Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

<ul>
<li>
<strong>Our</strong> <strong>Q3-2021 All Cap High-Risk screen of stocks produced a market-cap-weighted average price return of 2% and a simple average decline of 0.2%</strong>.</li>
<li>
<strong>Out of the 34 stocks that appeared in our Q3-2021 screen, </strong>15 stocks saw an average share price decline of 11.5%, whilst 19 stocks appreciated on average by 14%. The two biggest declining stock  were down 25% and 19% respectively.</li>
<li><strong>Our Q4 2021 screen, with 38 names (up from 34 seen in Q3 and Q2 2021) delivers an interesting composition this quarter, </strong></li>
<li>
<strong>As in the previous few quarters, we anticipate the possibility of a risk of deteriorating credit metrics during the next few quarters: </strong>Q4 2021’s Altman Z score rests at 1.23, which is just up on Q3 2021’s level of 1.19.</li>
</ul>



Our Q3-2021 All Cap High-Risk screen of stocks produced a market-cap-weighted average price return of 2% and a simple average decline of 0.2%.

Out of the 34 stocks that appeared in our Q3-2021 screen, 15 stocks saw an average share price decline of 11.5%, whilst 19 stocks appreciated on average by 14%. The two biggest declining stock  were down 25% and 19% respectively.
Our Q4 2021 screen, with 38 names (up from 34 seen in Q3 and Q2 2021) delivers an interesting composition this quarter, 

As in the previous few quarters, we anticipate the possibility of a risk of deteriorating credit metrics during the next few quarters: Q4 2021’s Altman Z score rests at 1.23, which is just up on Q3 2021’s level of 1.19.


Screening the Silk Road: Q4 2021 High-Risk Names to Avoid

<h2><strong>Eight new names, SoftBank remains for the 3rd quarter running</strong></h2>
<ul>
<li>
<strong>Our</strong><strong>Q2-2021 All Cap High-Risk screen of stocks produced a market cap-weighted average price decline of 2%</strong>. In comparison, the MSCI Asia Pacific Index posted a decline of 1.7% over the same period. The stock quality of our Q2 2021 decreased 2.4 points or 3.8% over the period. Within the mix of 34 stocks in our Q2 2021 (May) list 19 posted negative performance, with an average decline of 14.1%.</li>
<li>
<strong>At a static number of 34</strong><strong> stocks our Q3 2021 screen, delivers an interesting composition this quarter, </strong>with eight (8) new names and strong representation from Hong Kong in terms of geography and Industrials and Basic Materials from a sector perspective. This suggests that the “reopening of the economy” trade may have run its course for now.</li>
<li><strong>Our Q3 2021 screen shows a further reduction in average stock rank (a reading on relative quality amongst the broad market peers with 100 being the highest) to 61 from 65.18 in Q2 2021.</strong></li>
<li>
<strong>Stock specific focus:</strong> We discuss why SoftBank stands out as a stock that presents with additional risk. We also discuss the fact that whilst there is a high representation of Industrials in the list, within this list, there are several names that may warrant not being too bearish towards.</li>
</ul>

Eight new names, SoftBank remains for the 3rd quarter running


OurQ2-2021 All Cap High-Risk screen of stocks produced a market cap-weighted average price decline of 2%. In comparison, the MSCI Asia Pacific Index posted a decline of 1.7% over the same period. The stock quality of our Q2 2021 decreased 2.4 points or 3.8% over the period. Within the mix of 34 stocks in our Q2 2021 (May) list 19 posted negative performance, with an average decline of 14.1%.

At a static number of 34 stocks our Q3 2021 screen, delivers an interesting composition this quarter, with eight (8) new names and strong representation from Hong Kong in terms of geography and Industrials and Basic Materials from a sector perspective. This suggests that the “reopening of the economy” trade may have run its course for now.
Our Q3 2021 screen shows a further reduction in average stock rank (a reading on relative quality amongst the broad market peers with 100 being the highest) to 61 from 65.18 in Q2 2021.

