Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<p>It was announced on 15 October that a consortium led by <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> plans to purchase a large property in Seoul for more than<a href="https://moneys.mt.co.kr/news/mwView.php?no=2021101517518088669" target="_blank" rel="noopener"> 1 trillion won. </a>CBRE is the advisory firm in this sale. The Krafton-Mirae Asset Managment consortium has been selected as the preferred bidder for this property located in Seongsu-dong, Seoul (currently owned by <a href="https://www.smartkarma.com/entities/e-mart-inc" target="_blank" data-smartkarma-citation="entities:6993:1" rel="noopener">E Mart Inc (139480 KS).</a> Krafton and Emart are expected to sign a MOU for this deal next week.</p><div class="content-highlight"><p><strong>We believe that Krafton purchasing a large piece of property in Seoul is likely to have a negative impact on its share price.</strong> Although Krafton is a cash rich company with nearly 4.5 trillion won in net cash post the IPO, it may need to spend about 500 billion won to 750 billion won in investment in this large property in Seong-su dong, Seoul. Many investors will not like this deal as they would rather have Krafton invest in its core gaming business (internally or through acquisitions).</p></div>

It was announced on 15 October that a consortium led by  Krafton Inc (259960 KS) plans to purchase a large property in Seoul for more than 1 trillion won. CBRE is the advisory firm in this sale. The Krafton-Mirae Asset Managment consortium has been selected as the preferred bidder for this property located in Seongsu-dong, Seoul (currently owned by E Mart Inc (139480 KS). Krafton and Emart are expected to sign a MOU for this deal next week.We believe that Krafton purchasing a large piece of property in Seoul is likely to have a negative impact on its share price. Although Krafton is a cash rich company with nearly 4.5 trillion won in net cash post the IPO, it may need to spend about 500 billion won to 750 billion won in investment in this large property in Seong-su dong, Seoul. Many investors will not like this deal as they would rather have Krafton invest in its core gaming business (internally or through acquisitions).

Krafton Consortium Plans to Buy a Large Property in Seoul from Emart for More than 1 Trillion Won

Thematic (Sector/Industry)

<div class="content-highlight">
<p>In this insight, we provide 8 examples of how metaverse is revolutionizing numerous businesses in Korea. We also provide a list of Korean companies that are actively trying to expand their metaverse businesses. Because metaverse is in the initial stages of growth for many of these businesses, their contributions to their companies' sales and profits may not be meaningful right now. However, they are experiencing a significant popularity. Metaverse is certainly one of the key industry trends that is likely to have a multi-years impact on the companies mentioned in this insight.</p>
<p>The term "metaverse" was first coined by the writer Neal Stephenson in his 1992 science fiction novel <a href="https://digiday.com/marketing/wtf-is-the-metaverse/" target="_blank" rel="noopener"><em>Snow Crash </em></a>where metaverse refers to a popular virtual world where the main characters are equipped with augmented technologies. </p>
<p>Metaverse refers to a computerized domain where the users can share their virtual encounters. Still in the beginning phases of advancement, metaverse has become more important in key industries industries including technology, media, and telecom. In addition, metaverse is also impacting other major industries such as retail, gaming, and fashion. </p>
<p>Metaverse will empower its users to be more engaged in online shopping, web-based media, entertainment, and share virtual encounters. Metaverse is often considered as a "coming together" of numerous technologies including augmented reality (AR), virtual reality (VR), 5G, smartphones, and distributed computing. Up until recently, the gaming industry has been driving the demand for metaverse. However, greater improvements in technologies have allowed metaverse to flourish in other industries as well. </p>
<p>South Korea is one of the key countries driving the metaverse industry globally. This is one of the leaders in this area and there will be numerous, interesting opportunities involving metaverse in Korea. </p>
</div>


In this insight, we provide 8 examples of how metaverse is revolutionizing numerous businesses in Korea. We also provide a list of Korean companies that are actively trying to expand their metaverse businesses. Because metaverse is in the initial stages of growth for many of these businesses, their contributions to their companies' sales and profits may not be meaningful right now. However, they are experiencing a significant popularity. Metaverse is certainly one of the key industry trends that is likely to have a multi-years impact on the companies mentioned in this insight.
The term "metaverse" was first coined by the writer Neal Stephenson in his 1992 science fiction novel Snow Crash where metaverse refers to a popular virtual world where the main characters are equipped with augmented technologies. 
Metaverse refers to a computerized domain where the users can share their virtual encounters. Still in the beginning phases of advancement, metaverse has become more important in key industries industries including technology, media, and telecom. In addition, metaverse is also impacting other major industries such as retail, gaming, and fashion. 
Metaverse will empower its users to be more engaged in online shopping, web-based media, entertainment, and share virtual encounters. Metaverse is often considered as a "coming together" of numerous technologies including augmented reality (AR), virtual reality (VR), 5G, smartphones, and distributed computing. Up until recently, the gaming industry has been driving the demand for metaverse. However, greater improvements in technologies have allowed metaverse to flourish in other industries as well. 
South Korea is one of the key countries driving the metaverse industry globally. This is one of the leaders in this area and there will be numerous, interesting opportunities involving metaverse in Korea. 


