Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

The IPO price range for the <a href="https://www.smartkarma.com/entities/ls-ev-korea-ltd" target="_blank" data-smartkarma-citation="entities:28866:1" rel="noopener">LS EV Korea Ltd (1566799D KS)</a> is from 5,500 won to 6,100 won. The book-building for the institutional investors starts on 11 March. Given the terrible market conditions, unless the IPO price is reduced significantly, it may be difficult for the company to pull off this IPO at the end of this IPO. There is a high probability of this IPO getting postponed. 
We forecast the company to generate sales of 182.3 billion won (down 21% YoY) and an operating profit of 11.9 billion won (down 52% YoY) in 2020. The coronavirus is likely to have a major negative impact on the company's operations in both China and South Korea in terms of sales and profits. 
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Applying the P/E multiple of 12.9x against our estimated net profit of 15.7 billion won, this results in an implied market cap of 202 billion won or 4,850 won per share. This is 12% lower than the low end of the IPO price range of 5,500 won. Because our estimated intrinsic value of the company is lower than the IPO price range, we have a negative view of the stock and would pass up on the IPO deal. 
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The IPO price range for the LS EV Korea Ltd (1566799D KS) is from 5,500 won to 6,100 won. The book-building for the institutional investors starts on 11 March. Given the terrible market conditions, unless the IPO price is reduced significantly, it may be difficult for the company to pull off this IPO at the end of this IPO. There is a high probability of this IPO getting postponed. 
We forecast the company to generate sales of 182.3 billion won (down 21% YoY) and an operating profit of 11.9 billion won (down 52% YoY) in 2020. The coronavirus is likely to have a major negative impact on the company's operations in both China and South Korea in terms of sales and profits. 

Applying the P/E multiple of 12.9x against our estimated net profit of 15.7 billion won, this results in an implied market cap of 202 billion won or 4,850 won per share. This is 12% lower than the low end of the IPO price range of 5,500 won. Because our estimated intrinsic value of the company is lower than the IPO price range, we have a negative view of the stock and would pass up on the IPO deal. 


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<li>
LS EV Korea is getting ready to complete its IPO in the Korean stock market in March. <a href="https://www.smartkarma.com/entities/ls-ev-korea-ltd" target="_blank" data-smartkarma-citation="entities:28866:1" rel="noopener">LS EV Korea Ltd (1566799D KS)</a> makes automotive EV related parts including high voltage connectors, battery parts, wiring harness, power transmission devices, and other related products.The IPO price range is from 5,500 won to 6,100 won. The IPO base deal size is from 83 billion won ($69 million) to 92 billion won ($76 million).</li>
<li>
Concerns about LSCW Affiliate in China - Nearly two-thirds of the company's sales are generated by its LSCW affiliate in China. Given the massive supply disruption caused by the COVID-19 in China, it is highly likely that the sales and profits out of its Chinese operation in 2020 will fall far short of the management's internal targets as well as historical 2019 numbers.</li>
<li>
Concerns about financial investors selling - After the IPO sale, Paratus Investment and KDB Capital will hold a 17.3% stake in the company (7.2 million shares), of which 2.5 million shares can be sold right after the IPO. The remaining 4.7 million shares will have a 3 months lock-up. This remaining stake in the company by the financial investors post IPO will remain one of the key investment risks of the company. Paratus Investment and KDB Capital invested in LS EV Korea in 4Q 2017. </li>
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LS EV Korea is getting ready to complete its IPO in the Korean stock market in March. LS EV Korea Ltd (1566799D KS) makes automotive EV related parts including high voltage connectors, battery parts, wiring harness, power transmission devices, and other related products.The IPO price range is from 5,500 won to 6,100 won. The IPO base deal size is from 83 billion won ($69 million) to 92 billion won ($76 million).

Concerns about LSCW Affiliate in China - Nearly two-thirds of the company's sales are generated by its LSCW affiliate in China. Given the massive supply disruption caused by the COVID-19 in China, it is highly likely that the sales and profits out of its Chinese operation in 2020 will fall far short of the management's internal targets as well as historical 2019 numbers.

Concerns about financial investors selling - After the IPO sale, Paratus Investment and KDB Capital will hold a 17.3% stake in the company (7.2 million shares), of which 2.5 million shares can be sold right after the IPO. The remaining 4.7 million shares will have a 3 months lock-up. This remaining stake in the company by the financial investors post IPO will remain one of the key investment risks of the company. Paratus Investment and KDB Capital invested in LS EV Korea in 4Q 2017. 


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LS EV Korea Ltd (1566799D KS)

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The IPO price range for the LS EV Korea Ltd (1566799D KS) is from 5,500 won to 6,100 won. The book-building for the institutional investors starts...

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LS EV Korea is getting ready to complete its IPO in the Korean stock market in March. LS EV Korea Ltd (1566799D KS) makes automotive EV related...

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