Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>After the market close on 27 February, Samsung Display announced that it will sell its 4.95% stake in Sfa Engineering (056190 KS) in a block deal sale. </li>
<li>We would take the trade. We like the relatively large block deal sale discount as well as the company's attractive valuations. </li>
<li>SFA Engineering is trading at P/E of 8.3x, EV/EBITDA of 2.7x, and P/B of 0.7x in 2024, which are much lower than historical valuations.</li>
</ul>


After the market close on 27 February, Samsung Display announced that it will sell its 4.95% stake in Sfa Engineering (056190 KS) in a block deal sale. 
We would take the trade. We like the relatively large block deal sale discount as well as the company's attractive valuations. 
SFA Engineering is trading at P/E of 8.3x, EV/EBITDA of 2.7x, and P/B of 0.7x in 2024, which are much lower than historical valuations.


Block Deal Sale of 5% Stake In SFA Engineering by Samsung Display

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Equity Capital Markets

Yas Co Ltd/Korea / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/25488" target="_blank" data-smartkarma-citation="entities:25488:1">YAS Co Ltd/Korea (255440 KS)</a> was founded in 2002 by two university professors named Jeong Kwang-ho and Hwang Chang-ho. Both have a Ph.D. degree in electrical engineering. Hwang briefly served as the company's CEO in early days, but Jeong soon took over the company and he is still serving as the company's CEO and major shareholder with a 53.4% stake. YAS was founded with the sole purpose of developing OLED mass production system. It successfully developed a couple of key OLED production technologies soon after its foundation. But it was 2009 when the company finally took center stage by supplying Gen 5.5 OLED deposition equipment for <a href="https://www.smartkarma.com/entities/7145" target="_blank" data-smartkarma-citation="entities:7145:1">LG Display Co Ltd (034220 KS)</a>'s large-sized W-OLED panel production. LGD had used <a href="https://www.smartkarma.com/entities/1" target="_blank" data-smartkarma-citation="entities:1:1">Canon Inc (7751 JP)</a> Tokki's OLED deposition equipment until Gen 3.5. YAS became Korea's first supplier to successfully develop a key technology in the OLED fabrication process. As a result, YAS also secured ₩10bil investment from LGD in 2010 for a 20% stake. LGD still owns a 17.81% stake.<div class="content-highlight">* To more accurately see where YAS stands in the OLED supply chain, we first need to know the OLED production process very thoroughly. But this would be a very laborious and tiresome study. So, I will put out a separate report in which I will specifically summarize and discuss the OLED production process and supply chain along with the companies belonging to the supply chain for each OLED panel maker. For this YAS IPO report, I will only provide a brief overview so that you can simply get a sense of where YAS stands in the OLED supply chain.First, like <a href="https://www.smartkarma.com/entities/24259" target="_blank" data-smartkarma-citation="entities:24259:1">Sunic System Ltd. (SUNICSZ KS)</a>, the main product of YAS is also OLED deposition equipment (also called 'OLED mass production system' or 'OLED evaporator'). OLED deposition equipment is the most critical equipment in the OLED fabrication process as shown in the below figure. This is the area where Japan's Canon Tokki has long dominated and still dominating. But in recent years, several Korean suppliers have risen and they actually became a real competitor to Tokki.