Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul>
<li>Chungdam Global is getting ready to complete its IPO in the next several weeks. The expected market cap after the IPO is from 179 billion won to 204 billion won.</li>
<li>Chungdam Global sells Korean cosmetics and other global beauty brands to e-commerce companies in China and other countries. It generated more than 75% of its sales in 2021 from JD.com.</li>
<li>The company experienced exceptional growth in sales and profits in the past several years. Its sales and operating profits jumped by 97.4% and 204% CAGR from 2019 to 2021, respectively</li>
</ul>


Chungdam Global is getting ready to complete its IPO in the next several weeks. The expected market cap after the IPO is from 179 billion won to 204 billion won.
Chungdam Global sells Korean cosmetics and other global beauty brands to e-commerce companies in China and other countries. It generated more than 75% of its sales in 2021 from JD.com.
The company experienced exceptional growth in sales and profits in the past several years. Its sales and operating profits jumped by 97.4% and 204% CAGR from 2019 to 2021, respectively


<div class="content-highlight">
<p><strong>Our base case valuation of Silicon2 Co is implied market cap of 436.5 billion won or 41,975 won per share, which is 54% higher than the high end of the IPO price range of 27,200 won per share. Given the attractive upside, we have a POSITIVE view of the Silicon2 Co IPO and we would subscribe to the IPO deal. </strong></p>
<p>Our base case valuation is based on 28.6x our estimated net profit of 15.3 billion won for the company in 2022. Our valuation multiple of 28.6x P/E is based on the average P/E valuation multiple of the peers in 2022. Our valuation sensitivity analysis suggests a low-high value of 30,222 won per share to 55,407 won per share.</p>
<p>Silicon2 Co has better metrics than its peers for operating margins, ROE, and sales growth. As such, one could make the case of higher valuation multiple for the company as compared to its peers. </p>
</div><div><p></p></div>


Our base case valuation of Silicon2 Co is implied market cap of 436.5 billion won or 41,975 won per share, which is 54% higher than the high end of the IPO price range of 27,200 won per share. Given the attractive upside, we have a POSITIVE view of the Silicon2 Co IPO and we would subscribe to the IPO deal. 
Our base case valuation is based on 28.6x our estimated net profit of 15.3 billion won for the company in 2022. Our valuation multiple of 28.6x P/E is based on the average P/E valuation multiple of the peers in 2022. Our valuation sensitivity analysis suggests a low-high value of 30,222 won per share to 55,407 won per share.
Silicon2 Co has better metrics than its peers for operating margins, ROE, and sales growth. As such, one could make the case of higher valuation multiple for the company as compared to its peers. 


<p>Silicon2, a company specializing in K-beauty ("Korean beauty") e-commerce platforms, is trying to complete its IPO in the KOSDAQ market in September. Established in 2001, Silicon2 operates 'stylekorean.com' which is a global online shopping mall that sells beauty products. It sells mostly cosmetics to more than 1 million customers in 100 countries around the world, including North America, Japan, Europe, and Southeast Asia. The company actively uses social media sites such as Facebook, Instagram, and Youtube to advertise and market its products. </p><p>The company is offering 1.65 million shares in this IPO offering. The IPO price range is from 23,800 won to 27,200 won per share. At the high end of the IPO price range, IPO offering will be 45 billion won. According to the bankers' valuation, the expected market cap after the IPO is from 248 billion won to 283 billion won. The book building for the institutional investors starts on 9 September. The lead bankers include Samsung Securities and Mirae Asset Securities.</p><div class="content-highlight"><p>The bankers used three companies including <a href="https://www.smartkarma.com/entities/koreacenter-com-co-ltd" target="_blank" data-smartkarma-citation="entities:28329:1" rel="noopener">Koreacenter.com Co Ltd (290510 KS)</a>, BrandX Corp, and <a href="https://www.smartkarma.com/entities/revolve-group-inc" target="_blank" data-smartkarma-citation="entities:27748:1" rel="noopener">Revolve Group Inc (RVLV US)</a> as comps to value Silicon2 Co. The bankers took the net profit of the comps in 1H 2021 and annualized them to derive an average P/E of 44.7x (taking into account recent prices). The bankers then took the annualized net profit of Silicon2 Co in 1H 2021 and applied P/E of 44.7x to derive an implied market cap of 469 billion won (45,061 won per share), pre IPO discount. <strong>After taking into the IPO discount of 39.6% - 47.2%, the company derived the IPO price range of 23,800 - 27,200 won per share.</strong></p></div>

