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.

Equity Capital Markets

<h2>Listing date</h2><p>The listing date of Krafton has been confirmed as August 10th.</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":"Schedule"}'>Krafton IPO schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book open"}'>Book open</td>
<td data-sheets-value='{"1":3,"3":44391}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 14</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'>Book close</td>
<td data-sheets-value='{"1":3,"3":44404}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 27</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'>Allotment</td>
<td data-sheets-value='{"1":3,"3":44406}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 29</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'>Subscription</td>
<td data-sheets-value='{"1":3,"3":44410}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 2</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td data-sheets-value='{"1":3,"3":44413}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 5</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'><strong>Listing</strong></td>
<td data-sheets-value='{"1":3,"3":44418}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 8. 10</strong></td>
</tr>
<tr>
<td><em><strong> - Kakao Bank's listing</strong></em></td>
<td><em><strong>2021. 8. 5</strong></em></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><ul>
<li><strong>The initially scheduled date was August 10th. However, as Kakao Pay's listing date was set for August 12, Krafton could not easily finalize the listing date due to the issue of mutual interference for retail investors with Kakao Pay.</strong></li>
<li><strong>The fact that Krafton confirmed the listing date as soon as Kakao Pay's listing schedule was delayed shows how sensitive Krafton was to this retail interference issue.</strong></li>
</ul><div class="content-highlight">
<p>The listing date of Kakao Bank is August 5, and there is a gap of 3 business days until the listing date of Krafton. However, in this case, Krafton is in a position to absorb retail demand from Kakao Bank. More importantly, Kakao Bank must draw less attention from retail investors than Kakao Pay in terms of business nature, so there is no need to worry too much about potential interference with Kakao Bank.</p>
<p><strong>And then, at least until the end of August, there is no major listing. That is, there is enough temporal buffer for Krafton to drive retail demand.</strong></p>
</div>

Listing dateThe listing date of Krafton has been confirmed as August 10th.





Krafton IPO schedule

Book open
2021. 7. 14


Book close
2021. 7. 27


Allotment
2021. 7. 29


Subscription
2021. 8. 2


Payment
2021. 8. 5


Listing
2021. 8. 10


 - Kakao Bank's listing
2021. 8. 5

Source: DART


The initially scheduled date was August 10th. However, as Kakao Pay's listing date was set for August 12, Krafton could not easily finalize the listing date due to the issue of mutual interference for retail investors with Kakao Pay.
The fact that Krafton confirmed the listing date as soon as Kakao Pay's listing schedule was delayed shows how sensitive Krafton was to this retail interference issue.

The listing date of Kakao Bank is August 5, and there is a gap of 3 business days until the listing date of Krafton. However, in this case, Krafton is in a position to absorb retail demand from Kakao Bank. More importantly, Kakao Bank must draw less attention from retail investors than Kakao Pay in terms of business nature, so there is no need to worry too much about potential interference with Kakao Bank.
And then, at least until the end of August, there is no major listing. That is, there is enough temporal buffer for Krafton to drive retail demand.


Krafton Listing Date Confirmed as August 10th: Rebalancing Trading Timeline

APAC IPOs & Placements

Zhen Zhou, Toh

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.

<p><a href="https://www.smartkarma.com/entities/lotte-rental-co-ltd" target="_blank" data-smartkarma-citation="entities:33445:1" rel="noopener">Lotte Rental (KTRENZ KS)</a> is looking to raise about US$740m in its Korea IPO. </p><p>Lotte Rental (LR) is the largest car rental provider in South Korea in 2020 based on the number of registered rental cars. The company mainly offers car rentals and leasing services. It provides short-term car rental, monthly car rental, and chauffeur-driven car rental services. The company buys and sells used cars and also owns 84% stake in Green Car, a car-sharing platform.</p>

Lotte Rental (KTRENZ KS) is looking to raise about US$740m in its Korea IPO. Lotte Rental (LR) is the largest car rental provider in South Korea in 2020 based on the number of registered rental cars. The company mainly offers car rentals and leasing services. It provides short-term car rental, monthly car rental, and chauffeur-driven car rental services. The company buys and sells used cars and also owns 84% stake in Green Car, a car-sharing platform.

