Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<p>In this insight, we review 27 of the largest IPOs in Korea in 2020 and 2021. We discuss the institutional investors demand ratio, lock-up ratios, market caps, IPO offering amounts, and share price performances in different time periods. We conclude that while we should continue to evaluate IPOs in Korea on a case-by-case basis, the overall bullish trend of IPOs has clearly been deteriorating in the past three months.</p><p>Among the 9 stocks that completed their IPOs in the past three months (June - August), their first day share price performance was an increase of 22% on average. In comparison, among the other 18 stocks that completed their IPOs from February 2020 to May 2021, their first day share price performance was an increase of 81.4% on average.</p><div class="content-highlight"><p><strong>Among the three major criteria mentioned in this report, the most important is the lock-up ratios, followed by market cap, and then the institutional investors demand. Prudent investors may want to use a combination of these methods to pick the best performing IPOs in Korea.  </strong></p></div>

In this insight, we review 27 of the largest IPOs in Korea in 2020 and 2021. We discuss the institutional investors demand ratio, lock-up ratios, market caps, IPO offering amounts, and share price performances in different time periods. We conclude that while we should continue to evaluate IPOs in Korea on a case-by-case basis, the overall bullish trend of IPOs has clearly been deteriorating in the past three months.Among the 9 stocks that completed their IPOs in the past three months (June - August), their first day share price performance was an increase of 22% on average. In comparison, among the other 18 stocks that completed their IPOs from February 2020 to May 2021, their first day share price performance was an increase of 81.4% on average.Among the three major criteria mentioned in this report, the most important is the lock-up ratios, followed by market cap, and then the institutional investors demand. Prudent investors may want to use a combination of these methods to pick the best performing IPOs in Korea.  

A Comprehensive Review of 27 IPOs in Korea in 2020 and 2021

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<p>Krafton has finally reached its IPO price. Krafton is again up 5% today.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/224/891/original/1.png?1629353317" class="editor-image img-responsive" data-smartkarma-image-id="224891"></figure></section><p><strong>Below is the net trade by investor type for 6 days since the listing of Krafton, including yesterday's data. The net buying of local pension continued yesterday as well. This should also be seen as a rebalancing trading of the KOSPI 200.</strong> Another thing to note is that foreign buys continue. Apparently, foreign investors are flowing in for short-term momentum trading.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/224/895/original/5.png?1629354386" class="editor-image img-responsive" data-smartkarma-image-id="224895"></figure><p></p></section><p><strong>Below is the provisional aggregated data as of 2:25 local time. Again, the local pension net buys 52,000 shares today, a similar size of rebalancing trading to yesterday.</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/224/893/original/3.png?1629354063" class="editor-image img-responsive" data-smartkarma-image-id="224893"></figure></section><div class="content-highlight"><p><strong>What we should pay attention to in today's trading trend is the return of local retail investors. They net sold for the past three consecutive trading days. But they are estimated to have recorded a net purchase of 70,000-80,000 shares today.</strong></p></div>

Krafton has finally reached its IPO price. Krafton is again up 5% today.Below is the net trade by investor type for 6 days since the listing of Krafton, including yesterday's data. The net buying of local pension continued yesterday as well. This should also be seen as a rebalancing trading of the KOSPI 200. Another thing to note is that foreign buys continue. Apparently, foreign investors are flowing in for short-term momentum trading.Below is the provisional aggregated data as of 2:25 local time. Again, the local pension net buys 52,000 shares today, a similar size of rebalancing trading to yesterday.What we should pay attention to in today's trading trend is the return of local retail investors. They net sold for the past three consecutive trading days. But they are estimated to have recorded a net purchase of 70,000-80,000 shares today.