Silicon2, a company specializing in K-beauty ("Korean beauty") e-commerce platforms, is trying to complete its IPO in the KOSDAQ market in September. Established in 2001, Silicon2 operates 'stylekorean.com' which is a global online shopping mall that sells beauty products. It sells mostly cosmetics to more than 1 million customers in 100 countries around the world, including North America, Japan, Europe, and Southeast Asia. The company actively uses social media sites such as Facebook, Instagram, and Youtube to advertise and market its products. The company is offering 1.65 million shares in this IPO offering. The IPO price range is from 23,800 won to 27,200 won per share. At the high end of the IPO price range, IPO offering will be 45 billion won. According to the bankers' valuation, the expected market cap after the IPO is from 248 billion won to 283 billion won. The book building for the institutional investors starts on 9 September. The lead bankers include Samsung Securities and Mirae Asset Securities.The bankers used three companies including Koreacenter.com Co Ltd (290510 KS), BrandX Corp, and Revolve Group Inc (RVLV US) as comps to value Silicon2 Co. The bankers took the net profit of the comps in 1H 2021 and annualized them to derive an average P/E of 44.7x (taking into account recent prices). The bankers then took the annualized net profit of Silicon2 Co in 1H 2021 and applied P/E of 44.7x to derive an implied market cap of 469 billion won (45,061 won per share), pre IPO discount. After taking into the IPO discount of 39.6% - 47.2%, the company derived the IPO price range of 23,800 - 27,200 won per share.

Revolve Group Inc / Equity Capital Markets

<p><strong>Revolve (Advance Holdings LLC, RVLV US) is a US-based online fashion retailer that is getting ready for an IPO in the next few weeks. </strong>Established in 2003, Revolve focuses on the women's premium lifestyle apparel sector for the millennial demographic segment. The company's key competitive advantage is the fact that it is one of the pioneers and leaders in the <strong>"influence, rinse, and repeat"</strong> online apparel marketing strategy.</p>
<p>Revolve has more than 2,500 "influencers," mostly in the millennial women's apparel segment and the company does a very good job of marketing to these influencers who in turn play a big role in generating sales for the company. All major apparel companies use these influencers to market their products. However, Revolve capitalizes on these influencers better than most of its competitors and this is a key reason the company has been able to rapidly grow its business in a profitable manner. According to the company, the influencers drive almost 70% of its sales. </p>
<p>The company is profitable and generates positive free cash flow. In the 15 years of operations, the company has been profitable in 14 of these years. In addition, unlike many other recent IPOs, the company has raised only US$15 million in outside equity capital since inception of the company. The company's sales increased 24% YoY to US$245 million and its operating profit increased 82% YoY to US$21.6 million in 1H18. Its operating margin improved from 6% in 1H17 to 8.7% in 1H18, which reflects improving economies of scale. </p>

Revolve (Advance Holdings LLC, RVLV US) is a US-based online fashion retailer that is getting ready for an IPO in the next few weeks. Established in 2003, Revolve focuses on the women's premium lifestyle apparel sector for the millennial demographic segment. The company's key competitive advantage is the fact that it is one of the pioneers and leaders in the "influence, rinse, and repeat" online apparel marketing strategy.
Revolve has more than 2,500 "influencers," mostly in the millennial women's apparel segment and the company does a very good job of marketing to these influencers who in turn play a big role in generating sales for the company. All major apparel companies use these influencers to market their products. However, Revolve capitalizes on these influencers better than most of its competitors and this is a key reason the company has been able to rapidly grow its business in a profitable manner. According to the company, the influencers drive almost 70% of its sales. 
The company is profitable and generates positive free cash flow. In the 15 years of operations, the company has been profitable in 14 of these years. In addition, unlike many other recent IPOs, the company has raised only US$15 million in outside equity capital since inception of the company. The company's sales increased 24% YoY to US$245 million and its operating profit increased 82% YoY to US$21.6 million in 1H18. Its operating margin improved from 6% in 1H17 to 8.7% in 1H18, which reflects improving economies of scale. 

Revolve IPO Preview (Part 1): Influence, Rinse, & Repeat

United States

Revolve Group, Inc. operates as an e-commerce fashion company. The Company markets and sells men's and women's designer apparels, shoes, and accessories. Revolve Group offers jackets, pants, shorts, skirts, sweaters, tops, shoes, and jewelry products. Revolve Group markets its products worldwide.

Revolve Group Inc (RVLV US)

Chungdam Global IPO Preview

Chungdam Global is getting ready to complete its IPO in the next several weeks. The company experienced exceptional growth in sales and profits in...

Douglas Kim

Silicon2 Co IPO Valuation Analysis

Our base case valuation of Silicon2 Co is implied market cap of 436.5 billion won or 41,975 won per share, which is 54% higher than the high end of...

Douglas Kim

Silicon2 Co IPO Preview

Silicon2, a company specializing in K-beauty e-commerce platforms, is trying to complete its IPO. Silicon2 operates 'stylekorean.com' which sells...

Douglas Kim

Revolve IPO Preview (Part 1): Influence, Rinse, & Repeat

Revolve (Advance Holdings LLC, RVLV US) is a US-based online fashion retailer that is getting ready for an IPO in the next few weeks. Established...

Douglas Kim