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2020 to be big year for South Korean IPOs

With a healthy pipeline of companies seeking initial public offerings next year, industry watchers say the proceeds raised could exceed 10 trillion won ($.8.9 billion) for the first time since 2010.

According to corporate announcements made so far, the first major IPO of 2020 is expected to be South Korean drug development firm SK Biopharmaceuticals. The drug unit of South Korea’s telecom-to-energy conglomerate SK Group submitted a preliminary application for an IPO to the Korea Exchange in October. It plans to go public on the main bourse Kospi.

Brokerage analysts are expecting SK’s drug arm to be valued at around 5 trillion won, which would put it on a similar level to some of its industry peers already trading on the Kospi such as Hanmi Pharmaceutical, following its IPO. 

Advertisement for Hyundai Card’s partnership with Costco Korea (Hyundai Card)
Advertisement for Hyundai Card’s partnership with Costco Korea (Hyundai Card)

Another highly anticipated IPO slated for next year is biopharmaceutical firm CJ Healthcare, which this month named Korea Investment & Securities, Samsung Securities and JP Morgan as underwriters for its IPO. The underwriters have reportedly said the firm is valued at around 2 trillion won.

The firm was acquired by South Korean cosmetics and pharmaceuticals contract manufacturer Korea Kolmar for $1.3 trillion won last year. It said it decided on an IPO to allow partners that helped Kolmar in the acquisition process, including Mirae Asset Private Equity, J&Q Korea and Stic Investments, to collect on their investments.

Hyundai Card, the credit card unit of Hyundai Motor Group is also eyeing a Kospi debut.

Last month, the card issuer selected overseas bank Citi Global Market Securities and local brokerages NH Investment & Securities as lead underwriters last month, after sending out requests to investment banking houses earlier.

Industry watchers believe Hyundai Card is valued at around 2.5 trillion won, though Ted Chung, chief executive of Hyundai Card and Hyundai Capital, Hyundai Motor Group’s automotive finance unit told the Financial Times on Nov. 4 that the valuation “may be more” than the industry projections reported by the South Korean media.

If Hyundai Card follows through with its IPO, it will be the nation’s second card issuer to go public after Samsung Card in 2007.

There are also hopes that firms that have either dropped or delayed their plans to go public this year -- such as massage chair maker Bodyfriend and local refiner Hyundai Oilbank -- may revive their IPO plans next year.

Several firms have either scrapped or delayed their IPOs initially planned this year for reasons such as internal issues, failure to receive screening approval by the KRX, or a lukewarm market response.

According to the KRX, 18 firms have decided to retract their requests for screening by the bourse operator so far this year, compared with 14 firms in 2018.

Though the IPO announcements have fueled excitement and expectations, the timeframes for many of them are vague, with key firms hinting that their plans may be pushed back to 2021.

Hyundai Card’s aggressive offshore expansion into key ASEAN nations including Vietnam, Thailand, Indonesia and Malaysia is expected to keep the firm occupied throughout 2020. It recently acquired a 50 percent stake in Vietnamese consumer finance institution Finance Company for Community for 49 billion won, signaling an official foray into the Southeast Asian market.

This, coupled with Chung’s comments to the Financial Times that he would prefer the listing to be delayed until 2021 to reach a “more favorable IPO price,” has left investors unsure as to the company’s intentions.

On top of that, CJ Healthcare has yet to announce an exact schedule for its IPO, while also mentioning its actual market debut might not come until 2021.

However, overall, analysts project the market response and investor sentiment toward IPOs to improve next year, with the government adopting measures to boost the local stock market.

“With Japan’s export restrictions on key materials needed for production of displays and semiconductors highlighting the importance of local parts and materials sector, the government adopted an ‘IPO fast track’ which lowers hurdles for public debut of such firms,” SK Securities analyst Lee So-joong said in a recent note. Lee’s comments indicate that next year’s IPO market may not be necessarily driven by conglomerate subsidiaries, but by small-and medium-sized firms.

The volume of capital raised through IPOs this year in Korea amounted to around 3.2 trillion won so far, which is slightly higher than last year’s annual figure of 2.8 trillion won. The 2018 figure marked the lowest equity capital raised via IPOs in five years.

It has been nearly a decade since South Korea saw its IPO market surpass 10 trillion won. Buoyed by the market debuts of Samsung Life Insurance and Hanwha Life Insurance -- which used to be Daehan Life Insurance before Hanwha acquired it in 2002 -- the annual volume of capital raised through IPOs amounted to nearly 10.09 trillion won that year.

By Jung Min-kyung (