Lotte Rental IPO - Not Growing Its Fleet as Fast but Utilizing Them Better

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight"><p>Our base case valuation of Lotte Rental is implied market cap of 2.9 trillion won or implied price of 79,679 won per share, which would represent a 35% upside to the high end of the IPO price range of 59,000 won per share. Given the solid upside, we have a Positive view of the Lotte Rental IPO. We would take the deal. </p></div><ul>
<li>Our base case valuation is based on a 6.1x EV/EBITDA using 2020 EBITDA of 1,055 billion won. The EV/EBITDA multiple of 6.1x is at a 5% premium to the comps' valuation multiple.</li>
<li>We believe this is justified given higher ROE and EBITDA margins of Lotte Rental as compared to its peers.</li>
<li>In addition, Lotte Rental enjoys higher market share, higher revenues, and better brand recognition than its peers and as a result, the slight premium valuation multiples to its peers is justified, in our view. </li>
</ul>

Our base case valuation of Lotte Rental is implied market cap of 2.9 trillion won or implied price of 79,679 won per share, which would represent a 35% upside to the high end of the IPO price range of 59,000 won per share. Given the solid upside, we have a Positive view of the Lotte Rental IPO. We would take the deal. 
Our base case valuation is based on a 6.1x EV/EBITDA using 2020 EBITDA of 1,055 billion won. The EV/EBITDA multiple of 6.1x is at a 5% premium to the comps' valuation multiple.
We believe this is justified given higher ROE and EBITDA margins of Lotte Rental as compared to its peers.
In addition, Lotte Rental enjoys higher market share, higher revenues, and better brand recognition than its peers and as a result, the slight premium valuation multiples to its peers is justified, in our view. 


<div class="content-highlight">
<p>Lotte Rental is offering 14.4 million shares in this IPO. Lotte Rental is the largest car rental company in Korea with about 22% market share. The IPO price range is from 47,000 won to 59,000 won. The IPO deal size is from US$595 million to  US$746 million.</p>
<p>According to the bankers' valuation, the expected market cap after the IPO will be 1.7 trillion won to 2.2 trillion won. The book building for the Lotte Rental IPO starts on August 3rd. Korea Investment &amp; Securities and NH Investment &amp; Securities are the lead underwriters of this IPO. </p>
</div><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 233pt;"><div><strong>Deal Specifics of the Lotte Rental IPO:</strong></div></td>
<td style="width: 340pt;"> </td>
</tr>
<tr>
<td>Lead underwriters of the IPO: </td>
<td style="width: 340pt;">NH Investment &amp; Securiites, Korea Investment &amp; Securities</td>
</tr>
<tr>
<td>Expected IPO price per share: </td>
<td style="width: 340pt;">47,000 won (low)/59,000 won (high)</td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td style="width: 340pt;">14.42m shares (7.2m new shares and 7.2m old shares)</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td style="width: 340pt;">US$595 mn (low);  US$746 mn (high)</td>
</tr>
<tr>
<td>Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 340pt;">36.63m shares</td>
</tr>
<tr>
<td>Expected market cap after IPO:</td>
<td style="width: 340pt;">1,722 billion won (low)/2,161 billion won (high)</td>
</tr>
<tr>
<td>Book open: </td>
<td style="text-align: left; width: 340pt;">3-Aug-21</td>
</tr>
<tr>
<td>Book closed:</td>
<td style="text-align: left; width: 340pt;">4-Aug-21</td>
</tr>
<tr>
<td>Listing date: </td>
<td style="text-align: left; width: 340pt;">TBD</td>
</tr>
<tr>
<td>Source: Company data</td>
<td> </td>
</tr>
</tbody>
</table>


Lotte Rental is offering 14.4 million shares in this IPO. Lotte Rental is the largest car rental company in Korea with about 22% market share. The IPO price range is from 47,000 won to 59,000 won. The IPO deal size is from US$595 million to  US$746 million.
According to the bankers' valuation, the expected market cap after the IPO will be 1.7 trillion won to 2.2 trillion won. The book building for the Lotte Rental IPO starts on August 3rd. Korea Investment &amp; Securities and NH Investment &amp; Securities are the lead underwriters of this IPO. 







