Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight">
<p>Lotte Rental is offering 14.4 million shares in this IPO. Lotte Rental is the largest car rental company in Korea with about 22% market share. The IPO price range is from 47,000 won to 59,000 won. The IPO deal size is from US$595 million to  US$746 million.</p>
<p>According to the bankers' valuation, the expected market cap after the IPO will be 1.7 trillion won to 2.2 trillion won. The book building for the Lotte Rental IPO starts on August 3rd. Korea Investment &amp; Securities and NH Investment &amp; Securities are the lead underwriters of this IPO. </p>
</div><table class="table table-striped">
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<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 233pt;"><div><strong>Deal Specifics of the Lotte Rental IPO:</strong></div></td>
<td style="width: 340pt;"> </td>
</tr>
<tr>
<td>Lead underwriters of the IPO: </td>
<td style="width: 340pt;">NH Investment &amp; Securiites, Korea Investment &amp; Securities</td>
</tr>
<tr>
<td>Expected IPO price per share: </td>
<td style="width: 340pt;">47,000 won (low)/59,000 won (high)</td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td style="width: 340pt;">14.42m shares (7.2m new shares and 7.2m old shares)</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td style="width: 340pt;">US$595 mn (low);  US$746 mn (high)</td>
</tr>
<tr>
<td>Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 340pt;">36.63m shares</td>
</tr>
<tr>
<td>Expected market cap after IPO:</td>
<td style="width: 340pt;">1,722 billion won (low)/2,161 billion won (high)</td>
</tr>
<tr>
<td>Book open: </td>
<td style="text-align: left; width: 340pt;">3-Aug-21</td>
</tr>
<tr>
<td>Book closed:</td>
<td style="text-align: left; width: 340pt;">4-Aug-21</td>
</tr>
<tr>
<td>Listing date: </td>
<td style="text-align: left; width: 340pt;">TBD</td>
</tr>
<tr>
<td>Source: Company data</td>
<td> </td>
</tr>
</tbody>
</table>


Lotte Rental is offering 14.4 million shares in this IPO. Lotte Rental is the largest car rental company in Korea with about 22% market share. The IPO price range is from 47,000 won to 59,000 won. The IPO deal size is from US$595 million to  US$746 million.
According to the bankers' valuation, the expected market cap after the IPO will be 1.7 trillion won to 2.2 trillion won. The book building for the Lotte Rental IPO starts on August 3rd. Korea Investment &amp; Securities and NH Investment &amp; Securities are the lead underwriters of this IPO. 







Deal Specifics of the Lotte Rental IPO:
 


Lead underwriters of the IPO: 
NH Investment &amp; Securiites, Korea Investment &amp; Securities


Expected IPO price per share: 
47,000 won (low)/59,000 won (high)


Number of Shares for IPO:
14.42m shares (7.2m new shares and 7.2m old shares)


IPO base deal size: 
US$595 mn (low);  US$746 mn (high)


Expected common shares outstanding, fully diluted (post-IPO):  
36.63m shares


Expected market cap after IPO:
1,722 billion won (low)/2,161 billion won (high)


Book open: 
3-Aug-21


Book closed:
4-Aug-21


Listing date: 
TBD


Source: Company data
 




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.

