Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div><p>Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, raised US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.</p></div><div><p>We have covered most aspects of the deal in our earlier notes:</p></div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-guided-by-ant-financial-to-be-a-mini-ant" target="_blank" rel="noopener">Kakao Pay IPO - Guided by Ant Financial to be a mini Ant,</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-peer-comparison-local-and-international" target="_blank" rel="noopener">Kakao Pay IPO - Peer comparison - local and international, and</a></li>
</ul></div><div><ul style="list-style-type: disc;"><li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-valuation-and-likely-impact-of-latest-announcement" target="_blank" rel="noopener">Kakao Pay IPO - Valuation and Likely Impact of Latest Announcement</a></li></ul></div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-low-end-still-appear-reasonable-but-stock-will-more-likely-be-driven-by-sentiment" target="_blank" rel="noopener">Kakao Pay IPO - Low-End Still Appear Reasonable but Stock Will More Likely Be Driven by Sentiment</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-comparison-with-kakao-bank-and-an-alternate-look-at-valuation" target="_blank" rel="noopener">Kakao Pay IPO - Comparison with Kakao Bank and an Alternate Look at Valuation</a></li>
</ul></div><p>In this note, we will talk about the deal's trading dynamics.</p>

Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, raised US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.We have covered most aspects of the deal in our earlier notes:
Kakao Pay IPO - Guided by Ant Financial to be a mini Ant,
Kakao Pay IPO - Peer comparison - local and international, and
Kakao Pay IPO - Valuation and Likely Impact of Latest Announcement
Kakao Pay IPO - Low-End Still Appear Reasonable but Stock Will More Likely Be Driven by Sentiment
Kakao Pay IPO - Comparison with Kakao Bank and an Alternate Look at Valuation
In this note, we will talk about the deal's trading dynamics.

<div><p><a href="https://www.smartkarma.com/entities/paytm-mobile-solutions-pvt-ltd" target="_blank" data-smartkarma-citation="entities:26149:1" rel="noopener">Paytm (PAYTM IN)</a> plans to raise around US$2.5bn via selling a mix of primary and secondary shares in its India IPO. The company is backed by <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a> (<a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>), <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and counts <a href="https://www.smartkarma.com/entities/berkshire-hathaway-inc-cl-a" target="_blank" data-smartkarma-citation="entities:1044:1" rel="noopener">Berkshire Hathaway Inc Cl A (BRK/A US)</a> among its investors.</p></div><div><p>Paytm offers payment services, commerce and cloud services, and financial services to 333m consumers and over 21m merchants, as of Mar 21. It offers consumers a wide selection of payment options on the Paytm app. It also offers merchants solutions that allow them to accept payments, acquire and retain consumers, improve their business operations and access financial services.</p></div><div><p>We covered the deal background in our earlier notes:</p></div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/paytm-one-97-pre-ipo-the-positives-will-be-one-of-india-s-largest-ipos" target="_blank" rel="noopener">Paytm (One 97) Pre-IPO - The Positives - Will Be One of India’s Largest IPOs</a></li>
<li><a href="https://www.smartkarma.com/insights/paytm-one-97-pre-ipo-the-negatives-asking-valuations-a-long-shot" target="_blank" rel="noopener">Paytm (One 97) Pre-IPO - The Negatives - Asking Valuations a Long Shot</a></li>
<li><a href="https://www.smartkarma.com/insights/paytm-one-97-ipo-rhp-updates-better-disclosures-signs-of-turning-around" target="_blank" rel="noopener">Paytm (One 97) IPO - RHP Updates - Better Disclosures, Signs of Turning Around</a></li>
</ul></div><div><p>In this note, we will talk about the valuations.</p></div>

