Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<p>Our base case valuation of K Car is implied market cap of 2.8 trillion won or 55,441 won per share, which is 28% higher than the high end of the IPO price range of 43,200 won per share. Given the attractive upside, we have a POSITIVE view of the K Car IPO and we would subscribe to the IPO deal. </p><p><em>Given K Car's solid financials combined with its dominant market share in the online used car segment in Korea, we believe that many investors would be willing to attach higher valuation multiples on the company than its peers. In the first few days of trading, we believe that investors could push K Car's shares higher towards the high end of our valuation range 67,084 won per share, which would be 55% higher than the high end of the IPO valuation range. </em></p>

Our base case valuation of K Car is implied market cap of 2.8 trillion won or 55,441 won per share, which is 28% higher than the high end of the IPO price range of 43,200 won per share. Given the attractive upside, we have a POSITIVE view of the K Car IPO and we would subscribe to the IPO deal. Given K Car's solid financials combined with its dominant market share in the online used car segment in Korea, we believe that many investors would be willing to attach higher valuation multiples on the company than its peers. In the first few days of trading, we believe that investors could push K Car's shares higher towards the high end of our valuation range 67,084 won per share, which would be 55% higher than the high end of the IPO valuation range. 

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.

<h2>Offering overview</h2><p>K Car (formerly known as SK Encar), the largest used car brokerage company in Korea, has filed a securities declaration. K Car will be listed on the KOSPI, and a total of 16.83M shares will be offered through this IPO. This is 35.90% of the total number of shares before listing. The amount allocated to institutions is 55-75%.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Offering size"}'>Offering size</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bourse"}'>Bourse</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSPI"}'>KOSPI</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Pre-IPO SO"}'>Pre-IPO SO</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":46884369}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[-3]">46,884,369</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering"}'><strong>Offering</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":16830288}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[3]C[-3]"><strong>16,830,288</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - % of SO"}'><strong>- % of SO</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.35897439506970863}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[5]C[-3]"><strong>35.90%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Institutional allotment"}'>Institutional allotment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":9256659}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=Terms!R[5]C[-3]">9,256,659</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - % of the offering"}'><strong>- % of the offering</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5500000356500139}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-3]C[0]"><strong>55.00%</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>Yes, we have a massive secondary offering here. The secondary offering percentage is a whopping 92.86%. This is basically a private equity-owned company. One of the largest local PEs, Hahn &amp; Company, owns a full 100% stake. It acquired full ownership from SK Inc in 2018. Hahn &amp; Co has been pushing to sell its stake in K Car since last year. The most well-known candidate was Lotte Rental. However, as these attempts ended in vain, Hahn &amp; Co opted for an exit strategy through IPO.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Split"}'>Split</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Primary %"}'>Primary %</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07142860538096556}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[2]C[-3]">7.14%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Secondary %"}'><strong>Secondary %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.9285713946190345}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[3]C[-3]"><strong>92.86%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Post-IPO shares outstanding"}'>Post-IPO shares outstanding</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":48086533}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-10]C[0]+Terms!R[1]C[-3]">48,086,533</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'><strong>Capital increase rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.025641040407305044}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[3]C[-3]"><strong>2.56%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.025000014037194155}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[3]C[-3]">2.50%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Shareholding"}'>Shareholding</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Post IPO"}'>Post-IPO</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Shares"}'>Shares</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Lock-up"}'>Lock-up</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hahn &amp; Company"}'><strong>Hahn &amp; Company</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6499999698460274}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[1]/Terms!R14C5"><strong>65.00%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":31256245}' data-sheets-numberformat='[null,2,"#,##0",1]'><strong>31,256,245</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"1 year"}' data-sheets-numberformat='[null,2,"#,##0",1]'><strong>1 year</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"ESOP (post-IPO)"}'>ESOP (post-IPO)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0699999935532886}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[1]/Terms!R14C5">7.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3366057}' data-sheets-numberformat='[null,2,"#,##0",1]'>3,366,057</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"1 year"}' data-sheets-numberformat='[null,2,"#,##0",1]'>1 year</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"IPO"}'>IPO</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.280000036600684}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[1]/Terms!R14C5">28.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13464231}' data-sheets-numberformat='[null,2,"#,##0",1]'>13,464,231</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,2,"#,##0",1]'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total"}'>Total</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[1]/Terms!R14C5">100.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":48086533}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula="=sum(R[-3]C[0]:R[-1]C[0])">48,086,533</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,2,"#,##0",1]'>-</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>The schedule is as follows. The book opens on September 13th and closes on the 28th. The payment date is October 6, and the listing date will be announced later.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Schedule"}'>Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book open"}'>Book open</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44452}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 09. 13</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'>Book close</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44467}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 09. 28</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'>Allotment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44468}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 09. 29</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'>Subscription</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44469}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 09. 30</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44475}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 10. 06</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"TBA"}'>TBA</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>