<div><div><h2>Offering size</h2></div></div><div>
<p>Lotte Rental offers 14.4M shares, which account for 49.02% of the pre-IPO total shares, of which 55-75% are allocated to institutions. It will be listed on KOSPI.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Offering size"}'>Offering size</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}' data-sheets-formula="=R[-43]C[0]">Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"089862"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-43]C[0]">089862</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bourse"}' data-sheets-formula="=R[-43]C[0]">Bourse</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSPI"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-43]C[0]">KOSPI</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering"}'><strong>Offering</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":14422000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-40]C[0]"><strong>14,422,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- % of pre-IPO SO"}'><strong>- % of pre-IPO SO</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4901607585902185}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-38]C[0]"><strong>49.02%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Institutional allotment"}'><strong>Institutional allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"55.00~75.00%"}'><strong>55.00~75.00%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<div class="content-highlight">
<p><strong>Who is Lotte Rental?</strong></p>
<p>Lotte Rental is the number one car rental company in Korea. Lotte Rental has 220 branches and sales offices nationwide and operates 210,000 vehicles.</p>
<p>In 1990, Kumho Asiana Group partnered with Hertz to establish Lotte Rental. Since then, it has grown into the largest car rental company in Korea. In 2010, Kumho Group sold it to KT for ₩300B. Five years after KT acquired it, it was again sold to Lotte Group for ₩1.2T, and the corporate name was changed to the current Lotte Rental. Meanwhile, in 2020, Lotte Rental solidified its No. 1 position in the industry by acquiring the rental car division owned by Hanjin.</p>
<p><strong>Lotte Rental is currently engaged in car rental and used car sales, and office/construction equipment rentals.</strong></p>
<p>As of the first quarter of 2021,</p>
<ul>
<li>
<strong>Car rental sales</strong> accounted for <strong>62.07%</strong> of total sales.</li>
<li>
<strong>Used car sales</strong> accounted for <strong>28.77%</strong> of total sales.</li>
<li>
<strong>Office/construction equipment rentals</strong> accounted for <strong>9.16%</strong> of total sales.</li>
</ul>
</div>
<section><div id="ember7914"><div id="ember7921">
<div><div><h2>Split</h2></div></div>
<div>
<p>This IPO is a split offering with a primary of 50% and a secondary of 50%. As a result, this offering will see a capital increase rate of 24.5% with a shareholding dilution of 19.7%. This event is free of any additional options: cornerstone, clawback, or greenshoe.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Split"}'>Split</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Primary %"}'><strong>Primary %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5000043683261683}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-40]C[0]"><strong>50.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Secondary %"}'><strong>Secondary %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.49999563167383165}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-39]C[0]"><strong>50.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'>Capital increase rate</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2450825204771777}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-37]C[0]">24.51%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.19684038322475997}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-37]C[0]">19.68%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>
<div><div><h2>Schedule</h2></div></div>
<div><p>The book opens on August 3 (for both local and overseas investors) and runs for two days until August 4. The allotment will be on August 6, finalizing an offering price. The subscription falls on August 9.</p></div>
</div></div></section>
</div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Schedule"}'>Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book open"}'><strong>Book open</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44411}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 8. 3</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'>Book close</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44412}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 4</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'><strong>Allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44414}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 8. 6</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'><strong>Subscription</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44417}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 8. 9</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44420}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 12</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"TBA"}'>TBA</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><div><section><div id="ember7914"><div id="ember7921">
<div><div><h2>Pricing</h2></div></div>
<div>
<p>This IPO also uses EV/EBITDA. The corporate value was determined after selecting only two local rental companies:</p>
<ol>
<li><strong>SK Rent A Car (068400)</strong></li>
<li><strong>AJ Networks (095570)</strong></li>
</ol>
<p>The respective EV/EBITDA multiples are 5.47x for SK Rent A Car and 5.44x for AJ Networks, giving <strong>an average of 5.46x</strong>.</p>
<table class="table table-striped">
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<col width="150">
<col width="150">
<col width="150">
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<tr>
<td data-sheets-value='{"1":2,"2":"Valuation peers: EV/EBITDA"}'>Valuation peers: EV/EBITDA</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Rent A Car Co Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>SK Rent A Car Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"AJ Networks Co Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>AJ Networks Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Note"}'>Note</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"068400"}' data-sheets-formula='="068400"'>068400</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"095570"}' data-sheets-formula='="095570"'>095570</td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Reference market cap"}'>Reference market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":657.7460344}' data-sheets-formula="=R[1]C[0]*R[2]C[0]/1000000000">₩657.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":272.646223785}' data-sheets-formula="=R[1]C[0]*R[2]C[0]/1000000000">₩272.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A = a) × b)"}'>A = a) × b)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shares outstanding"}'>Shares outstanding</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":47285840}'>47,285,840</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":46822295}'>46,822,295</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"a)"}'>a)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Reference share price: MIN[1M Avg, 1W Avg, 1D Close]"}'>Reference share price: MIN[1M Avg, 1W Avg, 1D Close]</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13910}'>₩13,910</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5823}'>₩5,823</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"b)"}'>b)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net debt, as of 1Q21"}'>Net debt, as of 1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1568.98}'>₩1,569.