Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul>
<li>Numerous local Korean media outlets reported today after the market close that SK Shieldus is likely to lower the IPO price by about 19% to 25,000 won.</li>
<li>Our revised base case valuation of SK Shieldus is target price of 36,948 won per share, representing 48% upside from the estimated IPO price of 25,000 won.</li>
<li>We maintain our same earnings estimates for SK Shieldus. We slightly lowered the valuation multiples mainly due to lower valuations of the comps and weaker market sentiment on IPOs. </li>
</ul>


Numerous local Korean media outlets reported today after the market close that SK Shieldus is likely to lower the IPO price by about 19% to 25,000 won.
Our revised base case valuation of SK Shieldus is target price of 36,948 won per share, representing 48% upside from the estimated IPO price of 25,000 won.
We maintain our same earnings estimates for SK Shieldus. We slightly lowered the valuation multiples mainly due to lower valuations of the comps and weaker market sentiment on IPOs. 


SK Shieldus: Likely to Lower IPO Price by 19% Post Bookbuilding Results

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.

<ul>
<li>Suppose we grouped S1 and Taiwan Secom with the Physical/Integrated Security weighting and then applied the Cybersecurity weighing to Ahnlab and CyberOne. <strong>We would have 11.40x, substantially lower than 14.85x</strong>.</li>
<li>SK Shieldus' sales were ₩1.55T, an increase of ₩0.22T (16.8%) from the previous year. But<strong> 65% of last year's sales increase was derived from the internal deals with SK Group</strong>.</li>
<li>How the company and the bankers will respond to those mentioned above two controversial aspects will be the most crucial point in determining the success or failure of this IPO.</li>
</ul>


Suppose we grouped S1 and Taiwan Secom with the Physical/Integrated Security weighting and then applied the Cybersecurity weighing to Ahnlab and CyberOne. We would have 11.40x, substantially lower than 14.85x.
SK Shieldus' sales were ₩1.55T, an increase of ₩0.22T (16.8%) from the previous year. But 65% of last year's sales increase was derived from the internal deals with SK Group.
How the company and the bankers will respond to those mentioned above two controversial aspects will be the most crucial point in determining the success or failure of this IPO.


SK Shieldus Controversies: Excessive Valuations & Suspicious Surge in Internal Sales

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sk-shieldus-co-ltd" target="_blank" data-smartkarma-citation="entities:35799:1" rel="noopener">SK Shieldus (ABFHIZ KS)</a> is a leading South Korean security provider. It is seeking a KRX IPO to raise up to US$0.9 billion. </li>
<li>The primary change in the updated prospectus is the syndicate's valuation methodology which results in a 10% lower value per share. The IPO price range of KRW31,000-38,800 is unchanged.</li>
<li>Sentiment on IPOs remains poor. For investors willing to look at IPOs, our valuation analysis suggests that the IPO price range remains reasonable.  </li>
</ul>



SK Shieldus (ABFHIZ KS) is a leading South Korean security provider. It is seeking a KRX IPO to raise up to US$0.9 billion. 
The primary change in the updated prospectus is the syndicate's valuation methodology which results in a 10% lower value per share. The IPO price range of KRW31,000-38,800 is unchanged.
Sentiment on IPOs remains poor. For investors willing to look at IPOs, our valuation analysis suggests that the IPO price range remains reasonable.  


SK Shieldus IPO: The Syndicate's Revised Methodology

<ul>
<li>After the market close today, SK Shieldus revised its IPO filing, especially for the valuation comps. However, it maintained the same IPO price range of 31,000 won to 38,800 won.</li>
<li>Bankers included two new comps (Taiwan Secom and Cyberone). Bankers excluded ADT Inc, Alarm.com, and Qualys as comps.</li>
<li>Our valuation of SK Shieldus suggests market cap of 4.1 trillion won or target price of 44,892 won (28.6% higher than the mid-point of the IPO price range). </li>
</ul>


After the market close today, SK Shieldus revised its IPO filing, especially for the valuation comps. However, it maintained the same IPO price range of 31,000 won to 38,800 won.
Bankers included two new comps (Taiwan Secom and Cyberone). Bankers excluded ADT Inc, Alarm.com, and Qualys as comps.
Our valuation of SK Shieldus suggests market cap of 4.1 trillion won or target price of 44,892 won (28.6% higher than the mid-point of the IPO price range). 


SK Shieldus IPO: Revises IPO Filing But Maintains Same Price Range

<ul>
<li>S1 Corp is more giant in sales and ranks first in the local on-site security market, so it is tough to understand why SK Shieldus should receive a higher valuation. </li>
<li>If the growth story is sexier, the story may be different. Still, many investors will have doubts about whether SK Shieldus' growth story is convincingly explained in the IPO prospectus.</li>
<li>Even the lower end of the indicative price band is likely to be downwardly corrected in the post-IPO price-finding. Hence, I do not recommend an aggressive approach to this IPO.</li>
</ul>


S1 Corp is more giant in sales and ranks first in the local on-site security market, so it is tough to understand why SK Shieldus should receive a higher valuation. 
If the growth story is sexier, the story may be different. Still, many investors will have doubts about whether SK Shieldus' growth story is convincingly explained in the IPO prospectus.
Even the lower end of the indicative price band is likely to be downwardly corrected in the post-IPO price-finding. Hence, I do not recommend an aggressive approach to this IPO.


SK Shieldus IPO: Offering Details, Valuation Issues, & Index Fast Entry

South Korea

S1 Corporation provides security systems services.  The Company installs, maintains, and sells a variety of security systems used in households, businesses, financial institutions, and automobiles.  S1 also provides guarding services, systems integration services, structural safety diagnosis services.

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S 1 Corporation (012750 KS)

SK Shieldus: Likely to Lower IPO Price by 19% Post Bookbuilding Results

Our revised base case valuation of SK Shieldus is target price of 36,948 won per share, representing 48% upside from the estimated IPO price of...

Douglas Kim

SK Shieldus Controversies: Excessive Valuations & Suspicious Surge in Internal Sales

This post investigates two controversial aspects found in SK Shieldus' revised IPO prospectus as the bookbuilding is currently in progress.

Sanghyun Park

SK Shieldus IPO: The Syndicate's Revised Methodology

The primary change in the updated prospectus is the syndicate's valuation methodology which results in a 10% lower value per share. The unchanged...

Arun George

SK Shieldus IPO: Revises IPO Filing But Maintains Same Price Range

After the market close today, SK Shieldus revised its IPO filing, especially for the valuation comps. However, it maintained the same IPO price...

Douglas Kim

SK Shieldus IPO: Offering Details, Valuation Issues, & Index Fast Entry

This post offers the terms of the SK Shieldus IPO and discusses valuation issues that many investors will likely find quite controversial.

Sanghyun Park

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