Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<p><strong>Our base case valuation of Coocon is 66,104 won, which is 65% higher than the high end of the IPO price range of 40,000 won.</strong> Our base case valuation also suggests an EV of 494 billion won and implied market cap of 549 billion won. Our base case valuation suggests an EV/EBIT (2020) multiple of 43.7x, which represents a 40% premium to Webcash and 67% higher than the average of Settlebank and Webcash valuation multiples in 2020. We have a positive view of Coocon IPO, given that our base case valuation is much higher than the high end of the IPO valuation range. </p><p>Coocon has superior financials than its comps including sales growth, operating margin, operating profit growth, and ROE. The combination of the superior financial metrics for Coocon versus its comps suggest that Coocon should trade at higher valuation multiples than its peers. The comps had an average EV/EBIT of 26.2x in 2020. </p>

Our base case valuation of Coocon is 66,104 won, which is 65% higher than the high end of the IPO price range of 40,000 won. Our base case valuation also suggests an EV of 494 billion won and implied market cap of 549 billion won. Our base case valuation suggests an EV/EBIT (2020) multiple of 43.7x, which represents a 40% premium to Webcash and 67% higher than the average of Settlebank and Webcash valuation multiples in 2020. We have a positive view of Coocon IPO, given that our base case valuation is much higher than the high end of the IPO valuation range. Coocon has superior financials than its comps including sales growth, operating margin, operating profit growth, and ROE. The combination of the superior financial metrics for Coocon versus its comps suggest that Coocon should trade at higher valuation multiples than its peers. The comps had an average EV/EBIT of 26.2x in 2020. 

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<li>
<a href="https://www.smartkarma.com/entities/coocon-corp" target="_blank" data-smartkarma-citation="entities:32234:1" rel="noopener">Coocon Corp (294570 KS)</a> is getting ready to complete its IPO in Korea in the next several weeks. The IPO price range is from 31,000 won to 40,000 won per share. The expected market cap range is from 257 billion won to 332 billion won. The IPO base deal size is from $44 million to $57 million. The book building for the institutional investors will start on 13 April 2021. </li>
<li>The company generated sales of 51.4 billion won (up 24.8% YoY), operating profit of 11.3 billion won (up 82.3% YoY), and net profit of 18.9 billion won (up 106.5% YoY) in 2020. Coocon has experienced a strong growth in sales in the past four years. From 2017 to 2020, the company's sales increased by 52% CAGR.</li>
<li><div class="content-highlight">There is likely to be a strong demand for the Coocon IPO shares, especially because the  IPO discount range is very large (32.4% to 47.6%). As the market leader in providing API based information services, Coocon is well positioned to capitalize on the growing demand of Big Data based API services in Korea.</div></li>
<li>Despite the strong fundamentals of the company, there has been some noticeable weakness on numerous tech related IPOs globally in the past 2-3 weeks and the overall growing negative sentiment on the global tech IPOs could also have a negative impact on this IPO as well. </li>
</ul>



Coocon Corp (294570 KS) is getting ready to complete its IPO in Korea in the next several weeks. The IPO price range is from 31,000 won to 40,000 won per share. The expected market cap range is from 257 billion won to 332 billion won. The IPO base deal size is from $44 million to $57 million. The book building for the institutional investors will start on 13 April 2021. 
The company generated sales of 51.4 billion won (up 24.8% YoY), operating profit of 11.3 billion won (up 82.3% YoY), and net profit of 18.9 billion won (up 106.5% YoY) in 2020. Coocon has experienced a strong growth in sales in the past four years. From 2017 to 2020, the company's sales increased by 52% CAGR.
There is likely to be a strong demand for the Coocon IPO shares, especially because the  IPO discount range is very large (32.4% to 47.6%). As the market leader in providing API based information services, Coocon is well positioned to capitalize on the growing demand of Big Data based API services in Korea.
Despite the strong fundamentals of the company, there has been some noticeable weakness on numerous tech related IPOs globally in the past 2-3 weeks and the overall growing negative sentiment on the global tech IPOs could also have a negative impact on this IPO as well. 


YoungLimWon Soft Lab / Equity Capital Markets

<div class="content-highlight"><p>We applied a 25% discount to the comps' average P/E ratio of 32.6x to derive our valuation multiple of 24.5x to value this company. Applying our estimated net profit of 6.6 billion won in 2020, this results in an implied market cap of 162 billion won or implied price of 19,984 won, which would represent a 74% upside versus the high-end IPO price range of 11,500 won. Given the big upside, we have a positive view of this IPO and we include this stock in our model portfolio. </p></div><p>Younglimwon Softlab is a leading ERP software provider in Korea with more than 1,700 customers. The company provided the "first" Korean specific ERP software called 'K-System." The IPO book-building for the institutional investors starts on July 27th. We forecast the company to generate sales of 55.9 billion won (up 47.3% YoY) and operating profit of 7 billion won (up 63.8% YoY) in 2020.</p><p>The Korean software companies have experienced a very strong performance in 2020. The six companies that we have used as comps to Younglimwon Softlab have experienced an average and median share price appreciation of 80.1% and 52.2% YTD. </p>

We applied a 25% discount to the comps' average P/E ratio of 32.6x to derive our valuation multiple of 24.5x to value this company. Applying our estimated net profit of 6.6 billion won in 2020, this results in an implied market cap of 162 billion won or implied price of 19,984 won, which would represent a 74% upside versus the high-end IPO price range of 11,500 won. Given the big upside, we have a positive view of this IPO and we include this stock in our model portfolio. Younglimwon Softlab is a leading ERP software provider in Korea with more than 1,700 customers. The company provided the "first" Korean specific ERP software called 'K-System." The IPO book-building for the institutional investors starts on July 27th. We forecast the company to generate sales of 55.9 billion won (up 47.3% YoY) and operating profit of 7 billion won (up 63.8% YoY) in 2020.The Korean software companies have experienced a very strong performance in 2020. The six companies that we have used as comps to Younglimwon Softlab have experienced an average and median share price appreciation of 80.1% and 52.2% YTD. 

Younglimwon Soft Lab IPO Valuation Analysis

South Korea

WebCash Corporation develops enterprise management software. The Company develops and sells corporate electronic finance products, corporate cash management with finance systems, and other products. WebCash provides services worldwide.

Webcash Corp (053580 KS)

COOCON IPO Valuation Analysis

Our base case valuation of Coocon is 66,104 won, which is 65% higher than the high end of the IPO price range of 40,000 won.

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As the market leader in providing API based information services, Coocon is well positioned to capitalize on the growing demand of Big Data based...

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We applied a 25% discount to the comps' average P/E ratio of 32.6x to derive our valuation multiple of 24.5x to value this company. Applying our...

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