Krafton Today: KOSPI 200 Rebalancing Trading Continues + Local Retail Re-Entry

<p>Krafton's share price is approaching its IPO price. Today alone, it is up 4%.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/224/616/original/Screen+Shot+2021-08-18+at+3.05.36+AM.png?1629270353" class="editor-image img-responsive" data-smartkarma-image-id="224616"></figure></section><p><strong>If we look at the trading data for the past 5 days, we can see a typical rebalancing trading of the KOSPI 200.</strong> The three major players in KOSPI 200 trading are pensions, insurance, and local publicly-raised funds. And they have been buying Krafton for the past five days.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/224/594/original/Screen+Shot+2021-08-18+at+2.06.35+AM.png?1629266839" class="editor-image img-responsive" data-smartkarma-image-id="224594"></figure></section><div class="content-highlight"><p><strong>Even today, if we look at the provisional aggregate data provided by the KRX, the buying of local pension funds continues. As of 2:30 pm (in local time) today, it was counted that local pension funds were making a net buy of about 30,000 shares.</strong></p></div>

Krafton's share price is approaching its IPO price. Today alone, it is up 4%.If we look at the trading data for the past 5 days, we can see a typical rebalancing trading of the KOSPI 200. The three major players in KOSPI 200 trading are pensions, insurance, and local publicly-raised funds. And they have been buying Krafton for the past five days.Even today, if we look at the provisional aggregate data provided by the KRX, the buying of local pension funds continues. As of 2:30 pm (in local time) today, it was counted that local pension funds were making a net buy of about 30,000 shares.

Checking Passive Flow Trading for Krafton

Equity Bottom-Up

<div class="content-highlight">
<p>We believe that the sales and profit estimates for Krafton in 2022 is based on the company near-perfectly executing its business plans and also the regulators in China not enforcing any major new rules that could result in reduced playing time of the company's games in China.</p>
<p>As a result, we think that the probability of Krafton being able to reach the consensus sales and profit estimates in 2022 is likely to be reduced further in the coming months causing its stock price to remain relatively weak. We maintain our Negative view of Krafton.</p>
</div><h2>Krafton 2Q 2021 Earnings Comparison</h2><p>Krafton reported its first quarterly earnings report after its IPO in the past week. Krafton reported sales of 459.3 billion won (up 7% YoY and down 0.4% QoQ) and operating profit of 174.2 billion won (down 0.3% YoY and down 23.3% QoQ) in 2Q 2021. Operating margins declined from 40.7% in 2Q 2020 to 37.9% in 2Q 2021. </p><table class="table table-striped">
<colgroup>
<col>
<col span="5">
</colgroup>
<tbody>
<tr>
<td colspan="3" style="width: 207pt;"><strong>Krafton 2Q 2021 Earnings Comparison</strong></td>
<td style="width: 60pt;"></td>
<td style="width: 60pt;"></td>
<td style="width: 60pt;"></td>
</tr>
<tr>
<td><strong>(Won bn)</strong></td>
<td style="text-align: right;"><strong>2Q 2020</strong></td>
<td style="text-align: right;"><strong>2Q 2021</strong></td>
<td style="text-align: right;"><strong>% Change YoY</strong></td>
<td style="text-align: right;"><strong>1Q 2021</strong></td>
<td style="text-align: right;"><strong>% Change QoQ</strong></td>
</tr>
<tr>
<td><strong>Sales</strong></td>
<td style="text-align: right;"><strong>429.4</strong></td>
<td style="text-align: right;"><strong>459.3</strong></td>
<td style="text-align: right;"><strong>7.0%</strong></td>
<td style="text-align: right;"><strong>461.0</strong></td>
<td style="text-align: right;"><strong>-0.4%</strong></td>
</tr>
<tr>
<td>Operating Profit</td>
<td style="text-align: right;">174.8</td>
<td style="text-align: right;">174.2</td>
<td style="text-align: right;">-0.3%</td>
<td style="text-align: right;">227.2</td>
<td style="text-align: right;">-23.3%</td>
</tr>
<tr>
<td>Net Profit</td>
<td style="text-align: right;">121.2</td>
<td style="text-align: right;">141.3</td>
<td style="text-align: right;">16.6%</td>
<td style="text-align: right;">194.0</td>
<td style="text-align: right;">-27.2%</td>
</tr>
<tr>
<td></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td><strong>Profit Margins</strong></td>
<td style="text-align: right;"><strong>2Q 2020</strong></td>
<td style="text-align: right;"><strong>2Q 2021</strong></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"><strong>1Q 2021</strong></td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td><strong>Operating Margin</strong></td>
<td style="text-align: right;"><strong>40.7%</strong></td>
<td style="text-align: right;"><strong>37.9%</strong></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"><strong>49.3%</strong></td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td>Net Margin</td>
<td style="text-align: right;">28.2%</td>
<td style="text-align: right;">30.8%</td>
<td style="text-align: right;"></td>
<td style="text-align: right;">42.1%</td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td colspan="2">Source: Company data</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/912/original/image_61680225921629098950166.png?1629098951" class="editor-image img-responsive" data-smartkarma-image-id="223912"></figure><div class="content-caption">Earnings CSource: Company data</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/913/original/image_45611897931629099016561.png?1629099016" class="editor-image img-responsive" data-smartkarma-image-id="223913"></figure><div class="content-caption">Sales Breakdown (Source: Company data)</div>


