Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

MiCo BioMed Co Ltd / Equity Capital Markets

Mico Biomed Co is getting ready for an IPO on the KOSDAQ exchange in the next few weeks. Established in 2009, Mico Biomed is a developer of in-vitro diagnostic medical devices. Mico Biomed was listed on the KONEX microcap exchange in 2015. Mico Biomed is one of the developers of in-vitro diagnostic medical testing devices for COVID-19 in Korea. In February 2020, <a href="http://www.koreaherald.com/view.php?ud=20200205000408" target="_blank" rel="noopener">Mico Biomed</a> announced that has developed a rapid molecular diagnostic system to detect COVID-19 with high sensitivity within an hour. The company generated 21.7 billion won in sales and 2.4 billion won in operating profit in 1H 2020. These results are much better than the recent historical figures from 2017 to 2019. The company had sales of 4.1 billion won and an operating loss of 11.7 billion won in 2019.<div class="content-highlight">The bankers used three companies including <a href="https://www.smartkarma.com/entities/seegene-inc" target="_blank" data-smartkarma-citation="entities:11483:1" rel="noopener">Seegene Inc (096530 KS)</a>, Lab Genomics, and Boditech Med as comparable companies to Mico Biomed. Using their annualized controlling interest net profit in 1Q 2020 and recent prices, the average P/E of the comps is 36.3x. The bankers then estimated Mico Biomed's net profit to be 12.3 billion won in 2022 and discounted to the present using a 15% cost of capital. Applying a P/E of 36.3x to 9.3 billion won and 18.3 million shares outstanding results in an implied price of 18,342 won. Applying an IPO discount range of 18.2% - 34.6% results in an IPO range of 12,000 won to 15,000 won. </div>

Mico Biomed Co is getting ready for an IPO on the KOSDAQ exchange in the next few weeks. Established in 2009, Mico Biomed is a developer of in-vitro diagnostic medical devices. Mico Biomed was listed on the KONEX microcap exchange in 2015. Mico Biomed is one of the developers of in-vitro diagnostic medical testing devices for COVID-19 in Korea. In February 2020, Mico Biomed announced that has developed a rapid molecular diagnostic system to detect COVID-19 with high sensitivity within an hour. The company generated 21.7 billion won in sales and 2.4 billion won in operating profit in 1H 2020. These results are much better than the recent historical figures from 2017 to 2019. The company had sales of 4.1 billion won and an operating loss of 11.7 billion won in 2019.The bankers used three companies including Seegene Inc (096530 KS), Lab Genomics, and Boditech Med as comparable companies to Mico Biomed. Using their annualized controlling interest net profit in 1Q 2020 and recent prices, the average P/E of the comps is 36.3x. The bankers then estimated Mico Biomed's net profit to be 12.3 billion won in 2022 and discounted to the present using a 15% cost of capital. Applying a P/E of 36.3x to 9.3 billion won and 18.3 million shares outstanding results in an implied price of 18,342 won. Applying an IPO discount range of 18.2% - 34.6% results in an IPO range of 12,000 won to 15,000 won. 

Our base case valuation multiple for E&amp;D Co is 19x P/E. Using this multiple and applying to our estimated net profit of 13.8 billion won, this results in an implied market cap of 263 billion won or 25,309 won per share. This represents a 63% upside from current levels. Given the strong upside, we have a positive view of this stock over a one year view.The 19x P/E valuation multiple represents a 20% discount to the bankers' valuation multiple of 23.8x. A key reason why the company continues to trade at a steep discount to its peers is that the market is still not uncertain as to how long the company will be able to maintain its excellent sales and profit growth. As such, as the company continues to post excellent results, our 20% valuation discount to its peers may actually be too conservative.We forecast the company to generate 96.2 billion won in sales (up 65% YoY) and an operating profit of 21.2 billion won (up 116% YoY) in 2020. We estimate the company's sales growth to decline to 27% YoY in 2021. One of the key catalysts of the company's surging growth in sales and profits has been the fact that the fine dust issue has emerged one of the biggest social problems in Korea and other parts of the world. There have been increased regulations on diesel and obsolete vehicles, increasing the mandatory installation of the emission reduction devices.