Deal Specifics of the Lotte Rental IPO:
 


Lead underwriters of the IPO: 
NH Investment &amp; Securiites, Korea Investment &amp; Securities


Expected IPO price per share: 
47,000 won (low)/59,000 won (high)


Number of Shares for IPO:
14.42m shares (7.2m new shares and 7.2m old shares)


IPO base deal size: 
US$595 mn (low);  US$746 mn (high)


Expected common shares outstanding, fully diluted (post-IPO):  
36.63m shares


Expected market cap after IPO:
1,722 billion won (low)/2,161 billion won (high)


Book open: 
3-Aug-21


Book closed:
4-Aug-21


Listing date: 
TBD


Source: Company data
 




<div><div><h2>Offering size</h2></div></div><div>
<p>Lotte Rental offers 14.4M shares, which account for 49.02% of the pre-IPO total shares, of which 55-75% are allocated to institutions. It will be listed on KOSPI.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Offering size"}'>Offering size</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}' data-sheets-formula="=R[-43]C[0]">Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"089862"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-43]C[0]">089862</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bourse"}' data-sheets-formula="=R[-43]C[0]">Bourse</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSPI"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-43]C[0]">KOSPI</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":14422000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-40]C[0]"><strong>14,422,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- % of pre-IPO SO"}'><strong>- % of pre-IPO SO</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4901607585902185}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-38]C[0]"><strong>49.02%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Institutional allotment"}'><strong>Institutional allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"55.00~75.00%"}'><strong>55.00~75.00%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<div class="content-highlight">
<p><strong>Who is Lotte Rental?</strong></p>
<p>Lotte Rental is the number one car rental company in Korea. Lotte Rental has 220 branches and sales offices nationwide and operates 210,000 vehicles.</p>
<p>In 1990, Kumho Asiana Group partnered with Hertz to establish Lotte Rental. Since then, it has grown into the largest car rental company in Korea. In 2010, Kumho Group sold it to KT for ₩300B. Five years after KT acquired it, it was again sold to Lotte Group for ₩1.2T, and the corporate name was changed to the current Lotte Rental. Meanwhile, in 2020, Lotte Rental solidified its No. 1 position in the industry by acquiring the rental car division owned by Hanjin.</p>
<p><strong>Lotte Rental is currently engaged in car rental and used car sales, and office/construction equipment rentals.</strong></p>
<p>As of the first quarter of 2021,</p>
<ul>
<li>
<strong>Car rental sales</strong> accounted for <strong>62.07%</strong> of total sales.</li>
<li>
<strong>Used car sales</strong> accounted for <strong>28.77%</strong> of total sales.</li>
<li>
<strong>Office/construction equipment rentals</strong> accounted for <strong>9.16%</strong> of total sales.</li>
</ul>
</div>
<section><div id="ember7914"><div id="ember7921">
<div><div><h2>Split</h2></div></div>
<div>
<p>This IPO is a split offering with a primary of 50% and a secondary of 50%. As a result, this offering will see a capital increase rate of 24.5% with a shareholding dilution of 19.7%. This event is free of any additional options: cornerstone, clawback, or greenshoe.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</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 %"}'><strong>Primary %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5000043683261683}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-40]C[0]"><strong>50.00%</strong></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":0.49999563167383165}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-39]C[0]"><strong>50.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'>Capital increase rate</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2450825204771777}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-37]C[0]">24.51%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.19684038322475997}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-37]C[0]">19.68%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>
<div><div><h2>Schedule</h2></div></div>
<div><p>The book opens on August 3 (for both local and overseas investors) and runs for two days until August 4. The allotment will be on August 6, finalizing an offering price. The subscription falls on August 9.</p></div>
</div></div></section>