How Is Metaverse Revolutionizing Businesses in Korea? Virtual Humans Rozy & Lucy Are Just a Start

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>Krafton's stock price has remained stubbornly strong despite numerous risks related to Chinese gaming restrictions and overdependence on a single revenue stream particularly vulnerable to those restrictions. It appears now that the risks we previously highlighted are starting to come through.</p>

Krafton's stock price has remained stubbornly strong despite numerous risks related to Chinese gaming restrictions and overdependence on a single revenue stream particularly vulnerable to those restrictions. It appears now that the risks we previously highlighted are starting to come through.

Equity Capital Markets

<h2>Bookbuilding Results of K Car IPO</h2><p><a href="https://www.smartkarma.com/entities/k-car" target="_blank" data-smartkarma-citation="entities:34118:1" rel="noopener">K Car (381970 KS)</a> announced today that the <a href="https://www.newsis.com/view/?id=NISX20210929_0001597864&amp;cID=15001&amp;pID=15000" target="_blank" rel="noopener">IPO price</a> has been determined at 25,000 won, which was below the IPO price range of 34,300 won and 43,200 won. There were mixed responses from the overseas and domestic institutional investors. Most of the global institutional investors, that have recorded high returns from IPOs of global used car trading online platform companies such as Carvana and Vroom in the US, applied at the upper end of the IPO offering price and showed solid demand. </p><p>On the other hand, the domestic institutional investors were more conservative in their view of this IPO, especially after the recent sluggish performance of major IPOs in Korea including <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/lotte-rental-co-ltd" target="_blank" data-smartkarma-citation="entities:33445:1" rel="noopener">Lotte Rental (089860 KS)</a>. Plus, given the recent series of large scale IPOs in Korea, many local institutions have limited amount of funds for further investments in IPOs.  </p><div class="content-highlight">
<p>We continue to have a positive view of the K Car IPO following the bookbuilding results. However, it appears that the market (especially local investors) have taken a much more pessimistic view of this IPO especially due to the recent poor IPO of Lotte Rental combined with the threat of Hyundai Motor Group becoming a major competitor.</p>
<p>We have lowered our fair value assessment to 38,809 per share, which still represents an upside of 55% versus the IPO price of 25,000 won. Our fair value assessment is based on 0.9x P/S using our estimated sales of 2.3 trillion won for the company in 2022. While we maintained our earnings estimates, we lowered to target multiple by 30% in 2022. The 0.9x P/S multiple now reflects a 30% discount to the comps' multiples (which are mainly US based companies). </p>
</div>

Bookbuilding Results of K Car IPOK Car (381970 KS) announced today that the IPO price has been determined at 25,000 won, which was below the IPO price range of 34,300 won and 43,200 won. There were mixed responses from the overseas and domestic institutional investors. Most of the global institutional investors, that have recorded high returns from IPOs of global used car trading online platform companies such as Carvana and Vroom in the US, applied at the upper end of the IPO offering price and showed solid demand. On the other hand, the domestic institutional investors were more conservative in their view of this IPO, especially after the recent sluggish performance of major IPOs in Korea including  Krafton Inc (259960 KS) and Lotte Rental (089860 KS). Plus, given the recent series of large scale IPOs in Korea, many local institutions have limited amount of funds for further investments in IPOs.  
We continue to have a positive view of the K Car IPO following the bookbuilding results. However, it appears that the market (especially local investors) have taken a much more pessimistic view of this IPO especially due to the recent poor IPO of Lotte Rental combined with the threat of Hyundai Motor Group becoming a major competitor.
We have lowered our fair value assessment to 38,809 per share, which still represents an upside of 55% versus the IPO price of 25,000 won. Our fair value assessment is based on 0.9x P/S using our estimated sales of 2.3 trillion won for the company in 2022. While we maintained our earnings estimates, we lowered to target multiple by 30% in 2022. The 0.9x P/S multiple now reflects a 30% discount to the comps' multiples (which are mainly US based companies). 


<p>While the battle for payment systems between Epic and Apple will continue with Epic filing an appeal, the rather mild ruling against Apple has some interesting implications, as do the responses of both companies to the ruling. In the context of regulatory upheaval in the key gaming space in China and a slew of regulatory moves in other Asian countries such as Japan and South Korea, there is plenty worth mulling as new winners and losers could emerge.</p>

While the battle for payment systems between Epic and Apple will continue with Epic filing an appeal, the rather mild ruling against Apple has some interesting implications, as do the responses of both companies to the ruling. In the context of regulatory upheaval in the key gaming space in China and a slew of regulatory moves in other Asian countries such as Japan and South Korea, there is plenty worth mulling as new winners and losers could emerge.

South Korea

HYBE Co., Ltd. operates as an entertainment company. The Company provides music production, album distribution, entertainers management, publicity, planning, training, and other services. HYBE also makes television shows.