Paytm (PAYTM IN) plans to raise around US$2.5bn via selling a mix of primary and secondary shares in its India IPO. The company is backed by Ant Financial Services Group (6688 HK) (Alibaba Group (BABA US)), Softbank Group (9984 JP) and counts Berkshire Hathaway Inc Cl A (BRK/A US) among its investors.Paytm offers payment services, commerce and cloud services, and financial services to 333m consumers and over 21m merchants, as of Mar 21. It offers consumers a wide selection of payment options on the Paytm app. It also offers merchants solutions that allow them to accept payments, acquire and retain consumers, improve their business operations and access financial services.We covered the deal background in our earlier notes:
Paytm (One 97) Pre-IPO - The Positives - Will Be One of India’s Largest IPOs
Paytm (One 97) Pre-IPO - The Negatives - Asking Valuations a Long Shot
Paytm (One 97) IPO - RHP Updates - Better Disclosures, Signs of Turning Around
In this note, we will talk about the valuations.

Paytm IPO - Still Needs a Whole Lot of Hope to Justify Valuation. Index Might Hold It up Briefly

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.

Order tableThe final institutional subscription rate of Kakao Pay was 1,714.47 to 1. It is close to the historical high of SKIET (1,883 to 1).There is a notable pattern in this bookbuilding. Foreign institutions account for more than 10% of the number of institutions. However, they do not exceed 4% based on the order volume. It is because most of the local institutions placed the maximum order to secure as many as possible. Of course, this pattern isn't unfamiliar at all, but it's gotten worse in this event.









By investor type
Institution
%
Demand
%


1. Local publicly raised funds
615
39.81%
7,086,056,400
44.20%


2. Local brokerages/investment advisories
32
2.07%
340,522,933
2.12%


3. Local pensions, funds managing proprietary assets, banks, and insurance companies
248
16.05%
2,827,447,500
17.64%


4. Local - Other (discretionary investment companies, primarily local hedge funds)
462
29.90%
5,223,138,145
32.58%


5. Foreign (foreign IPO funds &amp; hedge funds)
166
10.74%
285,333,793
1.78%


6. Foreign - Other (mostly local hot money)
22
1.42%
267,757,000
1.67%


Total
1,545
100.00%
16,030,255,771
100.00%


Subscription rate
1,714.47

Source: DART

There seem to be three explanations that local institutions rushed to this IPO like this.
First, the IPO price of Kakao Pay may have provided valuation merit.
Second, in terms of demand interference within the same corporate group and within the same sector, there might have been many local institutions that wanted to include Kakao Pay in their portfolios rather than Kakao Bank.
Third, Kakao Pay is the last mega IPO of this year in a situation where LGES's listing within this year has gone awry, so the competition between local IPO funds that have not yet achieved satisfactory results may have erupted this time.
This reasoning is evidenced by the fact that 100% of the orders are above 75% of the upper end. The "Unspecified" is generally considered "Above the upper end" in Korea's local IPO bookbuildings.









By price
Institution
%
Demand
%


Above high end
446
28.87%
5,205,975,000
32.48%


75-100% of high end
1,029
66.60%
10,219,345,229
63.75%


50-75% of high end
0
0.00%
0
0.00%


25-50% of high end
0
0.00%
0
0.00%


0-25% of high end
0
0.00%
0
0.00%


Median
0
0.00%
0
0.00%


75-100% of median
0
0.00%
0
0.00%


50-75% of median
0
0.00%
0
0.00%


25-50% of median
0
0.00%
0
0.00%


0-25% of median
4
0.26%
1,453,942
0.01%


Low end or below
0
0.00%
0
0.00%


Unspecified
66
4.27%
603,481,600
3.76%


Total
1,545
100.00%
16,030,255,771
100.00%

Source: DART

Regardless of whether the holding tendencies are long-term or short-term, all institutions have been pricing fairly aggressively. It shows once again that there is fierce competition among institutions to secure the target allocation volume.