<div class="content-caption">(Courtesy YAS, edited by <a href="https://www.smartkarma.com/profiles/354" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a>)</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/032/264/original/1.png?1503752409" class="editor-image img-responsive" data-smartkarma-image-id="32264"></figure>This is an excellent news article about the fierce race between Canon Tokki and Korean chasers: <a href="http://www.olednet.com/en/oled-deposition-equipment-market-can-replace-canon-tokki/" target="_blank">http://www.olednet.com/en/oled-deposition-equipment-market-can-replace-canon-tokki/</a>But it is important to note that Sunic and YAS are a bit different in terms of target clients even though their main client is LGD. Sunic's OLED deposition equipment is for small-sized panels mainly used in mobile devices. In contrast, YAS' OLED deposition equipment is for large-sized panels mainly used in TVs. Yes, this means YAS is one of the main players in LGD's W-OLED production supply chain. Since LGD is virtually the world's only W-OLED TV panel producer, LGD is currently responsible for nearly all of YAS sales. Below is a summary of who is supplying to whom in regard to OLED deposition equipment. Oh FYI, YAS is now saying that it is planning to develop OLED deposition equipment for small-sized panels as its future business. This means YAS will likely become Sunic's direct competitor.<table class="table table-striped"><colgroup></colgroup><tbody><tr><td>OLED deposition equipment maker</td><td>Country</td><td>Panel size</td><td>Clients</td></tr><tr><td>Tokki of <a href="https://www.smartkarma.com/entities/1" target="_blank" data-smartkarma-citation="entities:1:1">Canon Inc (7751 JP)</a></td><td>Japan</td><td>Small(mobile)</td><td><ul><li><a href="https://www.smartkarma.com/entities/191" target="_blank" data-smartkarma-citation="entities:191:1">Samsung Electronics (005930 KS)</a> (SDC): Gen 6</li><li><a href="https://www.smartkarma.com/entities/7145" target="_blank" data-smartkarma-citation="entities:7145:1">LG Display (034220 KS)</a>: Gen 6</li><li><a href="https://www.smartkarma.com/entities/11323" target="_blank" data-smartkarma-citation="entities:11323:1">Boe Technology Group (200725 CH)</a>: Gen 6</li><li><a href="https://www.smartkarma.com/entities/391" target="_blank" data-smartkarma-citation="entities:391:1">Sharp Corp (6753 JP)</a>: (Gen 6)</li></ul></td></tr><tr><td><a href="https://www.smartkarma.com/entities/24259" target="_blank" data-smartkarma-citation="entities:24259:1">Sunic System Ltd. (SUNICSZ KS)</a></td><td>Korea</td><td>Small(mobile)</td><td><ul><li><a href="https://www.smartkarma.com/entities/7145" target="_blank" data-smartkarma-citation="entities:7145:1">LG Display (034220 KS)</a>: Gen 6</li></ul></td></tr><tr><td><a