Stock specific focus: We discuss why SoftBank stands out as a stock that presents with additional risk. We also discuss the fact that whilst there is a high representation of Industrials in the list, within this list, there are several names that may warrant not being too bearish towards.


Screening the Silk Road: Q3 2021 High-Risk Names to Avoid

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Equity Capital Markets

HK Inno.N's offering price got fixed at ₩59,000, the upper end of the indicative price band, implying a market cap of ₩1.7T. There is no change in the offering volume.







Indicative price band
Low
High (final)


Price
₩50,000
₩59,000


Base deal size
₩505.9B
₩596.9B


- Institutional allotment
₩278.2B
₩328.3B


Implied market cap
₩1,445.2B
₩1,705.4B


- Discount
29.54%
16.85%


EV/EBITDA
15.77x
18.02x

Source: DART

The institutional subscription competition rate is 1,871 to 1, nearly hitting the record holder SKIET's 1,883 to 1. In this bookbuilding, it seems that local institutions have been overbetting quite aggressively. In particular, it seems that local publicly raised funds with long-term holding tendencies have been active in securing the stocks. This proves that many local institutional investors felt that this IPO was price attractive enough for long-term holding.









By investor type
Institution
%
Demand
%


Local publicly raised funds
713
43.82%
4,795,649,600
46.05%


Local brokerages/investment advisories
31
1.91%
202,086,750
1.94%


Local pensions, funds managing proprietary assets, banks, and insurance companies
220
13.52%
1,434,513,850
13.78%


Local others (mostly discretionary investment companies - local hedge funds))
392
24.09%
2,678,313,000
25.72%


Foreign (foreign IPO funds &amp; hedge funds)
74
4.55%
79,187,194
0.76%


Foreign others (mostly local hot money)
197
12.11%
1,223,144,000
11.75%


Total
1,627
100.00%
10,412,894,394
100.00%


Subscription rate
1,871.36

Source: DART

The "Unspecified" category usually indicates that they want the shares above the high end.With that in mind, about one-third have gone for the upper end or above. The remaining two-thirds selected 75-100% of the upper end. All of the orders are priced at 75-100% of the upper end or higher. So, yes, we can say the institutional pricing is quite aggressive.









