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

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

Kakao Bank IPO: Valuation Peer Group Issues & Local Street's General View on Valuation Level

Kakao Pay IPO: Offering Detail & Valuation Issues

Kakao Valuation Studies: 12M Forward PER, Enterprise Multiples, & Discount to NAV

Kakao's Timely Trick to Defend Its Inflated Share Price: Merger with Kakao Commerce

Kakao Block Deal Risk, Potentially Initiated by SK Telecom

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Equity Capital Markets

<div><h2>Offering size</h2></div><div>
<p>Kakao Bank released an IPO prospectus. Kakao Bank is the second Internet-only bank in Korea. It was officially launched on July 27, 2017. Unlike K-Bank, the first Internet-only bank, Kakao Bank is 100% mobile-only. Kakao Bank offers 65.45M shares, which account for 15.98% of the total shares, of which 55-75% are allocated to institutions.</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":3,"3":323410}'>323410</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":"Offering"}'><strong>Offering</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":65450000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>65,450,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- % of pre-IPO SO"}'><strong>- % of pre-IPO SO</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1598}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'><strong>15.98%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Institutional allotment"}'><strong>Institutional allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"55.00~75.00%"}'><strong>55.00~75.00%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<div><h2>Split</h2></div>
<div><p>This is a 100% primary offering. As a result, this offering will see a capital increase rate of 15.98%. In addition, this IPO is free of any additional options: cornerstone, clawback, or greenshoe.</p></div>
<div>
<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":0.6987911807185323}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[3]C[0]"><strong>100.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Secondary %"}'>Secondary %</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3012088192814677}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[0]">0.00%</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":0.16245294237403599}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[0]"><strong>15.98%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'><strong>Dilution</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.139750123598349}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[0]"><strong>13.78%</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<div><h2>Schedule</h2></div>
<div><p>The book opens on July 9 (for overseas investors) and runs until July 21. The allotment will be on July 22 with a final offering price. The subscription follows on July 26.</p></div>
<div>
<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":44375}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 7. 9</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'>Book close</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44386}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 21</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'>Allotment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44389}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 22</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'><strong>Subscription</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44391}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 7. 26</strong></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":44396}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 7. 29</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"}'>2021. 8. 5</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<div><h2>Pricing</h2></div>
<div>
<p>This IPO selected the following 4 valuation peers: Rocket Companies, PagSeguro Digital, TCS Group, and Nordnet AB. They calculated an average PBR of 7.3x by applying net assets as of 1Q11 to the market cap as of June 21.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Valuation peers"}'>PBR valuation</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Rocket Companies Inc"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Rocket Companies Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"PagSeguro Digital Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>PagSeguro Digital Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"TCS Group Holding PLC"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>TCS Group Holding PLC</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Nordnet AB (publ)"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Nordnet AB (publ)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"RKT"}' data-sheets-formula='="RKT"'>NYSE: RKT</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"PAGS"}' data-sheets-formula='="PAGS"'>NYSE: PAGS</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"MCX:TCSG"}' data-sheets-formula='="MCX:TCSG"'>MCX: TCSG</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"STO:SAVE"}' data-sheets-formula='="STO:SAVE"'>STO: SAVE</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Reference market cap: MIN[1M Avg, 1W Avg, 1D Close] as of June 21"}'>Reference market cap: MIN[1M Avg, 1W Avg, 1D Close] as of June 21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":43184.655}'>₩43,184.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18918.666}'>₩18,918.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":16522.978}'>₩16,523.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4923.031}'>₩4,923.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Equity, as of 1Q21"}'>Equity, as of 1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":9404.053}'>₩9,404.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2152.996}'>₩2,153.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2057.841}'>₩2,057.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":644.004}'>₩644.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PBR"}'><strong>PBR</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.592132243406114}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>4.6x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8.787134764765007}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>8.8x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8.029278258135589}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>8.0x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.64441059372302}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>7.6x</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Average PBR"}'><strong>Average PBR</strong></td>
<td colspan="4" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":7.2632389650074325}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}' data-sheets-formula="=average(R[-1]C[0]:R[-1]C[3])"><strong>7.3x</strong></td>
</tr>
<tr><td colspan="5" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>
<div><div><p>After applying the 7.3x multiple to Kakao Bank's equity in Q1 of this year, they added funds from the public offering to derive a market cap of ₩22.97T. This was then divided by the post-IPO total shares to arrive at ₩48,058 per share.</p></div></div>
<div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Kakao PBR"}'>Kakao PBR</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PBR"}'>PBR</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.3}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}'>7.3x</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A"}'>A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Equity, as of 1Q21"}'>Equity, as of 1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2849.5}' data-sheets-formula="=2849.5">₩2,849.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"B"}'>B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital inflow from IPO (based on the lower end of the indicative price band)"}'>Capital inflow from IPO (based on the lower end of the indicative price band)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2159.9}'>₩2,159.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"C"}'>C</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap"}'><strong>Market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":22961.25}' data-sheets-formula="=R[-2]C[0]*R[-3]C[0]+R[-1]C[0]"><strong>₩22,961.3B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A × B + C"}'><strong>A × B + C</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Post-IPO SO"}'>Post-IPO SO</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":477773037}'>477,773,037</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</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":48058}'><strong>₩48,058</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'><strong>-</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div>
<div><div>An 18.85~31.33% discount sets up an indicative price band of ₩33,000~39,000, implying a market cap of ₩15.77~18.63T.</div></div>
<div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Indicative price band"}'>Indicative price band</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":33000}'><strong>₩33,000</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":39000}'><strong>₩39,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Base deal size"}'>Base deal size</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2159.85}' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩2,159.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2552.55}' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩2,552.6B</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":1187.9175}' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩1,187.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1403.9025000000001}' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩1,403.9B</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":15766.510221}' data-sheets-formula="=R[-3]C[0]*R14C2/1000000000"><strong>₩15,766.5B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18633.148443}' data-sheets-formula="=R[-3]C[0]*R14C2/1000000000"><strong>₩18,633.1B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Discount"}'><strong>- Discount</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3133426873101421}' data-sheets-formula="=(R13C2-R[-1]C[0])/R13C2"><strong>31.33%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.18849590318471346}' data-sheets-formula="=(R13C2-R[-1]C[0])/R13C2"><strong>18.85%</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div>
</div>
</div>
</div>

