Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<p><strong>On 6 August, Lotte Rental announced its IPO book building results. The IPO price has been determined at 59,000 won, which was at the high end of the IPO price range. </strong>The demand ratio among the institutional investors was 218 to 1. There were 762 institutional investors that participated in the IPO survey of which 640 were domestic investors and 122 were overseas investors. </p><div class="content-highlight"><p>We continue to have a POSIVE view of the Lotte Rental IPO post book building results. Our base case valuation of Lotte Rental remains implied market cap of 2.9 trillion won or implied price of 79,679 won per share, which represents 35% higher than the IPO price of 59,000 won. </p></div><table class="table table-striped">
<colgroup>
<col>
<col>
<col>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td colspan="4" style="width: 515.09px;"><div style="text-align: start;"><div><div><strong>Institutional Investors Demand Breakdown of Lotte Rental IPO Bookbuilding Results</strong></div></div></div></td>
<td style="width: 99.27px;"><strong> </strong></td>
</tr>
<tr>
<td style="text-align: left; width: 141.29px;"><strong>Domestic Investors</strong></td>
<td style="text-align: center; width: 115.24px;"><strong> </strong></td>
<td style="text-align: center; width: 112.23px;"><strong> </strong></td>
<td style="text-align: center; width: 146.33px;"><strong> </strong></td>
<td style="text-align: center; width: 99.27px;"><strong> </strong></td>
</tr>
<tr>
<td style="width: 141.29px;"><strong> </strong></td>
<td style="text-align: center; width: 115.24px;"><strong>Asset mgmt companies</strong></td>
<td style="text-align: center; width: 112.23px;"><strong>Brokerages</strong></td>
<td style="text-align: center; width: 146.33px;"><strong>Pension funds/insurance/banks</strong></td>
<td style="text-align: center; width: 99.27px;"><strong>Others</strong></td>
</tr>
<tr>
<td style="width: 141.29px;">No. of companies</td>
<td style="text-align: center; width: 115.24px;">322</td>
<td style="text-align: center; width: 112.23px;">23</td>
<td style="text-align: center; width: 146.33px;">145</td>
<td style="text-align: center; width: 99.27px;">150</td>
</tr>
<tr>
<td style="width: 141.29px;">Demand</td>
<td style="text-align: center; width: 115.24px;">86.3 to 1</td>
<td style="text-align: center; width: 112.23px;">9.6 to 1</td>
<td style="text-align: center; width: 146.33px;">49.2 to 1</td>
<td style="text-align: center; width: 99.27px;">35.6 to 1</td>
</tr>
<tr>
<td style="width: 141.29px;"> </td>
<td style="text-align: center; width: 115.24px;"> </td>
<td style="text-align: center; width: 112.23px;"> </td>
<td style="text-align: center; width: 146.33px;"> </td>
<td style="text-align: center; width: 99.27px;"> </td>
</tr>
<tr>
<td style="width: 141.29px;"><strong> Overseas Investors</strong></td>
<td style="text-align: center; width: 115.24px;"><strong> </strong></td>
<td style="text-align: center; width: 112.23px;"><strong> </strong></td>
<td style="text-align: center; width: 146.33px;"> </td>
<td style="text-align: center; width: 99.27px;"> </td>
</tr>
<tr>
<td style="width: 141.29px;"><strong> </strong></td>
<td style="text-align: center; width: 115.24px;"><strong>(A)*</strong></td>
<td style="text-align: center; width: 112.23px;"><strong>(B)**</strong></td>
<td style="text-align: center; width: 146.33px;"> </td>
<td style="text-align: center; width: 99.27px;"> </td>
</tr>
<tr>
<td style="width: 141.29px;">No. of companies</td>
<td style="text-align: center; width: 115.24px;">79</td>
<td style="text-align: center; width: 112.23px;">43</td>
<td style="text-align: center; width: 146.33px;"> </td>
<td style="text-align: center; width: 99.27px;"> </td>
</tr>
<tr>
<td style="width: 141.29px;">Demand</td>
<td style="text-align: center; width: 115.24px;">34.5 to 1</td>
<td style="text-align: center; width: 112.23px;">2.5 to 1</td>
<td style="text-align: center; width: 146.33px;"> </td>
<td style="text-align: center; width: 99.27px;"> </td>
</tr>
<tr>
<td style="width: 141.29px;"> </td>
<td style="text-align: center; width: 115.24px;"> </td>
<td style="text-align: center; width: 112.23px;"> </td>
<td style="text-align: center; width: 146.33px;"> </td>
<td style="text-align: center; width: 99.27px;"> </td>
</tr>
<tr>
<td style="width: 141.29px;"><strong>Total (No. of companies)</strong></td>
<td style="text-align: center; width: 115.24px;"><strong>762</strong></td>
<td style="text-align: center; width: 112.23px;"> </td>
<td style="text-align: center; width: 146.33px;"> </td>
<td style="text-align: center; width: 99.27px;"> </td>
</tr>
<tr>
<td style="width: 141.29px;"><strong>Total Demand</strong></td>
<td style="text-align: center; width: 115.24px;"><strong>217.6 to 1</strong></td>
<td style="text-align: center; width: 112.23px;"> </td>
<td style="text-align: center; width: 146.33px;"> </td>
<td style="text-align: center; width: 99.27px;"> </td>
</tr>
<tr><td colspan="5" style="width: 614.36px;">Note: (A)* refers to overseas investment mgmt companies that have records of trading with the brokers involved in this deal.</td></tr>
<tr><td colspan="5" style="width: 614.36px;">(B)** refers to overseas investment mgmt companies that do not have records of trading with the brokers involved in this deal.</td></tr>
<tr>
<td colspan="2" style="width: 256.53px;">Source: Company data</td>
<td style="width: 112.23px;"> </td>
<td style="width: 146.33px;"> </td>
<td style="width: 99.27px;"> </td>
</tr>
</tbody>
</table>