</div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</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"}'><strong>Book open</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44411}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 8. 3</strong></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":44412}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 4</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'><strong>Allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44414}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 8. 6</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'><strong>Subscription</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44417}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 8. 9</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44420}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 12</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><div><section><div id="ember7914"><div id="ember7921">
<div><div><h2>Pricing</h2></div></div>
<div>
<p>This IPO also uses EV/EBITDA. The corporate value was determined after selecting only two local rental companies:</p>
<ol>
<li><strong>SK Rent A Car (068400)</strong></li>
<li><strong>AJ Networks (095570)</strong></li>
</ol>
<p>The respective EV/EBITDA multiples are 5.47x for SK Rent A Car and 5.44x for AJ Networks, giving <strong>an average of 5.46x</strong>.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Valuation peers: EV/EBITDA"}'>Valuation peers: EV/EBITDA</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Rent A Car Co Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>SK Rent A Car Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"AJ Networks Co Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>AJ Networks Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Note"}'>Note</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"068400"}' data-sheets-formula='="068400"'>068400</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"095570"}' data-sheets-formula='="095570"'>095570</td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Reference market cap"}'>Reference market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":657.7460344}' data-sheets-formula="=R[1]C[0]*R[2]C[0]/1000000000">₩657.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":272.646223785}' data-sheets-formula="=R[1]C[0]*R[2]C[0]/1000000000">₩272.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A = a) × b)"}'>A = a) × b)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shares outstanding"}'>Shares outstanding</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":47285840}'>47,285,840</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":46822295}'>46,822,295</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"a)"}'>a)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Reference share price: MIN[1M Avg, 1W Avg, 1D Close]"}'>Reference share price: MIN[1M Avg, 1W Avg, 1D Close]</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13910}'>₩13,910</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5823}'>₩5,823</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"b)"}'>b)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net debt, as of 1Q21"}'>Net debt, as of 1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1568.98}'>₩1,569.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":911.167}'>₩911.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"B"}'>B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Enterprise value (EV)"}'>Enterprise value (EV)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2226.7260344}' data-sheets-formula="=R[-4]C[0]+R[-1]C[0]">₩2,226.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1183.813223785}' data-sheets-formula="=R[-4]C[0]+R[-1]C[0]">₩1,183.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"C = A + B"}'>C = A + B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EBITDA: 2Q20~1Q21"}'>EBITDA: 2Q20~1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":407.02}'>₩407.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":217.525}'>₩217.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"D = c) + d)"}'>D = c) + d)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Operating profit: 2Q20~1Q21"}'>Operating profit: 2Q20~1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":71.245}'>₩71.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18.324}'>₩18.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"c)"}'>c)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Depreciation &amp; Amortization: 2Q20~1Q21"}'>Depreciation &amp; Amortization: 2Q20~1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":335.774}'>₩335.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":199.202}'>₩199.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"d)"}'>d)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EV/EBITDA"}'><strong>EV/EBITDA</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5.47080250208835}' data-sheets-formula="=R[-4]C[0]/R[-3]C[0]"><strong>5.47x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5.442193880174693}' data-sheets-formula="=R[-4]C[0]/R[-3]C[0]"><strong>5.44x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"E = C / D"}'>E = C / D</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Average EV/EBITDA"}'><strong>Average EV/EBITDA</strong></td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":5.456498191131521}' data-sheets-formula="=average(R[-1]C[0]:R[-1]C[1])"><strong>5.46x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>
