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.

Equity Capital Markets

<div><a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"></a><a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> is looking to raise up to US3.8bn in its South Korea IPO. </div><div>
Krafton Inc is a video game developer based in South Korea. The company is known for developing the global hit, PlayerUnknown's Battlegrounds (PUBG), an online multiplayer battle royale game. It is backed by Tencent and has also developed other games such as Tera, Elyon, Golf King: World Tour, Mini Golf King, Bowling King, and Archery King.
In this note, we will share our thoughts on assumptions and valuation.
We covered the IPO earlier in:
<ul><li>
<a href="https://www.smartkarma.com/insights/krafton-ipo-adapting-and-transforming-well" target="_blank" data-smartkarma-citation="insights:54117" rel="noopener">Krafton IPO - Adapting and Transforming Well</a> </li></ul>
</div>

 Krafton Inc (259960 KS) is looking to raise up to US3.8bn in its South Korea IPO. 
Krafton Inc is a video game developer based in South Korea. The company is known for developing the global hit, PlayerUnknown's Battlegrounds (PUBG), an online multiplayer battle royale game. It is backed by Tencent and has also developed other games such as Tera, Elyon, Golf King: World Tour, Mini Golf King, Bowling King, and Archery King.
In this note, we will share our thoughts on assumptions and valuation.
We covered the IPO earlier in:

Krafton IPO - Adapting and Transforming Well 


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.

Offering price &amp; size
Krafton submitted a correction report to the Financial Supervisory Service on the afternoon yesterday. It lowered the indicative price band from ₩458,000~557,000 to ₩400,000~498,000 by about 10%. The newly adjusted price band now implies a market cap range at ₩19.56~24.35T.










Pricing
Low, previous
High, previous
Low, adjusted
High, adjusted


Price
₩458,000
₩557,000
₩400,000
₩498,000


Base deal size
₩4,607.6B
₩5,603.5B
₩3,461.7B
₩4,309.8B


- Institutional allotment
₩2,534.2B
₩3,082.0B
₩1,903.9B
₩2,370.4B


Implied market cap
₩23,039.3B
₩28,019.4B
₩19,559.2B
₩24,351.2B


- Discount
32.40%
17.79%
30.93%
14.01%

Source: DART


In addition, the issuance of new shares was also reduced from 7.03 million shares to 5.62 million shares. Therefore, based on the lower end of the public offering band, the offering size decreased by ₩1.2T from ₩4.6T to ₩3.5T.  However, the secondary offering volume remains the same at 3.03 million shares. So, the split ratio is now 0.65 (primary) to 0.35 (secondary).








Offering size
Previous
Adjusted


Pre-IPO SO
43,274,070
43,274,070


Offering
10,060,230
8,654,230


- % of SO
23.25%
20.00%


- Institutional allotment
55.00~75.00%
55.00~75.00%


Primary %
69.88%
64.99%


Secondary %
30.12%
35.01%


Post-IPO shares outstanding
50,304,070
48,898,070


Capital increase rate
16.25%
13.00%


Dilution
13.98%
11.50%

Source: DART


Schedule

Krafton will open the book on July 14 and keep it open until July 27. After finalizing the offering price on July 29, we will see subscriptions on August 2. After that, August 5 is the payment date, and listing on the stock market will be completed in mid-August.
There was a time difference of about a week with Kakao Bank, whose subscription will fall on July 26.








Schedule
Previous
Adjusted


Book open
2021. 6. 28
2021. 7. 14


Book close
2021. 7. 9
2021. 7. 27


Allotment
2021. 7. 12
2021. 7. 29


Subscription
2021. 7. 14
2021. 8. 2


Payment
2021. 7. 19
2021. 8. 5


Listing
TBA
TBA

Source: DART


Valuation

The core of this revised report is the recalculation of the offering price. First, the group of comparative companies was completely changed. Krafton deleted all overseas companies, including Walt Disney and Warner Music, and reduced the comparative group to four domestic game companies: NCsoft, Netmarble, Kakao Games, and Pearl Abyss.
The average price-to-earnings ratio (PER) to last year's net income for the comparative group was 40.4 times. The average PER for the first quarter of this year on an annualized basis was calculated to be 47.2 times. An average of 43.8x was presented as the applied PER. This is slightly lower than the previous PER of 45.2x, which was initially controversial.











