Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Equity Capital Markets

Samyang Optics Co. / Equity Capital Markets

We will have another PE-owned company IPO. This time, Korea's another major local PE called VIG Partners (spun off from Vogo Fund) will IPO one of its key investments, <a href="https://www.smartkarma.com/entities/24100" target="_blank" data-smartkarma-citation="entities:24100:1">Samyang Optics Co. Ltd (225190 KS)</a>. The indicative price band is ₩16,700 - ₩20,600. The IPO size is ₩66.8bil - ₩82.4bil. All shares will be offered via secondary distribution. 4 million shares will be offered and this is 40% of what VIG Partners owns. Market cap will be ₩168bil - ₩207bil. In fact, Samyang Optics could be Korea's first PE-owned company IPO before MBK's <a href="https://www.smartkarma.com/entities/23999" target="_blank" data-smartkarma-citation="entities:23999:1">ING Life Insurance Korea Ltd. (079440 KS)</a>. VIG Partners attempted to IPO Samyang Optics back in October 2015. But it failed to attract enough demands from investors, so it dropped the IPO and now is trying it again.Samyang Optics is basically an optical lens company (it is important to note that Samyang makes lenses for digital cameras, not smartphone cameras). In fact, Samyang Optics is Korea's only interchangeable lens maker. VIG Partners acquired it for ₩68bil in August 2013. After being acquired by VIG, Samyang has achieved a remarkable turnaround. Its 2016 sales reached ₩62.7bil (9.7% YoY) with ₩19.5bil in operating profits (11.0% YoY). 2016 EBITDA is ₩21.0bil. If we apply EV/EBITDA multiple of 10x (which is generally considered as the average multiple to be applied to M&amp;A deals in Korea), then Samyang's valuation would easily be estimated at around ₩200bil level. This means VIG would easily triple its initial investment of ₩68bil just in four years. Moreover, VIG has already taken a hefty sum of money from Samyang. In 2014, VIG retrieved ₩10.9bil through capital reduction and ₩7bil through dividends. Again 2015, VIG retrieved ₩10bil through dividends. Last year, VIG retrieved ₩12bil through dividends. This means VIG has already retrieved nearly 60% of its initial investment. So, with Samyang's ₩200bil IPO valuation, we can say VIG is well positioned to hit a jackpot.I guess we can say Korea's PE industry has advanced to a point where Korean PEs are now serving as a true business reformer rather than a mere investor. Samyang Optics is widely viewed as an exemplary case by many people in Korea. VIG Partners has had ups and downs in the past decade, but not many people here in Korea would disagree that VIG Partners' achievements in Samyang should be highly rated. Immediately after the acquisition, VIG formed Samyang's top management with the highly-regarded industry experts (mostly former Samsung employees) and also made a brave decision to discontinue the long-stagnant CCTV business. Another pleasantly surprising aspect is VIG has done the company restructuring (PMI: Post-Merger Integration) in an unusual way. VIG focused on the improvement of each individual employee's competence. So, it kept all of Samyang's 120 employees instead of a massive layoff during the PMI process. As a result, Samyang became able to push ahead with aggressive business expansions, including new plant construction and new product development (most notably, auto-focus lens).Buoyed by immediate financial improvements, VIG attempted an early IPO in 2015 but to no avail. It might be too early but also the IPO market at the time was too crowded. Now, VIG is again making a second IPO attempt with even better financial performances. Samyang Optics has achieved 30% OP and EBITDA margin in each of the past three years and its sales are also growing at a modest rate. The company appears to be well positioned as a low-cost high-end player which can bring a real threat to such established camera lens makers as <a href="https://www.smartkarma.com/entities/21580" target="_blank" data-smartkarma-citation="entities:21580:1">Carl Zeiss Meditec AG (AFX GR)</a> (Germany), Sigma Corporation (private, Japan) and <a href="https://www.smartkarma.com/entities/17712" target="_blank" data-smartkarma-citation="entities:17712:1">Tamron Co Ltd (7740 JP)</a> (Japan). Its financial look is undoubtedly solid and bright. Now the key question is how Samyang's growth prospects in the seemingly "unsexy" digital camera market would be received and perceived by investors.