Offering overviewK Car (formerly known as SK Encar), the largest used car brokerage company in Korea, has filed a securities declaration. K Car will be listed on the KOSPI, and a total of 16.83M shares will be offered through this IPO. This is 35.90% of the total number of shares before listing. The amount allocated to institutions is 55-75%.





Offering size

Bourse
KOSPI


Pre-IPO SO
46,884,369


Offering
16,830,288


- % of SO
35.90%


Institutional allotment
9,256,659


- % of the offering
55.00%

Source: DART

Yes, we have a massive secondary offering here. The secondary offering percentage is a whopping 92.86%. This is basically a private equity-owned company. One of the largest local PEs, Hahn &amp; Company, owns a full 100% stake. It acquired full ownership from SK Inc in 2018. Hahn &amp; Co has been pushing to sell its stake in K Car since last year. The most well-known candidate was Lotte Rental. However, as these attempts ended in vain, Hahn &amp; Co opted for an exit strategy through IPO.





Split

Primary %
7.14%


Secondary %
92.86%


Post-IPO shares outstanding
48,086,533


Capital increase rate
2.56%


Dilution
2.50%

Source: DART










Shareholding
Post-IPO
Shares
Lock-up


Hahn &amp; Company
65.00%
31,256,245
1 year


ESOP (post-IPO)
7.00%
3,366,057
1 year


IPO
28.00%
13,464,231
-


Total
100.00%
48,086,533
-

Source: DART

The schedule is as follows. The book opens on September 13th and closes on the 28th. The payment date is October 6, and the listing date will be announced later.





Schedule

Book open
2021. 09. 13


Book close
2021. 09. 28


Allotment
2021. 09. 29


Subscription
2021. 09. 30


Payment
2021. 10. 06


Listing
TBA

Source: DART



K Car (Korea's Carvana?): Offering Details, Pricing Structure, & Valuation Issues

<p>K Car is another interesting upcoming IPO in Korea. K Car, the largest used car e-commerce player in Korea, is getting ready to complete its IPO in early October. The IPO price range is from 34,300 won to 43,200 won per share. The IPO base deal size is from US$498 million to US$627 million. Of the 16.8m shares offered in the IPO, 15.6m shares are old shares and 1.2m are new shares).</p><p>According to the bankers' valuation, the expected market cap of the company is from 1.8 trillion won to 2.2 trillion won. The lead underwriters include NH Investment &amp; Securities and Goldman Sachs. The book building for the institutional investors starts on 27 September 2021. </p><p>K Car is mainly in the used car and rental car businesses. Hahn &amp; Co, a private equity firm in Korea, acquired the controlling stake in K Car in April 2018. Hahn &amp; Co Auto Service Holdings currently has a 100% stake in K Car. Post the IPO, it will have a 61% stake in K Car. </p><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td><div><strong>Deal Specifics of K Car IPO</strong></div></td>
<td style="width: 258pt;"> </td>
</tr>
<tr>
<td>Lead underwriters of the IPO: </td>
<td style="width: 258pt;">NH Investment &amp; Securities, Goldman Sachs</td>
</tr>
<tr>
<td>Expected IPO price per share: </td>
<td style="width: 258pt;">34,300 won (low)/43,200 won (high)</td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td style="width: 258pt;">16.83m shares (15.6mn old shares; 1.2mn new shares)</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td style="width: 258pt;">US$498mn (low);  US$627mn (high)</td>
</tr>
<tr>
<td>Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 258pt;">50.89m shares</td>
</tr>
<tr>
<td>Expected market cap after IPO:</td>
<td style="width: 258pt;">1,745 billion won (low)/2,198 billion won (high)</td>
</tr>
<tr>
<td>Book open: </td>
<td style="text-align: left; width: 258pt;">27-Sep-21</td>
</tr>
<tr>
<td>Book closed:</td>
<td style="text-align: left; width: 258pt;">28-Sep-21</td>
</tr>
<tr>
<td>Listing date: </td>
<td style="text-align: left; width: 258pt;">TBC</td>
</tr>
<tr>
<td>Source: Company data</td>
<td style="width: 258pt;"></td>
</tr>
</tbody>
</table>