FY2020 net earnings based P/E
Note
NCSoft Corp
Netmarble Corp
Kakao Games Corp
PearlAbyss Corp


Reference full market cap: MIN[1M Avg, 1W Avg, 1D Close]
(A)
₩18,068.2B
₩11,216.9B
₩4,111.6B
₩4,086.8B


FY2020 annual net earnings to controlling stake
(B)
₩587.4B
₩312.9B
₩86.0B
₩86.6B


P/E
(C)=(A)/(B)
30.76x
35.85x
47.82x
47.19x


Average P/E
-
40.41x

Source: DART













FY2021 1Q based annualized net earnings based P/E
Note
NCSoft Corp
Netmarble Corp
Kakao Games Corp
PearlAbyss Corp


Reference full market cap: MIN[1M Avg, 1W Avg, 1D Close]
(A)
₩18,068.2B
₩11,216.9B
₩4,111.6B
₩4,086.8B


FY2021 1Q based annualized net earnings to controlling stake
(B)
₩323.5B
₩225.7B
₩83.0B
₩121.8B


P/E
(C)=(A)/(B)
55.85x
49.70x
49.52x
33.56x


Average P/E
-
47.16x

Source: DART


Krafton also slightly lowered the net profit applied to the IPO price.
They derived a simple average value by adding the annualized net profit based on the net profit in the first quarter of this year and last year's net profit. Through this, the applied net profitdecreased from ₩776B to ₩666B. By lowering the applied NP and the applied PER multiple together, the company's pre-discount enterprise value, which was initially calculated at ₩35T, dropped by 17% to ₩29T.
Here, a discount rate of 14.0 to 30.9% was applied to calculate the new indicative price band.








P/E valuation
Note
Krafton


FY2020 annual net earnings to controlling stake
(A)
₩556.3B


FY2021 1Q net earnings to controlling stake
(B)
₩194.0B


FY2021 1Q based annualized net earnings to controlling stake
(C) = (B) * 4
₩776.1B


Net earnings to controlling stake used in the valuation
(D) = [(A) + (C)]/2
₩666.2B


Average P/E based on FY2020 annual net earnings to controlling stake
(E)
40.40x


Average P/E based on FY2021 1Q based annualized net earnings to controlling stake
(F)
47.20x


Reference P/E
(G) = [(E) + (F)]/2
43.80x


Full market cap
(H) = (D) * (G)
₩29,166.2B


Price per share
(I) = (H)/post-IPO SO
₩579,153


Source: DART










Krafton IPO Offering Price/​Size Adjustment & Valuation Re-Review

Index Rebalance

What is the KRX BBIG K-New Deal Index?The KRX BBIG K-New Deal Index consists of 12 stocks, each of which is a representative company in four industries, including rechargeable Batteries, Bio, Internet, and Games, which are the leading industries in the Korean stock market.It is important to note that this is a mother index, under which there are four sub-indices, like one for each sector. Each sub-index has ten constituents selected based on market capitalization.Index weight &amp; number of constituentsThe mother index is an equal-weighted index, in which each index constituent is allocated the same weight at each balancing, 1/12 = 8.33%.But the four sub-indices employ a hybrid weight system. The top-three group is given the weight of 75%, in which each stock is allocated the same weight of 25% at each rebalancing. In comparison, the plus group consisting of the remaining seven constituents is given the remaining weight of 25%, in which their float-adjusted market capitalization weights the seven stocks.Screening criteria, period, base date, &amp; implementation dateScreening for index inclusion is based on the average daily market capitalization and the average daily trading value of an eligible company over the screening period. Companies are screened over the three months preceding the screening base date.Regular rebalancings are made at the end of February and August every year. This year, February 26 and August 31 are the implementation dates of the regular rebalancing.Therefore, the screening base date is January 29 and July 30, which are the last days of the previous month.
Screening details

Criteria
Average daily market capitalization


Period
3 months preceding the screening base date


Base date

Last trading day of January and July
: January 29 and July 30 



Implementation date

Last trading day of February and August
: February 26 &amp; August 31 


Source: KRX
Current constituents &amp; index weights, as of June 18, 2021Below is the index weight of the constituent stocks of each index based on last Friday's closing price. The index weight reset on February 26 changed in proportion to the share price increase (or decrease).