We will have another PE-owned company IPO. This time, Korea's another major local PE called VIG Partners (spun off from Vogo Fund) will IPO one of its key investments, Samyang Optics Co. Ltd (225190 KS). The indicative price band is ₩16,700 - ₩20,600. The IPO size is ₩66.8bil - ₩82.4bil. All shares will be offered via secondary distribution. 4 million shares will be offered and this is 40% of what VIG Partners owns. Market cap will be ₩168bil - ₩207bil. In fact, Samyang Optics could be Korea's first PE-owned company IPO before MBK's ING Life Insurance Korea Ltd. (079440 KS). VIG Partners attempted to IPO Samyang Optics back in October 2015. But it failed to attract enough demands from investors, so it dropped the IPO and now is trying it again.Samyang Optics is basically an optical lens company (it is important to note that Samyang makes lenses for digital cameras, not smartphone cameras). In fact, Samyang Optics is Korea's only interchangeable lens maker. VIG Partners acquired it for ₩68bil in August 2013. After being acquired by VIG, Samyang has achieved a remarkable turnaround. Its 2016 sales reached ₩62.7bil (9.7% YoY) with ₩19.5bil in operating profits (11.0% YoY). 2016 EBITDA is ₩21.0bil. If we apply EV/EBITDA multiple of 10x (which is generally considered as the average multiple to be applied to M&amp;A deals in Korea), then Samyang's valuation would easily be estimated at around ₩200bil level. This means VIG would easily triple its initial investment of ₩68bil just in four years. Moreover, VIG has already taken a hefty sum of money from Samyang. In 2014, VIG retrieved ₩10.9bil through capital reduction and ₩7bil through dividends. Again 2015, VIG retrieved ₩10bil through dividends. Last year, VIG retrieved ₩12bil through dividends. This means VIG has already retrieved nearly 60% of its initial investment. So, with Samyang's ₩200bil IPO valuation, we can say VIG is well positioned to hit a jackpot.I guess we can say Korea's PE industry has advanced to a point where Korean PEs are now serving as a true business reformer rather than a mere investor. Samyang Optics is widely viewed as an exemplary case by many people in Korea. VIG Partners has had ups and downs in the past decade, but not many people here in Korea would disagree that VIG Partners' achievements in Samyang should be highly rated. Immediately after the acquisition, VIG formed Samyang's top management with the highly-regarded industry experts (mostly former Samsung employees) and also made a brave decision to discontinue the long-stagnant CCTV business. Another pleasantly surprising aspect is VIG has done the company restructuring (PMI: Post-Merger Integration) in an unusual way. VIG focused on the improvement of each individual employee's competence. So, it kept all of Samyang's 120 employees instead of a massive layoff during the PMI process. As a result, Samyang became able to push ahead with aggressive business expansions, including new plant construction and new product development (most notably, auto-focus lens).Buoyed by immediate financial improvements, VIG attempted an early IPO in 2015 but to no avail. It might be too early but also the IPO market at the time was too crowded. Now, VIG is again making a second IPO attempt with even better financial performances. Samyang Optics has achieved 30% OP and EBITDA margin in each of the past three years and its sales are also growing at a modest rate. The company appears to be well positioned as a low-cost high-end player which can bring a real threat to such established camera lens makers as Carl Zeiss Meditec AG (AFX GR) (Germany), Sigma Corporation (private, Japan) and Tamron Co Ltd (7740 JP) (Japan). Its financial look is undoubtedly solid and bright. Now the key question is how Samyang's growth prospects in the seemingly "unsexy" digital camera market would be received and perceived by investors.

Samyang Optics IPO Part 1 - Schedule, Financials & Valuation

Japan

Tamron Co., Ltd. is a maker of lenses including lenses for general, single-lens reflex (SLR), video, and digital cameras.

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Samyang Optics IPO Part 1 - Schedule, Financials & Valuation

We will have another PE-owned company IPO. This time, Korea's another major local PE called VIG Partners (spun off from Vogo Fund) will IPO one of...

Sanghyun Park