We believe that the sales and profit estimates for Krafton in 2022 is based on the company near-perfectly executing its business plans and also the regulators in China not enforcing any major new rules that could result in reduced playing time of the company's games in China.
As a result, we think that the probability of Krafton being able to reach the consensus sales and profit estimates in 2022 is likely to be reduced further in the coming months causing its stock price to remain relatively weak. We maintain our Negative view of Krafton.
Krafton 2Q 2021 Earnings ComparisonKrafton reported its first quarterly earnings report after its IPO in the past week. Krafton reported sales of 459.3 billion won (up 7% YoY and down 0.4% QoQ) and operating profit of 174.2 billion won (down 0.3% YoY and down 23.3% QoQ) in 2Q 2021. Operating margins declined from 40.7% in 2Q 2020 to 37.9% in 2Q 2021. 






Krafton 2Q 2021 Earnings Comparison





(Won bn)
2Q 2020
2Q 2021
% Change YoY
1Q 2021
% Change QoQ


Sales
429.4
459.3
7.0%
461.0
-0.4%


Operating Profit
174.8
174.2
-0.3%
227.2
-23.3%


Net Profit
121.2
141.3
16.6%
194.0
-27.2%










Profit Margins
2Q 2020
2Q 2021

1Q 2021



Operating Margin
40.7%
37.9%

49.3%



Net Margin
28.2%
30.8%

42.1%



Source: Company data






Earnings CSource: Company dataSales Breakdown (Source: Company data)