Our base case valuation multiple for E&amp;D Co is 19x P/E. Using this multiple and applying to our estimated net profit of 13.8 billion won, this results in an implied market cap of 263 billion won or 25,309 won per share. This represents a 63% upside from current levels. Given the strong upside, we have a positive view of this stock over a one year view.The 19x P/E valuation multiple represents a 20% discount to the bankers' valuation multiple of 23.8x. A key reason why the company continues to trade at a steep discount to its peers is that the market is still not uncertain as to how long the company will be able to maintain its excellent sales and profit growth. As such, as the company continues to post excellent results, our 20% valuation discount to its peers may actually be too conservative.We forecast the company to generate 96.2 billion won in sales (up 65% YoY) and an operating profit of 21.2 billion won (up 116% YoY) in 2020. We estimate the company's sales growth to decline to 27% YoY in 2021. One of the key catalysts of the company's surging growth in sales and profits has been the fact that the fine dust issue has emerged one of the biggest social problems in Korea and other parts of the world. There have been increased regulations on diesel and obsolete vehicles, increasing the mandatory installation of the emission reduction devices. 

Established in 2004, E&amp;D Co (Eco &amp; Dream) is an advanced materials company in Korea,  specializing in producing diesel oxidation catalysts, fuel carrying catalysts, and other environment catalysts. E&amp;D Co is getting ready for an IPO on the KOSDAQ exchange in July.This one is a bit interesting and different since it already trades on the microcap KONEX market and is transferring its listing to the KOSDAQ exchange. Currently, E&amp;D Co's share price is at 15,000, which is slightly higher than the high end of the IPO price range of 14,400 won.The bankers used two companies including <a href="https://www.smartkarma.com/entities/sejong-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:7932:1" rel="noopener">Sejong Industrial (033530 KS)</a> and <a href="https://www.smartkarma.com/entities/ecopro-co-ltd" target="_blank" data-smartkarma-citation="entities:19029:1" rel="noopener">Ecopro Co Ltd (086520 KS)</a> as comps to E&amp;D Co. Using their net profit in 2019, the average P/E multiple of the comps in 23.8x. Applying this multiple on E&amp;D Co's net profit of 9.3 billion won in 2019, this results in an implied market cap of 221.5 billion won. After applying an additional IPO discount of 32.5% to 42.1%, this results in an IPO price range of 12,350 won to 14,400 won. The company's sales and profits have been exploding higher in the past year. In 2019, the company generated sales of 58.3 billion won (up 108% YoY), and an operating profit of 9.8 billion won (up 12x YoY). It had its best-ever quarterly results in 1Q 2020 when it posted sales of 25.2 billion won (up 360% YoY) and an operating profit of 5.5 billion won (up from operating profit of only 0.2 billion won in 1Q 2019).

Established in 2004, E&amp;D Co (Eco &amp; Dream) is an advanced materials company in Korea,  specializing in producing diesel oxidation catalysts, fuel carrying catalysts, and other environment catalysts. E&amp;D Co is getting ready for an IPO on the KOSDAQ exchange in July.This one is a bit interesting and different since it already trades on the microcap KONEX market and is transferring its listing to the KOSDAQ exchange. Currently, E&amp;D Co's share price is at 15,000, which is slightly higher than the high end of the IPO price range of 14,400 won.The bankers used two companies including Sejong Industrial (033530 KS) and Ecopro Co Ltd (086520 KS) as comps to E&amp;D Co. Using their net profit in 2019, the average P/E multiple of the comps in 23.8x. Applying this multiple on E&amp;D Co's net profit of 9.3 billion won in 2019, this results in an implied market cap of 221.5 billion won. After applying an additional IPO discount of 32.5% to 42.1%, this results in an IPO price range of 12,350 won to 14,400 won. The company's sales and profits have been exploding higher in the past year. In 2019, the company generated sales of 58.3 billion won (up 108% YoY), and an operating profit of 9.8 billion won (up 12x YoY). It had its best-ever quarterly results in 1Q 2020 when it posted sales of 25.2 billion won (up 360% YoY) and an operating profit of 5.5 billion won (up from operating profit of only 0.2 billion won in 1Q 2019). 

South Korea

KISWIRE Ltd. manufactures secondary steel products, such as wire ropes and wire strands for electric wire and springs.  The Company markets to the shipbuilding and construction industries, and exports products to overseas markets.  KISWIRE also has a financial subsidiary.

