Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>According to a local media outlet called ETNews, CJ ENM is considering on selling about half of its stake in Netmarble to potentially acquire the controlling stake in S.M. Entertainment.</li>
<li>Although CJ ENM is the lead candidate to acquire SM Entertainment, other contenders including Kakao Corp and Naver are not totally out of the M&amp;A race. </li>
<li>Overall, we would wait on buying CJ ENM at current levels. We think that the market is still concerned about CJ ENM overpaying for SM Entertainment.</li>
</ul>


According to a local media outlet called ETNews, CJ ENM is considering on selling about half of its stake in Netmarble to potentially acquire the controlling stake in S.M. Entertainment.
Although CJ ENM is the lead candidate to acquire SM Entertainment, other contenders including Kakao Corp and Naver are not totally out of the M&amp;A race. 
Overall, we would wait on buying CJ ENM at current levels. We think that the market is still concerned about CJ ENM overpaying for SM Entertainment.


CJ ENM: Potential Block Sale of Its Stake In Netmarble & Concerns About Corporate Reorganization

Thematic (Sector/Industry)

<p>There were four new<a href="http://www.koreaherald.com/view.php?ud=20211013001007" target="_blank" rel="noopener"> metaverse related ETFs</a> were launched in Korea on 13 October for the first time ever in the Korean stock market. The first three ETFs (KBSTAR iSelect Metaverse, Hanaro Fn K-Metaverse MZ, and Tiger Fn Metaverse) are passive funds. KODEX K-Metaverse Active is an active fund. These four new ETFs are as follows:</p><p><strong>1) Tiger Fn Metaverse</strong> (managed by Mirae Asset Global Investment)</p><p><strong>2) KBSTAR iSelect Metaverse</strong> (managed by KB Asset Management)</p><p><strong>3) Hanaro Fn K-Metaverse MZ</strong> (managed by NH Amundi Asset Management)</p><p><strong>4) KODEX K-Metaverse Active</strong>  (managed by Samsung Asset Management)</p><p>The stocks that are included in these metaverse related names also tend to be higher beta ones that could perform much better in a rising market environment. However, because these stocks tend to be higher beta stocks with high valuation multiples, it could be challenging for these stocks to outperform the market when the market downturn occurs. </p>

There were four new metaverse related ETFs were launched in Korea on 13 October for the first time ever in the Korean stock market. The first three ETFs (KBSTAR iSelect Metaverse, Hanaro Fn K-Metaverse MZ, and Tiger Fn Metaverse) are passive funds. KODEX K-Metaverse Active is an active fund. These four new ETFs are as follows:1) Tiger Fn Metaverse (managed by Mirae Asset Global Investment)2) KBSTAR iSelect Metaverse (managed by KB Asset Management)3) Hanaro Fn K-Metaverse MZ (managed by NH Amundi Asset Management)4) KODEX K-Metaverse Active  (managed by Samsung Asset Management)The stocks that are included in these metaverse related names also tend to be higher beta ones that could perform much better in a rising market environment. However, because these stocks tend to be higher beta stocks with high valuation multiples, it could be challenging for these stocks to outperform the market when the market downturn occurs. 

