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

We have another interesting microcap IPO this month. It is Syswork Co Ltd (269620 KS) which basically makes ventilation/cooling control system, which mainly operates and controls 'FFU' (fan filter unit), mainly used in semiconductor clean rooms. In particular, it has successfully developed its own proprietary brushless DC motor which serves as the key component in its ventilation/cooling system. The company makes and supplies everything related to semiconductor cleanroom ventilation/cooling system, ranging from the entire control system to the controller (device) to the BLCD motor (component) depending on the needs of each client. That is, the company is providing a sort of 'one-stop' fully integrated service when it comes to semiconductor cleanroom ventilation/cooling system.(Syswork HQ in Daejeon, Korea - Courtesy News Tomato, Syswork)More than half of its total sales are coming from the sales of 'system', followed by BLCD motor (component) which accounts for about 40%.ProductRegion201420152016Accu. 3Q17Ventilation/cooling control system→ SystemLocal7,2219,73111,21311,459Overseas4871861,3922,456Sub-total7,7089,91612,60513,915BLCD motor→ ComponentLocal3,5523,7568,5688,870Overseas1352251,2141,044Sub-total3,6873,9819,7829,915Ventilation/cooling controller→ DeviceLocal1,1821,3021,3291,109Overseas325308396252Sub-total1,5061,6101,7261,361OtherLocal99956516Overseas---54Sub-total99956570TotalLocal12,05414,88421,17621,455Overseas9467193,0023,806Total13,00115,60324,17825,261Source: DARTBelow shows how Syswork's cleanroom ventilation/cooling control system is constructed and operated.(Semiconductor cleanroom ventilation/cooling control system overview - Courtesy Syswork)Below show Syswork's proprietary BLDC motor products. The first one is the motor/driver integrated type, and the second one is the motor/driver separated type.(Syswork's motor/driver integrated type BLDC motor - Courtesy Syswork)(Syswork's motor/driver separated type BLDC motor - Courtesy Syswork)Corporate history?Actually, Syswork didn't really start as a semiconductor value chain player. It began its business  in 2004 as a mere motor and controller maker. In 2005, it partnered with LS Cable &amp; Wire to develop the GHP (gas engine driven heat pump), then it later also developed the monitoring/controlling system for this GHP. Only after 2010, it turned its eye to the semiconductor field and began to develop ventilation/cooling system for semiconductor cleanrooms. In this connection, it registered the key patents related to the FFU (fan filter unit) and the EFU (equipment fan filter unit) in 2013. Finally, in 2014 it successfully developed and patented its own proprietary brushless DC electronic motor which is the most critical component of a ventilation/cooling system for semiconductor cleanroom.Corporate history2004Founded as a motor/controller maker2005Partnered with LS Cable &amp; Wire to develop the GHP2010Started focusing on semiconductor clients2013Developed and patented the FFU/EFU2014Developed and patented the BLDC motorSource: Syswork, Sanghyun ParkAs a result, starting 2014 it began to deliver very impressive sales growth. From 2014 to 2016, its annual sales growth stands at a whopping 36.75%. Last year, sales grew 56% YoY and OP grew 118% YoY. This year, its accumulated 3Q sales (₩25.9bil) already surpassed last year's total sales (₩24.3bil).Consolidated basis (₩ mil)201420152016Accu. 3Q17Sales13,00115,60324,29425,863OP5252,7125,9155,737OPM4.04%17.38%24.35%22.18%NPM5.53%15.22%21.46%19.97%Source: DARTIts major clients are Samsung Display (Samsung Electronics Co Ltd (005930 KS)), SK Hynix Inc (000660 KS) and SK Siltron. Its current market share in Korea's local semiconductor cleanroom market is 48%. It occupies nearly half of Korea's local market. That is, it is indeed the strongest local player in this field. As for BLDC motor, its local market share is about 40%.Clients &amp; market shareMajor clientsSamsung Display (Samsung Electronics Co Ltd (005930 KS))SK Hynix Inc (000660 KS)SK SiltronLocal semiconductor cleanroom market share48%Local BLDC motor market share40%Source: Syswork

Syswork IPO Summary - Semicon Cleanroom Ventilation/Cooling System Provider