Flurry of IPOs on horizon to join stock rally

It will be another busy year for initial public offerings in South Korea as a slew of companies are rushing to debut on the local stock market amid a stock rally and strong appetite from retail investors, analysts said Tuesday.

Companies ranging from bio, battery makers, fintech to games are set to go public in 2021, following a string of successful IPOs last year driven by ample liquidity.

The IPO market in Asia's fourth-largest economy could raise a record amount of money this year, analysts said, as investors are searching for stocks likely to benefit from the COVID-19 pandemic and rapid technological transition.

The benchmark KOSPI index jumped 31 percent last year, and the rally continued through this month on the back of strong buying by retail investors. The index broke above the 3,000-point mark for the first time on Jan. 6, and closed at 3,208.99 points on Monday.

A total of 112 companies raised 5.9 trillion won ($5.3 billion) via IPOs in the local stock market last year, the largest in three years, according to bourse operator Korea Exchange (KRX).

Some mega-scale deals, such as Kakao Games, SK Biopharmaceuticals and Big Hit Entertainment, raised tens of trillions of won in subscription deposits from retail investors.

Park Jong-sun, an analyst at Eugene Securities, expected 120-140 companies to attract 10.5-12 trillion won via IPOs this year.

"Price-earnings ratios of IPO companies rose to the highest level in 2020 thanks to the year-end rally and ample liquidity," Park said. "Big names are preparing IPOs this year to benefit from the booming stock market."

This year, SK Group, the nation's third-largest conglomerate whose businesses range from chips, telecom to bio and chemical, is expected to make a splash with a flurry of subsidiaries set to go public.

Vaccine maker SK Bioscience Co., 98 percent owned by SK Chemicals Co., last month submitted its application for listing on the main KOSPI market. Its market debut is expected in the first half of this year, according to analysts.

SK Bioscience manufactures COVID-19 vaccines by leading pharmaceutical companies, including AstraZeneca and Novavax, for global markets, as major countries roll out vaccine programs.

SK IE Technology Co., a material business unit under SK Innovation Co., submitted its IPO application last month to finance the expansion of its production capacity of lithium-ion battery separation, a key part for electric vehicle (EV) batteries.

SK Telecom Co., the nation's top telecom operator, is also set to float its subsidiaries this year to realign its business structure.

Analysts expect SK Telecom's Android app market unit ONE Store, which has an estimated value of 1 trillion won, to lead the IPO push.

The Android app market operator was established in 2016 after merging with rivals from the country's top portal operator, Naver Corp., and the carriers KT Corp. and LG Uplus Corp.

SK Telecom's other digital subsidiaries are expected to follow ONE Store's IPO, including SK Broadband and smart security firm ADT Caps.

Other big deals in the pipeline are family of top messenger app Kakao Corp., including Kakao Bank, Kakao Pay and Kakao Page, which have recently chosen lead managers for IPO processes.

Kakao Bank, the nation's top internet-only lender, has shown remarkable growth since 2017 with its popular lending program and diversified financial services.

Kakao Pay is a leading mobile payment service provider for 34 million users, with the amount of payments reaching 29.1 trillion won in the first half of last year. Kakao Page is a webtoon and internet social media platform under Kakao.

"The favorable business environment for Kakao is expected to continue this year on the back of rising demand for digital content and contactless activities spurred by the pandemic," Choi Kwan-sun, an analyst at SK Securities, said.

"Its major subsidiaries preparing IPOs, including Kakako Bank, Kakao Pay and Kakao Page, are expected to post improved earnings this year."

Among the mega deals on the horizon is battery maker LG Energy Solutions, which was spun off from top chemical firm LG Chem Ltd. in December to grab a bigger share in the growing electric vehicle (EV) battery market.

The EV battery supplier to industry leader Tesla said last month it aims to expand battery production bases in the United States, Europe and China with a goal of 30 trillion won of sales by 2024.

Analysts expect LG Energy Solution's listing on the KOSPI market in the second half of 2021 or early 2022, estimating the market value at around 100 trillion won. A company official said the IPO schedule hasn't been decided.

Market watchers say companies that have delayed their IPO plans amid the pandemic and failed to meet requirements of profits and sales are expected to push forward bids this year under eased standards for high-growth companies and the favorable environment for IPOs.

"Companies that have delayed their IPO plans due to high market volatility last year are expected to list this year, which would raise the number of companies that go public," Choi Jong-kyung, an analyst at Heungkuk Securities, said. (Yonhap)