By price
Institution
%
Demand
%


Above high end
536
32.94%
3,597,972,500
34.55%


75-100% of high end
1,061
65.21%
6,630,326,894
63.67%


50-75% of high end
0
0.00%
0
0.00%


25-50% of high end
0
0.00%
0
0.00%


0-25% of high end
0
0.00%
0
0.00%


Median
0
0.00%
0
0.00%


75-100% of median
0
0.00%
0
0.00%


50-75% of median
0
0.00%
0
0.00%


25-50% of median
0
0.00%
0
0.00%


0-25% of median
0
0.00%
0
0.00%


Low end or below
0
0.00%
0
0.00%


Unspecified
30
1.84%
184,595,000
1.77%


Total
1,627
100.00%
10,412,894,394
100.00%

Source: DART



HK Inno.N Bookbuilding Results: Subscription/Lockup Orders in Detail

<div><div><h2>Offering size</h2></div></div><div>
<p>HK inno.N offers 10.1M shares, which account for 43.75% of the pre-IPO total shares, of which 55-75% are allocated to institutions. It will be listed on KOSDAQ.</p>
<div class="content-highlight">
<p><strong>Who is HK inno.N?</strong></p>
<p>HK inno.N was a subsidiary of CJ Group, established in April 2014 through a physical spin-off of CJ CheilJedang's pharmaceutical business.</p>
<p>However, HK inno.N was acquired by Kolmar Korea on April 18, 2018, and <strong>the corporate name was changed from CJ Healthcare Co., Ltd. to HK Innoen Co., Ltd. in February 2020</strong>.</p>
</div>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Offering size"}'>Offering size</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}' data-sheets-formula="=R[-44]C[0]">Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"195940"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-44]C[0]">195940</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bourse"}' data-sheets-formula="=R[-44]C[0]">Bourse</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSDAQ"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-44]C[0]">KOSDAQ</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering"}'><strong>Offering</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10117000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-41]C[0]"><strong>10,117,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- % of pre-IPO SO"}'><strong>- % of pre-IPO SO</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.43752029050620755}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-39]C[0]"><strong>43.75%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Institutional allotment"}'><strong>Institutional allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"55.00~75.00%"}'><strong>55.00~75.00%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<div><h2>Split</h2></div>
<div>
<p>This IPO is a split offering with a primary of 57.14% and a secondary of 42.86%. As a result, this offering will see a capital increase rate of 25% with a shareholding dilution of 20%. This IPO is free of any additional options: cornerstone, clawback, or greenshoe.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Split"}'>Split</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Primary %"}'><strong>Primary %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.571414450924187}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-41]C[0]"><strong>57.14%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Secondary %"}'><strong>Secondary %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.428585549075813}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-40]C[0]"><strong>42.86%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'>Capital increase rate</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2500054165677954}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-38]C[0]">25.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.20000346658836743}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-38]C[0]">20.00%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>
<div><div><h2>Schedule</h2></div></div>
<div>
<p>The book opens on July 13 (for overseas investors) and runs until July 26. The allotment will be on July 28 as the offering price is finalized. The subscription falls on July 29.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Schedule"}'>Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book open"}'><strong>Book open</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44390}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 7. 13</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'>Book close</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44403}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 26</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'><strong>Allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44405}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 7. 28</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'><strong>Subscription</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44406}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 7. 29</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44411}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 3</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"TBA"}'>TBA</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>
<div><h2>Pricing</h2></div>
<div>
<p>HK inno.N used EV/EBITDA. The corporate value was determined after selecting three local pharmaceutical companies: 1. Yuhan, 2. Chong Kun Dang Pharmaceutical, and 3. Daewoong Pharmaceutical. The respective EV/EBITDA multiples are 25.93x for Yuhan, 10.30x for Chong Kun Dang, and 26.8x for Daewoong Pharm.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Valuation peers: EV/EBITDA"}'>Valuation peers: EV/EBITDA</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Yuhan Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Yuhan Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Chong Kun Dang Pharmaceutical Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Chong Kun Dang Pharmaceutical Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Daewoong Pharmaceutical Co., Ltd."}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Daewoong Pharmaceutical Co., Ltd.</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"000100"}' data-sheets-formula='="000100"'>000100</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"185750"}' data-sheets-formula='="185750"'>185750</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"069620"}' data-sheets-formula='="069620"'>069620</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shares outstanding"}'>Shares outstanding</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":69972959}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'>69,972,959</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":11426099}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'>11,426,099</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":11586575}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'>11,586,575</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Reference share price: MIN[1W Avg, 1M Avg, 1D Close] at June 22, 2021"}'>Reference share price: MIN[1W Avg, 1M Avg, 1D Close] on June 22, 2021</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":63300}' data-sheets-numberformat='[null,4,"[$₩]#,##0",1]'>₩63,300</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":130841}' data-sheets-numberformat='[null,4,"[$₩]#,##0",1]'>₩130,841</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":154000}' data-sheets-numberformat='[null,4,"[$₩]#,##0",1]'>₩154,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Reference market cap"}'>Reference market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4429.2883047}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*R[-2]C[0]/1000000000">$4,429.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1495.002219259}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*R[-2]C[0]/1000000000">$1,495.