Listing of 4 New Metaverse Related ETFs in Korea

<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

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>Offering terms</h2><p>Dear U, a fan messenger company invested by SM Entertainment and JPY Entertainment, will be listed on the KOSDAQ market in November. The total offering is 3.3 million, representing 17.92% of the current number of shares. The institutional allotment is 60% of the offering.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</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"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"DEAR U Co.,Ltd."}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[0]C[-3]">DEAR U Co., Ltd.</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bourse"}'>Bourse</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSPI"}'>KOSPI</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Pre-IPO SO"}'>Pre-IPO SO</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18412769}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[-3]">18,412,769</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":3300000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[3]C[-3]"><strong>3,300,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- % of SO"}'><strong>- % of SO</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1792234508563052}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[5]C[-3]"><strong>17.92%</strong></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":0.6}' data-sheets-numberformat='{"1":3,"2":"0%","3":1}' data-sheets-formula="=Terms!R[5]C[-3]">60%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>It is a 100% primary offering, so the capital increase rate is 17.92%, and the share dilution is 15.20%.</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":"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":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[3]C[-3]"><strong>100.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Post-IPO shares outstanding"}'>Post-IPO shares outstanding</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":21712769}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-9]C[0]+Terms!R[2]C[-3]">21,712,769</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'><strong>Capital increase rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1792234508563052}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[-3]"><strong>17.92%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.15198430011390993}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[-3]">15.20%</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>The indicative price band is ₩18,000~₩24,000. So, based on this band, the IPO valuation is between ₩390B and ₩520B. The company plans to raise ₩79.2B based on the upper end of the price band.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Pricing"}'>Pricing</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":18000}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'><strong>₩18,000</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":24000}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'><strong>₩24,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Base deal size"}'><strong>Base deal size</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":59.4}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000"><strong>₩59.4B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":79.2}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000"><strong>₩79.2B</strong></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":35.64}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-1]C[0]*Terms!R7C5">₩35.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":47.52}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-1]C[0]*Terms!R7C5">₩47.5B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Implied market cap"}'><strong>Implied market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":390.829842}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-3]C[0]*Terms!R13C5/1000000000"><strong>₩390.8B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":521.106456}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-3]C[0]*Terms!R13C5/1000000000"><strong>₩521.1B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Discount"}'>- Discount</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3414312893311869}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(27332-R[-4]C[0])/27332">34.14%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.12190838577491585}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(27332-R[-4]C[0])/27332">12.19%</td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>The company selected four valuation peers: JYP Entertainment, Cube Entertainment, Kakao, and YG Plus.</p><p>They came up with an IPO valuation of ₩600B by multiplying a 1H21-based annualized net profit of ₩11.24B by the average PER of the four valuation peers (53.46x). The price per share arrived at ₩27,332, and they applied a discount rate of 12.19~34.14% to derive the price band.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"PER valuation"}'>PER valuation</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"JYP Entertainment Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>JYP Entertainment Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Cube Entertainment Inc"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Cube Entertainment Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Kakao Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Kakao Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"YG Plus Inc"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>YG Plus Inc</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"035900"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="035900"'>035900</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"182360"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="182360"'>182360</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"035720"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="035720"'>035720</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"037270"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="037270"'>037270</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Annualized net profit based on 1H21"}'>Annualized net profit based on 1H21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":33.736403}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00B","3":1}'>₩33.74B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3.145899}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00B","3":1}'>₩3.15B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1072.392165}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00B","3":1}'>₩1,072.39B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.080872}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00B","3":1}'>₩7.08B</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":35497492}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>35,497,492</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13804687}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>13,804,687</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":444992180}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>444,992,180</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":63429410}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>63,429,410</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EPS"}'>EPS</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":950.388354196967}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}' data-sheets-formula="=R[-2]C[0]*1000000000/R[-1]C[0]">₩950</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":227.88629687873402}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}' data-sheets-formula="=R[-2]C[0]*1000000000/R[-1]C[0]">₩228</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2409.9123831794077}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}' data-sheets-formula="=R[-2]C[0]*1000000000/R[-1]C[0]">₩2,410</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":111.63389348884058}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}' data-sheets-formula="=R[-2]C[0]*1000000000/R[-1]C[0]">₩112</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Reference share price"}'>Reference share price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":40050}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩40,050</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13116}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩13,116</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":122500}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩122,500</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7070}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩7,070</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PER"}'><strong>PER</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":42.140667889223394}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x"}' data-sheets-formula="=R[-1]C[0]/R[-2]C[0]"><strong>42.14x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":57.55501835627908}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x"}' data-sheets-formula="=R[-1]C[0]/R[-2]C[0]"><strong>57.56x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":50.831723532780565}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x"}' data-sheets-formula="=R[-1]C[0]/R[-2]C[0]"><strong>50.83x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":63.332020222933}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x"}' data-sheets-formula="=R[-1]C[0]/R[-2]C[0]"><strong>63.33x</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Average PER"}'><strong>Average PER</strong></td>
<td colspan="4" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":53.46485750030401}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x"}' data-sheets-formula="=average(R[-1]C[0]:R[-1]C[3])"><strong>53.46x</strong></td>
</tr>
<tr><td colspan="5" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"PER valuation"}'>PER valuation</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Annualized net profit based on 1H21"}'><strong>Annualized net profit based on 1H21</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":11.244}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00B","3":1}'><strong>₩11.24B</strong></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":21994260}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>21,994,260</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EPS"}'>EPS</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":511}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩511</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PER"}'>PER</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":53.46485750030401}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x"}' data-sheets-formula="=R[-7]C[0]">53.46x</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":27332}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'><strong>₩27,332</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>The book opens on October 25, and the allotment will be unveiled on October 28. The subscription follows on November 1, followed by the payment on November 4. The listing date will be announced later.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</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":44494}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 10. 25</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'><strong>Book close</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44495}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 10. 26</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'>Allotment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44497}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 10. 28</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'>Subscription</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44501}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 11. 01</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'><strong>Payment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44504}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 11. 04</strong></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>

Offering termsDear U, a fan messenger company invested by SM Entertainment and JPY Entertainment, will be listed on the KOSDAQ market in November. The total offering is 3.3 million, representing 17.92% of the current number of shares. The institutional allotment is 60% of the offering.





