customers in 2021 are young people in their 20s and 30s that are flocking to K-Bank to invest in cryptocurrencies such as Bitcoin and Ethereum at the cryptocurrency exchange Upbit, which requires the users to have an account at K-Bank to deposit or withdraw money for cryptocurrency trading.</div><a href="https://www.hankyung.com/finance/article/2021041583121" target="_blank" rel="noopener">Korea Value Asset Mgmt</a> has a 27.1% stake in Kakao Bank. Korea Value Asset Mgmt is 100% owned by Korea Investment &amp; Securities, which is also 100% owned by <a href="https://www.smartkarma.com/entities/korea-investment-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:14839:1" rel="noopener">Korea Investment Holdings Co, Ltd. (071050 KS)</a>. Thus, Korea Investment &amp; Securities directly and indirectly owns 31.8% stake in Kakao Bank. Korea Investment &amp; Securities currently has a market cap of 5.8 trillion won. If Kakao Bank is valued at 20 trillion won, a 31.8% stake in the company would be worth 6.4 trillion won, which would be worth 110% of Korea Investment &amp; Securities' market cap. Therefore, although the exact number of how many new licenses for Internet banks remains uncertain, we believe that there could be any many as 2 to 3+ new Internet banks in the next 2-3 years. It is probably no coincidence that Kakao Bank is trying to complete its IPO this year. Kakao Bank will be aiming to accelerate this IPO prior to the Korean government giving out new licenses for Internet banks this year.

According to K-Bank, it gained 1.72 million new customers in 1Q 2021. This was more than the 1.57 million customers that K-Bank gained from 2018 to 2020. It is estimated about 70% of K-Bank's new customers in 2021 are young people in their 20s and 30s that are flocking to K-Bank to invest in cryptocurrencies such as Bitcoin and Ethereum at the cryptocurrency exchange Upbit, which requires the users to have an account at K-Bank to deposit or withdraw money for cryptocurrency trading.Korea Value Asset Mgmt has a 27.1% stake in Kakao Bank. Korea Value Asset Mgmt is 100% owned by Korea Investment &amp; Securities, which is also 100% owned by Korea Investment Holdings Co, Ltd. (071050 KS). Thus, Korea Investment &amp; Securities directly and indirectly owns 31.8% stake in Kakao Bank. Korea Investment &amp; Securities currently has a market cap of 5.8 trillion won. If Kakao Bank is valued at 20 trillion won, a 31.8% stake in the company would be worth 6.4 trillion won, which would be worth 110% of Korea Investment &amp; Securities' market cap. Therefore, although the exact number of how many new licenses for Internet banks remains uncertain, we believe that there could be any many as 2 to 3+ new Internet banks in the next 2-3 years. It is probably no coincidence that Kakao Bank is trying to complete its IPO this year. Kakao Bank will be aiming to accelerate this IPO prior to the Korean government giving out new licenses for Internet banks this year. 

K-Bank Vs. Kakao Bank: A Big Change in New Customers Driven by Cryptos

<div class="content-highlight">
With only three weeks remaining in 2020, we now look forward to the major IPOs in Korea in 2021. This is our 6th "Annual Edition of the Major Korean IPOs Pipeline Preview" already at Smartkarma! In this report, we have identified 50 companies that are expected to complete their IPOs in the Korean Stock Market in 2021. This year has been a big year for IPOs in Korea with many IPOs that have done really well including <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals (326030 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games (293490 KS)</a>.  
In 2020, there were only three IPOs in Korea that were more than US$1 billion in market cap including SK Biopharm, Kakao Games, and Big Hit Entertainment. However, in 2021, we believe there could be more than 10 IPOs in Korea that are more than US$1 billion in market cap including the following:
<ol>
<li>LG Energy Solutions</li>
<li>Krafton</li>
<li>SK Bioscience</li>
<li>Kakao Bank</li>
<li>Kakao Page</li>
<li>Kakao Pay</li>
<li>SK IET</li>
<li>One Store</li>
<li>HK inno.N </li>
<li>Coupang</li>
</ol>
</div>