KRX BBIG K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


LG Chem Ltd
051910
7.58%
₩58,026.9B
₩254.2B


Samsung SDI Co Ltd
006400
7.86%
₩46,347.3B
₩181.5B


SK Innovation Co Ltd
096770
8.42%
₩25,613.0B
₩228.0B


Samsung Biologics Co Ltd
207940
8.85%
₩55,313.9B
₩196.2B


Celltrion, Inc.
068270
7.19%
₩33,625.7B
₩164.3B


SK Biopharmaceuticals Co Ltd
326030
8.30%
₩9,984.9B
₩41.1B


Kakao Corp
035720
13.13%
₩68,809.1B
₩405.9B


Naver Corp
035420
8.53%
₩65,376.8B
₩245.8B


Duzon Bizon Co Ltd
012510
6.38%
₩2,530.4B
₩17.5B


NCSoft Corp
036570
7.02%
₩17,958.4B
₩74.0B


Netmarble Corp
251270
8.49%
₩11,560.7B
₩46.2B


Kakao Games Corp
293490
8.44%
₩4,305.6B
₩30.4B

Source: KRX











KRX Secondary Battery K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


LG Chem Ltd
051910
23.22%
₩58,026.9B
₩254.2B


Samsung SDI Co Ltd
006400
24.07%
₩46,347.3B
₩181.5B


SK Innovation Co Ltd
096770
25.79%
₩25,613.0B
₩228.0B


Posco Chemical Co Ltd
003670
7.83%
₩9,117.7B
₩38.9B


SKC Co Ltd
011790
5.53%
₩5,509.8B
₩50.1B


Ecopro BM Co Ltd
247540
3.87%
₩4,546.1B
₩26.3B


Iljin Materials Co Ltd
020150
2.77%
₩3,255.4B
₩15.5B


L&amp;F Co., Ltd.
066970
2.85%
₩2,625.4B
₩41.6B


SoulBrain Co Ltd
357780
2.58%
₩2,568.5B
₩9.4B


Chunbo Co Ltd
278280
1.50%
₩1,853.0B
₩9.2B

Source: KRX











KRX Bio K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


Samsung Biologics Co Ltd
207940
27.57%
₩55,313.9B
₩196.2B


Celltrion, Inc.
068270
22.41%
₩33,625.7B
₩164.3B


Celltrion HealthCare Co Ltd
091990
10.79%
₩18,490.4B
₩107.9B


SK Biopharmaceuticals Co Ltd
326030
25.87%
₩9,984.9B
₩41.1B


Celltrion Pharm Inc
068760
2.39%
₩5,653.7B
₩36.5B


Hanmi Science Co Ltd
008930
1.41%
₩4,691.1B
₩15.9B


Yuhan Corp
000100
3.16%
₩4,478.3B
₩16.2B


Shinpoong Pharmaceutical Co Ltd
019170
2.66%
₩4,339.5B
₩216.5B


Green Cross Corp
006280
1.61%
₩3,728.0B
₩52.2B


Seegene Inc
096530
2.12%
₩3,352.9B
₩58.6B

Source: KRX











KRX Internet K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


Kakao Corp
035720
36.25%
₩68,809.1B
₩405.9B


Naver Corp
035420
23.55%
₩65,376.8B
₩245.8B


Duzon Bizon Co Ltd
012510
17.42%
₩2,530.4B
₩17.5B


KMW Co Ltd
032500
6.74%
₩2,289.7B
₩15.6B


NHN KCP Corp
060250
3.60%
₩1,450.6B
₩6.5B


AfreecaTV Co Ltd
067160
4.14%
₩1,249.5B
₩13.4B


Ace Technologies Corp.
088800
2.65%
₩852.8B
₩12.2B


Seojin System Co Ltd
178320
2.55%
₩839.0B
₩8.8B


Ahnlab Inc
053800
1.95%
₩720.0B
₩6.4B


Rsupport Co Ltd
131370
1.15%
₩470.9B
₩2.7B

Source: KRX











KRX Game K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


NCSoft Corp
036570
21.23%
₩17,958.4B
₩74.0B


Netmarble Corp
251270
26.10%
₩11,560.7B
₩46.2B


PearlAbyss Corp
263750
8.85%
₩4,410.4B
₩12.2B


Kakao Games Corp
293490
25.95%
₩4,305.6B
₩30.4B


Com2uS Corp
078340
4.92%
₩1,688.1B
₩31.4B


NHN Corp
181710
3.38%
₩1,543.7B
₩5.7B


Doubleu Games Co Ltd
192080
2.55%
₩1,205.2B
₩7.1B


Webzen Inc
069080
3.05%
₩1,145.8B
₩9.8B


Wemade Co Ltd
112040
2.16%
₩971.0B
₩10.1B


Neptune Co
217270
1.81%
₩819.8B
₩4.1B

Source: KRX



KRX BBIG Index Rebalancing Preview: SK IE Tech, SK Bioscience, Krafton, Kakao Games, & Pearl Abyss

