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

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/27805" target="_blank" data-smartkarma-citation="entities:27805:1">SNK Corp (951104 KS)</a> bookbuilding begins this Tuesday (Dec 4-5). Shares are preliminary priced at a ₩34,300-46,800 range, which values the company at ₩771bil-1.05tril.</li>
<li>There is no clear valuation peer in the Korean game space. They even used PBR to justify their target valuation. Using the same valuation peers, SNK should be given a 22.59x PER. Per share, it should be priced at ₩25,228. High end is at a 42.15% premium to this. Low end is a 17.72% premium.</li>
<li>Bandai, Square Enix and Konami are more sensible valuation peers. Their LTM PER average is 20.33x. This puts high end at a 47.08% premium. Valuation premium can be granted on higher profit margin. But even at a 30x PER, high end is at a 25.99% premium.</li>
<li>General consensus is that game IP business is capped at a 25x PER. This should be applied to SNK as well. Even at a 30x PER, highest bid should be limited to the low end of the indicative price band.</li>
</ul>



SNK Corp (951104 KS) bookbuilding begins this Tuesday (Dec 4-5). Shares are preliminary priced at a ₩34,300-46,800 range, which values the company at ₩771bil-1.05tril.
There is no clear valuation peer in the Korean game space. They even used PBR to justify their target valuation. Using the same valuation peers, SNK should be given a 22.59x PER. Per share, it should be priced at ₩25,228. High end is at a 42.15% premium to this. Low end is a 17.72% premium.
Bandai, Square Enix and Konami are more sensible valuation peers. Their LTM PER average is 20.33x. This puts high end at a 47.08% premium. Valuation premium can be granted on higher profit margin. But even at a 30x PER, high end is at a 25.99% premium.
General consensus is that game IP business is capped at a 25x PER. This should be applied to SNK as well. Even at a 30x PER, highest bid should be limited to the low end of the indicative price band.


SNK Corp IPO Pricing: No Higher than Low End