With only three weeks remaining in 2020, we now look forward to the major IPOs in Korea in 2021. This is our 6th "Annual Edition of the Major Korean IPOs Pipeline Preview" already at Smartkarma! In this report, we have identified 50 companies that are expected to complete their IPOs in the Korean Stock Market in 2021. This year has been a big year for IPOs in Korea with many IPOs that have done really well including SK Biopharmaceuticals (326030 KS) and Kakao Games (293490 KS).  
In 2020, there were only three IPOs in Korea that were more than US$1 billion in market cap including SK Biopharm, Kakao Games, and Big Hit Entertainment. However, in 2021, we believe there could be more than 10 IPOs in Korea that are more than US$1 billion in market cap including the following:

LG Energy Solutions
Krafton
SK Bioscience
Kakao Bank
Kakao Page
Kakao Pay
SK IET
One Store
HK inno.N 
Coupang



<div class="content-highlight">
Kakao Bank is one of the <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> affiliates which is expected to complete its IPO in 1H 2021. Kakao Bank is expected to be one of the largest IPOs in Korea in 2021. The local media have mentioned the <a href="http://www.thebell.co.kr/free/content/ArticleView.asp?key=202007021435091720105091&amp;svccode=00&amp;page=1&amp;sort=thebell_check_time" target="_blank" rel="noopener">value of Kakao Bank</a> to be about 8 trillion won to 9 trillion won.
Korea Investment Holdings (KIH) has a 33.5% stake in Kakao Bank (indirectly owned through KIH's subsidiaries Korea Investment &amp; Securities and Korea Value Asset Management. <a href="https://www.smartkarma.com/entities/korea-investment-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:14839:1" rel="noopener">Korea Investment Holdings Co, Ltd. (071050 KS) </a>currently has a market cap of 4.4 trillion won so this 2.7 trillion won (33.5% stake in Kakao Bank at a value of 8 trillion won) would be worth 61% of Korea Investment Holding's market cap.
</div>


Kakao Bank is one of the Kakao Corp (035720 KS) affiliates which is expected to complete its IPO in 1H 2021. Kakao Bank is expected to be one of the largest IPOs in Korea in 2021. The local media have mentioned the value of Kakao Bank to be about 8 trillion won to 9 trillion won.
Korea Investment Holdings (KIH) has a 33.5% stake in Kakao Bank (indirectly owned through KIH's subsidiaries Korea Investment &amp; Securities and Korea Value Asset Management. Korea Investment Holdings Co, Ltd. (071050 KS) currently has a market cap of 4.4 trillion won so this 2.7 trillion won (33.5% stake in Kakao Bank at a value of 8 trillion won) would be worth 61% of Korea Investment Holding's market cap.


Kakao Bank (One of the Biggest IPOs in Korea in 2021) - Big Boost to Korea Investment & Holdings

<ul>
<li>A company called Saltlux is getting ready for an IPO in the Korean stock market in July. Established in 2000, Saltlux has been one of the leading companies in the field of AI and Big Data in Korea in the past 20 years. The company launched an AI platform called ADAM in 2016. </li>
<li>The IPO price range is from 24,000 won to 30,000 won. According to the bankers' valuation, the expected market cap after the IPO is from 123 billion won to 153 billion won. The company expects to raise from $14.6 million to $18.3 million in this IPO. </li>
<li>
How the Bankers Priced the IPO - The bankers used five comps including three Korean companies (Wise ITech, Laon People, and Namu Tech) and two U.S. companies (Akamai Technologies and Citrix Systems). Applying the average comps P/E of 31.7x results in an implied price of 37,685 won. After applying an additional IPO discount of 20.39% - 36.31%, this results in an IPO price range of 24,000 won to 30,000 won (123 billion won to 153 billion won in implied market cap). </li>
</ul>


A company called Saltlux is getting ready for an IPO in the Korean stock market in July. Established in 2000, Saltlux has been one of the leading companies in the field of AI and Big Data in Korea in the past 20 years. The company launched an AI platform called ADAM in 2016. 
The IPO price range is from 24,000 won to 30,000 won. According to the bankers' valuation, the expected market cap after the IPO is from 123 billion won to 153 billion won. The company expects to raise from $14.6 million to $18.3 million in this IPO. 

