Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight">
<h2>Revised IPO Price Range and Methodology by the Bankers</h2>
<p>On 11 June, SD Biosensor announced that it will drastically lower the IPO price range to 45,000 won to 52,000 won, down from 66,000 won to 85,000 won previously, representing a reduction in prices by 32% to 39%. As a result of this change, the IPO price range will be reduced from the high end price level of 8.8 trillion won to 4.6 trillion won to 5.3 trillion won. In terms of the key IPO dates, the bookbuilding for the institional investors will start on July 5th. </p>
<p>Despite the lower IPO price levels, we would continue to pass on this IPO deal. If we just take the P/E of the four Korean comps that the bankers used, that would be 9.8x. If we take this multiple and apply it to our estimated net profit of 560 billion won in 2022, that would suggest 5.5 trillion won in implied market cap or target price of 53,350 won. At this price, it would not suggest much upside from the IPO price range. Plus, at this price, it is highly unlikely for the company to be included in the KOSPI 200 Fast Entry.</p>
</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/212/860/original/image_81501406031623646972806.png?1623618124" class="editor-image img-responsive" data-smartkarma-image-id="212860"></figure>


Revised IPO Price Range and Methodology by the Bankers
On 11 June, SD Biosensor announced that it will drastically lower the IPO price range to 45,000 won to 52,000 won, down from 66,000 won to 85,000 won previously, representing a reduction in prices by 32% to 39%. As a result of this change, the IPO price range will be reduced from the high end price level of 8.8 trillion won to 4.6 trillion won to 5.3 trillion won. In terms of the key IPO dates, the bookbuilding for the institional investors will start on July 5th. 
Despite the lower IPO price levels, we would continue to pass on this IPO deal. If we just take the P/E of the four Korean comps that the bankers used, that would be 9.8x. If we take this multiple and apply it to our estimated net profit of 560 billion won in 2022, that would suggest 5.5 trillion won in implied market cap or target price of 53,350 won. At this price, it would not suggest much upside from the IPO price range. Plus, at this price, it is highly unlikely for the company to be included in the KOSPI 200 Fast Entry.


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.

Offering price &amp; sizeSD Biosensor lowered its IPO price from ₩66,000~85,000 to ₩45,000~52,000. This is a nearly 40% decrease from the previous price band. The newly adjusted price band now implies a market cap range at ₩4.57~5.28T.









Indicative price band
Low, previous
High, previous
Low, adjusted
High, adjusted


Price
₩66,000
₩85,000
₩45,000
₩52,000


Offering value
₩1,026.5B
₩1,322.0B
₩559.9B
₩647.0B


- Institutional allotment
₩564.6B
₩727.1B
₩307.9B
₩355.8B


Implied market cap
₩6,843.3B
₩8,813.3B
₩4,572.6B
₩5,283.9B

Source: DART

We also see a substantial decrease in the offering size, nearly halving the total offering value to ₩560~647B.







Offering size
Previous
Adjusted


Pre-IPO SO
93,317,753
93,317,753


Offering
15,552,900
12,442,200


- % of SO
16.67%
13.33%


Institutional allotment
55.00~75.00%
55.00~75.00%


Primary
10,368,600
8,294,800


- % of the total offering
66.67%
66.67%


Secondary
5,184,300
4,147,400


 - % of the total offering
33.33%
33.33%


Post-IPO shares outstanding
103,686,353
101,612,553


Capital increase rate
11.11%
8.89%


Dilution
10.00%
8.16%

Source: DART

ScheduleThe IPO schedule has also been delayed by a month. The company will open the book on July 5 to finalize the offering price on July 7. Then, SD Biosensor proceeds with the subscription on July 8.





Timetable

Book open
2021. 7. 5


Book close
2021. 7. 6


Subscription
2021. 7. 8


Payment
2021. 7. 13


Listing
TBA

Source: DART

ValuationSD Biosensor added local peers (Humasis, Labgenomics, and Bioneer) with relatively low PERs to the valuation comps. This led to a reduction of the offering price by up to 40%. As a result, the adjusted average PER is 14.64x, down 23.31% from the previous average PER of 19.09x.











