Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/enchem-co-ltd" target="_blank" data-smartkarma-citation="entities:34297:1" rel="noopener">Enchem (348370 KS)</a> reported strong book building results and the IPO price has been finalized at 42,000 won per share, which was 20% higher than the high end of the IPO price range of 35,000 won. The IPO of Enchem will start trading on 1 November.</p><p>Enchem's<a href="http://www.ipo38.co.kr/ipo/index.htm?o=v&amp;key=6&amp;no=1714&amp;l=&amp;page=1" target="_blank" rel="noopener"> gray market price</a> is trading at around 71,000 won per share, which is 69% higher than the IPO price of 42,000 won. There were 1,721 institutions that participated in this IPO survey and the demand ratio for the IPO shares were 1,647 to 1.</p><p>The company had some excellent book building data points. For example, a 73.9% of the institutional investors thought that the intrinsic value of Enchem should be more than 42,000 won. In addition, a very high ratio (64.4%) of the institutional investors' subscribed shares are under various lock-up periods.</p><div class="content-highlight"><p>Our base case valuation of Enchem remains implied market cap of 904 billion won or 55,777 won per share, which is 33% higher than the IPO price range of 42,000 won per share. Given the strong upside, we have a POSITIVE view of the Enchem IPO. Our base case valuation is based on a P/E of 45.7x our estimated net profit of 20 billion won in 2022.</p></div>

Enchem (348370 KS) reported strong book building results and the IPO price has been finalized at 42,000 won per share, which was 20% higher than the high end of the IPO price range of 35,000 won. The IPO of Enchem will start trading on 1 November.Enchem's gray market price is trading at around 71,000 won per share, which is 69% higher than the IPO price of 42,000 won. There were 1,721 institutions that participated in this IPO survey and the demand ratio for the IPO shares were 1,647 to 1.The company had some excellent book building data points. For example, a 73.9% of the institutional investors thought that the intrinsic value of Enchem should be more than 42,000 won. In addition, a very high ratio (64.4%) of the institutional investors' subscribed shares are under various lock-up periods.Our base case valuation of Enchem remains implied market cap of 904 billion won or 55,777 won per share, which is 33% higher than the IPO price range of 42,000 won per share. Given the strong upside, we have a POSITIVE view of the Enchem IPO. Our base case valuation is based on a P/E of 45.7x our estimated net profit of 20 billion won in 2022.

Enchem IPO - Excellent Book Building Results

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.

Event-Driven

<p>KRX officially announced today that it would not apply the volatility interruption on the first day of listing for newly listed stocks from <strong>October 18th</strong>.</p><p><strong>Both dynamic VI and static VI do not apply on the listing date.</strong> However, in the case of a transfer listing from the KOSDAQ to the KOSPI or a transfer listing from the KOSPI to the KOSDAQ, the current VI continues to apply. However, it won't apply for a transfer from KONEX to KOSDAQ.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/232/793/original/1.png?1632975345" class="editor-image img-responsive" data-smartkarma-image-id="232793"></figure></section><div class="content-caption">(Source: KRX)</div><div class="content-highlight"><p>Attached below is the full version of the press release by the KRX.</p></div><p>KRX cited as the reason for this rule change that, although it is a natural phenomenon that price fluctuations accompany the process of finding a fair price on the listing date, the VI was excessively triggered in the recent listings, which undermines transaction continuity.</p><p>In particular, there has been frequent VI activation immediately after the opening, where many investors participated, caused many problems by stopping trading and delaying the discovery of a fair price. Therefore, through this measure, KRX expects to improve the process of finding a fair price for newly listed stocks by increasing transaction continuity on the listing date.</p>

KRX officially announced today that it would not apply the volatility interruption on the first day of listing for newly listed stocks from October 18th.Both dynamic VI and static VI do not apply on the listing date. However, in the case of a transfer listing from the KOSDAQ to the KOSPI or a transfer listing from the KOSPI to the KOSDAQ, the current VI continues to apply. However, it won't apply for a transfer from KONEX to KOSDAQ.(Source: KRX)Attached below is the full version of the press release by the KRX.KRX cited as the reason for this rule change that, although it is a natural phenomenon that price fluctuations accompany the process of finding a fair price on the listing date, the VI was excessively triggered in the recent listings, which undermines transaction continuity.In particular, there has been frequent VI activation immediately after the opening, where many investors participated, caused many problems by stopping trading and delaying the discovery of a fair price. Therefore, through this measure, KRX expects to improve the process of finding a fair price for newly listed stocks by increasing transaction continuity on the listing date.

No VI (Volatility Interruption) Applies to Korean IPO Stocks on the Listing Date After October 18

<div class="content-highlight">
<p>Our base case valuation of Enchem is implied market cap of 904 billion won or 55,777 won per share, which is 59% higher than the high end of the IPO price range of 35,000 won per share. Given the strong upside, we have a POSITIVE view of the Enchem IPO and we would subscribe to the IPO deal. Our valuation sensitivity analysis suggests a low-how value of 45,179 won to 67,490 won per share. </p>
<p>Our base case valuation is based on a P/E of 45.7x our estimated net profit of 20 billion won in 2022. Our valuation multiple of 45.7x P/E is based on a 10% discount to the average P/E valuation multiple of the peers in 2022. We have used a 10% discount mainly due to lower operating margin of the company versus its peers as well as due to size factor of lower market cap of the company as compared to its comps. </p>
<p><em>Enchem's<a href="http://www.ipo38.co.kr/ipo/index.htm?o=v&amp;key=6&amp;no=1714&amp;l=&amp;page=1" target="_blank" rel="noopener"> gray market price</a> is trading at around 71,000 won per share, which is more than 100% higher than the high end of the IPO price of 35,000 won per share. </em></p>
</div>


Our base case valuation of Enchem is implied market cap of 904 billion won or 55,777 won per share, which is 59% higher than the high end of the IPO price range of 35,000 won per share. Given the strong upside, we have a POSITIVE view of the Enchem IPO and we would subscribe to the IPO deal. Our valuation sensitivity analysis suggests a low-how value of 45,179 won to 67,490 won per share. 
Our base case valuation is based on a P/E of 45.7x our estimated net profit of 20 billion won in 2022. Our valuation multiple of 45.7x P/E is based on a 10% discount to the average P/E valuation multiple of the peers in 2022. We have used a 10% discount mainly due to lower operating margin of the company versus its peers as well as due to size factor of lower market cap of the company as compared to its comps. 
Enchem's gray market price is trading at around 71,000 won per share, which is more than 100% higher than the high end of the IPO price of 35,000 won per share. 


