Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight">Our base case valuation of DearU is implied market cap of 746 billion won or 33,907 won per share, which is 41% higher than the high end of the IPO price range of 24,000 won. Given the solid upside, we have a POSITIVE view of the DearU IPO and we would subscribe to the deal.</div>Our base case valuation is based on a P/E of 33.9x our estimated profit of 22 billion won in 2022. The valuation multiple of 33.9x is based on a 10% premium to the average P/E valuation multiple of the peers in 2022. We have used a 10% premium mainly due to the much higher sales growth rate of the company as well as higher operating margin of DearU as compared to its peers, despite its lower sales and earnings base. We estimate DearU to generate sales of 40.5 billion won in 2021, up 210.7% YoY and 67.7 billion won in sales in 2022, up 67% YoY. We also estimate the company to generate an operating profit of 13.4 billion won in 2021 and 22 billion won in 2022. This represents an operating margin of 33.1% in 2021 and 32.5% in 2022.

Our base case valuation of DearU is implied market cap of 746 billion won or 33,907 won per share, which is 41% higher than the high end of the IPO price range of 24,000 won. Given the solid upside, we have a POSITIVE view of the DearU IPO and we would subscribe to the deal.Our base case valuation is based on a P/E of 33.9x our estimated profit of 22 billion won in 2022. The valuation multiple of 33.9x is based on a 10% premium to the average P/E valuation multiple of the peers in 2022. We have used a 10% premium mainly due to the much higher sales growth rate of the company as well as higher operating margin of DearU as compared to its peers, despite its lower sales and earnings base. We estimate DearU to generate sales of 40.5 billion won in 2021, up 210.7% YoY and 67.7 billion won in sales in 2022, up 67% YoY. We also estimate the company to generate an operating profit of 13.4 billion won in 2021 and 22 billion won in 2022. This represents an operating margin of 33.1% in 2021 and 32.5% in 2022.

DearU is another very interesting small cap IPO in Korea. DearU has enjoyed phenomenal sales growth rate and this company has figured out a way to monetize the huge popularity of K-Pop around the world. <a href="https://www.smartkarma.com/entities/dearu-co-ltd" target="_blank" data-smartkarma-citation="entities:34381:1" rel="noopener">DearU (376300 KS)</a> is getting ready to complete its IPO in Korea in the next several weeks. The IPO price of DearU is from 18,000 won to 24,000 won. The IPO base deal size is from $51 million to $68 million. According to the bankers' valuation, the expected market cap of the IPO is from 396 billion won to 528 billion won. The book building for the institutional investors starts on 25 October 2021. <a href="https://www.smartkarma.com/entities/dearu-co-ltd" target="_blank" data-smartkarma-citation="entities:34381:1" rel="noopener">DearU (376300 KS) </a>is a global fan messenger platform. The company's core platform is called DearU bubble which is a global fan messenger platform that has enhanced the communications among stars/artists and their fans. The company plans to capitalize on its strong global user base and IPO proceeds to expand into the metaverse platform, increase brand awareness, expand abroad, and include more top artists in the platform. Shareholding structure - The controlling shareholder of DearU is <a href="http://dart.fss.or.kr/dsaf001/main.do?rcpNo=20210817001014" target="_blank" rel="noopener">SM Studios</a> which own a 40.2% stake in the company. SM Studios is a subsidiary of SM Entertainment, the label which includes some of the top K-pop artists including Red Velvet, EXO, NCT, Girls Generation, TVXQ, and Super Junior. <a href="https://www.smartkarma.com/entities/s-m-entertainment-co" target="_blank" data-smartkarma-citation="entities:3500:1" rel="noopener">S.M.Entertainment Co (041510 KS)</a> owns a 100% stake in SM Studios.

DearU is another very interesting small cap IPO in Korea. DearU has enjoyed phenomenal sales growth rate and this company has figured out a way to monetize the huge popularity of K-Pop around the world. DearU (376300 KS) is getting ready to complete its IPO in Korea in the next several weeks. The IPO price of DearU is from 18,000 won to 24,000 won. The IPO base deal size is from $51 million to $68 million. According to the bankers' valuation, the expected market cap of the IPO is from 396 billion won to 528 billion won. The book building for the institutional investors starts on 25 October 2021. DearU (376300 KS) is a global fan messenger platform. The company's core platform is called DearU bubble which is a global fan messenger platform that has enhanced the communications among stars/artists and their fans. The company plans to capitalize on its strong global user base and IPO proceeds to expand into the metaverse platform, increase brand awareness, expand abroad, and include more top artists in the platform. Shareholding structure - The controlling shareholder of DearU is SM Studios which own a 40.2% stake in the company. SM Studios is a subsidiary of SM Entertainment, the label which includes some of the top K-pop artists including Red Velvet, EXO, NCT, Girls Generation, TVXQ, and Super Junior. S.M.Entertainment Co (041510 KS) owns a 100% stake in SM Studios.

South Korea

Dear U Co Ltd develops and produces application software. The Company provides mobile karaoke services, artist-only fan community platform and other services. Dear U offers services worldwide.

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DearU (376300 KS)

DearU IPO Valuation Analysis

Our base case valuation of DearU is implied market cap of 746 billion won or 33,907 won per share, which is 41% higher than the high end of the IPO...

Douglas Kim

DearU IPO Preview

DearU is another very interesting small cap IPO in Korea. It has enjoyed phenomenal sales growth rate and this company has figured out a way to...

Douglas Kim

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