<div><div>The averaged EV/EBITDA multiple of 5.46x was applied to Lott Rental's EBITDA of ₩1,120.6B from the second quarter of last year to the first quarter of this year. As a result, we have a price per share of ₩77,708, giving <strong>a market cap of ₩2.85T</strong>.</div></div>
<div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Lotte Rental: EV/EBITDA"}' data-sheets-formula='=Terms!R[-13]C[1]&amp;": EV/EBITDA"'>Lotte Rental: EV/EBITDA</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EBITDA: 2Q20~1Q21"}'>EBITDA: 2Q20~1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1120.574}'>₩1,120.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A"}'>A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EV/EBITDA"}'>EV/EBITDA</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5.456498191131521}' data-sheets-formula="=R[-5]C[0]">5.46x</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"B"}'>B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Enterprise value (EV)"}'>Enterprise value (EV)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6114.410004029013}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]">₩6,114.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"C = A X B"}'>C = A X B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net debt"}'>Net debt</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3267.667}'>₩3,267.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"D"}'>D</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap"}'><strong>Market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2846.7430040290133}' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]"><strong>₩2,846.7B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"E = C - D"}'><strong>E = C - D</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Post-IPO total shares"}'>Post-IPO total shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":36634063}' data-sheets-formula="=Terms!R[-3]C[0]">36,634,063</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"F"}'>F</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price per share"}'><strong>Price per share</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":77707.54240470169}' data-sheets-formula="=R[-2]C[0]*1000000000/R[-1]C[0]"><strong>₩77,708</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"G = E / F"}'><strong>G = E / F</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div>
<div><div><div>The indicative price band lies between ₩47,000 and ₩59,000. This is obtained by applying a discount rate of <strong>24.07% to 39.52% to the market cap of ₩2.85T</strong> calculated through EV/EBITDA. This much discount gives an <strong>EV/EBITDA multiple of 4.45x to 4.84x</strong>.</div></div></div>
<div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Indicative price band"}'>Indicative price band</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Low"}'>Low</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"High"}'>High</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price"}'><strong>Price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":47000}'><strong>₩47,000</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":59000}'><strong>₩59,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Base deal size"}'>Base deal size</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":677.834}' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩677.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":850.898}' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩850.9B</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":372.8087}' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩372.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":467.99390000000005}' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩468.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Implied market cap"}'>Implied market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1721.800961}' data-sheets-formula="=R[-3]C[0]*Terms!R18C2/1000000000">₩1,721.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2161.409717}' data-sheets-formula="=R[-3]C[0]*Terms!R18C2/1000000000">₩2,161.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Discount"}'><strong>- Discount</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.395168106652717}' data-sheets-formula="=(R22C2-R[-4]C[0])/R22C2"><strong>39.52%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.24074294239383626}' data-sheets-formula="=(R22C2-R[-4]C[0])/R22C2"><strong>24.07%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EV/EBITDA"}'><strong>EV/EBITDA</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.452600150458604}' data-sheets-formula="=(R[-2]C[0]+R[-12]C[0])/R[-15]C[0]"><strong>4.45x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.844906911100917}' data-sheets-formula="=(R[-2]C[0]+R[-12]C[-1])/R[-15]C[-1]"><strong>4.84x</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div>
</div></div></section></div>