<p><a href="https://www.smartkarma.com/entities/enchem-co-ltd" target="_blank" data-smartkarma-citation="entities:34297:1" rel="noopener">Enchem (348370 KS) </a>is getting ready to complete its IPO in Korea in the next several weeks. The IPO price range is between 30,000 won and 35,000 won. The IPO base deal size is from $57 million to $67 million. According to the bankers' valuation, the expected market cap of the company post IPO is from 486 billion won to 567 billion won. The book building for the institutional investors starts on 15 October. The lead bankers on this deal include Daishin Securities and Shinhan Investment Securities. </p><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 181pt;"><div>Deal Specifics of Enchem IPO</div></td>
<td style="width: 287pt;"> </td>
</tr>
<tr>
<td>Lead underwriters of the IPO: </td>
<td style="width: 287pt;">Daishin Securities, Shinhan Investment Securities</td>
</tr>
<tr>
<td>Expected IPO price per share: </td>
<td style="width: 287pt;">30,000 won (low)/35,000 won (high)</td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td style="width: 287pt;">2.26m shares (new shares)</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td style="width: 287pt;">US$57mn (low);  US$67mn (high)</td>
</tr>
<tr>
<td>Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 287pt;">16.2m shares</td>
</tr>
<tr>
<td>Expected market cap after IPO:</td>
<td style="width: 287pt;">486 billion won (low)/567 billion won (high)</td>
</tr>
<tr>
<td>Book open: </td>
<td style="text-align: left; width: 287pt;">15-Oct-21</td>
</tr>
<tr>
<td>Book closed:</td>
<td style="text-align: left; width: 287pt;">18-Oct-21</td>
</tr>
<tr>
<td>Listing date: </td>
<td style="text-align: left; width: 287pt;">TBC</td>
</tr>
<tr>
<td>Source: Company data</td>
<td style="width: 287pt;"> </td>
</tr>
</tbody>
</table><p>Established in 2012, Enchem specializes in the development and manufacturing of electrolytes and high functionality additives for rechargeable batteries and (electric double layer capacitors) EDLCs. Electrolyte is one of the core materials of rechargeable batteries. Enchem was the first company in Korea to successfully commercialize electrolyte for electric vehicles. Major customers include LG Energy Solution, SK Innovation, and CATL. The company sells its products to three of the top five largest makers of rechargeable batteries in the world. </p>

Enchem (348370 KS) is getting ready to complete its IPO in Korea in the next several weeks. The IPO price range is between 30,000 won and 35,000 won. The IPO base deal size is from $57 million to $67 million. According to the bankers' valuation, the expected market cap of the company post IPO is from 486 billion won to 567 billion won. The book building for the institutional investors starts on 15 October. The lead bankers on this deal include Daishin Securities and Shinhan Investment Securities. 






Deal Specifics of Enchem IPO
 


Lead underwriters of the IPO: 
Daishin Securities, Shinhan Investment Securities


Expected IPO price per share: 
30,000 won (low)/35,000 won (high)


Number of Shares for IPO:
2.26m shares (new shares)


IPO base deal size: 
US$57mn (low);  US$67mn (high)


Expected common shares outstanding, fully diluted (post-IPO):  
16.2m shares


Expected market cap after IPO:
486 billion won (low)/567 billion won (high)


Book open: 
15-Oct-21


Book closed:
18-Oct-21


Listing date: 
TBC


Source: Company data
 


Established in 2012, Enchem specializes in the development and manufacturing of electrolytes and high functionality additives for rechargeable batteries and (electric double layer capacitors) EDLCs. Electrolyte is one of the core materials of rechargeable batteries. Enchem was the first company in Korea to successfully commercialize electrolyte for electric vehicles. Major customers include LG Energy Solution, SK Innovation, and CATL. The company sells its products to three of the top five largest makers of rechargeable batteries in the world. 

South Korea

ENCHEM Co.,Ltd. produces and sells electrolyte and functional additives. The Company develops, manufactures and markets lithium rechargeable batteries electrolytes, polymer batteries electrolytes, high functionality additives, and other products. ENCHEM markets its products primarily throughout Korea with limited overseas.

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Enchem (348370 KS)

Enchem IPO - Excellent Book Building Results

Enchem (348370 KS) reported strong book building results and the IPO price has been finalized at 42,000 won per share, which was 20% higher than...

Douglas Kim

No VI (Volatility Interruption) Applies to Korean IPO Stocks on the Listing Date After October 18

The KRX made it official that no VI (volatility interruption) applies to IPO stocks on the listing date after October 18. This post details the...

Sanghyun Park

Enchem IPO Valuation Analysis

Our base case valuation of Enchem is implied market cap of 904 billion won or 55,777 won per share, which is 59% higher than the high end of the...

Douglas Kim

Enchem IPO Preview

Enchem is getting ready to complete its IPO in Korea in the next several weeks. The expected market cap of the company post IPO is from 486 billion...

Douglas Kim

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