Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul>
<li>KTB Network announced its IPO price which was finalized at 5,800 won (low end of the IPO price range). The demand ratio from the institutional investors was 50 to 1.</li>
<li>There were 93.3% of the total IPO shares applied by the institutions that had the intrinsic value of KTB Network of more than 7,200 won.</li>
<li>Our base case valuation of KTB Network is market cap of 938.3 billion won or 9,383 won per share, which is 62% higher than the IPO price of 5,800 won.</li>
</ul>


KTB Network announced its IPO price which was finalized at 5,800 won (low end of the IPO price range). The demand ratio from the institutional investors was 50 to 1.
There were 93.3% of the total IPO shares applied by the institutions that had the intrinsic value of KTB Network of more than 7,200 won.
Our base case valuation of KTB Network is market cap of 938.3 billion won or 9,383 won per share, which is 62% higher than the IPO price of 5,800 won.


<ul>
<li>Our base case valuation of KTB Network is 9,383 won per share, which is 30% higher than the high end of the IPO price of 7,200 won. </li>
<li>Our base case valuation is based on 11x P/E using 2021 estimated net profit of 85.1 billion won for KTB Network. </li>
<li>KTB Network deserves to trade at higher multiples than its peers since it had higher sales growth (YoY), operating profit growth (YoY), and ROE than its peers in 1H 2021. </li>
</ul>


Our base case valuation of KTB Network is 9,383 won per share, which is 30% higher than the high end of the IPO price of 7,200 won. 
Our base case valuation is based on 11x P/E using 2021 estimated net profit of 85.1 billion won for KTB Network. 
KTB Network deserves to trade at higher multiples than its peers since it had higher sales growth (YoY), operating profit growth (YoY), and ROE than its peers in 1H 2021. 


<div class="content-highlight">
<p>KTB Network is getting ready to complete its IPO in the Korean stock market in December. Established in 1981, KTB Network is one of the first venture capital companies in Korea. KTB Network has become the most profitable venture capital company in Korea and it generated the highest net profit among the venture capital companies in Korea in 2020. The company has been one of the beneficiaries of the surge in tech stocks in Korea in the past 18 months. </p>
<p>The IPO price range is from 5,800 won to 7,200 won. The IPO offering range amount is from 116 billion won to 144 billion won. The book building for the institutional investors starts on 29 November. Korea Investment &amp; Securities is the lead underwriter of this IPO. According to the bankers' valuation, KTB Network is valued at 580 billion won to 720 billion won. </p>
<p><strong>Major shareholder</strong> - <a href="https://www.smartkarma.com/entities/ktb-investment-securities" target="_blank" data-smartkarma-citation="entities:15345:1" rel="noopener">Ktb Investment &amp; Securities (030210 KS) </a>has a controlling stake (65%) of KTB Venture. KTB Investment &amp; Securities currently has a market cap of 386 billion won. After the IPO, KTB Investment &amp; Securities will have a 52% stake in KTB Venture. At the high end of the IPO valuation range (720 billion won), a 52% stake would be worth 374 billion won, which is nearly 97% of KTB Investment &amp; Securities' current market cap. </p>
</div>


KTB Network is getting ready to complete its IPO in the Korean stock market in December. Established in 1981, KTB Network is one of the first venture capital companies in Korea. KTB Network has become the most profitable venture capital company in Korea and it generated the highest net profit among the venture capital companies in Korea in 2020. The company has been one of the beneficiaries of the surge in tech stocks in Korea in the past 18 months. 
The IPO price range is from 5,800 won to 7,200 won. The IPO offering range amount is from 116 billion won to 144 billion won. The book building for the institutional investors starts on 29 November. Korea Investment &amp; Securities is the lead underwriter of this IPO. According to the bankers' valuation, KTB Network is valued at 580 billion won to 720 billion won. 
Major shareholder - Ktb Investment &amp; Securities (030210 KS) has a controlling stake (65%) of KTB Venture. KTB Investment &amp; Securities currently has a market cap of 386 billion won. After the IPO, KTB Investment &amp; Securities will have a 52% stake in KTB Venture. At the high end of the IPO valuation range (720 billion won), a 52% stake would be worth 374 billion won, which is nearly 97% of KTB Investment &amp; Securities' current market cap. 


Equity Bottom-Up

<p>One of the most prolific investors in the Korean unicorns has been a local investment company called <a href="https://www.smartkarma.com/entities/dsc-investment-inc" target="_blank" data-smartkarma-citation="entities:34293:1" rel="noopener">DSC Investment (241520 KS), </a>which currently has a market cap of 160 billion won. Established in 2012, DSC Investment currently operates 19 funds with a total AUM of $586 million. DSC Investment is a venture capital firm focusing on early-stage startups. </p><p>Among the hundreds of venture capital companies in Korea, DSC Investment is a stand-out since it has done such an excellent job in picking big winners (especially unicorns that plan to complete their IPOs in the next three years). Among the unicorns/near unicorns below which have been invested by DSC Investment, Kurly, Musinsa, Kong Studio, and Dunamu are expected to complete their IPOs in the next 1-2 years. </p><div class="content-highlight">
<p>We estimate DSC Investment's major ownership stakes in four, key unicorns in Korea (Kurly, Musinsa, Kong Studio, and Dunamu) to be about 435 billion won. DSC Investment's stakes in these four companies are nearly 172% higher than its market cap. </p>
<p>DSC Investment has many other promising investments including Riiid, Furiosa AI, Brandi, and SMLAB. Most of the company's promising investments are still private companies ready to complete their IPOs in the next 1-2 years. As these companies start to complete their IPOs, investors will increasingly focus on <a href="https://www.smartkarma.com/entities/dsc-investment-inc" target="_blank" data-smartkarma-citation="entities:34293:1" rel="noopener">DSC Investment (241520 KS)</a> as a key investment play. Consequently, we believe that DSC Investment could be a big winner over the next 1-2 years. </p>
</div>

One of the most prolific investors in the Korean unicorns has been a local investment company called DSC Investment (241520 KS), which currently has a market cap of 160 billion won. Established in 2012, DSC Investment currently operates 19 funds with a total AUM of $586 million. DSC Investment is a venture capital firm focusing on early-stage startups. Among the hundreds of venture capital companies in Korea, DSC Investment is a stand-out since it has done such an excellent job in picking big winners (especially unicorns that plan to complete their IPOs in the next three years). Among the unicorns/near unicorns below which have been invested by DSC Investment, Kurly, Musinsa, Kong Studio, and Dunamu are expected to complete their IPOs in the next 1-2 years. 
We estimate DSC Investment's major ownership stakes in four, key unicorns in Korea (Kurly, Musinsa, Kong Studio, and Dunamu) to be about 435 billion won. DSC Investment's stakes in these four companies are nearly 172% higher than its market cap. 
DSC Investment has many other promising investments including Riiid, Furiosa AI, Brandi, and SMLAB. Most of the company's promising investments are still private companies ready to complete their IPOs in the next 1-2 years. As these companies start to complete their IPOs, investors will increasingly focus on DSC Investment (241520 KS) as a key investment play. Consequently, we believe that DSC Investment could be a big winner over the next 1-2 years. 


Korea Small Cap Gem #11: DSC Investment - One of the Most Prolific Investors of Korean Unicorns

South Korea

DSC Investment Inc. is a venture capital firm. The Company provides growth financing to companies operating across the consumer, technology, environment, and healthcare sectors.

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DSC Investment (241520 KS)

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We estimate DSC Investment's major ownership stakes in Kurly, Musinsa, Kong Studio, and Dunamu to be about 435 billion won which is nearly 172%...

Douglas Kim

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