Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/dn-solutions" target="_blank" data-smartkarma-citation="entities:44474:1" rel="noopener">DN Solutions (298440 KS)</a> (DNS) aims to raise around US$1.1bn in its Korea IPO via selling a mix of primary and secondary shares.</li>
<li>DNS is engaged in the manufacture and sale of machine tools and the business of automation solutions and services related thereto.</li>
<li>We have looked at its past performance in our earlier notes. In this note, we will undertake a peer comparison.</li>
</ul>



DN Solutions (298440 KS) (DNS) aims to raise around US$1.1bn in its Korea IPO via selling a mix of primary and secondary shares.
DNS is engaged in the manufacture and sale of machine tools and the business of automation solutions and services related thereto.
We have looked at its past performance in our earlier notes. In this note, we will undertake a peer comparison.


IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/dn-solutions" target="_blank" data-smartkarma-citation="entities:44474:1" rel="noopener">DN Solutions (298440 KS)</a>, the third-largest machining centre/turning centre machine tool manufacturer, seeks to raise US$1.1 billion in a KRX IPO.</li>
<li>In <em><strong><a href="https://www.smartkarma.com/insights/dn-solutions-ipo-the-bull-case" target="_blank" data-smartkarma-citation="insights:180468" rel="noopener">DN Solutions IPO: The Bull Case</a></strong></em>, we highlighted the key elements of the bull case. In this note, we outline the bear case.</li>
<li>The bear case rests on tepid growth due to volume declines, early indications of margin pressure, rising cash conversion cycle, and mid-tier FCF margin.</li>
</ul>



DN Solutions (298440 KS), the third-largest machining centre/turning centre machine tool manufacturer, seeks to raise US$1.1 billion in a KRX IPO.
In DN Solutions IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on tepid growth due to volume declines, early indications of margin pressure, rising cash conversion cycle, and mid-tier FCF margin.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/dn-solutions" target="_blank" data-smartkarma-citation="entities:44474:1" rel="noopener">DN Solutions (298440 KS)</a>, the third-largest machining centre/turning centre machine tool manufacturer, seeks to raise US$1.1 billion in a KRX IPO.   </li>
<li>
<a href="https://www.smartkarma.com/entities/dn-automotive-corporation" target="_blank" data-smartkarma-citation="entities:20840:1" rel="noopener">DN Automotive (007340 KS)</a> is the largest shareholder, representing 84.8% of outstanding shares. The primary/secondary split is 43%/57%.</li>
<li>The bull case rests on the market share gains, high barriers to entry, healthy forward revenue indicators, a return to growth, and top-tier EBIT margin.</li>
</ul>



DN Solutions (298440 KS), the third-largest machining centre/turning centre machine tool manufacturer, seeks to raise US$1.1 billion in a KRX IPO.   

DN Automotive (007340 KS) is the largest shareholder, representing 84.8% of outstanding shares. The primary/secondary split is 43%/57%.
The bull case rests on the market share gains, high barriers to entry, healthy forward revenue indicators, a return to growth, and top-tier EBIT margin.


Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/makino-milling-machine-co" target="_blank" data-smartkarma-citation="entities:5200:1" rel="noopener">Makino Milling Machine Co (6135 JP)</a> Board has proposed introducing countermeasures to nudge <a href="https://www.smartkarma.com/entities/nidec-corp" target="_blank" data-smartkarma-citation="entities:7245:1" rel="noopener">Nidec Corp (6594 JP)</a> to delay the start of the tender to 9 May. </li>
<li>The countermeasure was likely needed to facilitate a competing offer rather than force Nidec to provide the required information and delay the start (Nidec is still evaluating the request).</li>
<li>Nidec’s offer at current terms has a low chance of success, necessitating revised terms. The Board claims that there is a sufficient probability of a competing proposal.</li>
</ul>


The Makino Milling Machine Co (6135 JP) Board has proposed introducing countermeasures to nudge Nidec Corp (6594 JP) to delay the start of the tender to 9 May. 
The countermeasure was likely needed to facilitate a competing offer rather than force Nidec to provide the required information and delay the start (Nidec is still evaluating the request).
Nidec’s offer at current terms has a low chance of success, necessitating revised terms. The Board claims that there is a sufficient probability of a competing proposal.


Makino Milling Machine (6135 JP): Proposes Countermeasures

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

<ul>
<li>Our base case valuation of DN Solutions suggests target price of 90,167 won per share, which is 1% higher than the high end of the IPO price range. </li>
<li>Our base case valuation is based on 17.9x P/E using our estimated net profit of 317.9 billion won for DN Solutions in 2025. </li>
<li>Given the lack of upside, we have a Negative View of this IPO. DN Solutions has higher operating margin and ROE but lower revenue growth than its comps. </li>
</ul>


Our base case valuation of DN Solutions suggests target price of 90,167 won per share, which is 1% higher than the high end of the IPO price range. 
Our base case valuation is based on 17.9x P/E using our estimated net profit of 317.9 billion won for DN Solutions in 2025. 
Given the lack of upside, we have a Negative View of this IPO. DN Solutions has higher operating margin and ROE but lower revenue growth than its comps. 


Japan

OKUMA Corporation manufactures machine tools and other industrial machinery. The Company produces computerized numerically controlled (CNC) machine tools including lathes, machining centers (MCs), grinders, and drilling machines.

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Okuma Corp (6103 JP)

DN Solutions Pre-IPO - Peer Comparison

DN Solutions (298440 KS) (DNS) aims to raise around US$1.1bn in its Korea IPO via selling a mix of primary and secondary shares. In this note, we...

Sumeet Singh

DN Solutions IPO: The Bear Case

The bear case rests on tepid growth due to volume declines, early indications of margin pressure, rising cash conversion cycle, and mid-tier FCF...

Arun George

DN Solutions IPO: The Bull Case

The bull case rests on the market share gains, high barriers to entry, healthy forward revenue indicators, a return to growth, and top-tier EBIT...

Arun George

Makino Milling Machine (6135 JP): Proposes Countermeasures

The Board proposes countermeasures to get Nidec to delay the start but is more likely to facilitate a competing offer. The probability of a bidding...

Arun George

DN Solutions IPO Valuation Analysis

Our base case valuation of DN Solutions suggests target price of 90,167 won per share, which is 1% higher than the high end of the IPO price range....

Douglas Kim

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