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":911.167}'>₩911.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"B"}'>B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Enterprise value (EV)"}'>Enterprise value (EV)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2226.7260344}' data-sheets-formula="=R[-4]C[0]+R[-1]C[0]">₩2,226.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1183.813223785}' data-sheets-formula="=R[-4]C[0]+R[-1]C[0]">₩1,183.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"C = A + B"}'>C = A + B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EBITDA: 2Q20~1Q21"}'>EBITDA: 2Q20~1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":407.02}'>₩407.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":217.525}'>₩217.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"D = c) + d)"}'>D = c) + d)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Operating profit: 2Q20~1Q21"}'>Operating profit: 2Q20~1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":71.245}'>₩71.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18.324}'>₩18.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"c)"}'>c)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Depreciation &amp; Amortization: 2Q20~1Q21"}'>Depreciation &amp; Amortization: 2Q20~1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":335.774}'>₩335.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":199.202}'>₩199.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"d)"}'>d)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EV/EBITDA"}'><strong>EV/EBITDA</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5.47080250208835}' data-sheets-formula="=R[-4]C[0]/R[-3]C[0]"><strong>5.47x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5.442193880174693}' data-sheets-formula="=R[-4]C[0]/R[-3]C[0]"><strong>5.44x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"E = C / D"}'>E = C / D</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Average EV/EBITDA"}'><strong>Average EV/EBITDA</strong></td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":5.456498191131521}' data-sheets-formula="=average(R[-1]C[0]:R[-1]C[1])"><strong>5.46x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>
<div><div>The averaged EV/EBITDA multiple of 5.46x was applied to Lott Rental's EBITDA of ₩1,120.6B from the second quarter of last year to the first quarter of this year. As a result, we have a price per share of ₩77,708, giving <strong>a market cap of ₩2.85T</strong>.</div></div>
<div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Lotte Rental: EV/EBITDA"}' data-sheets-formula='=Terms!R[-13]C[1]&amp;": EV/EBITDA"'>Lotte Rental: EV/EBITDA</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EBITDA: 2Q20~1Q21"}'>EBITDA: 2Q20~1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1120.574}'>₩1,120.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A"}'>A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EV/EBITDA"}'>EV/EBITDA</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5.456498191131521}' data-sheets-formula="=R[-5]C[0]">5.46x</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"B"}'>B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Enterprise value (EV)"}'>Enterprise value (EV)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6114.410004029013}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]">₩6,114.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"C = A X B"}'>C = A X B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net debt"}'>Net debt</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3267.667}'>₩3,267.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"D"}'>D</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap"}'><strong>Market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2846.7430040290133}' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]"><strong>₩2,846.7B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"E = C - D"}'><strong>E = C - D</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Post-IPO total shares"}'>Post-IPO total shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":36634063}' data-sheets-formula="=Terms!R[-3]C[0]">36,634,063</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"F"}'>F</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price per share"}'><strong>Price per share</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":77707.54240470169}' data-sheets-formula="=R[-2]C[0]*1000000000/R[-1]C[0]"><strong>₩77,708</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"G = E / F"}'><strong>G = E / F</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div>
<div><div><div>The indicative price band lies between ₩47,000 and ₩59,000. This is obtained by applying a discount rate of <strong>24.07% to 39.52% to the market cap of ₩2.85T</strong> calculated through EV/EBITDA. This much discount gives an <strong>EV/EBITDA multiple of 4.45x to 4.84x</strong>.</div></div></div>
<div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Indicative price band"}'>Indicative price band</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Low"}'>Low</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"High"}'>High</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price"}'><strong>Price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":47000}'><strong>₩47,000</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":59000}'><strong>₩59,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Base deal size"}'>Base deal size</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":677.834}' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩677.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":850.898}' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩850.9B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Institutional allotment"}'>- Institutional allotment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":372.8087}' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩372.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":467.99390000000005}' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩468.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Implied market cap"}'>Implied market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1721.800961}' data-sheets-formula="=R[-3]C[0]*Terms!R18C2/1000000000">₩1,721.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2161.409717}' data-sheets-formula="=R[-3]C[0]*Terms!R18C2/1000000000">₩2,161.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Discount"}'><strong>- Discount</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.395168106652717}' data-sheets-formula="=(R22C2-R[-4]C[0])/R22C2"><strong>39.52%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.24074294239383626}' data-sheets-formula="=(R22C2-R[-4]C[0])/R22C2"><strong>24.07%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EV/EBITDA"}'><strong>EV/EBITDA</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.452600150458604}' data-sheets-formula="=(R[-2]C[0]+R[-12]C[0])/R[-15]C[0]"><strong>4.45x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.844906911100917}' data-sheets-formula="=(R[-2]C[0]+R[-12]C[-1])/R[-15]C[-1]"><strong>4.84x</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div>
</div></div></section></div>