K Car is another interesting upcoming IPO in Korea. K Car, the largest used car e-commerce player in Korea, is getting ready to complete its IPO in early October. The IPO price range is from 34,300 won to 43,200 won per share. The IPO base deal size is from US$498 million to US$627 million. Of the 16.8m shares offered in the IPO, 15.6m shares are old shares and 1.2m are new shares).According to the bankers' valuation, the expected market cap of the company is from 1.8 trillion won to 2.2 trillion won. The lead underwriters include NH Investment &amp; Securities and Goldman Sachs. The book building for the institutional investors starts on 27 September 2021. K Car is mainly in the used car and rental car businesses. Hahn &amp; Co, a private equity firm in Korea, acquired the controlling stake in K Car in April 2018. Hahn &amp; Co Auto Service Holdings currently has a 100% stake in K Car. Post the IPO, it will have a 61% stake in K Car. 






Deal Specifics of K Car IPO
 


Lead underwriters of the IPO: 
NH Investment &amp; Securities, Goldman Sachs


Expected IPO price per share: 
34,300 won (low)/43,200 won (high)


Number of Shares for IPO:
16.83m shares (15.6mn old shares; 1.2mn new shares)


IPO base deal size: 
US$498mn (low);  US$627mn (high)


Expected common shares outstanding, fully diluted (post-IPO):  
50.89m shares


Expected market cap after IPO:
1,745 billion won (low)/2,198 billion won (high)


Book open: 
27-Sep-21


Book closed:
28-Sep-21


Listing date: 
TBC


Source: Company data





Equity Bottom-Up

<ul>
<li>In the first table, we provide a list of 56 stocks (2.2% of total) which have dividend yields of 7% or more. </li>
<li>The second table is a list of stocks with dividend yields of 7% or more and they are ranked in terms of market cap. </li>
<li>These 25 stocks have an average dividend yield of 9.1%. The second table has 12 financials related stocks, representing 48% of total. </li>
</ul>


In the first table, we provide a list of 56 stocks (2.2% of total) which have dividend yields of 7% or more. 
The second table is a list of stocks with dividend yields of 7% or more and they are ranked in terms of market cap. 
These 25 stocks have an average dividend yield of 9.1%. The second table has 12 financials related stocks, representing 48% of total. 


Alpha Generation Through High Dividend Stocks in Korea

South Korea

K Car Co., Ltd. retails used automobiles. The Company distributes sedans, commercial vehicles, light trucks, utility vehicles, used vehicles, and other related automobiles. K Car markets its products throughout South Korea.

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K Car (381970 KS)

K Car IPO Valuation Analysis

Our base case valuation of K Car is implied market cap of 2.8 trillion won or 55,441 won per share, which is 28% higher than the high end of the...

Douglas Kim

K Car (Korea's Carvana?): Offering Details, Pricing Structure, & Valuation Issues

This post details the IPO conditions of K Car (often called Korea's Carvana), along with the pricing structure and valuation issues.

Sanghyun Park

K Car IPO Preview

K Car, the largest used car e-commerce player in Korea, is getting ready to complete its IPO in early October. The IPO base deal size is from...

Douglas Kim

Alpha Generation Through High Dividend Stocks in Korea

There are 2,576 listed stocks in Korea. In this insight, we provide a list of 56 stocks (2.2% of total) which have dividend yields of 7% or more.

Douglas Kim

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