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

Equity Capital Markets

<ul>
<li>
<strong><a href="https://www.smartkarma.com/entities/27459" target="_blank" data-smartkarma-citation="entities:27459:1">Plakor (032340 KS)</a></strong> is an IPO in Korea which is expected to be completed in the Korean stock market in October. Established in 1967, Plakor makes auto parts. Its main products include bumper and instrument panel molds, gas injection molding bumpers, and air bags. The company is trying to raise between US$19 million to US$31 million. </li>
<li>The bankers used <a href="https://www.smartkarma.com/entities/3963" target="_blank" data-smartkarma-citation="entities:3963:1">Sungwoo Hitech (015750 KS)</a>, <a href="https://www.smartkarma.com/entities/20088" target="_blank" data-smartkarma-citation="entities:20088:1">Pyeong Hwa Automotive (043370 KS)</a>, and <a href="https://www.smartkarma.com/entities/3864" target="_blank" data-smartkarma-citation="entities:3864:1">Sambo Motors (053700 KS)</a> as comparable companies to Plakor. The average P/E of the comps was 10.3x. After applying additional IPO discount of 46% to 66%, the bankers derived the IPO price range of 7,000 won to 11,000 won. Notice how huge the IPO discount range is in this deal - <strong>46% to 66%! </strong>Typically, the IPO deals in Korea include IPO discount that range 20-30%. It is very unusual to see the high end of the IPO discount range in the 66% levels.</li>
<li>The company's sales increased 17.4% CAGR from 2014 to 2017. However, its sales growth declined materially to 2.3% YoY in 1H18. The company's business has been plagued with declining gross and operating margins. Its operating margin declined from 4.1% in 2014 to 2.4% in 2017. Basically, what has been happening is that its major customers including Hyundai Motor and Kia Motors have been putting greater margin pressure on their numerous suppliers, including Plakor in the past several years. </li>
</ul>



Plakor (032340 KS) is an IPO in Korea which is expected to be completed in the Korean stock market in October. Established in 1967, Plakor makes auto parts. Its main products include bumper and instrument panel molds, gas injection molding bumpers, and air bags. The company is trying to raise between US$19 million to US$31 million. 
The bankers used Sungwoo Hitech (015750 KS), Pyeong Hwa Automotive (043370 KS), and Sambo Motors (053700 KS) as comparable companies to Plakor. The average P/E of the comps was 10.3x. After applying additional IPO discount of 46% to 66%, the bankers derived the IPO price range of 7,000 won to 11,000 won. Notice how huge the IPO discount range is in this deal - 46% to 66%! Typically, the IPO deals in Korea include IPO discount that range 20-30%. It is very unusual to see the high end of the IPO discount range in the 66% levels.
The company's sales increased 17.4% CAGR from 2014 to 2017. However, its sales growth declined materially to 2.3% YoY in 1H18. The company's business has been plagued with declining gross and operating margins. Its operating margin declined from 4.1% in 2014 to 2.4% in 2017. Basically, what has been happening is that its major customers including Hyundai Motor and Kia Motors have been putting greater margin pressure on their numerous suppliers, including Plakor in the past several years. 


Plakor

Plakor IPO Preview (Part 1)