Offering size
Lotte Rental offers 14.4M shares, which account for 49.02% of the pre-IPO total shares, of which 55-75% are allocated to institutions. It will be listed on KOSPI.






Offering size

Ticker
089862


Bourse
KOSPI


Offering
14,422,000


- % of pre-IPO SO
49.02%


Institutional allotment
55.00~75.00%

Source: DART



Who is Lotte Rental?
Lotte Rental is the number one car rental company in Korea. Lotte Rental has 220 branches and sales offices nationwide and operates 210,000 vehicles.
In 1990, Kumho Asiana Group partnered with Hertz to establish Lotte Rental. Since then, it has grown into the largest car rental company in Korea. In 2010, Kumho Group sold it to KT for ₩300B. Five years after KT acquired it, it was again sold to Lotte Group for ₩1.2T, and the corporate name was changed to the current Lotte Rental. Meanwhile, in 2020, Lotte Rental solidified its No. 1 position in the industry by acquiring the rental car division owned by Hanjin.
Lotte Rental is currently engaged in car rental and used car sales, and office/construction equipment rentals.
As of the first quarter of 2021,


Car rental sales accounted for 62.07% of total sales.

Used car sales accounted for 28.77% of total sales.

Office/construction equipment rentals accounted for 9.16% of total sales.



Split

This IPO is a split offering with a primary of 50% and a secondary of 50%. As a result, this offering will see a capital increase rate of 24.5% with a shareholding dilution of 19.7%. This event is free of any additional options: cornerstone, clawback, or greenshoe.






Split

Primary %
50.00%


Secondary %
50.00%


Capital increase rate
24.51%


Dilution
19.68%

Source: DART



Schedule
The book opens on August 3 (for both local and overseas investors) and runs for two days until August 4. The allotment will be on August 6, finalizing an offering price. The subscription falls on August 9.







Schedule

Book open
2021. 8. 3


Book close
2021. 8. 4


Allotment
2021. 8. 6


Subscription
2021. 8. 9


Payment
2021. 8. 12


Listing
TBA

Source: DART


Pricing

This IPO also uses EV/EBITDA. The corporate value was determined after selecting only two local rental companies:

SK Rent A Car (068400)
AJ Networks (095570)

The respective EV/EBITDA multiples are 5.47x for SK Rent A Car and 5.44x for AJ Networks, giving an average of 5.46x.