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1784.33255}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*R[-2]C[0]/1000000000">$1,784.3B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preferred share market cap"}'>Preferred share market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":71.683}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]'>$71.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]'>$0.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]'>$0.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net debt"}'>Net debt</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-440.398}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]'>-$440.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-7.554}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]'>-$7.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":225.79}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]'>$225.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Enterprise value (EV)"}'>Enterprise value (EV)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4060.5733046999994}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]+R[-2]C[0]+R[-1]C[0]">$4,060.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1487.4482192589999}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]+R[-2]C[0]+R[-1]C[0]">$1,487.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2010.12255}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]+R[-2]C[0]+R[-1]C[0]">$2,010.1B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EBITDA: 2Q20~1Q21"}'>EBITDA: 2Q20~1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":156.583}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]'>$156.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":144.368}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]'>$144.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":75.002}' data-sheets-numberformat='[null,2,"$#,##0.0B",1]'>$75.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EV/EBITDA"}'><strong>EV/EBITDA</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":25.93240201490583}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>25.93x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10.303171196241548}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>10.30x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":26.800919308818433}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>26.80x</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Average EV/EBITDA"}'><strong>Average EV/EBITDA</strong></td>
<td colspan="3" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":21.012164173321935}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=average(R[-1]C[0]:R[-1]C[2])"><strong>21.01x</strong></td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>
<div><div>The combined EV/EBITDA multiple of 21.01 times was applied to the EBITDA of ₩115.5B from the second quarter of last year to the first quarter of this year.</div></div>
<div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"HK inno.N: EV/EBITDA"}'>HK inno.N: EV/EBITDA</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EBITDA: 2Q20~1Q21"}'>EBITDA: 2Q20~1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":115.526}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>₩115.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A"}'>A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EV/EBITDA"}'>EV/EBITDA</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":21.012164173321935}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=R[-5]C[0]">21.01x</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"B"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Enterprise value (EV)"}'>Enterprise value (EV)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2427.194}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>₩2,427.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"C = A X B"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>C = A X B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net debt"}'>Net debt</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":376.158}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>₩376.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"D"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>D</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap"}'><strong>Market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2051.036}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]"><strong>₩2,051.0B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"E = C - D"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'><strong>E = C - D</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Post-IPO total shares"}'>Post-IPO total shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":28904499}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula="=Terms!R[-2]C[0]">28,904,499</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"F"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>F</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price per share"}'><strong>Price per share</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":70959.05727340232}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-2]C[0]*1000000000/R[-1]C[0]"><strong>₩70,959</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"G = E / F"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'><strong>G = E / F</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div>
<div><p>The indicative price band is between ₩50,000 and ₩59,000. This is obtained by applying a discount rate of 16.85% to 29.54% to the market cap of ₩2,051.0B calculated through EV/EBITDA.</p></div>
<div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Indicative price band"}'>Indicative price band</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Low"}'>Low</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"High"}'>High</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price"}'><strong>Price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":50000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'><strong>₩50,000</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":59000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'><strong>₩59,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Base deal size"}'>Base deal size</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":505.85}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩505.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":596.903}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩596.9B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Institutional allotment"}'>- Institutional allotment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":278.21750000000003}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩278.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":328.29665000000006}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩328.3B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Implied market cap"}'><strong>Implied market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1445.22495}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*Terms!R18C2/1000000000"><strong>₩1,445.2B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1705.365441}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*Terms!R18C2/1000000000"><strong>₩1,705.4B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Discount"}'><strong>- Discount</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2953683163045407}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R21C2-R[-4]C[0])/R21C2"><strong>29.54%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.16853461323935803}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R21C2-R[-4]C[0])/R21C2"><strong>16.85%</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div>
</div>

