Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 25 years of experience in analyzing hundreds of companies, especially in Asia. Deep expertise in the following sectors:
- Technology (E-commerce, SaaS, Internet)
- Consumer 
- Special Situations/Deep Value Plays
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

Big Hit Entertainment IPO Valuation Analysis

Interest Comparisons of Upcoming Korean Large-Cap IPOs: Kakao Games & Big Hit Entertainment

Big Hit Ent. IPO: KOSPI 200 Inclusion Event

Netmarble Corp (SoTP Valuation Analysis) - Impact of Big Hit Entertainment

Netmarble Corp: Firing on All Cylinders + Earnings Beat Consensus by Big Amount in 2Q 2020

Initial Thoughts on the Big Hit Entertainment IPO

Coway: Business Model Proves Resilient, Earnings Upgrades Set to Continue

Equity Capital Markets

Big Hit Entertainment ("BHE") is getting ready to complete its IPO in the Korean stock market in early October. This is the second largest IPO in Korea this year after SK Biopharm. The IPO price range of the Big Hit Entertainment is between 105,000 won to 135,000 won. The IPO base deal size is from $634 million to $816 million. The expected market cap after the IPO is from 3.8 trillion won to 4.9 trillion won. The bookbuilding for the institutional ivnestors starts on September 24th.Excluding YG Plus, Naver, and Kakao as comps and including only JYP Enter and YG Enter as comps, the average EV/EBITDA multiple would decline to 33x, which is lower than the bankers' EV/EBITDA valuation multiple of 42.4x. Moreover, it may be more appropriate to include S.M. Entertainment in the comps as well. The bankers probably excluded S.M. Entertainment as one of the comps due to its relatively low valuation multiples.<div class="content-highlight">It is time to separate the wheat from the chaff among the large cap Korean IPOs in 2020. SK Biopharm has performed very well post its IPO and it is highly likely that Kakao Games IPO will also have an excellent performance post its IPO next week. Thus, SK Biopharm and Kakao Games are the wheat of the large cap Korean IPOs. However, mainly due to lofty valuations and over-reliance on the BTS, the Big Hit Entertainment IPO is likely to become the chaff.</div>

Big Hit Entertainment ("BHE") is getting ready to complete its IPO in the Korean stock market in early October. This is the second largest IPO in Korea this year after SK Biopharm. The IPO price range of the Big Hit Entertainment is between 105,000 won to 135,000 won. The IPO base deal size is from $634 million to $816 million. The expected market cap after the IPO is from 3.8 trillion won to 4.9 trillion won. The bookbuilding for the institutional ivnestors starts on September 24th.Excluding YG Plus, Naver, and Kakao as comps and including only JYP Enter and YG Enter as comps, the average EV/EBITDA multiple would decline to 33x, which is lower than the bankers' EV/EBITDA valuation multiple of 42.4x. Moreover, it may be more appropriate to include S.M. Entertainment in the comps as well. The bankers probably excluded S.M. Entertainment as one of the comps due to its relatively low valuation multiples.It is time to separate the wheat from the chaff among the large cap Korean IPOs in 2020. SK Biopharm has performed very well post its IPO and it is highly likely that Kakao Games IPO will also have an excellent performance post its IPO next week. Thus, SK Biopharm and Kakao Games are the wheat of the large cap Korean IPOs. However, mainly due to lofty valuations and over-reliance on the BTS, the Big Hit Entertainment IPO is likely to become the chaff.

Big Hit Entertainment IPO Preview (Time to Separate the Wheat from the Chaff)

HYBE

Big Hit Entertainment IPO Preview (Time to Separate the Wheat from the Chaff)