Valuation peers: EV/EBITDA
SK Rent A Car Co Ltd
AJ Networks Co Ltd
Note


Ticker
068400
095570



Reference market cap
₩657.7B
₩272.6B
A = a) × b)


Shares outstanding
47,285,840
46,822,295
a)


Reference share price: MIN[1M Avg, 1W Avg, 1D Close]
₩13,910
₩5,823
b)


Net debt, as of 1Q21
₩1,569.0B
₩911.2B
B


Enterprise value (EV)
₩2,226.7B
₩1,183.8B
C = A + B


EBITDA: 2Q20~1Q21
₩407.0B
₩217.5B
D = c) + d)


Operating profit: 2Q20~1Q21
₩71.2B
₩18.3B
c)


Depreciation &amp; Amortization: 2Q20~1Q21
₩335.8B
₩199.2B
d)


EV/EBITDA
5.47x
5.44x
E = C / D


Average EV/EBITDA
5.46x
-

Source: DART



The averaged EV/EBITDA multiple of 5.46x was applied to Lott Rental's EBITDA of ₩1,120.6B from the second quarter of last year to the first quarter of this year. As a result, we have a price per share of ₩77,708, giving a market cap of ₩2.85T.







Lotte Rental: EV/EBITDA

EBITDA: 2Q20~1Q21
₩1,120.6B
A


EV/EBITDA
5.46x
B


Enterprise value (EV)
₩6,114.4B
C = A X B


Net debt
₩3,267.7B
D


Market cap
₩2,846.7B
E = C - D


Post-IPO total shares
36,634,063
F


Price per share
₩77,708
G = E / F

Source: DART


The indicative price band lies between ₩47,000 and ₩59,000. This is obtained by applying a discount rate of 24.07% to 39.52% to the market cap of ₩2.85T calculated through EV/EBITDA. This much discount gives an EV/EBITDA multiple of 4.45x to 4.84x.








Indicative price band
Low
High


Price
₩47,000
₩59,000


Base deal size
₩677.8B
₩850.9B


- Institutional allotment
₩372.8B
₩468.0B


Implied market cap
₩1,721.8B
₩2,161.4B


- Discount
39.52%
24.07%


EV/EBITDA
4.45x
4.84x

Source: DART




Lotte Rental (Feat. Car Sharing Unicorn Green Car) IPO: Offering Details & Valuation Issues

<div class="content-highlight">
<p><a href="https://www.kedglobal.com/newsView/ked202105310007" target="_blank" rel="noopener">Lotte Rental</a> is getting ready to complete its IPO in Korea in 2H 2021 (around September). It has been reported in the media that the company may be seeking a valuation of about 2 trillion won ($1.8 billion). </p>
</div>
<p>The company generated total revenue of 2.3 trillion won (up 9.8% YoY) and an operating profit of 164.3 billion won (up 25.9% YoY) in 2020. From 2018 to 2020, it had an average operating margin of 6.6%. Despite the company's improving income statement, it has a leveraged balance sheet and it will try to improve its balance sheet through an IPO. </p>


Lotte Rental is getting ready to complete its IPO in Korea in 2H 2021 (around September). It has been reported in the media that the company may be seeking a valuation of about 2 trillion won ($1.8 billion). 

The company generated total revenue of 2.3 trillion won (up 9.8% YoY) and an operating profit of 164.3 billion won (up 25.9% YoY) in 2020. From 2018 to 2020, it had an average operating margin of 6.6%. Despite the company's improving income statement, it has a leveraged balance sheet and it will try to improve its balance sheet through an IPO. 

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)

Lotte Rental IPO Preview

Lotte Rental is the largest car rental company in Korea with about 22% market share. The IPO price range is from 47,000 won to 59,000 won. The IPO...

Douglas Kim

Initial Thoughts on the Lotte Rental IPO

Lotte Rental is getting ready to complete its IPO in Korea in 2H 2021. It has been reported in the media that the company may be seeking a...

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Lotte Rental IPO Preview

Lotte Rental is the largest car rental company in Korea with about 22% market share. The IPO price range is from 47,000 won to 59,000 won. The IPO...

Douglas Kim

Lotte Rental (Feat. Car Sharing Unicorn Green Car) IPO: Offering Details & Valuation Issues

This post summarizes the key details of Lotte Rental's listing and discusses valuation issues, including credit rating downgrade risk and a...

Sanghyun Park

Initial Thoughts on the Lotte Rental IPO

Lotte Rental is getting ready to complete its IPO in Korea in 2H 2021. It has been reported in the media that the company may be seeking a...

Douglas Kim