Daily BriefsIPOs and Placements

Equity Capital Markets: Krafton Inc, Kindstar Globalgene Technology, Filinvest Reit, SK Holdings and more

In today’s briefing:

  • Krafton IPO – This Should Be Pulled
  • Krafton IPO – Lock-Up (Or Lack Thereof on Most Shares) + Index Inclusion
  • Krafton’s Index Play: KOSPI 200, MSCI Std, FTSE AW, FnGuide Top 10, & KRX BBIG
  • Kindstar (康圣环球) IPO Trading: Pattern of Demand Divergence
  • Filinvest REIT IPO – Almost like a Single Asset REIT, COVID Hasn’t Been Kind
  • The Merger Between SES & SPAC Ivanhoe – Impact on SK Holdings
  • Filinvest REIT IPO – Hard to Get Excited, Despite the Yield

Krafton IPO – This Should Be Pulled

By Mio Kato

We previously discussed our thoughts on Krafton’s valuation in Krafton IPO – Valuation | Smartkarma. Since then, Krafton has lowered its asking range from KRW458,00-557,000 to KRW400,000-498,000 while reducing the number of new share offered from 7,030,000 to 5,624,000. They didn’t reduce the number of existing shares offered though, no. Somewhat fitting perhaps for a company that is over-reliant on a game whose battlefield you enter by parachute. They should colour the parachutes golden if they manage to pull this off.


Krafton IPO – Lock-Up (Or Lack Thereof on Most Shares) + Index Inclusion

By Zhen Zhou, Toh

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 take a look at lock-up on shareholders and index inclusion.

We covered the IPO earlier in:


Krafton’s Index Play: KOSPI 200, MSCI Std, FTSE AW, FnGuide Top 10, & KRX BBIG

By Sanghyun Park

Krafton is likely to strategically allocate to institutions with a low lock-up ratio. By securing a maximum of 13%p from the 14.16% IPO stocks as floats and limiting ESOP subscriptions as much as possible, they will likely secure more than a 15% float rate.

In this case, even if the pre-IPO non-lockup minority shareholder’s stake is not included in the float at all, it may not be a big deal.

In the case of ESOP subscriptions, there are media reports that the subscription rate of Krafton’s internal employees will be quite low due to the high IPO price.

Here is the link to the news report about this.

Post-IPO shareholding%Lock-up
Major shareholder23.73%6 months to 1 year
Pre-IPO minority shareholders, with lockups26.81%1 month to 1 year
Treasury shares4.43%6 months
ESOP (post-IPO)3.54%1 year
Non-float: sub-total58.53%
Pre-IPO non-lockup minority shareholders27.31%
IPO shareholders (institutional & retail)14.16%
Source: DART

MSCI and FTSE are expected to be able to stably secure at least a 15% float. Assuming that a 15% float is secured from the offering, the float can rise to 70% for KOSPI 200 and FnGuide/Wise.

It may vary depending on the proportion of special stakeholders among pre-IPO minority shareholders. However, as specified in the IPO prospectus, there is no pre-IPO minority shareholder in a separate joint ownership agreement with the major shareholder. So, it seems appropriate to assume that KOSPI 200 and FnGuide/Wise are 70% float.

Post-IPO immediate index floatKOSPI 200MSCI StandardFTSE All-WorldFnGuide/Wise
At the listing69.12%15.00%15.00%69.12%
Source: DART

Kindstar (康圣环球) IPO Trading: Pattern of Demand Divergence

By Ke Yan, CFA, FRM

Kindstar Globalgene raised HKD 2,054 million (USD 264m) from its global offering and will list on the Hong Kong Stock Exchange on Friday, July 16th.

In our previous note, we discussed Kindstar’s business segment. The company has a strong footprint in the hematology test segment with the majority of its revenue is derived from the hematological tests, particularly for lymphoma and myeloma-related diseases. The company is relatively weak in other areas such as oncology and maternity related businesses. We think the company can continue to grow the existing pie of hematological tests for which the public hospitals do not want to invest in the test equipment and processes but it will be challenging for the company to expand the business into the area where public hospitals are willing to invest in. We think the company has a decent line-up of investors but there is still a lack of international healthcare investors. The management’s experience is also decent. 

In this note, we look at the updates since our last note. The demand for the deal is strong from the retail side but not so strong on the institution side. With its valuation higher than leading ICL peer, we do not expect a strong debut performance.


Filinvest REIT IPO – Almost like a Single Asset REIT, COVID Hasn’t Been Kind

By Sumeet Singh

Filinvest Reit (FILRT PM) (FREIT), a subsidiary of Filinvest, aims to raise up to US$240m in its Philippines listing. The REIT is sponsored by Filinvest Land (FLI PM)

FREIT’s initial property portfolio consists of 16 office towers located in Northgate Cyberzone, Alabang, and one office tower in Cebu City with an aggregate office space GLA of 299,158 sqm and 2,204 sqm of retail GLA. The portfolio will have a weighted average lease expiry (WALE) of 3.8 years with an occupancy of 89.7% as of Mar 2021. The Properties were valued at PHP48,547.4m (US$965m).

Given the recent restructuring of the REITs assets, its past financials aren’t of much use. However, looking at the operational data of its existing portfolio, FREIT doesn’t appear to have had a very good FY20 and even FY21 doesn’t appear to be shaping up well.

Having said that, the REIT does have a strong sponsor with a rich pipeline of ROFR assets.


The Merger Between SES & SPAC Ivanhoe – Impact on SK Holdings

By Douglas Kim

A battery developer SES has announced it will merge with the SPAC Ivanhoe Capital Acquisition on the US stock exchange. After this merger with SPAC Ivanhoe, the company will have an estimated value of $3.6 billion. In this transaction, SES will receive $476 million. 


Filinvest REIT IPO – Hard to Get Excited, Despite the Yield

By Sumeet Singh

Filinvest Reit (FILRT PM) (FREIT), a subsidiary of Filinvest, aims to raise up to US$240m in its Philippines listing. The REIT is sponsored by Filinvest Land (FLI PM)

FREIT’s initial property portfolio consists of 16 office towers located in Northgate Cyberzone, Alabang, and one office tower in Cebu City with an aggregate office space GLA of 299,158 sqm and 2,204 sqm of retail GLA. The portfolio will have a weighted average lease expiry (WALE) of 3.8 years with an occupancy of 89.7% as of Mar 2021. The Properties were valued at PHP48,547.4m (US$965m).

Given the recent restructuring of the REITs assets, its past financials aren’t of much use. However, looking at the operational data of its existing portfolio, FREIT doesn’t appear to have had a very good FY20 and even FY21 doesn’t appear to be shaping up well.

We looked at the background of the REIT in our earlier note, Filinvest REIT IPO – Almost like a single asset REIT, COVID hasn’t been kind.

In this note, we will comment on valuation and run the deal through our ECM framework.


Before it’s here, it’s on Smartkarma