Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul>
<li>Our base case valuation of Manyo Factory is target price of 29,555 won per share, which represents 111% higher than the high end of the IPO price range.</li>
<li>We estimate the company to generate sales of 147.7 billion won in 2023 (up 45.1% YoY) and its operating margins to improve from 24.1% in 2022 to 24.7% in 2023. </li>
<li>We believe a 20% premium valuation multiple to the comps is appropriate due to its higher sales growth rate, higher operating margins, and higher ROE than the comps.</li>
</ul>


Our base case valuation of Manyo Factory is target price of 29,555 won per share, which represents 111% higher than the high end of the IPO price range.
We estimate the company to generate sales of 147.7 billion won in 2023 (up 45.1% YoY) and its operating margins to improve from 24.1% in 2022 to 24.7% in 2023. 
We believe a 20% premium valuation multiple to the comps is appropriate due to its higher sales growth rate, higher operating margins, and higher ROE than the comps.


<ul>
<li>Manyo Factory is well known for its functional skin care products made from naural ingredients. Its products have been enjoying excellent sales in Japan and Korea.</li>
<li>Given the company's superior sales growth and operating margins than its peers combined with the large IPO discount, there is likely to be a strong interest in Manyo Factory IPO. </li>
<li>Unlike other major Korean cosmetic companies with poor sales and operating profit in the past three years, Manyo Factory experienced excellent growth of its sales and profits in this period. </li>
</ul>


Manyo Factory is well known for its functional skin care products made from naural ingredients. Its products have been enjoying excellent sales in Japan and Korea.
Given the company's superior sales growth and operating margins than its peers combined with the large IPO discount, there is likely to be a strong interest in Manyo Factory IPO. 
Unlike other major Korean cosmetic companies with poor sales and operating profit in the past three years, Manyo Factory experienced excellent growth of its sales and profits in this period. 


Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>The KRX has announced the list of inclusions and exclusions to the <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a> today. The rebalance is effective after the close of trading on 10 June.</p><p>There are 16 inclusions into and exclusions from the index at the June review with an estimated one-way turnover of 7.04%.</p><table class="table table-striped">
<colgroup>
<col>
<col>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td colspan="2" style="text-align: center; width: 233pt;"><h3>Inclusions</h3></td>
<td colspan="2" style="text-align: center; width: 242pt;"><h3>Exclusions</h3></td>
</tr>
<tr>
<td><strong>Code</strong></td>
<td><strong>Name</strong></td>
<td><strong>Code</strong></td>
<td><strong>Name</strong></td>
</tr>
<tr>
<td>015750.KQ</td>
<td>Sungwoo Hitech Co Ltd</td>
<td>018290.KQ</td>
<td>VT GMP Co Ltd</td>
</tr>
<tr>
<td>018000.KQ</td>
<td>Unison Co Ltd</td>
<td>034950.KQ</td>
<td>Korea Ratings Corp</td>
</tr>
<tr>
<td>027360.KQ</td>
<td>AJu IB Investment Co Ltd</td>
<td>035810.KQ</td>
<td>Easy Holdings Co Ltd</td>
</tr>
<tr>
<td>036810.KQ</td>
<td>Fine Semitech Corp</td>
<td>052020.KQ</td>
<td>STCube Inc</td>
</tr>
<tr>
<td>041190.KQ</td>
<td>Woori Technology Investment Co Ltd</td>
<td>052260.KQ</td>
<td>Hyundai BioLand Co Ltd</td>
</tr>
<tr>
<td>053030.KQ</td>
<td>Binex Co Ltd</td>
<td>060570.KQ</td>
<td>Dream Us Co</td>
</tr>
<tr>
<td>082270.KQ</td>
<td>GemVax &amp; KAEL Co Ltd</td>
<td>065660.KQ</td>
<td>Anterogen Co Ltd</td>
</tr>
<tr>
<td>100090.KQ</td>
<td>Samkang M&amp;T Co Ltd</td>
<td>082920.KQ</td>
<td>Vitzrocell Co Ltd</td>
</tr>
<tr>
<td>131290.KQ</td>
<td>TSE Co Ltd</td>
<td>092730.KQ</td>
<td>NeoPharm Co Ltd</td>
</tr>
<tr>
<td>131970.KQ</td>
<td>Tesna Inc</td>
<td>143240.KQ</td>
<td>Saramin HR Co Ltd</td>
</tr>
<tr>
<td>140860.KQ</td>
<td>Park Systems Corp</td>
<td>194700.KQ</td>
<td>Novarex Co Ltd</td>
</tr>
<tr>
<td>166090.KQ</td>
<td>Hana Materials Inc</td>
<td>214370.KQ</td>
<td>Caregen Co Ltd</td>
</tr>
<tr>
<td>175250.KQ</td>
<td>Icure Pharmaceutical Inc</td>
<td>215000.KQ</td>
<td>Golfzon Co Ltd</td>
</tr>
<tr>
<td>194480.KQ</td>
<td>Devsisters Corp</td>
<td>237880.KQ</td>
<td>Clio Cosmetics Co Ltd</td>
</tr>
<tr>
<td>222800.KQ</td>
<td>Simmtech Co Ltd</td>
<td>239610.KQ</td>
<td>HL Science Co Ltd</td>
</tr>
<tr>
<td>323990.KQ</td>
<td>Vaxcell Bio Therapeutics</td>
<td>243840.KQ</td>
<td>Shin Heung Energy &amp; Electronics Co Ltd</td>
</tr>
</tbody>
</table><p>There are 12 trading days to implementation of the changes and there are a lot of additions and deletions that have over 2 days of ADV to trade. There will be a lot of action in the next few days on the names with higher ADV to trade.</p><p>With short selling limited to the constituents of the <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a>, shorting the inclusions will be tough while selling/shorting the deletions is a lot easier since they are current index constituents. The inclusions could outperform the deletions till a couple of days before implementation date, while there could be a high risk/reward reverse trade if the outperformance is significant.</p>

