Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 30 years of experience in the Korean/Asian equity research. Major sectors coverage include the following:
- Technology 
- Consumer 
- Special Situations/Deep Value Plays
- Tender Offers/M&As
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

Settlebank IPO Preview - Monopoly in Simple Cash Payment (간편현금결제) Market in Korea

Equity Capital Markets

In this report, we provide a trading strategy for <a href="https://www.smartkarma.com/entities/settlebank-inc" target="_blank" data-smartkarma-citation="entities:28113:1" rel="noopener">Settlebank Inc (1370075D KS)</a> IPO, which is expected to start trading on July 12th. The IPO price has been finalized at 55,000 won, which is 12% higher than the high-end of the original IPO price of 49,000 won. The institutional investors' demand for the Settlebank IPO was exceptionally very strong at 1,122 to 1. Given the exceptionally strong institutional demand for this IPO, it appears that our base case valuation (59,454 won), which is 8% higher than the IPO price, may be too conservative. A more likely scenario now is that the stock reaches about 70,000 won to 75,000 won in the first few hours of trading on the first day, overshooting its intrinsic value and sells off a bit for a few days/weeks, enters a consolidation phase and then resumes its higher price once again. Of the 1,310 institutional investors that participated in the Settlebank IPO survey, 63% of them them thought that the intrinsic value of the company should be more than 55,000 won, which provides a strong vote of confidence that this IPO should do well once it starts trading.

In this report, we provide a trading strategy for Settlebank Inc (1370075D KS) IPO, which is expected to start trading on July 12th. The IPO price has been finalized at 55,000 won, which is 12% higher than the high-end of the original IPO price of 49,000 won. The institutional investors' demand for the Settlebank IPO was exceptionally very strong at 1,122 to 1. Given the exceptionally strong institutional demand for this IPO, it appears that our base case valuation (59,454 won), which is 8% higher than the IPO price, may be too conservative. A more likely scenario now is that the stock reaches about 70,000 won to 75,000 won in the first few hours of trading on the first day, overshooting its intrinsic value and sells off a bit for a few days/weeks, enters a consolidation phase and then resumes its higher price once again. Of the 1,310 institutional investors that participated in the Settlebank IPO survey, 63% of them them thought that the intrinsic value of the company should be more than 55,000 won, which provides a strong vote of confidence that this IPO should do well once it starts trading. 

A Trading Strategy for Settlebank Post IPO