Offering size
HK inno.N offers 10.1M shares, which account for 43.75% of the pre-IPO total shares, of which 55-75% are allocated to institutions. It will be listed on KOSDAQ.

Who is HK inno.N?
HK inno.N was a subsidiary of CJ Group, established in April 2014 through a physical spin-off of CJ CheilJedang's pharmaceutical business.
However, HK inno.N was acquired by Kolmar Korea on April 18, 2018, and the corporate name was changed from CJ Healthcare Co., Ltd. to HK Innoen Co., Ltd. in February 2020.







Offering size

Ticker
195940


Bourse
KOSDAQ


Offering
10,117,000


- % of pre-IPO SO
43.75%


Institutional allotment
55.00~75.00%

Source: DART


Split

This IPO is a split offering with a primary of 57.14% and a secondary of 42.86%. As a result, this offering will see a capital increase rate of 25% with a shareholding dilution of 20%. This IPO is free of any additional options: cornerstone, clawback, or greenshoe.






Split

Primary %
57.14%


Secondary %
42.86%


Capital increase rate
25.00%


Dilution
20.00%

Source: DART



Schedule

The book opens on July 13 (for overseas investors) and runs until July 26. The allotment will be on July 28 as the offering price is finalized. The subscription falls on July 29.






Schedule

Book open
2021. 7. 13


Book close
2021. 7. 26


Allotment
2021. 7. 28


Subscription
2021. 7. 29


Payment
2021. 8. 3


Listing
TBA

Source: DART



Pricing

HK inno.N used EV/EBITDA. The corporate value was determined after selecting three local pharmaceutical companies: 1. Yuhan, 2. Chong Kun Dang Pharmaceutical, and 3. Daewoong Pharmaceutical. The respective EV/EBITDA multiples are 25.93x for Yuhan, 10.30x for Chong Kun Dang, and 26.8x for Daewoong Pharm.









Valuation peers: EV/EBITDA
Yuhan Corp
Chong Kun Dang Pharmaceutical Corp
Daewoong Pharmaceutical Co., Ltd.


Ticker
000100
185750
069620


Shares outstanding
69,972,959
11,426,099
11,586,575


Reference share price: MIN[1W Avg, 1M Avg, 1D Close] on June 22, 2021
₩63,300
₩130,841
₩154,000


Reference market cap
$4,429.3B
$1,495.0B
$1,784.3B


Preferred share market cap
$71.7B
$0.0B
$0.0B


Net debt
-$440.4B
-$7.6B
$225.8B


Enterprise value (EV)
$4,060.6B
$1,487.4B
$2,010.1B


EBITDA: 2Q20~1Q21
$156.6B
$144.4B
$75.0B


EV/EBITDA
25.93x
10.30x
26.80x


Average EV/EBITDA
21.01x

Source: DART



The combined EV/EBITDA multiple of 21.01 times was applied to the EBITDA of ₩115.5B from the second quarter of last year to the first quarter of this year.







HK inno.N: EV/EBITDA

EBITDA: 2Q20~1Q21
₩115.5B
A


EV/EBITDA
21.01x
B


Enterprise value (EV)
₩2,427.2B
C = A X B


Net debt
₩376.2B
D


Market cap
₩2,051.0B
E = C - D


Post-IPO total shares
28,904,499
F


Price per share
₩70,959
G = E / F

Source: DART


The indicative price band is between ₩50,000 and ₩59,000. This is obtained by applying a discount rate of 16.85% to 29.54% to the market cap of ₩2,051.0B calculated through EV/EBITDA.








