Strong IPO pipeline for 2nd half of 2016

[THE INVESTOR] Korea’s stock market will see mega initial public offerings during the second half this year with subsidiaries of large conglomerates like Samsung and Lotte poised to fuel the IPO market. 

Given that companies commonly push for public listing after posting half-year earnings in June, more deals will fill up this year’s upcoming IPO calendar, following the robust first half, thanks to the stock market that is recovering from negative sentiments.

As of June 8, a total of 15 companies went public on the main bourse KOSPI and the secondary tech-heavy KOSDAQ this year, up from only five deals during the same period in 2015. 

“Total IPO size will reach the highest level this year as 25 companies are expected to be listed on the KOSPI and some 140 on the KOSDAQ this year,” an official at Korea Exchange said.  

The strong IPO pipeline includes Samsung BioLogics, Hotel Lotte, Doosan Bobcat and Netmarble Games whose combined stock value is estimated at up to 12 trillion won ($10.27 billion), according to industry watchers.

“Stocks that can make an impact on the entire market are waiting to go public. If investors flock to the IPOs, market demand and supply can be distorted,” said Beak Chan-kyu, analyst at KB Investment & Securities.

Samsung BioLogics, the biopharmaceutical contract manufacturing affiliate of Samsung Group, is one of the hot IPO contenders with industry experts’ sanguine outlook for the company earnings in the next five years.

The company had considered a listing on Nasdaq in the U.S. earlier, but opted for its domestic listing in November this year.

The industry estimates that at least 3 trillion won worth of new shares will be issued through the offering and that its market valuation stands at around 10 trillion won.

Hotel Lotte, which had been regarded as most prominent in the IPO pipeline, postponed its offering to July from June 29 as senior officials have come under investigation for alleged bribery related to its duty-free business.

Facing the major setback, the centerpiece of Korea’s fifth-largest conglomerate lowered its IPO price range to 85,000-110,000 won per share, from a range of 97,000 won to 120,000 won.

“The date is pushed back but it will be carried out as planned,” the company’s official said.

With the adjustment, the offering is estimated to be around 4.7 trillion to 5.2 trillion won. Still, the upper price band would surpass the record amount of 4.9 trillion sale by Samsung Life Insurance in 2010.

Shin Young-ja, the head of the Lotte Foundation and daughter of group founder Shin Kyuk-ho is facing allegations of bribery.

Netmarble Games, Korea’s No.1 mobile game developer and publisher, plans to raise 2 trillion won by listing its shares on the country’s main bourse.

The company, which is expected to request an IPO review with the Korea Exchange no later than September, will use the fund to boost its global presence by pursuing merger and acquisition deals.

Netmarble’s market capitalization is estimated at around 10 trillion won, putting it nearly on par with LG Electronics ranked currently at 26th.

In March, the company picked four underwriters for its initial public offering -- JP Morgan, Citi Group Global Markets Securities, NH Investment & Securities and Korea Investment & Securities.

Doosan Bobcat, a subsidiary of Doosan Infracore, is seeking to raise some 1 trillion with a market debut.

Acquired by Doosan Infracore in 2007 for $4.9 billion from Irish manufacturer Ingersoll-Rand, Doosan Bobcat has 32 affiliates in North America, Europe and Asia with its focus on the manufacturing of small construction machinery, such as skid steer loaders and compact tractors.

The planned IPO will bring much needed relief to its parent firm Doosan Group which is facing a cash crunch with its debt reaching 11 trillion won.

By Park Han-na (hnpark@heraldcorp.com)