Offering size
Kakao Bank released an IPO prospectus. Kakao Bank is the second Internet-only bank in Korea. It was officially launched on July 27, 2017. Unlike K-Bank, the first Internet-only bank, Kakao Bank is 100% mobile-only. Kakao Bank offers 65.45M shares, which account for 15.98% of the total shares, of which 55-75% are allocated to institutions.






Offering size

Ticker
323410


Bourse
KOSPI


Offering
65,450,000


- % of pre-IPO SO
15.98%


Institutional allotment
55.00~75.00%

Source: DART


Split
This is a 100% primary offering. As a result, this offering will see a capital increase rate of 15.98%. In addition, this IPO is free of any additional options: cornerstone, clawback, or greenshoe.







Split

Primary %
100.00%


Secondary %
0.00%


Capital increase rate
15.98%


Dilution
13.78%

Source: DART


Schedule
The book opens on July 9 (for overseas investors) and runs until July 21. The allotment will be on July 22 with a final offering price. The subscription follows on July 26.







Schedule

Book open
2021. 7. 9


Book close
2021. 7. 21


Allotment
2021. 7. 22


Subscription
2021. 7. 26


Payment
2021. 7. 29


Listing
2021. 8. 5

Source: DART


Pricing

This IPO selected the following 4 valuation peers: Rocket Companies, PagSeguro Digital, TCS Group, and Nordnet AB. They calculated an average PBR of 7.3x by applying net assets as of 1Q11 to the market cap as of June 21.










PBR valuation
Rocket Companies Inc
PagSeguro Digital Ltd
TCS Group Holding PLC
Nordnet AB (publ)


Ticker
NYSE: RKT
NYSE: PAGS
MCX: TCSG
STO: SAVE


Reference market cap: MIN[1M Avg, 1W Avg, 1D Close] as of June 21
₩43,184.7B
₩18,918.7B
₩16,523.0B
₩4,923.0B


Equity, as of 1Q21
₩9,404.1B
₩2,153.0B
₩2,057.8B
₩644.0B


PBR
4.6x
8.8x
8.0x
7.6x


Average PBR
7.3x

Source: DART



After applying the 7.3x multiple to Kakao Bank's equity in Q1 of this year, they added funds from the public offering to derive a market cap of ₩22.97T. This was then divided by the post-IPO total shares to arrive at ₩48,058 per share.







Kakao PBR

PBR
7.3x
A


Equity, as of 1Q21
₩2,849.5B
B


Capital inflow from IPO (based on the lower end of the indicative price band)
₩2,159.9B
C


Market cap
₩22,961.3B
A × B + C


Post-IPO SO
477,773,037
-


Price per share
₩48,058
-

Source: DART


An 18.85~31.33% discount sets up an indicative price band of ₩33,000~39,000, implying a market cap of ₩15.77~18.63T.








Indicative price band
Low
High


Price
₩33,000
₩39,000


Base deal size
₩2,159.9B
₩2,552.6B


- Institutional allotment
₩1,187.9B
₩1,403.9B


Implied market cap
₩15,766.5B
₩18,633.1B


- Discount
31.33%
18.85%

Source: DART






Kakao Bank IPO: Offering Detail, Valuation Issue, & Index Fast Entry

KakaoBank

Kakao Bank IPO: Offering Detail, Valuation Issue, & Index Fast Entry