How the Bankers Priced the IPO - The bankers used five comps including three Korean companies (Wise ITech, Laon People, and Namu Tech) and two U.S. companies (Akamai Technologies and Citrix Systems). Applying the average comps P/E of 31.7x results in an implied price of 37,685 won. After applying an additional IPO discount of 20.39% - 36.31%, this results in an IPO price range of 24,000 won to 30,000 won (123 billion won to 153 billion won in implied market cap). 


Saltlux IPO Preview: A Legit Player in the AI/Big Data Sector in Korea

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

Preferred shares in Korea have historically traded at a discount. At times the discount has been so wide that funds have been set up just to invest in Korean preferred shares. What makes the trade attractive are the low valuations of Korean stocks, the discount on the preferred shares and the higher dividend on preferred shares compared to common shares.This year, the discount on a few preferred shares has tightened noticeably accompanied by a big pick up in trading volume. There have also been some huge moves in some of the preferred shares as corporate boardroom battles pick up.In this Insight, we look at a few names where the preferred shares have significantly outperformed the common shares year to date and recommend a basket of preferred shares that trade at a big discount to the common shares while sporting significantly higher dividend yields.

Preferred shares in Korea have historically traded at a discount. At times the discount has been so wide that funds have been set up just to invest in Korean preferred shares. What makes the trade attractive are the low valuations of Korean stocks, the discount on the preferred shares and the higher dividend on preferred shares compared to common shares.This year, the discount on a few preferred shares has tightened noticeably accompanied by a big pick up in trading volume. There have also been some huge moves in some of the preferred shares as corporate boardroom battles pick up.In this Insight, we look at a few names where the preferred shares have significantly outperformed the common shares year to date and recommend a basket of preferred shares that trade at a big discount to the common shares while sporting significantly higher dividend yields. 

Korea Preferred Shares - Liquidity Picks Up Amid Some Big Moves

South Korea

Korea Investment Holdings Co., Ltd. is a financial holding company. The Company operates and controls its financial subsidiaries such as Korea Investment & Securities, Korea Investment Partners, and Korea Investment Mutual Savings Bank.

Korea Investment Holdings Co, Ltd. (071050 KS)

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Korea Investment Holdings Co, Ltd. (071050 KS)

K-Bank Vs. Kakao Bank: A Big Change in New Customers Driven by Cryptos

In this insight, we discuss the exploding growth of new customers at K-Bank, the IPO expectations of Kakao Bank, and the likelihood of additional...

Douglas Kim

2021 Major IPOs Pipeline in Korea

This is our 6th "Annual Edition of the Major Korean IPOs Pipeline Preview" already at Smartkarma! In this report, we have identified 50 companies...

Douglas Kim

Kakao Bank (One of the Biggest IPOs in Korea in 2021) - Big Boost to Korea Investment & Holdings

Kakao Bank is expected to be one of the largest IPOs in Korea in 2021. The local media have mentioned the value of Kakao Bank to be about 8...

Douglas Kim

Saltlux IPO Preview: A Legit Player in the AI/Big Data Sector in Korea

A company called Saltlux is getting ready for an IPO in the Korean stock market in July. Established in 2000, Saltlux has been one of the leading...

Douglas Kim

Korea Preferred Shares - Liquidity Picks Up Amid Some Big Moves

Preferred shares in Korea have historically traded at a discount. At times the discount has been so wide that funds have been set up just to invest...

Brian Freitas

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