Netmarble Corporation develops and publishes mobile games. The Company develops and publishes casual games, action, sports games, strategy, simulation games, and social casino games. Netmarble offers services worldwide.

Pearl Abyss Corp. operates as a computer games making company. The Company offers games development, games exporting, and other services. Pearl Abyss serves customers worldwide.

Kakao Games Corp. operates as a multiply platform gaming company. The Company provides mobile games, computer games, virtual reality games, and other related products. Kakao Games markets its products worldwide.

SK Telecom Co., Ltd. is a Korean mobile and telecommunications operator. The Company provides cellular voice, wireless data, and wireless internet services. SK Telecom also offers fixed line services and platform services.

KT Corporation provides telecommunication services including local, long distance, and international calling, satellite communication, data transmission, and wireless telephone services in South Korea.  The Company also offers network portal and high-speed Internet access services using asymmetric digital subscriber lines (ADSLs).

LG Uplus Corp., an affiliate of LG Group, provides a wide range of personal communications services (PCS) using code division multiple access (CDMA) technology.  The Company offers call forwarding, call and data transfer, call waiting, voice mail, Internet-phone, prepaid call, and authentication text-to-speech (TTS) services.

LS Cable & System Asia Ltd. provides and offers cable products.  The Company manufactures and markets electric and telecommunication cables, head transmission lines, voltage cables and industrial specialty cables for the energy, infrastructure, construction, automotive, railway, telecommunication and electronics industries.

KINX INC is the Internet linkage and line adapter service providing firm.  The Company provides IX and Internet Data Center service to the network service providers to reduce the traffic and to contruct Internet infrastructure.  KINX also provides VoIP service.

Sejong Telecom, Inc. develops and provides various telecom service.  The Company's main service include international phone call, Internet phone call, and long distance call.

Endeavor Group Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, offers entertainment content, as well as specializes in marketing and licensing, representation, and event management. Endeavor Group Holdings serves customers worldwide.

Roku, Inc. designs and manufactures consumer electronic products. The Company offers wireless enabled devices that stream audio and video content from the internet to home entertainment systems. Roku serves customers globally.

Kunlun Tech Co., Ltd. offers comprehensive Internet value-added services. The Company focuses on social network interactive and online game fields. Kunlun Tech also provides localized translation outsourcing and agency advertising services.

Bilibili Inc. provides online entertainment services. The Company offers a platform that covers a wide array of genres and media formats, including videos, live broadcasting, mobile games, animation, and comics. Bilibili serves customers in China.

China Ruyi Holdings Limited operates as a holding company. The Company, through its subsidiaries, focuses on online streaming video and internet community businesses. China Ruyi Holdings also manufactures and sells photographic, electronic, and multimedia accessories.

37 Interactive Entertainment Network Technology Group Co.,Ltd designs, develops, and operates mobile games and web games. The Company also provides game promotion, customer service, top-up payment, and other services. 37 Interactive Entertainment Network Technology Group conducts its businesses in China.

37 Interactive Entertainment N (002555 CH)

Lions Gate Entertainment Corporation develops and distributes film entertainment contents. The Company produces motion pictures, television programming, animation, and digital media. Lions Gate Entertainment serves customers worldwide.

World Wrestling Entertainment, Inc. operates as a media and entertainment company. The Company offers live wrestling events, television programming, music publishing, advertising, licensing, and home video streaming services. World Wrestling distributes its programs worldwide in various languages.

AMC Entertainment Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, provides theatrical exhibition, movie screening, food distribution, online ticket booking, and other related services. AMC Entertainment offers movie theaters worldwide.

Saregama India Limited manufactures, sells and deals in Audio Cassettes, CD's and DVDs, which they market in India, Europe, the USA, Canada, the Caribbean Islands and South Africa. The Group's range of music encompasses both new and old Hindi films, regional films, ghazals, classical, Indipop and International. Saregama also has a film business, which produces films and TV serials.

Krafton, Inc. operates as a game development company. The Company develops console games, mobile games, computer games, and other related products. Krafton markets its products throughout South Korea.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Krafton (259960 KS)

Krafton Consortium Plans to Buy a Large Property in Seoul from Emart for More than 1 Trillion Won

We believe that Krafton purchasing a large piece of property in Seoul is likely to have a negative impact on its share price.

Douglas Kim

How Is Metaverse Revolutionizing Businesses in Korea? Virtual Humans Rozy & Lucy Are Just a Start

In this insight, we provide 8 examples of how metaverse is revolutionizing businesses in Korea. We also provide a list of Korean companies that are...

Douglas Kim

Krafton - And So It Begins...

The first signs that China's regulatory risks will indeed hurt Krafton are appearing and the market does not seem to have noticed yet.

Mio Kato

K-Car IPO Bookbuilding Results Analysis

K Car (381970 KS) announced today that the IPO price has been determined at 25,000 won, which was below the IPO price range of 34,300 won and...

Douglas Kim

Not an Epic Ruling Against Apple

We examine developments in Epic's legal battle with Apple to identify potential long-term implications and winners and losers.

Mio Kato

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)