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

Vespa IPO Pricing Approach: 25% Discount to High End

Vespa Inc IPO Preview (Part 2) - Valuation Analysis

Equity Capital Markets

<ul>
<li>The offer price is inexpensive. The valuation peers have delivered a '<em>relatively</em>' solid performance lately. At a 13~14x PER multiple, the offer price should have a 25% upside potential.</li>
<li>But the concern over sustainable earnings size is still bothering investors. Retail offering ended poorly at a 3.3 to 1 ratio. This should be another disappointment. This is a sign of the market's confidence level for true size of earnings.</li>
<li>At a 20% correction on the FY18 earnings in the book, price should be settled at a ₩37,000 level. This is close to the offer price. It is unlikely that we will see a strong post-IPO retail influx. But a panic selling by institutional investors right after the IPO doesn't seem to be a high possibility either as not a lot of local hot money has flowed in.</li>
<li>I wouldn't trade on this in the immediate term. As a long-term investor? I'd wait until later the month. We may be able to buy at a cheaper level after US rate hike.</li>
</ul>


The offer price is inexpensive. The valuation peers have delivered a 'relatively' solid performance lately. At a 13~14x PER multiple, the offer price should have a 25% upside potential.
But the concern over sustainable earnings size is still bothering investors. Retail offering ended poorly at a 3.3 to 1 ratio. This should be another disappointment. This is a sign of the market's confidence level for true size of earnings.
At a 20% correction on the FY18 earnings in the book, price should be settled at a ₩37,000 level. This is close to the offer price. It is unlikely that we will see a strong post-IPO retail influx. But a panic selling by institutional investors right after the IPO doesn't seem to be a high possibility either as not a lot of local hot money has flowed in.
I wouldn't trade on this in the immediate term. As a long-term investor? I'd wait until later the month. We may be able to buy at a cheaper level after US rate hike.


Vespa Post IPO Trade: At a 20% Earnings Correction, Price Should Be Settled at ₩37,000