href="https://www.smartkarma.com/entities/25488" target="_blank" data-smartkarma-citation="entities:25488:1">YAS Co Ltd/Korea (255440 KS)</a></td><td>Korea</td><td>Large(TV)</td><td><ul><li><a href="https://www.smartkarma.com/entities/7145" target="_blank" data-smartkarma-citation="entities:7145:1">LG Display (034220 KS)</a>: Gen 8 (for TV)</li></ul></td></tr><tr><td><a href="https://www.smartkarma.com/entities/19252" target="_blank" data-smartkarma-citation="entities:19252:1">SFA Engineering Corp (056190 KS)</a></td><td>Korea</td><td>Small(mobile)</td><td><ul><li>Truly Semiconductors (00732 HK): Gen 4.5</li><li>GVO (GoVisionox): Gen 5.5</li><li>Royole Corp: Gen 5.5</li></ul></td></tr><tr><td><a href="https://www.smartkarma.com/entities/20156" target="_blank" data-smartkarma-citation="entities:20156:1">Snu Precision Co Ltd (080000 KS)</a></td><td>Korea</td><td>Small(mobile)</td><td><ul><li><a href="https://www.smartkarma.com/entities/11323" target="_blank" data-smartkarma-citation="entities:11323:1">Boe Technology Group (200725 CH)</a>: Gen 5.5</li><li>GVO (GoVisionox): Gen 5.5</li><li>Truly Semiconductors (00732 HK): Gen 5.5</li></ul></td></tr><tr><td colspan="4">Source: DART, <a href="https://www.smartkarma.com/entities/20782" target="_blank" data-smartkarma-citation="entities:20782:1">Dongbu Securities Co Ltd (016610 KS)</a></td></tr></tbody></table>For those who are not familiar with LGD's W-OLED, I recommend reading the following news article from BusinessKorea. This would also be a very laborious study if we want to learn it properly. I may write another separate insight to more thoroughly discuss it. But for now, I recommend reading the following article.<a href="http://www.businesskorea.co.kr/english/news/industry/2891-w-oled-vs-rgb-oled-samsung-lg-show-different-techs-large-displays-ces-2014" target="_blank">http://www.businesskorea.co.kr/english/news/industry/2891-w-oled-vs-rgb-oled-samsung-lg-show-different-techs-large-displays-ces-2014</a></div>The company's sales soared in 2016 and LGD accounts for nearly all of its total sales. YAS achieved ₩83bil in sales with ₩16.1bil in OP and ₩13.1bil in NP. This is like 159% growth YoY for sales and +1052% and +1144% for OP and NP, respectively. LGD accounted for 98% of its total sales in 2016. The main reason why YAS finally saw a huge spike in sales was because of LGD's E4-2 line expansion, which is Gen 8-5 W-OLED production line.<table class="table table-striped"><tbody><tr><td colspan="4">(₩ mil)</td><td>2014</td><td>2015</td><td colspan="2">2016</td><td colspan="2">1H17</td></tr><tr><td colspan="4">OLED deposition equipment: 'Evaporator'</td><td>18,469</td><td>15,743</td><td>63,654</td><td>76.7%</td><td>16,534</td><td>32.9%</td></tr><tr><td colspan="4">OLED deposition equipment: 'Evaporation source'</td><td>9,612</td><td>10,739</td><td>11,098</td><td>13.4%</td><td>30,481</td><td>60.7%</td></tr><tr><td colspan="10"></td></tr><tr><td colspan="4">Others</td><td>1,953</td><td>5,508</td><td>8,230</td><td>9.9%</td><td>3,241</td><td>6.4%</td></tr><tr><td colspan="4">Total</td><td>30,034</td><td>31,990</td><td>82,982</td><td>100.0%</td><td>50,257</td><td>100.0%</td></tr><tr><td colspan="10">Source: DART</td></tr></tbody></table>

