[News in focus] IPO market struggles in 1st half

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[News in focus] IPO market struggles in 1st half


Korea’s initial public offering (IPO) market suffered a lull in the first six months, affected by the cancellation of a big public listing and downbeat investor sentiment especially in the bio sector.

But the stock market is set to welcome a series of long-anticipated public debuts in the second half of this year as units like Hyundai Oilbank and Kakao Games line up.

The 21 firms that went public between January and June attracted a total of 780.1 billion won ($698 million) in investment during their IPOs, down 83.6 percent from the same period last year.

Surprisingly, the number of listed companies was the same as the first half of last year even though investments were much lower, according to SK Securities.

“The result is impacted by SK Lubricants’ withdrawal from an IPO plan and the downturn in investor sentiment linked with an ongoing probe over an alleged accounting breach by Samsung BioLogics,” said Lee Ji-hoon, an analyst at SK Securities.

SK Innovation, SK’s refinery unit that holds a 100 percent stake in SK Lubricants, decided to drop its plans to list the wholly-owned company in April, saying that it was hard to gain “a reasonable valuation” for the subsidiary.

SK Lubricants had initially planned an IPO worth up to 1.56 trillion won. Analysts believe that weak refining margins appeared to affect the plan.

Besides the cancellation, investors turned more cautious as financial authorities launched a probe on a suspected accounting breach by Samsung BioLogics.

Listed in 2016, Samsung BioLogics led a bullish market entering this year as the largest market cap in the bio sector.

The rally ground to a halt in May with the launch of the inspection.

But the rest of this year will likely see more active debuts because companies large and small are on track to throw their hats into the market.

The hottest IPO up for grabs is Hyundai Oilbank, a refinery subsidiary of Hyundai Heavy Industries, due to its size and valuation.

The company is expected to raise around 2 trillion won with an expected valuation at 7 trillion won, according to SK Securities.

“Various media reports say that Hyundai Oilbank entered talks with the Korea Exchange to discuss listings,” said Jeong Dong-ik, an analyst at KB Securities.

“Once the discussions finish, it will likely file for a preliminary screening in August. In this scenario, an IPO could take place as early as October,” the analyst said.

Others are edging closer. Kakao Games, a gaming affiliate of Kakao, passed the preliminary screening to be listed on the junior bourse Kosdaq last month in a move to raise more than 100 billion won.

The unit, valued at around 1 trillion won, will use the proceeds to strengthen intellectual property and its capacity to develop new games.

Kakao holds a 60.4 percent share in Kakao Games and the game publisher recorded 162.3 billion won in revenue and 32.2 billion won in profit.

T’way Air is also at the same stage as it gained the green light in the preliminary procedure last month to be listed on the main bourse Kospi.

The low-cost airline is expected to be valued at 1 trillion won and raise between 233.6 billion won and 267.2 billion won.

Lotte Data Communication is also waiting on public listing as the IT service unit of Lotte has also passed the preliminary screening to target an IPO at the end of this month.

“The government’s push to promote the bio, tech heavy Kosdaq will continue to help the IPO market gain a boost,” said Lee Ji-hoon at SK Securities.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]
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