Valuation peers
Seegene Inc
Thermo Fisher Scientific Inc.
PerkinElmer, Inc.
Humasis Co Ltd
Labgenomics Co Ltd
Bioneer Corp


Ticker
096530
TMO
PKI
205470
084650
064550


Currency
KRW
USD
USD
KRW
KRW
KRW


FY20 earnings (in millions)
₩503,147
$6,375
$728
₩20,937
₩42,764
₩59,188


Total shares
52,225,994
393,793,362
112,061,794
34,194,111
11,322,125
25,211,579


EPS
₩9,634
$16.19
$6.50
₩612
₩3,777
₩2,348


Reference share price
₩61,600
$441.00
$138.80
₩12,000
₩21,695
₩17,540


PER
6.39x
27.24x
21.37x
19.60x
5.74x
7.47x


Average PER
14.64x

Source: DART

Applying the adjusted earnings multiple of 14.64x to SD Biosensor's FY2020 earnings gives an ₩87,635 price per share, putting the indicative price band discount at 40.66~48.65%.





SD Biosensor PER valuation

Ticker
137310


Currency
KRW


FY20 earnings (in millions)
₩615,636


Total shares
102,818,553


EPS
₩5,988


Reference share price
₩87,635


PER
14.64x


 - The indicative band discount
40.66~48.65%

Source: DART



SD Biosensor Offering Price/Size Adjustment & Valuation Re-Review

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>The Korea Exchange (KRX) will announce the results of the December 2021 review of the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> in November. The constituent changes will be effective after the close of trading on 9 December.</p><p>There could be a change at the September futures expiry with <a href="https://www.smartkarma.com/entities/sd-biosensor-inc" target="_blank" data-smartkarma-citation="entities:33333:1" rel="noopener">SD Biosensor (SDBIOZ KS)</a> getting Fast Entry into the index. We see <a href="https://www.smartkarma.com/entities/lock-lock-co-ltd" target="_blank" data-smartkarma-citation="entities:4739:1" rel="noopener">Lock&amp;Lock (115390 KS)</a> as a potential deletion to make way for <a href="https://www.smartkarma.com/entities/sd-biosensor-inc" target="_blank" data-smartkarma-citation="entities:33333:1" rel="noopener">SD Biosensor (SDBIOZ KS)</a>. </p><p>At the current time, we see 3 potential changes at the regular review in December with F&amp;F Co (383220 KS), <a href="https://www.smartkarma.com/entities/sl-corp" target="_blank" data-smartkarma-citation="entities:20694:1" rel="noopener">Sl Corp (005850 KS)</a> and <a href="https://www.smartkarma.com/entities/seah-besteel-corp" target="_blank" data-smartkarma-citation="entities:11760:1" rel="noopener">Seah Besteel (001430 KS)</a> replacing <a href="https://www.smartkarma.com/entities/samyang-foods-co-ltd" target="_blank" data-smartkarma-citation="entities:9100:1" rel="noopener">Samyang Foods (003230 KS)</a>, <a href="https://www.smartkarma.com/entities/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 KS)</a> and <a href="https://www.smartkarma.com/entities/jw-pharmaceutical-corp" target="_blank" data-smartkarma-citation="entities:18784:1" rel="noopener">Jw Pharmaceutical (001060 KS)</a>. These names could change over the next few months and their prices (and the prices of the other stocks) move around.</p><p>After the 100%+ returns in the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> June review by buying the inclusions and selling the exclusions (or the KOSPI2 index futures), there will be a lot of interest in the December review.</p><p>In this Insight we look at the KOSPI 200 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.</p>

The Korea Exchange (KRX) will announce the results of the December 2021 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in November. The constituent changes will be effective after the close of trading on 9 December.There could be a change at the September futures expiry with SD Biosensor (SDBIOZ KS) getting Fast Entry into the index. We see Lock&amp;Lock (115390 KS) as a potential deletion to make way for SD Biosensor (SDBIOZ KS). At the current time, we see 3 potential changes at the regular review in December with F&amp;F Co (383220 KS), Sl Corp (005850 KS) and Seah Besteel (001430 KS) replacing Samyang Foods (003230 KS), F&amp;F Co Ltd (007700 KS) and Jw Pharmaceutical (001060 KS). These names could change over the next few months and their prices (and the prices of the other stocks) move around.After the 100%+ returns in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) June review by buying the inclusions and selling the exclusions (or the KOSPI2 index futures), there will be a lot of interest in the December review.In this Insight we look at the KOSPI 200 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.

