Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<p>Maeil Business Daily <a href="https://finance.naver.com/news/news_read.naver?article_id=0004867946&amp;office_id=009&amp;mode=LSS3D&amp;type=0&amp;section_id=101&amp;section_id2=258&amp;section_id3=402&amp;date=20211021&amp;page=1" target="_blank" rel="noopener">reported</a> after the market close today that <a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300 KS)</a> has successfully completed its IPO book building with the IPO price of 90,000 won, which was at the high end of the IPO price range. As of 2PM, it was estimated that the competition rate for the IPO shares was about 1,400 to 1. It is estimated that the final competition rate could be closer to about 2,000 to 1.</p><p>More than 70% of the subscription shares included lock-up periods, which is quite high. There is a good chance that Kakao Pay could be the last major IPO with market cap of more than 10 trillion won and many institutional investors subscribed to this IPO. The successful IPO of Kakao Bank also likely to have played an important role in the strong IPO demand of Kakao Pay as well.</p><p><strong>Valuation - </strong>Our one year base case valuation of Kakao Pay is implied market cap of 11.1 trillion won or 81,829 won per share, which is based on EV/S of 10x using our estimated sales of 919 billion won in 2022. However, given the excellent book building results, we believe that there is a strong likelihood of a short term pop on the share price after the IPO. Our sensitivity analysis suggests a high end price of 103,366 won and we believe that it is likely to reach/surpass this high end level in the first few hours of trading. </p><p>In the first few days of trading Kakao Pay IPO, it may not be as bullish as Kakao Bank's IPO in the first two weeks of trading. However, there is a good probability that Kakao Pay's stock price will likely exceed our high end valuation levels (103,366 won). Nonetheless, over a longer period of time (1 year), we believe that the share price of Kakao Pay will likely come down closer to our base case (81,829 won) as investors become more concerned about the heightened competitive pressures and the company's growth rate starts to decline. </p>

Maeil Business Daily reported after the market close today that Kakao Pay (377300 KS) has successfully completed its IPO book building with the IPO price of 90,000 won, which was at the high end of the IPO price range. As of 2PM, it was estimated that the competition rate for the IPO shares was about 1,400 to 1. It is estimated that the final competition rate could be closer to about 2,000 to 1.More than 70% of the subscription shares included lock-up periods, which is quite high. There is a good chance that Kakao Pay could be the last major IPO with market cap of more than 10 trillion won and many institutional investors subscribed to this IPO. The successful IPO of Kakao Bank also likely to have played an important role in the strong IPO demand of Kakao Pay as well.Valuation - Our one year base case valuation of Kakao Pay is implied market cap of 11.1 trillion won or 81,829 won per share, which is based on EV/S of 10x using our estimated sales of 919 billion won in 2022. However, given the excellent book building results, we believe that there is a strong likelihood of a short term pop on the share price after the IPO. Our sensitivity analysis suggests a high end price of 103,366 won and we believe that it is likely to reach/surpass this high end level in the first few hours of trading. In the first few days of trading Kakao Pay IPO, it may not be as bullish as Kakao Bank's IPO in the first two weeks of trading. However, there is a good probability that Kakao Pay's stock price will likely exceed our high end valuation levels (103,366 won). Nonetheless, over a longer period of time (1 year), we believe that the share price of Kakao Pay will likely come down closer to our base case (81,829 won) as investors become more concerned about the heightened competitive pressures and the company's growth rate starts to decline. 

Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

<p>South Korea-based EuBiologics is the largest supplier of oral cholera vaccine in the world, representing more than 80% market share. By leveraging on market leadership positioning, amid increasing demand and capacity expansion, its oral cholera vaccine has become a stable cash cow for the company. This year, EuBiologics has started developing COVID-19 vaccine, EuCorVac-19, which is currently under clinical trial. The company is one of the frontrunners among the local COVID-19 vaccine developers. With just 2.5% of the people in low-income countries (EuBiologic’s core operating markets) receiving at least one dose of a COVID-19 vaccine, EuCorVac-19 has the potential of becoming second major revenue stream for EuBiologics. Demand for vaccinations will remain for years to come, as more populations become eligible for vaccinations and booster vaccines are rolled out. EuBiologics has a rich late-stage pipeline of typhoid and pneumococcal conjugate vaccines, which target a combined market size of more than KRW8 trillion.   </p>

South Korea-based EuBiologics is the largest supplier of oral cholera vaccine in the world, representing more than 80% market share. By leveraging on market leadership positioning, amid increasing demand and capacity expansion, its oral cholera vaccine has become a stable cash cow for the company. This year, EuBiologics has started developing COVID-19 vaccine, EuCorVac-19, which is currently under clinical trial. The company is one of the frontrunners among the local COVID-19 vaccine developers. With just 2.5% of the people in low-income countries (EuBiologic’s core operating markets) receiving at least one dose of a COVID-19 vaccine, EuCorVac-19 has the potential of becoming second major revenue stream for EuBiologics. Demand for vaccinations will remain for years to come, as more populations become eligible for vaccinations and booster vaccines are rolled out. EuBiologics has a rich late-stage pipeline of typhoid and pneumococcal conjugate vaccines, which target a combined market size of more than KRW8 trillion.   