Institution type
Above 75% of the upper end + Unspecified
% of total demands
Holding tendencies


1. Local publicly raised funds
100.00%
44.20%
Long-term


2. Local brokerages/investment advisories
100.00%
2.12%
Short-term


3. Local pensions, funds managing proprietary assets, banks, and insurance companies
100.00%
17.64%
Long-term


4. Local - Other (discretionary investment companies, primarily local hedge funds)
100.00%
32.58%
Short-term


5. Foreign (foreign IPO funds &amp; hedge funds)
97.59%
1.77%
Long or short-term, depends


6. Foreign - Other (mostly local hot money)
100.00%
1.67%
Short-term

Source: DART

Additional data:The order table for each institutional type is below.The daily bookbuilding participation quantity is as follows.

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<p>In this insight, we discuss the end of lock-up periods for <a href="https://www.smartkarma.com/entities/hyundai-heavy-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:33808:1" rel="noopener">Hyundai Heavy Industries (329180 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a>,<a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a>, and <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a> in 4Q 2021 and 1Q 2022. </p><ul>
<li>In particular, there are lock up periods ending for these four stocks in November and December.</li>
<li>There are also end of lock-up periods for Krafton and Kakao Bank in early February 2022.</li>
<li>Typically, investors tend to focus on the end of the lock-up periods in Korea about 1-2 months ahead of the actual end of these lock-up periods.</li>
</ul><p>In addition to analyzing the end of these lock-up periods, we analyze the recent shorts balance of these stocks in recent weeks. </p><hr><ul>
<li>Although <strong>Kakao Bank's</strong> share price has performed well since the IPO (up 54% from IPO price), its share price is down 22% from the end of the one month lock-up period. The amount of shares that could be sold after the end of the three months and six months lock-up periods are much bigger (18.3 million shares combined) as compared to the 3.1 million shares that could be sold after the one month lock-up period. Therefore, there are continued concerns about additional selling of Kakao Bank shares in November (after the end of the three months lock-up period).</li>
<li>
<strong>Krafton's</strong> share price has not performed well after the IPO (down 2% from the IPO price of 498,000 won). With the upcoming end of the 3 month lock-up period, there could be continued negative pressure for additional selling from the existing shareholders.</li>
</ul>

In this insight, we discuss the end of lock-up periods for Hyundai Heavy Industries (329180 KS), SK IE Technology (361610 KS), Krafton Inc (259960 KS), and KakaoBank (323410 KS) in 4Q 2021 and 1Q 2022. 
In particular, there are lock up periods ending for these four stocks in November and December.
There are also end of lock-up periods for Krafton and Kakao Bank in early February 2022.
Typically, investors tend to focus on the end of the lock-up periods in Korea about 1-2 months ahead of the actual end of these lock-up periods.
In addition to analyzing the end of these lock-up periods, we analyze the recent shorts balance of these stocks in recent weeks. 
Although Kakao Bank's share price has performed well since the IPO (up 54% from IPO price), its share price is down 22% from the end of the one month lock-up period. The amount of shares that could be sold after the end of the three months and six months lock-up periods are much bigger (18.3 million shares combined) as compared to the 3.1 million shares that could be sold after the one month lock-up period. Therefore, there are continued concerns about additional selling of Kakao Bank shares in November (after the end of the three months lock-up period).

Krafton's share price has not performed well after the IPO (down 2% from the IPO price of 498,000 won). With the upcoming end of the 3 month lock-up period, there could be continued negative pressure for additional selling from the existing shareholders.


End of Lock-Ups for Kakao Bank, Krafton, SK IET, & HHI in 4Q 2021 and Increasing Short Volumes