On 6 August, Lotte Rental announced its IPO book building results. The IPO price has been determined at 59,000 won, which was at the high end of the IPO price range. The demand ratio among the institutional investors was 218 to 1. There were 762 institutional investors that participated in the IPO survey of which 640 were domestic investors and 122 were overseas investors. We continue to have a POSIVE view of the Lotte Rental IPO post book building results. Our base case valuation of Lotte Rental remains implied market cap of 2.9 trillion won or implied price of 79,679 won per share, which represents 35% higher than the IPO price of 59,000 won. 









Institutional Investors Demand Breakdown of Lotte Rental IPO Bookbuilding Results
 


Domestic Investors
 
 
 
 


 
Asset mgmt companies
Brokerages
Pension funds/insurance/banks
Others


No. of companies
322
23
145
150


Demand
86.3 to 1
9.6 to 1
49.2 to 1
35.6 to 1


 
 
 
 
 


 Overseas Investors
 
 
 
 


 
(A)*
(B)**
 
 


No. of companies
79
43
 
 


Demand
34.5 to 1
2.5 to 1
 
 


 
 
 
 
 


Total (No. of companies)
762
 
 
 


Total Demand
217.6 to 1
 
 
 

Note: (A)* refers to overseas investment mgmt companies that have records of trading with the brokers involved in this deal.
(B)** refers to overseas investment mgmt companies that do not have records of trading with the brokers involved in this deal.

Source: Company data
 
 
 




Trading Strategy of Lotte Rental IPO Post Bookbuilding Results

APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<div><p><a href="https://www.smartkarma.com/entities/lotte-rental-co-ltd" target="_blank" data-smartkarma-citation="entities:33445:1" rel="noopener">Lotte Rental (KTRENZ KS)</a> is looking to raise about US$740m in its Korea IPO. </p></div><div>
<p>Lotte Rental (LR) is the largest car rental provider in South Korea in 2020 based on the number of registered rental cars. The company mainly offers car rentals and leasing services. It provides short-term car rental, monthly car rental, and chauffeur-driven car rental services. The company buys and sells used cars and also owns 84% stake in Green Car, a car-sharing platform.</p>
<p>Our previous coverage of the IPO:</p>
<ul><li dir="ltr" aria-level="1"><p><a href="https://www.smartkarma.com/insights/lotte-rental-ipo-not-growing-its-fleet-as-fast-but-utilizing-them-better" target="_blank" data-smartkarma-citation="insights:54689" rel="noopener">Lotte Rental IPO - Not Growing Its Fleet as Fast but Utilizing Them Better</a> </p></li></ul>
</div>