Offering size
Lotte Rental offers 14.4M shares, which account for 49.02% of the pre-IPO total shares, of which 55-75% are allocated to institutions. It will be listed on KOSPI.






Offering size

Ticker
089862


Bourse
KOSPI


Offering
14,422,000


- % of pre-IPO SO
49.02%


Institutional allotment
55.00~75.00%

Source: DART



Who is Lotte Rental?
Lotte Rental is the number one car rental company in Korea. Lotte Rental has 220 branches and sales offices nationwide and operates 210,000 vehicles.
In 1990, Kumho Asiana Group partnered with Hertz to establish Lotte Rental. Since then, it has grown into the largest car rental company in Korea. In 2010, Kumho Group sold it to KT for ₩300B. Five years after KT acquired it, it was again sold to Lotte Group for ₩1.2T, and the corporate name was changed to the current Lotte Rental. Meanwhile, in 2020, Lotte Rental solidified its No. 1 position in the industry by acquiring the rental car division owned by Hanjin.
Lotte Rental is currently engaged in car rental and used car sales, and office/construction equipment rentals.
As of the first quarter of 2021,


Car rental sales accounted for 62.07% of total sales.

Used car sales accounted for 28.77% of total sales.

Office/construction equipment rentals accounted for 9.16% of total sales.



Split

This IPO is a split offering with a primary of 50% and a secondary of 50%. As a result, this offering will see a capital increase rate of 24.5% with a shareholding dilution of 19.7%. This event is free of any additional options: cornerstone, clawback, or greenshoe.






Split

Primary %
50.00%


Secondary %
50.00%


Capital increase rate
24.51%


Dilution
19.68%

Source: DART



Schedule
The book opens on August 3 (for both local and overseas investors) and runs for two days until August 4. The allotment will be on August 6, finalizing an offering price. The subscription falls on August 9.







Schedule

Book open
2021. 8. 3


Book close
2021. 8. 4


Allotment
2021. 8. 6


Subscription
2021. 8. 9


Payment
2021. 8. 12


Listing
TBA

Source: DART


Pricing

This IPO also uses EV/EBITDA. The corporate value was determined after selecting only two local rental companies:

SK Rent A Car (068400)
AJ Networks (095570)

The respective EV/EBITDA multiples are 5.47x for SK Rent A Car and 5.44x for AJ Networks, giving an average of 5.46x.









Valuation peers: EV/EBITDA
SK Rent A Car Co Ltd
AJ Networks Co Ltd
Note


Ticker
068400
095570



Reference market cap
₩657.7B
₩272.6B
A = a) × b)


Shares outstanding
47,285,840
46,822,295
a)


Reference share price: MIN[1M Avg, 1W Avg, 1D Close]
₩13,910
₩5,823
b)


Net debt, as of 1Q21
₩1,569.0B
₩911.2B
B


Enterprise value (EV)
₩2,226.7B
₩1,183.8B
C = A + B


EBITDA: 2Q20~1Q21
₩407.0B
₩217.5B
D = c) + d)


Operating profit: 2Q20~1Q21
₩71.2B
₩18.3B
c)


Depreciation &amp; Amortization: 2Q20~1Q21
₩335.8B
₩199.2B
d)


EV/EBITDA
5.47x
5.44x
E = C / D


Average EV/EBITDA
5.46x
-

Source: DART



The averaged EV/EBITDA multiple of 5.46x was applied to Lott Rental's EBITDA of ₩1,120.6B from the second quarter of last year to the first quarter of this year. As a result, we have a price per share of ₩77,708, giving a market cap of ₩2.85T.







Lotte Rental: EV/EBITDA

EBITDA: 2Q20~1Q21
₩1,120.6B
A


EV/EBITDA
5.46x
B


Enterprise value (EV)
₩6,114.4B
C = A X B


Net debt
₩3,267.7B
D


Market cap
₩2,846.7B
E = C - D


Post-IPO total shares
36,634,063
F


Price per share
₩77,708
G = E / F

Source: DART


The indicative price band lies between ₩47,000 and ₩59,000. This is obtained by applying a discount rate of 24.07% to 39.52% to the market cap of ₩2.85T calculated through EV/EBITDA. This much discount gives an EV/EBITDA multiple of 4.45x to 4.84x.








Indicative price band
Low
High


Price
₩47,000
₩59,000


Base deal size
₩677.8B
₩850.9B


- Institutional allotment
₩372.8B
₩468.0B


Implied market cap
₩1,721.8B
₩2,161.4B


- Discount
39.52%
24.07%


EV/EBITDA
4.45x
4.84x

Source: DART




Lotte Rental (Feat. Car Sharing Unicorn Green Car) IPO: Offering Details & Valuation Issues

South Korea

CJ Logistics Corporation provides logistics services. The Company provides land transportation, maritime transportation, harbor unloading, cargo storage, international logistics processing, and other services. CJ Logistics also provides internet home shopping services. CJ Logistics serves customers worldwide.

SK Rent A Car Co., Ltd. provides cars rental and leasing services. The Company also offers passenger car leasing, and other motor vehicles leasing services. SK Rent A Car also offers used cars distribution services.