Taekwang Industrial Co., Ltd. manufactures synthetic yarns, petrochemical products, and textiles.  The Company's products include acrylic yarns, nylons, spandex, carbon fibers, spun yarns, polyester materials, and blankets.  Taekwang also produces electric equipment, such as audio equipment, and cordless telephones.  In addition, The Company operates real estate business.

KG Dongbusteel Co., Ltd. manufactures cold rolled sheets, such as commercial quality cold rolled steel sheets, deep drawing quality cold rolled sheets, and stabilized deep drawing cold rolled sheets.  The Company also offers special cold rolled sheets and plating base metals.

Unid Co., Ltd. manufactures and sells chemicals and timber products.  The Company's chemicals include potassium carbonate, hydrochloric acid, and caustic potash.  Unid also produces board and timber products, such as medium density fiberboard (MDF) and timber boards and formalin for construction uses.

Young Poong Corporation produces and markets non-ferrous metals, such as zinc ingots, sulfate, and cadmium.  The Company also generates income from leasing buildings.

Dongwha Enterprise Co., Ltd. is an investment holding company.  The Company, through its subsidiaries, processes timber and manufactures wood products used in the construction and furniture industries, produces and markets chemical products, provides architecture service, and operates trading business.

Hankuk Carbon Co., Ltd. develops, produces, and sells carbon products. The Company manufactures LNG panelling, sporting goods, aircraft parts, glass paper and other related carbon products. Hankuk Carbon offers its products to customers in Southeast Asia and Europe.

Aekyung Chemical Co., Ltd manufactures basic organic chemicals such as pht halic anhydride and plasticizers. The Company also produces maleic anhydride, itaconic acid, polyol and bio-diesel. Aekyung Chemical markets its products primarily throughout Korea with limited overseas.

Chunbo Co.,Ltd manufactures and sells chemical materials. The Company produces and sells display, semiconductor, and secondary battery application materials, as well as pharmaceutical intermediates and specialty chemicals. Chunbo markets its products worldwide.

Huchems Fine Chemical Corp. develops and provides fine chemical products. The main products include polyurethane, ammonium nitrate, nitric acid, and ammonia.

Thong Nhat Rubber JSC is a Vietnam-based company that manufactures and processes rubber products.

PT Archi Indonesia Tbk operates as a mining company. The Company explores and develops silver and gold projects. Archi Indonesia serves customers worldwide.

JSP Corporation manufactures polystyrene products used as automobile parts, construction, and other industrial materials.  The Company operates sale and manufacturing subsidiaries in US, France, Singapore, Korea, and Taiwan.

Jilin Liyuan Precision Manufacturing Co., Ltd manufactures and sells aluminum ex trusion profiles.  The Company's products include military, industrial, architec tural,  decoration and electronic aluminum profiles.

Jilin Liyuan Precision Manufactrg (002501 CH)

Beijing Lier High-temperature Materials Co.,Ltd. manufactures and sells steel, construction material, non-ferrous metals, and other refractory material.  The Company also designs, develops, constructs, installs, equips, uses, and maintains industrial furnace.

Beijing Lier High Temperatr Mtrls (002392 CH)

Jiangsu Alcha Aluminum Company Ltd. manufactures and markets pure aluminum foil, hydrophilic-coated aluminum foil, and aluminum scrip coil.

Jiangsu Alcha Aluminum Co, Ltd. (002160 CH)

The Pack Corporation produces paper products such as paper bags and corrugated cardboard boxes. The Company also manufactures plastic bags.

Zhejiang Great Southeast Company Ltd. manufactures a wide range of plastic packaging products. The Company produces plastic film, plastic bags, and other plastic packaging.

Zhejiang Jingxing Paper JSC Ltd manufactures and markets paper products including kraft box paper for packaging, corrugated paper, paperboard, and paper boxes.

Oriental Union Chemical Corporation manufactures and markets chemicals. The Company produces ethylene glycol, ethylene oxide, ethylene gas, and diethylene glycol.

E&D Co.,Ltd. operates advanced materials businesses. The Company mainly produces and sells diesel oxidation catalysts, fuel carrying catalysts, and other environment catalysts. E&D conducts business in Korea.

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E&D Co Ltd (101360 KS)

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Our base case valuation multiple for E&D Co is 19x P/E. Using this multiple and applying to our estimated net profit of 13.8 billion won, this...

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E&D Co IPO Preview

Established in 2004, E&D Co (Eco & Dream) is an advanced materials company in Korea, specializing in producing diesel oxidation catalysts,...

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