KOSPI200 Index Rebalance Preview: Focus Shifts to December After a Fantastic June Review

<div class="content-highlight"><p>Our base case valuation of SD Biosensor is 82,021 won, which is 4% lower than the high end of the IPO price range of 85,000 won. Given the lack of upside, we would pass on this IPO. Our base case valuation also represents an implied market cap of 8.6 trillion won, which is based on 15.4x P/E using our estimated net profit of 560 billion won in 2022. Our P/E multiple of 15.4x assumes a 50% premium to <a href="https://www.smartkarma.com/entities/seegene-inc" target="_blank" data-smartkarma-citation="entities:11483:1" rel="noopener">Seegene Inc (096530 KS)</a>'s P/E multiple next year. </p></div><p>We have used only Seegene as a comp to SD Biosensor. We have chosen to exclude other companies such as Thermo Fisher Scientific and Perkin Elmer which the bankers included in their valuation assessment. We do not believe these latter two US based companies are appropriate comps to SD Biosensor mainly because SD Biosensor has only a couple of years of sizable sales and profits whereas Thermo Fisher Scientific and Perkin Elmer have many decades of generating billion dollar plus in sales. </p>

Our base case valuation of SD Biosensor is 82,021 won, which is 4% lower than the high end of the IPO price range of 85,000 won. Given the lack of upside, we would pass on this IPO. Our base case valuation also represents an implied market cap of 8.6 trillion won, which is based on 15.4x P/E using our estimated net profit of 560 billion won in 2022. Our P/E multiple of 15.4x assumes a 50% premium to Seegene Inc (096530 KS)'s P/E multiple next year. We have used only Seegene as a comp to SD Biosensor. We have chosen to exclude other companies such as Thermo Fisher Scientific and Perkin Elmer which the bankers included in their valuation assessment. We do not believe these latter two US based companies are appropriate comps to SD Biosensor mainly because SD Biosensor has only a couple of years of sizable sales and profits whereas Thermo Fisher Scientific and Perkin Elmer have many decades of generating billion dollar plus in sales. 

<div class="content-highlight"><p><a href="https://www.smartkarma.com/entities/sd-biosensor-inc" target="_blank" data-smartkarma-citation="entities:33333:1" rel="noopener">SD Biosensor (SDBIOZ KS)</a> is getting ready for an IPO in Korea next month. SD Biosensor will be one of the largest IPOs in Korea in 2021. The IPO price range is from 66,000 won to 85,000 won. At the high end of the IPO price range, the company will raise 1.3 trillion won. The bookbuilding for the institutional investors starts on 10 June. According to the bankers' valuation, at the high end of the IPO price range, the company would be valued at 8.9 trillion won ($7.9 billion). The lead underwriters of this IPO include NH Investment &amp; Securities and Korea Investment &amp; Securities. </p></div><p>Established in 2010, SD Biosensor is a bio-diagnostic company that provides in vitro diagnostic products. This is one of the biggest companies in Korea in the field of in-vitro diagnostic products. According to the company, it exported <a href="https://www.edaily.co.kr/news/read?newsId=03634246629015792&amp;mediaCodeNo=257&amp;OutLnkChk=Y" target="_blank" rel="noopener">400 million COVID-19 diagnostic kit</a> related products from 2020 to January 2021.</p><p>The company's sales surged from 73 billion won in 2019 to 1,686.2 billion won in 2020. Operating profit also jumped from 1.5 billion won in 2019 to 738.3 billion won in 2020.</p><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 212pt;">Deal Specifics of the SD Bioscience IPO:</td>
<td style="width: 409pt;"> </td>
</tr>
<tr>
<td>Lead underwriters of the IPO: </td>
<td style="width: 409pt;">NH Investment &amp; Securities, Korea Investment &amp; Securities</td>
</tr>
<tr>
<td>Expected IPO price per share: </td>
<td style="width: 409pt;">66,000 won (low)/85,000 won (high)</td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td style="width: 409pt;">15.55m shares (10.37m new shares; 5.18m old shares)</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td style="width: 409pt;">US$908m (low);  US$1,170m (high)</td>
</tr>
<tr>
<td>Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 409pt;">104.89m shares</td>
</tr>
<tr>
<td>Expected market cap after IPO:</td>
<td style="width: 409pt;">6,923 billion won (low)/8,916 billion won (high)</td>
</tr>
<tr>
<td>Book open: </td>
<td style="text-align: left; width: 409pt;">10-Jun-21</td>
</tr>
<tr>
<td>Book closed:</td>
<td style="text-align: left; width: 409pt;">11-Jun-21</td>
</tr>
<tr>
<td>Listing date: </td>
<td style="text-align: left; width: 409pt;">TBD</td>
</tr>
<tr>
<td>Source: Company data</td>
<td style="width: 409pt;"> </td>
</tr>
</tbody>
</table>