RedcapTour Co., Ltd. develops, produces, and sells a variety of software, especially for a line of Internet kiosks.  The Company's products include database construction, search engine tools, and multimedia software.  Media Solution also provides touch screens, which is a touch-sensitive pad that enable user to navigate on the surface of monitors.

Chunil Express Co., Ltd. provides intercity bus transportation, serving the major cities in South Korea.  The Company also operates real estate leasing and oil distribution businesses.

Yoosung T&S Co., Ltd. manufactures steel products.  The company's product includes cold rolled sheets, coils, and pipes used in the construction industry. Yoosung T&S also transports steel and chemical products throughout South Korea.

Sejoong Co Ltd. develops and produces computer software, such as  web design and web browser software.  The Company also produces web plug-in softwarethat enables users to create web-based bulletin board systems and to view Korean word-processed documents.

SH Holdings Co., Ltd. manufactures communication equipment such as network access multiplexers, optical modules, and channel service units.  The Company also produces transmitters, transponders, signal receiver, and dense wavelength division multiplexing systems.

Han Express Co., Ltd. provides land transportation services.  The Company specializes in transporting petroleum and frozen products.  Han Express also offers logistics services, warehousing services, and real estate rental services.  In addition, Han Express manufactures and sells specialty vehicles, such as concrete mixers.

Jeju Air Co., Ltd. operates as an airline carrier in the aviation industry.   The Company provides air transportation services for passengers, baggage, and cargo within South Korea, Japan, and Southeastern Asian countries.

Asiana Airlines, Inc. provides air cargo and passenger transportation services throughout South Korea and overseas.  The Company also offers airline catering and on-flight duty free shopping services and operates aircraft leasing business.

Maruzen Showa Unyu Co., Ltd. provides van truckload, international logistics, marine cargo transportation, cargo handling, air cargo transportation, and warehousing services.  The Company has consignors of NKK Corp. and Showa Denko and transports Fuji Photo Film exports.  The Company offers customs clearing services and leases real estate as well.

China High-Speed Railway Technology Co., Ltd. mainly focuses on the safe operation and maintenance of rail transport lines.

China High Speed Railway Techn (000008 CH)

SBS Transit Limited provides public bus services, advertisement on its bus fleet, and bus chartering.

Covenant Logistics Group, Inc. operates as a truckload carrier. The Company offers temperature-controlled transportation service for shippers primarily in the frozen food and consumer products industries. Covenant Logistics Group serves customers in the United States.

Evergreen International Storage & Transport Corporation provides motor freight transportation and warehousing, cargo handling operation, as well as automobile repairing services.

Evergreen Int'L Storage & Transport (2607 TT)

Transport International Holdings Ltd, through its subsidiaries, operates both franchised and non-franchised public buses in Hong Kong. The Company also provides media sales services.

Transport International Holdings Ltd (62 HK)

SENKO Group Holdings Co., Ltd. mainly provides van truckload, logistics, warehousing, freight rail and marine transportation, cargo handling, supply chain management, and moving services around the world.  The Company transports construction materials, housing unit, commodity, textile products, and food stuffs.  Senko's customers include Asahi Kasei, Sekisui Chemical, and Sekisui House.

HAMAKYOREX CO., LTD. provides trucking, warehousing, and other related services. The Company's trucking services include distribution for retail firms such as large supermarkets.  Hamakyorex develops integrated distribution system.

Sakai Moving Service Co., Ltd. mainly provides moving services of household goods based in Osaka prefecture.  The Company offers trucking, storage, and other related services.  The Company leases real estate as well.

Heartland Express, Inc. is a short-to-medium haul truckload carrier.  The Company transports a variety of goods, including appliances, automotive parts, paper products, retail goods, and packaged foodstuffs.  Heartland operates in the United States.

Lotte Rental Co.,Ltd. provides car rental services. The Company offers passenger car rental, commercial car rental, used vehicle rental, and other related services. Lotte Rental offers services worldwide.

Price Gauge
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