Offering size

Ticker
DEAR U Co., Ltd.


Bourse
KOSPI


Pre-IPO SO
18,412,769


Offering
3,300,000


- % of SO
17.92%


- Institutional allotment
60%

Source: DART

It is a 100% primary offering, so the capital increase rate is 17.92%, and the share dilution is 15.20%.





Split

Primary %
100.00%


Post-IPO shares outstanding
21,712,769


Capital increase rate
17.92%


Dilution
15.20%

Source: DART

The indicative price band is ₩18,000~₩24,000. So, based on this band, the IPO valuation is between ₩390B and ₩520B. The company plans to raise ₩79.2B based on the upper end of the price band.







Pricing
Low
High


Price
₩18,000
₩24,000


Base deal size
₩59.4B
₩79.2B


- Institutional allotment
₩35.6B
₩47.5B


Implied market cap
₩390.8B
₩521.1B


- Discount
34.14%
12.19%

Source: DART

The company selected four valuation peers: JYP Entertainment, Cube Entertainment, Kakao, and YG Plus.They came up with an IPO valuation of ₩600B by multiplying a 1H21-based annualized net profit of ₩11.24B by the average PER of the four valuation peers (53.46x). The price per share arrived at ₩27,332, and they applied a discount rate of 12.19~34.14% to derive the price band.









PER valuation
JYP Entertainment Corp
Cube Entertainment Inc
Kakao Corp
YG Plus Inc


Ticker
035900
182360
035720
037270


Annualized net profit based on 1H21
₩33.74B
₩3.15B
₩1,072.39B
₩7.08B


Shares outstanding
35,497,492
13,804,687
444,992,180
63,429,410


EPS
₩950
₩228
₩2,410
₩112


Reference share price
₩40,050
₩13,116
₩122,500
₩7,070


PER
42.14x
57.56x
50.83x
63.33x


Average PER
53.46x

Source: DART







PER valuation

Annualized net profit based on 1H21
₩11.24B


Shares outstanding
21,994,260


EPS
₩511


PER
53.46x


Price per share
₩27,332

Source: DART

The book opens on October 25, and the allotment will be unveiled on October 28. The subscription follows on November 1, followed by the payment on November 4. The listing date will be announced later.





Schedule

Book open
2021. 10. 25


Book close
2021. 10. 26


Allotment
2021. 10. 28


Subscription
2021. 11. 01


Payment
2021. 11. 04


Listing
TBA

Source: DART



Dear U Offering Terms, Feat. Put-Back Options at 90% of the Offering Price

<div class="content-highlight"><p>Our base case valuation of DearU is implied market cap of 746 billion won or 33,907 won per share, which is 41% higher than the high end of the IPO price range of 24,000 won. Given the solid upside, we have a POSITIVE view of the DearU IPO and we would subscribe to the deal.</p></div><p>Our base case valuation is based on a P/E of 33.9x our estimated profit of 22 billion won in 2022. The valuation multiple of 33.9x is based on a 10% premium to the average P/E valuation multiple of the peers in 2022. We have used a 10% premium mainly due to the much higher sales growth rate of the company as well as higher operating margin of DearU as compared to its peers, despite its lower sales and earnings base. </p><p>We estimate DearU to generate sales of 40.5 billion won in 2021, up 210.7% YoY and 67.7 billion won in sales in 2022, up 67% YoY. We also estimate the company to generate an operating profit of 13.4 billion won in 2021 and 22 billion won in 2022. This represents an operating margin of 33.1% in 2021 and 32.5% in 2022.</p>

Our base case valuation of DearU is implied market cap of 746 billion won or 33,907 won per share, which is 41% higher than the high end of the IPO price range of 24,000 won. Given the solid upside, we have a POSITIVE view of the DearU IPO and we would subscribe to the deal.Our base case valuation is based on a P/E of 33.9x our estimated profit of 22 billion won in 2022. The valuation multiple of 33.9x is based on a 10% premium to the average P/E valuation multiple of the peers in 2022. We have used a 10% premium mainly due to the much higher sales growth rate of the company as well as higher operating margin of DearU as compared to its peers, despite its lower sales and earnings base. We estimate DearU to generate sales of 40.5 billion won in 2021, up 210.7% YoY and 67.7 billion won in sales in 2022, up 67% YoY. We also estimate the company to generate an operating profit of 13.4 billion won in 2021 and 22 billion won in 2022. This represents an operating margin of 33.1% in 2021 and 32.5% in 2022.