The KRX has announced the list of inclusions and exclusions to the KOSDAQ 150 Index (KOSDQ150 INDEX) today. The rebalance is effective after the close of trading on 10 June.There are 16 inclusions into and exclusions from the index at the June review with an estimated one-way turnover of 7.04%.








Inclusions
Exclusions


Code
Name
Code
Name


015750.KQ
Sungwoo Hitech Co Ltd
018290.KQ
VT GMP Co Ltd


018000.KQ
Unison Co Ltd
034950.KQ
Korea Ratings Corp


027360.KQ
AJu IB Investment Co Ltd
035810.KQ
Easy Holdings Co Ltd


036810.KQ
Fine Semitech Corp
052020.KQ
STCube Inc


041190.KQ
Woori Technology Investment Co Ltd
052260.KQ
Hyundai BioLand Co Ltd


053030.KQ
Binex Co Ltd
060570.KQ
Dream Us Co


082270.KQ
GemVax &amp; KAEL Co Ltd
065660.KQ
Anterogen Co Ltd


100090.KQ
Samkang M&amp;T Co Ltd
082920.KQ
Vitzrocell Co Ltd


131290.KQ
TSE Co Ltd
092730.KQ
NeoPharm Co Ltd


131970.KQ
Tesna Inc
143240.KQ
Saramin HR Co Ltd


140860.KQ
Park Systems Corp
194700.KQ
Novarex Co Ltd


166090.KQ
Hana Materials Inc
214370.KQ
Caregen Co Ltd


175250.KQ
Icure Pharmaceutical Inc
215000.KQ
Golfzon Co Ltd


194480.KQ
Devsisters Corp
237880.KQ
Clio Cosmetics Co Ltd


222800.KQ
Simmtech Co Ltd
239610.KQ
HL Science Co Ltd


323990.KQ
Vaxcell Bio Therapeutics
243840.KQ
Shin Heung Energy &amp; Electronics Co Ltd


There are 12 trading days to implementation of the changes and there are a lot of additions and deletions that have over 2 days of ADV to trade. There will be a lot of action in the next few days on the names with higher ADV to trade.With short selling limited to the constituents of the KOSDAQ 150 Index (KOSDQ150 INDEX), shorting the inclusions will be tough while selling/shorting the deletions is a lot easier since they are current index constituents. The inclusions could outperform the deletions till a couple of days before implementation date, while there could be a high risk/reward reverse trade if the outperformance is significant.

KOSDAQ150 Index Rebalance: 16 Changes & Large Turnover

Investor hunting for undervalued gems, Pretium Consulting

Jay Ju

Investor hunting for undervalued gems

Equity Bottom-Up

<p>Chinese In-bounds recovery not significant in Dec 2017 as there is no sign of positive inbound tourist YoY recovery according to arrival data of ICN(Incheon Intl. Airport). But this also means there is a nice base effect that could potentially lead to better comps in the months ahead. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/042/429/original/cap1.png?1516241211" class="editor-image img-responsive" data-smartkarma-image-id="42429"></figure><p>Duty-Free Store is still relying on dai-gong: DFS store revenues are very dependant on dai-gong (hand-carry wholesaler) visits. The impact of this dependency will differ by brands. What is surprising is that…</p>

Chinese In-bounds recovery not significant in Dec 2017 as there is no sign of positive inbound tourist YoY recovery according to arrival data of ICN(Incheon Intl. Airport). But this also means there is a nice base effect that could potentially lead to better comps in the months ahead. Duty-Free Store is still relying on dai-gong: DFS store revenues are very dependant on dai-gong (hand-carry wholesaler) visits. The impact of this dependency will differ by brands. What is surprising is that…

Quick Update on China Inbound Tourist Traffic to Korea

Thematic (Sector/Industry)