Lotte Rental (KTRENZ KS) is looking to raise about US$740m in its Korea IPO. 
Lotte Rental (LR) is the largest car rental provider in South Korea in 2020 based on the number of registered rental cars. The company mainly offers car rentals and leasing services. It provides short-term car rental, monthly car rental, and chauffeur-driven car rental services. The company buys and sells used cars and also owns 84% stake in Green Car, a car-sharing platform.
Our previous coverage of the IPO:
Lotte Rental IPO - Not Growing Its Fleet as Fast but Utilizing Them Better 


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.

<h2>Listing date</h2><p>The listing date of Krafton has been confirmed as August 10th.</p><table class="table table-striped">
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<col width="100">
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<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Schedule"}'>Krafton IPO schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book open"}'>Book open</td>
<td data-sheets-value='{"1":3,"3":44391}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 14</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'>Book close</td>
<td data-sheets-value='{"1":3,"3":44404}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 27</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'>Allotment</td>
<td data-sheets-value='{"1":3,"3":44406}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 29</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'>Subscription</td>
<td data-sheets-value='{"1":3,"3":44410}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 2</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td data-sheets-value='{"1":3,"3":44413}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 5</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'><strong>Listing</strong></td>
<td data-sheets-value='{"1":3,"3":44418}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 8. 10</strong></td>
</tr>
<tr>
<td><em><strong> - Kakao Bank's listing</strong></em></td>
<td><em><strong>2021. 8. 5</strong></em></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><ul>
<li><strong>The initially scheduled date was August 10th. However, as Kakao Pay's listing date was set for August 12, Krafton could not easily finalize the listing date due to the issue of mutual interference for retail investors with Kakao Pay.</strong></li>
<li><strong>The fact that Krafton confirmed the listing date as soon as Kakao Pay's listing schedule was delayed shows how sensitive Krafton was to this retail interference issue.</strong></li>
</ul><div class="content-highlight">
<p>The listing date of Kakao Bank is August 5, and there is a gap of 3 business days until the listing date of Krafton. However, in this case, Krafton is in a position to absorb retail demand from Kakao Bank. More importantly, Kakao Bank must draw less attention from retail investors than Kakao Pay in terms of business nature, so there is no need to worry too much about potential interference with Kakao Bank.</p>
<p><strong>And then, at least until the end of August, there is no major listing. That is, there is enough temporal buffer for Krafton to drive retail demand.</strong></p>
</div>

Listing dateThe listing date of Krafton has been confirmed as August 10th.





Krafton IPO schedule

Book open
2021. 7. 14


Book close
2021. 7. 27


Allotment
2021. 7. 29


Subscription
2021. 8. 2


Payment
2021. 8. 5


Listing
2021. 8. 10


 - Kakao Bank's listing
2021. 8. 5

Source: DART


The initially scheduled date was August 10th. However, as Kakao Pay's listing date was set for August 12, Krafton could not easily finalize the listing date due to the issue of mutual interference for retail investors with Kakao Pay.
The fact that Krafton confirmed the listing date as soon as Kakao Pay's listing schedule was delayed shows how sensitive Krafton was to this retail interference issue.

The listing date of Kakao Bank is August 5, and there is a gap of 3 business days until the listing date of Krafton. However, in this case, Krafton is in a position to absorb retail demand from Kakao Bank. More importantly, Kakao Bank must draw less attention from retail investors than Kakao Pay in terms of business nature, so there is no need to worry too much about potential interference with Kakao Bank.
And then, at least until the end of August, there is no major listing. That is, there is enough temporal buffer for Krafton to drive retail demand.