YAS Co Ltd/Korea (255440 KS) was founded in 2002 by two university professors named Jeong Kwang-ho and Hwang Chang-ho. Both have a Ph.D. degree in electrical engineering. Hwang briefly served as the company's CEO in early days, but Jeong soon took over the company and he is still serving as the company's CEO and major shareholder with a 53.4% stake. YAS was founded with the sole purpose of developing OLED mass production system. It successfully developed a couple of key OLED production technologies soon after its foundation. But it was 2009 when the company finally took center stage by supplying Gen 5.5 OLED deposition equipment for LG Display Co Ltd (034220 KS)'s large-sized W-OLED panel production. LGD had used Canon Inc (7751 JP) Tokki's OLED deposition equipment until Gen 3.5. YAS became Korea's first supplier to successfully develop a key technology in the OLED fabrication process. As a result, YAS also secured ₩10bil investment from LGD in 2010 for a 20% stake. LGD still owns a 17.81% stake.* To more accurately see where YAS stands in the OLED supply chain, we first need to know the OLED production process very thoroughly. But this would be a very laborious and tiresome study. So, I will put out a separate report in which I will specifically summarize and discuss the OLED production process and supply chain along with the companies belonging to the supply chain for each OLED panel maker. For this YAS IPO report, I will only provide a brief overview so that you can simply get a sense of where YAS stands in the OLED supply chain.First, like Sunic System Ltd. (SUNICSZ KS), the main product of YAS is also OLED deposition equipment (also called 'OLED mass production system' or 'OLED evaporator'). OLED deposition equipment is the most critical equipment in the OLED fabrication process as shown in the below figure. This is the area where Japan's Canon Tokki has long dominated and still dominating. But in recent years, several Korean suppliers have risen and they actually became a real competitor to Tokki.(Courtesy YAS, edited by Sanghyun Park)This is an excellent news article about the fierce race between Canon Tokki and Korean chasers: http://www.olednet.com/en/oled-deposition-equipment-market-can-replace-canon-tokki/But it is important to note that Sunic and YAS are a bit different in terms of target clients even though their main client is LGD. Sunic's OLED deposition equipment is for small-sized panels mainly used in mobile devices. In contrast, YAS' OLED deposition equipment is for large-sized panels mainly used in TVs. Yes, this means YAS is one of the main players in LGD's W-OLED production supply chain. Since LGD is virtually the world's only W-OLED TV panel producer, LGD is currently responsible for nearly all of YAS sales. Below is a summary of who is supplying to whom in regard to OLED deposition equipment. Oh FYI, YAS is now saying that it is planning to develop OLED deposition equipment for small-sized panels as its future business. This means YAS will likely become Sunic's direct competitor.OLED deposition equipment makerCountryPanel sizeClientsTokki of Canon Inc (7751 JP)JapanSmall(mobile)Samsung Electronics (005930 KS) (SDC): Gen 6LG Display (034220 KS): Gen 6Boe Technology Group (200725 CH): Gen 6Sharp Corp (6753 JP): (Gen 6)Sunic System Ltd. (SUNICSZ KS)KoreaSmall(mobile)LG Display (034220 KS): Gen 6YAS Co Ltd/Korea (255440 KS)KoreaLarge(TV)LG Display (034220 KS): Gen 8 (for TV)SFA Engineering Corp (056190 KS)KoreaSmall(mobile)Truly Semiconductors (00732 HK): Gen 4.5GVO (GoVisionox): Gen 5.5Royole Corp: Gen 5.5Snu Precision Co Ltd (080000 KS)KoreaSmall(mobile)Boe Technology Group (200725 CH): Gen 5.5GVO (GoVisionox): Gen 5.5Truly Semiconductors (00732 HK): Gen 5.5Source: DART, Dongbu Securities Co Ltd (016610 KS)For those who are not familiar with LGD's W-OLED, I recommend reading the following news article from BusinessKorea. This would also be a very laborious study if we want to learn it properly. I may write another separate insight to more thoroughly discuss it. But for now, I recommend reading the following article.http://www.businesskorea.co.kr/english/news/industry/2891-w-oled-vs-rgb-oled-samsung-lg-show-different-techs-large-displays-ces-2014The company's sales soared in 2016 and LGD accounts for nearly all of its total sales. YAS achieved ₩83bil in sales with ₩16.1bil in OP and ₩13.1bil in NP. This is like 159% growth YoY for sales and +1052% and +1144% for OP and NP, respectively. LGD accounted for 98% of its total sales in 2016. The main reason why YAS finally saw a huge spike in sales was because of LGD's E4-2 line expansion, which is Gen 8-5 W-OLED production line.(₩ mil)2014201520161H17OLED deposition equipment: 'Evaporator'18,46915,74363,65476.7%16,53432.9%OLED deposition equipment: 'Evaporation source'9,61210,73911,09813.4%30,48160.7%Others1,9535,5088,2309.9%3,2416.4%Total30,03431,99082,982100.0%50,257100.0%Source: DART

South Korea

SNU Precision Co., Ltd. manufactures metrological and optical products for semiconductors and optical components.  The Company's products include microscope video system, gear measuring system, 3D surface profiling system, and fiber optic inspection system.

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Snu Precision (080000 KS)

Block Deal Sale of 5% Stake In SFA Engineering by Samsung Display

Samsung Display announced that it will sell its 4.95% stake in Sfa Engineering in a block deal sale. We would take the trade. We like the sale...

Douglas Kim

YAS IPO Part 1 - IPO Prospectus Summary

YAS Co Ltd/Korea (255440 KS) was founded in 2002 by two university professors named Jeong Kwang-ho and Hwang Chang-ho. Both have a Ph.D. degree in...

Sanghyun Park

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