EuBiologics (206650 KS): Cashing on Vaccine Business

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.

Event-Driven

<p>At 4 pm today, SK Chemicals announced that it would conduct a bonus issue.</p><p><a href="https://kind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptno=20211007000382&amp;docno=&amp;viewerhost=&amp;viewerport=" target="_blank" rel="noopener">Here is the link to the regulatory filing at the KRX KIND</a>.</p><div class="content-highlight"><ul>
<li><strong>It will be a 50% capital increase ratio, which allocates 0.5 new shares per share.</strong></li>
<li><strong>The number of newly issued stocks is 5,869,384 common stocks and 656,759 preferred stocks, for a total of 6,526,143 shares.</strong></li>
<li><strong>The new stock allocation base date is October 22, and the expected listing date is November 9. </strong></li>
</ul></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/997/original/1.png?1633605858" class="editor-image img-responsive" data-smartkarma-image-id="233997"></figure><p></p></section><p></p><p>As a result, SK Chemicals' ordinary shares outstanding becomes 17,608,152 after the bonus issue, and the total number of preferred shares will be 1,970,278. Of course, 157,779 treasury shares (Ord: 12,628 and 1P: 145,151) are not allocated new shares.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/999/original/2.png?1633606196" class="editor-image img-responsive" data-smartkarma-image-id="233999"></figure><p></p></section><p>In addition, SK Chemicals has also introduced a new dividend policy.</p><p><a href="https://engkind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptNo=20211007000423&amp;docno=&amp;formProcsCd=070&amp;language=english" target="_blank" rel="noopener">Here is the link to the regulatory filing at the KRX KIND</a>.</p><div class="content-highlight"><ul>
<li><strong>A dividend payout ratio of 30% from 2021 to 2023: SK Chemicals will use 30% of the de-consolidated net profit generated for three years from 2021 to 2023 for shareholder return.</strong></li>
<li><strong>In addition, SK Chemicals will actively consider interim dividends starting FY2022.</strong></li>
</ul></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/234/003/original/3.png?1633606720" class="editor-image img-responsive" data-smartkarma-image-id="234003"></figure></section>

At 4 pm today, SK Chemicals announced that it would conduct a bonus issue.Here is the link to the regulatory filing at the KRX KIND.
It will be a 50% capital increase ratio, which allocates 0.5 new shares per share.
The number of newly issued stocks is 5,869,384 common stocks and 656,759 preferred stocks, for a total of 6,526,143 shares.
The new stock allocation base date is October 22, and the expected listing date is November 9. 
As a result, SK Chemicals' ordinary shares outstanding becomes 17,608,152 after the bonus issue, and the total number of preferred shares will be 1,970,278. Of course, 157,779 treasury shares (Ord: 12,628 and 1P: 145,151) are not allocated new shares.In addition, SK Chemicals has also introduced a new dividend policy.Here is the link to the regulatory filing at the KRX KIND.
A dividend payout ratio of 30% from 2021 to 2023: SK Chemicals will use 30% of the de-consolidated net profit generated for three years from 2021 to 2023 for shareholder return.
In addition, SK Chemicals will actively consider interim dividends starting FY2022.


SK Chemicals Bonus Issue & New Shareholder Return Policy: Background & Impact

<p>SK Chemicals announced after the market close that it will improve the company's dividend policy and complete a bonus issue. According to the company, these are part of the company's increased emphasis on ESG improvements. We believe these are positive catalysts that are likely to further boost SK Chemicals' share price.</p><p>If the company pays out 30% of its net income as dividends, this could suggest DPS of nearly 10,000 won per share, which means that its DPS could surge nearly five times versus last year. This would also suggest a dividend per share of 3.4% at current prices which would be much better than last year's level.</p><p>SK Chemicals also announced a bonus issue (0.5 new shares for 1 common share). The total number of newly issued shares will be 5.86 million (common shares) and 0.66 million (preferred shares). After the bonus issue, there will be 17.63 million common shares and 2.12 million preferred shares.</p><p><strong>SK Chemicals NAV Analysis - </strong>Our base case NAV valuation of SK Chemicals suggests a valuation of 530,140 won per share, representing an 82% upside from current levels. This is based on the current market valuation of SK Bioscience (68.4% stake), 8x OP of SK Chemicals' core business, and a 50% NAV discount. </p>

SK Chemicals announced after the market close that it will improve the company's dividend policy and complete a bonus issue. According to the company, these are part of the company's increased emphasis on ESG improvements. We believe these are positive catalysts that are likely to further boost SK Chemicals' share price.If the company pays out 30% of its net income as dividends, this could suggest DPS of nearly 10,000 won per share, which means that its DPS could surge nearly five times versus last year. This would also suggest a dividend per share of 3.4% at current prices which would be much better than last year's level.SK Chemicals also announced a bonus issue (0.5 new shares for 1 common share). The total number of newly issued shares will be 5.86 million (common shares) and 0.66 million (preferred shares). After the bonus issue, there will be 17.63 million common shares and 2.12 million preferred shares.SK Chemicals NAV Analysis - Our base case NAV valuation of SK Chemicals suggests a valuation of 530,140 won per share, representing an 82% upside from current levels. This is based on the current market valuation of SK Bioscience (68.4% stake), 8x OP of SK Chemicals' core business, and a 50% NAV discount. 