Krafton Listing Date Confirmed as August 10th: Rebalancing Trading Timeline

<p><a href="https://www.smartkarma.com/entities/lotte-rental-co-ltd" target="_blank" data-smartkarma-citation="entities:33445:1" rel="noopener">Lotte Rental (KTRENZ KS)</a> is looking to raise about US$740m in its Korea IPO. </p><p>Lotte Rental (LR) is the largest car rental provider in South Korea in 2020 based on the number of registered rental cars. The company mainly offers car rentals and leasing services. It provides short-term car rental, monthly car rental, and chauffeur-driven car rental services. The company buys and sells used cars and also owns 84% stake in Green Car, a car-sharing platform.</p>

Lotte Rental (KTRENZ KS) is looking to raise about US$740m in its Korea IPO. Lotte Rental (LR) is the largest car rental provider in South Korea in 2020 based on the number of registered rental cars. The company mainly offers car rentals and leasing services. It provides short-term car rental, monthly car rental, and chauffeur-driven car rental services. The company buys and sells used cars and also owns 84% stake in Green Car, a car-sharing platform.

Lotte Rental IPO - Not Growing Its Fleet as Fast but Utilizing Them Better

<div class="content-highlight"><p>Our base case valuation of Lotte Rental is implied market cap of 2.9 trillion won or implied price of 79,679 won per share, which would represent a 35% upside to the high end of the IPO price range of 59,000 won per share. Given the solid upside, we have a Positive view of the Lotte Rental IPO. We would take the deal. </p></div><ul>
<li>Our base case valuation is based on a 6.1x EV/EBITDA using 2020 EBITDA of 1,055 billion won. The EV/EBITDA multiple of 6.1x is at a 5% premium to the comps' valuation multiple.</li>
<li>We believe this is justified given higher ROE and EBITDA margins of Lotte Rental as compared to its peers.</li>
<li>In addition, Lotte Rental enjoys higher market share, higher revenues, and better brand recognition than its peers and as a result, the slight premium valuation multiples to its peers is justified, in our view. </li>
</ul>

Our base case valuation of Lotte Rental is implied market cap of 2.9 trillion won or implied price of 79,679 won per share, which would represent a 35% upside to the high end of the IPO price range of 59,000 won per share. Given the solid upside, we have a Positive view of the Lotte Rental IPO. We would take the deal. 
Our base case valuation is based on a 6.1x EV/EBITDA using 2020 EBITDA of 1,055 billion won. The EV/EBITDA multiple of 6.1x is at a 5% premium to the comps' valuation multiple.
We believe this is justified given higher ROE and EBITDA margins of Lotte Rental as compared to its peers.
In addition, Lotte Rental enjoys higher market share, higher revenues, and better brand recognition than its peers and as a result, the slight premium valuation multiples to its peers is justified, in our view. 


South Korea

Lotte Rental Co.,Ltd. provides car rental services. The Company offers passenger car rental, commercial car rental, used vehicle rental, and other related services. Lotte Rental offers services worldwide.

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Lotte Rental (089860 KS)

Trading Strategy of Lotte Rental IPO Post Bookbuilding Results

Lotte Rental announced its IPO book building results. The IPO price is 59,000 won, which was at the high end of the IPO price range. The demand...

Douglas Kim

Lotte Rental IPO - Peers and Valuation

Lotte Rental (KTRENZ KS) is looking to raise about US$740m in its Korea IPO. It is the largest car rental provider in South Korea in 2020 based on...

Zhen Zhou, Toh

Krafton Listing Date Confirmed as August 10th: Rebalancing Trading Timeline

The listing date of Krafton has been confirmed as August 10th. So, this post examines the index rebalancing trading timeline.

Sanghyun Park

Lotte Rental IPO - Not Growing Its Fleet as Fast but Utilizing Them Better

Lotte Rental (KTRENZ KS) is looking to raise about US$740m in its Korea IPO. Lotte Rental (LR) is the largest car rental provider in South Korea...

Zhen Zhou, Toh

Lotte Rental IPO Valuation Analysis

Our base case valuation of Lotte Rental is implied price of 79,679 won per share, which would represent a 35% upside to the high end of the IPO...

Douglas Kim

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