Indicative price band
Low
High


Price
₩50,000
₩59,000


Base deal size
₩505.9B
₩596.9B


- Institutional allotment
₩278.2B
₩328.3B


Implied market cap
₩1,445.2B
₩1,705.4B


- Discount
29.54%
16.85%

Source: DART




HK Inno.N (Formerly CJ Healthcare) IPO: Offering Detail & Valuation Issues

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>HK Inno.N ("Inno.N") is getting ready for an IPO in the Korean stock market. The IPO price range is from 50,000 won to 59,000 won. The company is offering 10.1 million shares in this IPO including 5.8 million new shares and 4.3 million old shares. The IPO deal size is from $447 million to $527 million.</p><p>According to the bankers' valuation, the expected market cap after the IPOs is from 1.4 trillion won ($1.2 billion) to 1.7 trillion won ($1.5 billion). The book building for the institutional investors starts on 22 July 2021. Korea Investment &amp; Securites and Samsung Securities are the lead underwriters of this IPO. </p><p><a href="https://www.smartkarma.com/entities/korea-kolmar-co-ltd" target="_blank" data-smartkarma-citation="entities:7985:1" rel="noopener">Korea Kolmar (161890 KS)</a> is the controlling shareholder of <a href="https://www.hkn24.com/news/articleView.html?idxno=319760" target="_blank" rel="noopener">HK Inno.N</a> with a 52.7% stake in the company. </p><p>HK Inno.N IPO will be on KOSDAQ. At the high end of the IPO price range, this would be valued at 1.7 trillion won. Currently, there are 23 stocks that have more than 1.7 trillion won in market cap on KOSDAQ. </p><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 248pt;"><div><strong>Deal Specifics of the HK Inno.N IPO:</strong></div></td>
<td style="width: 310pt;"> </td>
</tr>
<tr>
<td>Lead underwriters of the IPO: </td>
<td style="width: 310pt;">Korea Investment &amp; Securities, Samsung Securities</td>
</tr>
<tr>
<td>Expected IPO price per share: </td>
<td style="width: 310pt;">50,000 won (low)/59,000 won (high)</td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td style="width: 310pt;">10.1m shares (5.8m new shares and 4.3m old shares)</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td style="width: 310pt;">US$447 mn (low);  US$527 mn (high)</td>
</tr>
<tr>
<td>Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 310pt;">28.9m shares</td>
</tr>
<tr>
<td>Expected market cap after IPO:</td>
<td style="width: 310pt;">1,445 billion won (low)/1,705 billion won (high)</td>
</tr>
<tr>
<td>Book open: </td>
<td style="text-align: left; width: 310pt;">22-Jul-21</td>
</tr>
<tr>
<td>Book closed:</td>
<td style="text-align: left; width: 310pt;">26-Jul-21</td>
</tr>
<tr>
<td>Listing date: </td>
<td style="text-align: left; width: 310pt;">TBC</td>
</tr>
<tr>
<td>Source: Company data</td>
<td style="width: 310pt;"> </td>
</tr>
</tbody>
</table>

HK Inno.N ("Inno.N") is getting ready for an IPO in the Korean stock market. The IPO price range is from 50,000 won to 59,000 won. The company is offering 10.1 million shares in this IPO including 5.8 million new shares and 4.3 million old shares. The IPO deal size is from $447 million to $527 million.According to the bankers' valuation, the expected market cap after the IPOs is from 1.4 trillion won ($1.2 billion) to 1.7 trillion won ($1.5 billion). The book building for the institutional investors starts on 22 July 2021. Korea Investment &amp; Securites and Samsung Securities are the lead underwriters of this IPO. Korea Kolmar (161890 KS) is the controlling shareholder of HK Inno.N with a 52.7% stake in the company. HK Inno.N IPO will be on KOSDAQ. At the high end of the IPO price range, this would be valued at 1.7 trillion won. Currently, there are 23 stocks that have more than 1.7 trillion won in market cap on KOSDAQ. 






Deal Specifics of the HK Inno.N IPO:
 


Lead underwriters of the IPO: 
Korea Investment &amp; Securities, Samsung Securities


Expected IPO price per share: 
50,000 won (low)/59,000 won (high)


Number of Shares for IPO:
10.1m shares (5.8m new shares and 4.3m old shares)


IPO base deal size: 
US$447 mn (low);  US$527 mn (high)


Expected common shares outstanding, fully diluted (post-IPO):  
28.9m shares


Expected market cap after IPO:
1,445 billion won (low)/1,705 billion won (high)


Book open: 
22-Jul-21


Book closed:
26-Jul-21


Listing date: 
TBC


Source: Company data
 




South Korea

Kolmar Korea Co., Ltd. manufactures and distributes personal care products. The Company produces cosmetics. Kolmar Korea also produces medicine and healthcare products.

Price Gauge
52-week Range	0.00 - 0.00
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Kolmar Korea (161890 KS)

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