SK Chemicals - Announces A Big Improvement in Dividends and Bonus Issue

<p>September 18th is the major lockup release date for SK Bioscience. Not only will all 68.43% of the shares owned by SK Chemicals, the major shareholder, be released, but also the largest amount (5.16% of the SO) among the lockup shares held by the IPO institutional shareholders will be released.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/852/original/1.png?1631670665" class="editor-image img-responsive" data-smartkarma-image-id="229852"></figure><p>SK Chemicals recently received a shareholder letter from Metrica. In other words, the possibility of selling some of the shares held by the largest shareholder cannot be completely ruled out. But again, all attention is on the 4 million shares held by the IPO institutional investors. These are presumed to be mostly local publicly-raised funds and pension funds. Based on the current share price, their return is 330%. So, at this point, we should conclude that the probability that they will realize profits rather than holding for a longer period of time is quite high.</p><p>In both the 1-month lockup release on April 19 and the 3-month on June 18, the trading volume surged more than 3 times compared to the daily average. On the other hand, the stock price rose 6.44% on April 19th but fell 4.69% on June 18th. The reason that the stock price rose on April 19 was that it had fallen more than 20% since listing, so we may say that this 1-month lock-up release actually led to attracting bargain hunters.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/857/original/Trade+volume+%26+daily+price+gain.png?1631672810" class="editor-image img-responsive" data-smartkarma-image-id="229857"></figure><p>But the important thing that we must note here is that both of the previous major lockup releases had led to a huge surge in the trade volume, suggesting that a significant number of the IPO institutional shareholders must have opted to dispose of their holdings.</p>
<p>And this time, there is no reason to believe things would be different, especially considering that even the return is incomparably higher than the previous two lockup releases.</p></section>

September 18th is the major lockup release date for SK Bioscience. Not only will all 68.43% of the shares owned by SK Chemicals, the major shareholder, be released, but also the largest amount (5.16% of the SO) among the lockup shares held by the IPO institutional shareholders will be released.SK Chemicals recently received a shareholder letter from Metrica. In other words, the possibility of selling some of the shares held by the largest shareholder cannot be completely ruled out. But again, all attention is on the 4 million shares held by the IPO institutional investors. These are presumed to be mostly local publicly-raised funds and pension funds. Based on the current share price, their return is 330%. So, at this point, we should conclude that the probability that they will realize profits rather than holding for a longer period of time is quite high.In both the 1-month lockup release on April 19 and the 3-month on June 18, the trading volume surged more than 3 times compared to the daily average. On the other hand, the stock price rose 6.44% on April 19th but fell 4.69% on June 18th. The reason that the stock price rose on April 19 was that it had fallen more than 20% since listing, so we may say that this 1-month lock-up release actually led to attracting bargain hunters.But the important thing that we must note here is that both of the previous major lockup releases had led to a huge surge in the trade volume, suggesting that a significant number of the IPO institutional shareholders must have opted to dispose of their holdings.
And this time, there is no reason to believe things would be different, especially considering that even the return is incomparably higher than the previous two lockup releases.

Shorting Entry Timing on SK Bioscience for Sep 23 Lockup Release, Considering Chuseok Holiday

South Korea

SK Bioscience Co.,Ltd. operates biopharmaceutical businesses. The Company produces vaccines, sky cellflu prefilled syringes, sky cellflu quadrivalent prefilled syringes, varicella drugs, and other related products. SK Bioscience markets its products throughout South Korea.

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

SK Bioscience (302440 KS)

Kakao Pay Book Building Results

Maeil Business Daily reported after the market close today that Kakao Pay has successfully completed its IPO book building with the IPO price of...

Douglas Kim

EuBiologics (206650 KS): Cashing on Vaccine Business

Eubiologics is on a stable growth path, driven by increasing demand of its oral cholera vaccine business. Upcoming commercialization of COVID-19...

Tina Banerjee

SK Chemicals Bonus Issue & New Shareholder Return Policy: Background & Impact

This post details SK Chemicals' bonus issue and new shareholder return policy, announced late today. It also discusses the background of this...

Sanghyun Park

SK Chemicals - Announces A Big Improvement in Dividends and Bonus Issue

SK Chemicals announced after the market close that it will improve the company's dividend policy and complete a bonus issue.

Douglas Kim

Shorting Entry Timing on SK Bioscience for Sep 23 Lockup Release, Considering Chuseok Holiday

This post discusses short-selling entry timing on SK Bioscience aimed at the next week's major lockup release (September 23), considering the...

Sanghyun Park

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)