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

The KRX will announce the results of the September review of the BBIG indices in August and the changes will become effective after the close of trading on 9 September.The BBIG (secondary Battery, Bio, Internet and Gaming sectors) indices were launched late last year. ETFs were subsequently launched on the 5 indices and the BBIG ETF and the Secondary Battery ETF have gathered a significant amount of assets since then.At the September rebalance we expect the following changes:<ul>
<li>Secondary Battery ETF: <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a> replaces <a href="https://www.smartkarma.com/entities/chunbo-co-ltd" target="_blank" data-smartkarma-citation="entities:27848:1" rel="noopener">Chunbo Co Ltd (278280 KS)</a>
</li>
<li>Bio ETF: <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> joins the index and the top 3 stocks. This moves <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> to the plus group; <a href="https://www.smartkarma.com/entities/hanmi-pharm-co-ltd" target="_blank" data-smartkarma-citation="entities:12476:1" rel="noopener">Hanmi Pharm (128940 KS)</a> joins the index and <a href="https://www.smartkarma.com/entities/seegene-inc" target="_blank" data-smartkarma-citation="entities:11483:1" rel="noopener">Seegene Inc (096530 KS)</a> and <a href="https://www.smartkarma.com/entities/green-cross-corp" target="_blank" data-smartkarma-citation="entities:2969:1" rel="noopener">Green Cross (006280 KS)</a> are deleted.</li>
<li>Internet ETF: <a href="https://www.smartkarma.com/entities/kg-inicis-co-ltd" target="_blank" data-smartkarma-citation="entities:5234:1" rel="noopener">KG Inicis Co Ltd (035600 KS)</a> replaces <a href="https://www.smartkarma.com/entities/rsupport-co-ltd" target="_blank" data-smartkarma-citation="entities:14783:1" rel="noopener">Rsupport Co Ltd (131370 KS)</a> </li>
<li>Game ETF: <a href="https://www.smartkarma.com/entities/devsisters-co-ltd" target="_blank" data-smartkarma-citation="entities:14096:1" rel="noopener">Devsisters (194480 KS)</a> replaces <a href="https://www.smartkarma.com/entities/neptune-company" target="_blank" data-smartkarma-citation="entities:28826:1" rel="noopener">Neptune Company (217270 KS)</a>.</li>
<li>BBIG ETF: <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> replaces <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> </li>
</ul>There could be more interesting changes if <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (1486402D KS)</a> lists before end July as expected.The first rebalance of the index took place in February this year and the inclusions outperformed the exclusions by nearly 8% between announcement of the changes and implementation. So this rebalance is something worth looking at.

The KRX will announce the results of the September review of the BBIG indices in August and the changes will become effective after the close of trading on 9 September.The BBIG (secondary Battery, Bio, Internet and Gaming sectors) indices were launched late last year. ETFs were subsequently launched on the 5 indices and the BBIG ETF and the Secondary Battery ETF have gathered a significant amount of assets since then.At the September rebalance we expect the following changes:
Secondary Battery ETF: SK IE Technology (361610 KS) replaces Chunbo Co Ltd (278280 KS)

Bio ETF: SK Bioscience (302440 KS) joins the index and the top 3 stocks. This moves SK Biopharmaceuticals Co Ltd (326030 KS) to the plus group; Hanmi Pharm (128940 KS) joins the index and Seegene Inc (096530 KS) and Green Cross (006280 KS) are deleted.
Internet ETF: KG Inicis Co Ltd (035600 KS) replaces Rsupport Co Ltd (131370 KS) 
Game ETF: Devsisters (194480 KS) replaces Neptune Company (217270 KS).
BBIG ETF: SK Bioscience (302440 KS) replaces SK Biopharmaceuticals Co Ltd (326030 KS) 
There could be more interesting changes if  Krafton Inc (1486402D KS) lists before end July as expected.The first rebalance of the index took place in February this year and the inclusions outperformed the exclusions by nearly 8% between announcement of the changes and implementation. So this rebalance is something worth looking at.