<p>In this insight, we provide an updated valuation analysis of <a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300 KS)</a>. We update our financials to account for the company's 1H 2021 results. In addition, we have used the updated financials comparisons of the comps.</p><div class="content-highlight"><p>Our base case valuation of Kakao Pay is an implied market cap of 11.1 trillion won or 81,829 won per share. Our base case valuation of the company is reduced by 9% mainly due to lower sales estimates in 2022 combined with lower valuation multiple (EV/S of 10x in 2022 versus 10.6x previously). </p><ul style="list-style-type: disc;"><li>Our base case valuation is based on 10.0x EV/Sales multiple and applying this to our estimated sales of 919 billion won in 2022. </li><li>The EV/S multiple of 10.0x is based on the median valuation multiple of the comps in 2022. Among the comps, the valuation multiple of Upstart Holdings has increased materially in the past two months, which was offset by lower valuation multiples of 360 Digitech and Lemonade.</li></ul><p>The IPO price range is from 60,000 won to 90,000 won. If the IPO is priced near the mid to high end of the IPO price range, we would avoid this deal. On the other hand, if the IPO is priced close to the low end of the IPO price range, we would be more comfortable with taking the deal.</p><p><strong>Furthermore, although our one year base case valuation is 8</strong><strong>1,829 won per share, we do think there could be moderate (but not excessive) pop in the first 1-2 days of trading rising to as high as 103,366 won per share. We believe that many investors may opt to take some profits if the stock pops to more than 100,000 won per share. </strong></p></div>

In this insight, we provide an updated valuation analysis of Kakao Pay (377300 KS). We update our financials to account for the company's 1H 2021 results. In addition, we have used the updated financials comparisons of the comps.Our base case valuation of Kakao Pay is an implied market cap of 11.1 trillion won or 81,829 won per share. Our base case valuation of the company is reduced by 9% mainly due to lower sales estimates in 2022 combined with lower valuation multiple (EV/S of 10x in 2022 versus 10.6x previously). Our base case valuation is based on 10.0x EV/Sales multiple and applying this to our estimated sales of 919 billion won in 2022. The EV/S multiple of 10.0x is based on the median valuation multiple of the comps in 2022. Among the comps, the valuation multiple of Upstart Holdings has increased materially in the past two months, which was offset by lower valuation multiples of 360 Digitech and Lemonade.The IPO price range is from 60,000 won to 90,000 won. If the IPO is priced near the mid to high end of the IPO price range, we would avoid this deal. On the other hand, if the IPO is priced close to the low end of the IPO price range, we would be more comfortable with taking the deal.Furthermore, although our one year base case valuation is 81,829 won per share, we do think there could be moderate (but not excessive) pop in the first 1-2 days of trading rising to as high as 103,366 won per share. We believe that many investors may opt to take some profits if the stock pops to more than 100,000 won per share. 

Kakao Pay - Slightly Lower Our Base Case Valuation

South Korea

KakaoBank Corp. operates bank businesses. The Company provides deposit money, withdraw money, credit cards, stock accounts, linked loans, and other services. KakaoBank conducts businesses in South Korea.

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KakaoBank (323410 KS)

Kakao Pay IPO Trading - Won't Be Chasing

Kakao Pay, one of South Korea’s largest payment and financial services apps, raised around US$1.3bn in its South Korean IPO. Kakao held a 55% stake...

Sumeet Singh

Paytm IPO - Still Needs a Whole Lot of Hope to Justify Valuation. Index Might Hold It up Briefly

Paytm (PAYTM IN) plans to raise around US$2.5bn in its India IPO. The company is backed by Ant Fin (Alibaba Group (BABA US)), Softbank Group (9984...

Sumeet Singh

Kakao Pay Bookbuilding: Detailed Results

This post details and explains Kakao Pay's extremely successful bookbuilding results, officially published on DART late last Friday.

Sanghyun Park

End of Lock-Ups for Kakao Bank, Krafton, SK IET, & HHI in 4Q 2021 and Increasing Short Volumes

In this insight, we discuss end of lock-up periods for Hyundai Heavy Industries (329180 KS), SK IE Technology (361610 KS), Krafton Inc (259960 KS),...

Douglas Kim

Kakao Pay - Slightly Lower Our Base Case Valuation

Our base case valuation of Kakao Pay is 81,829 won per share, which is reduced by 9% than previously mainly due to lower sales estimates in 2022...

Douglas Kim

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