<p><strong>Update on Korean cosmetics industry </strong></p><p>Adding to <a href="https://www.smartkarma.com/profiles/1077" target="_blank" data-smartkarma-citation="accounts:1077">Ally Park</a>’s fantastic notes regarding the Korean cosmetics industry, I wanted to follow up with some additional factors in what is driving the industry. In this report, we would like to highlight the key factors that are important to consider when looking at the Korean cosmetics industry. </p><ul class=""><li><strong>Supply vs. demand dynamics</strong>: While cosmetics is not a commodity and usually analysts do not perform demand vs. supply analysis to determine industry returns, we believe the industry is becoming more driven by competitive factors going forward. The market is already expecting an upturn in ROIC in 2018E coming from rising demand vs. supply.</li><li><strong>Channel exposure becomes very important</strong>: Customers are much less brand loyal than before, according to CLSA research as consumers own more products than before and are willing to trade down to cheaper and less-prestigious brands; as brands build up their capacity and come out with new products faster than ever before, the brand loyalty could weaken, making industry economics more likely susceptible to competitive pressure going forward. We think given less differentiation, channel exposure (as they provide the platform) becomes very important. Internet and H&amp;B are the fastest rising medium in the cosmetics industry.</li><li><strong>ODMs continue to increase production share</strong>: Shares of OEM/ODM is likely to continue to expand due to rising channel share in H&amp;B Stores &amp; online which provides a level playing field for small to mid-cosmetics brands. These brands also normally don’t have their own manufacturing facilities due to the high fixed burden.</li><li><strong>Rising marketing competition from brand makers</strong>: Actual design &amp; production for mass products are increasingly outsourced to ODM companies, which means that differentiation comes from more from the brand image vs. quality, leading to higher marketing spend %, which could hurt brands’ profitability in the long run.</li><li><strong>China demand coming back but rising localization trends could mean trouble</strong> for Korean brand makers in the long run.</li><li>Overall our initial thoughts are leaning towards a bearish stance given the supply side pressures, lower differentiated products, strong competition (marketing) and platforms (H&amp;B stores, online) getting more bargaining power. We think the channel beneficiaries, ODM/OEM players are likely to grasp increasing value share of the overall industry. </li></ul>

Update on Korean cosmetics industry Adding to Ally Park’s fantastic notes regarding the Korean cosmetics industry, I wanted to follow up with some additional factors in what is driving the industry. In this report, we would like to highlight the key factors that are important to consider when looking at the Korean cosmetics industry. Supply vs. demand dynamics: While cosmetics is not a commodity and usually analysts do not perform demand vs. supply analysis to determine industry returns, we believe the industry is becoming more driven by competitive factors going forward. The market is already expecting an upturn in ROIC in 2018E coming from rising demand vs. supply.Channel exposure becomes very important: Customers are much less brand loyal than before, according to CLSA research as consumers own more products than before and are willing to trade down to cheaper and less-prestigious brands; as brands build up their capacity and come out with new products faster than ever before, the brand loyalty could weaken, making industry economics more likely susceptible to competitive pressure going forward. We think given less differentiation, channel exposure (as they provide the platform) becomes very important. Internet and H&amp;B are the fastest rising medium in the cosmetics industry.ODMs continue to increase production share: Shares of OEM/ODM is likely to continue to expand due to rising channel share in H&amp;B Stores &amp; online which provides a level playing field for small to mid-cosmetics brands. These brands also normally don’t have their own manufacturing facilities due to the high fixed burden.Rising marketing competition from brand makers: Actual design &amp; production for mass products are increasingly outsourced to ODM companies, which means that differentiation comes from more from the brand image vs. quality, leading to higher marketing spend %, which could hurt brands’ profitability in the long run.China demand coming back but rising localization trends could mean trouble for Korean brand makers in the long run.Overall our initial thoughts are leaning towards a bearish stance given the supply side pressures, lower differentiated products, strong competition (marketing) and platforms (H&amp;B stores, online) getting more bargaining power. We think the channel beneficiaries, ODM/OEM players are likely to grasp increasing value share of the overall industry. 

South Korea

Clio Cosmetics Co., Ltd. manufactures and markets lines of skin care and make-up products.  The Company owns multiple brands including Club Clio Professional, Peripera, and Goodal.

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Clio Cosmetics (237880 KS)

Manyo Factory IPO Valuation Analysis

Our base case valuation of Manyo Factory is target price of 29,555 won per share, which represents 111% higher than the high end of the IPO price...

Douglas Kim

Manyo Factory IPO Preview

Given the company's superior sales growth and operating margins than its peers combined with the large IPO discount, there is likely to be a strong...

Douglas Kim

KOSDAQ150 Index Rebalance: 16 Changes & Large Turnover

There are 16 changes to the KOSDAQ150 index resulting in a one-way turnover of 7.04%. The impact on the exclusions is a lot higher than on the...

Brian Freitas

Quick Update on China Inbound Tourist Traffic to Korea

Chinese In-bounds recovery not significant in Dec 2017 as there is no sign of positive inbound tourist YoY recovery according to arrival data of...

Jay Ju

Update on Korean Cosmetics Industry

Update on Korean cosmetics industry Adding to Ally Park’s fantastic notes regarding the Korean cosmetics industry, I wanted to follow up with some...

Jay Ju

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)