KRX BBIG Index Rebalance Preview: Worth a Look

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">
In this insight, we provide an update on the Krafton IPO, including its 2020 financials. It has been reported in the local media that the Krafton IPO could value the company at about <a href="https://www.gamesindustry.biz/articles/2021-01-19-ipo-plans-value-krafton-at-up-to-27bn" target="_blank" rel="noopener">20 trillion won</a> ($18 billion) to 30 trillion won ($27 billion). 
If Krafton is valued at about 30 trillion won, it would be close to the combined market caps of <a href="https://www.smartkarma.com/entities/ncsoft-corp" target="_blank" data-smartkarma-citation="entities:5169:1" rel="noopener">NCSOFT Corp (036570 KS)</a> and <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS) </a>which are 29.5 trillion won right now. The current<a href="http://www.ipo38.co.kr/forum/?code=259960" target="_blank" rel="noopener"> gray market value</a> of Krafton is 24.5 trillion won ($21.9 billion). 
</div>


In this insight, we provide an update on the Krafton IPO, including its 2020 financials. It has been reported in the local media that the Krafton IPO could value the company at about 20 trillion won ($18 billion) to 30 trillion won ($27 billion). 
If Krafton is valued at about 30 trillion won, it would be close to the combined market caps of NCSOFT Corp (036570 KS) and Netmarble Corporation (251270 KS) which are 29.5 trillion won right now. The current gray market value of Krafton is 24.5 trillion won ($21.9 billion). 


An Update on the Krafton IPO - The Largest Game Company in Korea

South Korea

Pearl Abyss Corp. operates as a computer games making company. The Company offers games development, games exporting, and other services. Pearl Abyss serves customers worldwide.

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

Pearl Abyss (263750 KS)

Krafton IPO - Assumptions and Valuation

Krafton Inc (259960 KS) is looking to raise up to US3.8bn in its South Korea IPO. In this note, we will share our thoughts on assumptions and...

Zhen Zhou, Toh

Krafton IPO Offering Price/Size Adjustment & Valuation Re-Review

Still, the revised valuation does not seem appropriate in that it still uses distorted net profit and the discount rate doesn't reflect high...

Sanghyun Park

KRX BBIG Index Rebalancing Preview: SK IE Tech, SK Bioscience, Krafton, Kakao Games, & Pearl Abyss

This post previews the KRX BBIG Index (including 4 sub-indices) scheduled for August 31, 2021. The notable names include SK Bioscience, SK IE...

Sanghyun Park

KRX BBIG Index Rebalance Preview: Worth a Look

There are lots of changes expected to the KRX BBIG indices at the September review. With a large amount of assets tracking the indices, some of the...

Brian Freitas

An Update on the Krafton IPO - The Largest Game Company in Korea

In this insight, we provide an update on the Krafton IPO. It has been reported in the local media that the Krafton could be valued at about 20...

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Krafton IPO - Assumptions and Valuation

Krafton Inc (259960 KS) is looking to raise up to US3.8bn in its South Korea IPO. In this note, we will share our thoughts on assumptions and...

Zhen Zhou, Toh

Krafton IPO Offering Price/​Size Adjustment & Valuation Re-Review

Still, the revised valuation does not seem appropriate in that it still uses distorted net profit and the discount rate doesn't reflect high...

Sanghyun Park

KRX BBIG Index Rebalancing Preview: SK IE Tech, SK Bioscience, Krafton, Kakao Games, & Pearl Abyss

This post previews the KRX BBIG Index (including 4 sub-indices) scheduled for August 31, 2021. The notable names include SK Bioscience, SK IE...

Sanghyun Park

KRX BBIG Index Rebalance Preview: Worth a Look

There are lots of changes expected to the KRX BBIG indices at the September review. With a large amount of assets tracking the indices, some of the...

Brian Freitas

An Update on the Krafton IPO - The Largest Game Company in Korea

In this insight, we provide an update on the Krafton IPO. It has been reported in the local media that the Krafton could be valued at about 20...

Douglas Kim

Krafton IPO Offering Price/Size Adjustment & Valuation Re-Review