South Korea

Cheil Worldwide Inc. provides a wide range of marketing services such as new product development and advertisement, brand management, advertising budget analysis, and advertising effectiveness evaluation.  The Company also creates, prints, publishes, and produces promotional and advertising materials.

JYP Entertainment Corp plans, produces, promotes, and markets Korean singers both in Korean and overseas market. The Company's also engages in licensing, merchandizing, and artist management business including the commercial flim contracts of the artists.

CJ CGV Co., Ltd. develops and operates multi-screen movie theaters in South Korea.  The Company's theater complex also conducts stores and restaurants in theaters, and offers advertisement through screens.

Innocean Worldwide Inc. provides marketing and communications services. As a media agency, the company is engaged in promotion, sports business consulting, space design, and advertisement production.

YG Entertainment Inc., produces and markets music recording, music publishing, record manufacturing/sales, artist management, concert production, and new artist discovering/training.

Hyundai Hy Communications & Network Co Ltd is cable television and Internet service company.  The Company also generates revenue from advertisement. Hyundai HCN provides service within South Korea.

Hyundai Hy Communications & Network (126560 KS)

Seoul Broadcasting System (SBS) is a commercial television and radio broadcasting company.  The Company produces and broadcasts programs, such as news, sports, weather, music, movies, and television drama series.

CJ Hellovision Company Ltd. operates as a multi-system operator that receives programs from program providers and airs them to subscribers. The Company offers cable TV services covering news, movie, music, entertainment, documentary, sports, education, go game, culture, homeshopping, and local broadcasting, as well as ground wave and satellite TV broadcasting channels.

Nasmedia Co., Ltd. is a Media Rep company that markets various advertising services based on the internet and mobile devices.  The Company's advertising service engages in digital signages, advertising solution, and web analysis.

YG PLUS provides a wide range of advertisement services through television, magazine, radio, and newspaper.  The Company also offers marketing and event planning related to sales promotion (SP) services.

Network 18 Media & Investments Ltd. is an entertainment holding company.  The Company, through its subsidiaries, operates a business news television channel; offers Internet access; operates real-time news terminals; operates general news television channels; produces motion pictures; and retails goods on television and over the Internet.

DAIICHIKOSHO CO., LTD. manufactures, sells, and, leases karaoke equipment and software.  The Company also operates karaoke booth chains called Big Echo, provides karaoke software via cable line called DAM, and participates in broadcasting via satellite.

TV Asahi Holdings Corporation produces and broadcasts a variety of television programs mainly in the Tokyo area. The Company sells commercial spots through a network system. TV Asahi also provides patent maintenance for music publication, entertainment planning, sales of broadcasting equipment, and TV shopping.

CITIC Guoan Information Industry Co., Ltd., through its subsidiary, installs, tests, and operates cable TV and satellite telecommunication networks. The Company also develops real estate properties .  In addition, CITIC designs network integrated systems and application software, and provides advertising services.

Sinclair Broadcast Group, Inc. is a diversified broadcasting company that owns or provides programming services to television stations across the United States.  The Company's television group includes FOX, WB, ABC, CBS, NBC, and UPN affiliates.

Visual China Group Co., Ltd. manufactures cultural and entertainment products and technologies. The Company's products include radio and television transmission technology, Internet transmission, Internet games and entertainment, mobile communications network gaming and entertainment technology, and computer software development.

Central China Land Media Co., Ltd. operates media businesses.  The company provides web services for news, publishing, movies and television related programs.

Hunan TV & Broadcast Intermediary Co. Ltd. designs, produces, and broadcasts TV advertisement and provide advertising agent services.  The Company also makes television programs, operates theme parks, and provides cable TV network program delivery services.

Beijing Gehua CATV Network Co., Ltd. builds, manages, and maintains cable TV networks. The Company also provides advertising and information services.

Beijing Gehua Catv Network Co, Ltd. (600037 CH)

Guangdong Advertising Group Co.,Ltd provides integrated market communication service.  The Company's services include brand management, media agency, costume design, private advertising media,photography,technology development and television planning.

S.M.Entertainment Co. plans, produces, promotes, and markets Korean rock and roll music in several formats, such as compact discs (CD), concert tours, television productions, and music videos.  The Company also operates artist management business as well as licensing and copyright business from the company's music records.

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S.M.Entertainment Co (041510 KS)

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