SD Biosensor (SDBIOZ KS) is getting ready for an IPO in Korea next month. SD Biosensor will be one of the largest IPOs in Korea in 2021. The IPO price range is from 66,000 won to 85,000 won. At the high end of the IPO price range, the company will raise 1.3 trillion won. The bookbuilding for the institutional investors starts on 10 June. According to the bankers' valuation, at the high end of the IPO price range, the company would be valued at 8.9 trillion won ($7.9 billion). The lead underwriters of this IPO include NH Investment &amp; Securities and Korea Investment &amp; Securities. Established in 2010, SD Biosensor is a bio-diagnostic company that provides in vitro diagnostic products. This is one of the biggest companies in Korea in the field of in-vitro diagnostic products. According to the company, it exported 400 million COVID-19 diagnostic kit related products from 2020 to January 2021.The company's sales surged from 73 billion won in 2019 to 1,686.2 billion won in 2020. Operating profit also jumped from 1.5 billion won in 2019 to 738.3 billion won in 2020.






Deal Specifics of the SD Bioscience IPO:
 


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


Expected IPO price per share: 
66,000 won (low)/85,000 won (high)


Number of Shares for IPO:
15.55m shares (10.37m new shares; 5.18m old shares)


IPO base deal size: 
US$908m (low);  US$1,170m (high)


Expected common shares outstanding, fully diluted (post-IPO):  
104.89m shares


Expected market cap after IPO:
6,923 billion won (low)/8,916 billion won (high)


Book open: 
10-Jun-21


Book closed:
11-Jun-21


Listing date: 
TBD


Source: Company data
 




South Korea

SD Biosensor, INC. operates medical device manufacturing businesses. The Company produces electric medical instruments and other products. SD Biosensor conducts businesses across worldwide.

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SD Biosensor (137310 KS)

SD Biosensor Reduces IPO Price Range

SD Biosensor announced that it will drastically lower the IPO price range to 45,000 won to 52,000 won. Despite the lower IPO price levels of SD...

Douglas Kim

SD Biosensor Offering Price/Size Adjustment & Valuation Re-Review

This post details the adjustments made to the offering price and size of SD Biosensor last Friday. This post then discusses the adjusted valuation.

Sanghyun Park

KOSPI200 Index Rebalance Preview: Focus Shifts to December After a Fantastic June Review

We see 1 potential change in September and 3 potential changes at the KOSPI200 December review. Post the excellent returns at the June rebalance,...

Brian Freitas

SD Biosensor IPO Valuation Analysis

Our base case valuation of SD Biosensor is 82,021 won, which is 4% lower than the high end of the IPO price range of 85,000 won. Given the lack of...

Douglas Kim

SD Biosensor IPO Preview

SD Biosensor is one of the biggest companies in Korea in the field of in-vitro diagnostic products.At the high end of the IPO price range, the...

Douglas Kim

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