Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Equity Capital Markets

<ul>
<li>The FSC announced the details of its new IPO system improvement measures in Korea on 21 January.  </li>
<li>New rules will discourage the rampant first day trading of Korean IPOs. In 74 out of 77 IPOs in 2024, institutional investors were “net sellers” on the listing date. </li>
<li>Rather, the new rules will encourage the investors to take more longer term approach to investing in Korean IPOs. </li>
</ul>


The FSC announced the details of its new IPO system improvement measures in Korea on 21 January.  
New rules will discourage the rampant first day trading of Korean IPOs. In 74 out of 77 IPOs in 2024, institutional investors were “net sellers” on the listing date. 
Rather, the new rules will encourage the investors to take more longer term approach to investing in Korean IPOs. 


Details of New IPO System Improvement Measures in Korea

<ul>
<li>LG CNS reported a successful IPO book building results analysis. The IPO price has been finalized at 61,900 won per share (high end of the IPO price range).</li>
<li>The demand ratio from the institutional investors was 114 to 1. At the IPO price of 61,900 won, the expected market cap will be 6 trillion won. </li>
<li>According to our valuation analysis, it suggests a base case target price of 76,383 won per share, which represents a 23% upside from the IPO price of 61,900 won.</li>
</ul>


LG CNS reported a successful IPO book building results analysis. The IPO price has been finalized at 61,900 won per share (high end of the IPO price range).
The demand ratio from the institutional investors was 114 to 1. At the IPO price of 61,900 won, the expected market cap will be 6 trillion won. 
According to our valuation analysis, it suggests a base case target price of 76,383 won per share, which represents a 23% upside from the IPO price of 61,900 won.


LG CNS IPO Book Building Results Analysis

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lg-cns-co-ltd" target="_blank" data-smartkarma-citation="entities:35945:1" rel="noopener">LG CNS (LGCNSZ KS)</a> is looking to raise up to KRW 1,199bn (US$830m), valuing the company at KRW 6 trillion (US$4.15bn) at the top end of the IPO price range.</li>
<li>As a member of the IT sector, inclusion in the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI200 Index</a> will only take place via Fast Entry (near impossible) or as a large-scale company.</li>
<li>Inclusion in global indices could commence in September 2025 and will be easier if the identity of the pre-IPO minority shareholders is disclosed or if the strategic investors sell.</li>
</ul>



LG CNS (LGCNSZ KS) is looking to raise up to KRW 1,199bn (US$830m), valuing the company at KRW 6 trillion (US$4.15bn) at the top end of the IPO price range.
As a member of the IT sector, inclusion in the KOSPI200 Index will only take place via Fast Entry (near impossible) or as a large-scale company.
Inclusion in global indices could commence in September 2025 and will be easier if the identity of the pre-IPO minority shareholders is disclosed or if the strategic investors sell.


LG CNS IPO: Limited Float Pushes Back Passive Buying

<ul>
<li>According to our updated valuation analysis of LG CNS, it suggests a base case implied market cap of 7.4 trillion won, representing target price of 76,383 won per share. </li>
<li>Our base case valuation target price of 76,383 won is 23% higher than the high end of the IPO price range. </li>
<li>We lowered our target price by 6%, mainly due to greater political risks arising from the recent cancelled martial law and ongoing impeachment of President Yoon.</li>
</ul>


According to our updated valuation analysis of LG CNS, it suggests a base case implied market cap of 7.4 trillion won, representing target price of 76,383 won per share. 
Our base case valuation target price of 76,383 won is 23% higher than the high end of the IPO price range. 
We lowered our target price by 6%, mainly due to greater political risks arising from the recent cancelled martial law and ongoing impeachment of President Yoon.


Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

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

<ul>
<li>The KRW 5T-6T valuation and 13x-16x PER look solid compared to local peers like SDS and Hyundai AutoEver, with CNS possibly getting a premium due to its smaller captive stake.</li>
<li>Instos probably won’t push hard for lock-ups but will aggressively target pricing to secure larger allotments, knowing the company is likely to stick with a market-friendly price.</li>
<li>On a separate note, I wouldn’t expect much of a NAV discount reduction for LG Corp, as LG CNS’s stake isn’t significant enough to move the needle.</li>
</ul>


The KRW 5T-6T valuation and 13x-16x PER look solid compared to local peers like SDS and Hyundai AutoEver, with CNS possibly getting a premium due to its smaller captive stake.
Instos probably won’t push hard for lock-ups but will aggressively target pricing to secure larger allotments, knowing the company is likely to stick with a market-friendly price.
On a separate note, I wouldn’t expect much of a NAV discount reduction for LG Corp, as LG CNS’s stake isn’t significant enough to move the needle.


LG CNS IPO Details Out: My Read on This IPO

South Korea

LG CNS Co., Ltd. provides information technology services and solutions. The Company offers consulting, system integration, outsourcing, convergence, video solutions, conditional access systems, and interactive digital television solutions.

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

LG CNS (LGCNSZ KS)

Details of New IPO System Improvement Measures in Korea

The new rules established by the FSC will discourage the rampant first day trading of Korean IPOs. New rules will encourage the investors to take...

Douglas Kim

LG CNS IPO Book Building Results Analysis

LG CNS reported a successful IPO book building results analysis. The IPO price has been finalized at 61,900 won per share (high end of the IPO...

Douglas Kim

LG CNS IPO: Limited Float Pushes Back Passive Buying

The subscription period runs from 21-22 January. Shares will reportedly be offered at KRW 61900, the top end of the IPO range. Demand was said to...

Brian Freitas

LG CNS: Updated IPO Valuation Analysis

LG CNS completed its IPO book building for the institutional investors. The demand from the institutional investors was high enough that the IPO...

Douglas Kim

LG CNS IPO Details Out: My Read on This IPO

LG CNS’s IPO pricing looks set at the top of the range (₩61,900). Word’s out late tonight in the local market. Buzz is that domestic instos went...

Sanghyun Park

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)