Krafton - Consensus Likely to Reduce Earnings Estimates in 2022

<h2>KOSPI 200 Fast Entry screening</h2><p>Kakao Bank and Krafton's KOSPI 200 Fast Entry are 100% certain at this point.</p><div class="content-highlight"><p><strong>They need to be within the top 50 full market cap rankings on the KOSPI for 15 trading days after listing.</strong></p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/755/original/Screen+Shot+2021-08-15+at+3.07.46+AM.png?1629011369" class="editor-image img-responsive" data-smartkarma-image-id="223755"></figure></section><p>Currently, LG Display ranks 50th in the KOSPI market cap, and its market cap is in the 7.4-8 trillion range. Fast entry is possible as long as the market caps of both Kakao Bank and Krafton do not plunge below half in the next ten trading days.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"KOSPI 200 Fast Entry"}'>KOSPI 200 Fast Entry</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KakaoBank Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>KakaoBank Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Krafton Inc"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Krafton Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LG Display Co Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'><div><div>LG Display Co Ltd, currently at the 50th spot</div></div></td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44414}' data-sheets-numberformat='[null,5,"mm. dd",1]'>08. 06</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":33.1619965426}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩33.16T</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.961399325}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.96T</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44417}' data-sheets-numberformat='[null,5,"mm. dd",1]' data-sheets-formula="=R[-1]C[0]+3">08. 09</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":37.2953686045}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩37.30T</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.854054615}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.85T</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44418}' data-sheets-numberformat='[null,5,"mm. dd",1]' data-sheets-formula="=R[-1]C[0]+1">08. 10</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":33.9221569218}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩33.92T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":22.19972378}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C3/1000000000000">₩22.20T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.925617755}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.93T</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44419}' data-sheets-numberformat='[null,5,"mm. dd",1]' data-sheets-formula="=R[-1]C[0]+1">08. 11</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":35.3474576328}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩35.35T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":19.90151449}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C3/1000000000000">₩19.90T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.90772697}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.91T</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44420}' data-sheets-numberformat='[null,5,"mm. dd",1]' data-sheets-formula="=R[-1]C[0]+1">08. 12</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":35.0623974906}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩35.06T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":19.85261642}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C3/1000000000000">₩19.85T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.710928335}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.71T</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44421}' data-sheets-numberformat='[null,5,"mm. dd",1]' data-sheets-formula="=R[-1]C[0]+1">08. 13</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":36.3926781542}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩36.39T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":21.36845659}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C3/1000000000000">₩21.37T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.44256656}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.44T</td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

KOSPI 200 Fast Entry screeningKakao Bank and Krafton's KOSPI 200 Fast Entry are 100% certain at this point.They need to be within the top 50 full market cap rankings on the KOSPI for 15 trading days after listing.Currently, LG Display ranks 50th in the KOSPI market cap, and its market cap is in the 7.4-8 trillion range. Fast entry is possible as long as the market caps of both Kakao Bank and Krafton do not plunge below half in the next ten trading days.








KOSPI 200 Fast Entry
KakaoBank Corp
Krafton Inc
LG Display Co Ltd, currently at the 50th spot


08. 06
₩33.16T
-
₩7.96T


08. 09
₩37.30T
-
₩7.85T


08. 10
₩33.92T
₩22.20T
₩7.93T


08. 11
₩35.35T
₩19.90T
₩7.91T


08. 12
₩35.06T
₩19.85T
₩7.71T


08. 13
₩36.39T
₩21.37T
₩7.44T

Source: KRX



Why Would Kakao Bank/Krafton's KOSPI 200 Fast Entry Float Estimations Be Such an Extraordinary Task?

South Korea

Krafton, Inc. operates as a game development company. The Company develops console games, mobile games, computer games, and other related products. Krafton markets its products throughout South Korea.

Price Gauge
52-week Range	0.00 - 0.00
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Krafton (259960 KS)

A Comprehensive Review of 27 IPOs in Korea in 2020 and 2021

In this insight, we review 27 of the largest IPOs in Korea in 2020 and 2021. We discuss the institutional investors demand ratio, lock-up ratios,...

Douglas Kim

Krafton Today: KOSPI 200 Rebalancing Trading Continues + Local Retail Re-Entry

This post examines Krafton's another 5% run today by looking at the provisional aggregated trading data by investor type.

Sanghyun Park

Checking Passive Flow Trading for Krafton

Krafton is approaching its IPO price as it is up 4% today alone. This post checks the passive flow trading since the listing, including today, and...

Sanghyun Park

Krafton - Consensus Likely to Reduce Earnings Estimates in 2022

We think that the probability of Krafton being able to reach the consensus sales and profit estimates in 2022 is likely to be reduced further in...

Douglas Kim

Why Would Kakao Bank/Krafton's KOSPI 200 Fast Entry Float Estimations Be Such an Extraordinary Task?

This post explains why Kakao Bank and Krafton's KOSPI 200 Fast Entry float estimations would be such an extraordinary task.

Sanghyun Park

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52-week Range

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