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Sencoretech’s listing plan is litmus test for Korean IPO market

A currency dealer in a dealing room of Hana Bank in Seoul (Yonhap)
A currency dealer in a dealing room of Hana Bank in Seoul (Yonhap)
Attention is centered on what is poised to become the only initial public offering deal in April, as investors are hinging on a change in market tides.

Starting Monday, Sencoretech -- a Seoul-based engineering firm dedicated to manufacturing steel structure -- will go on a two-day institutional investor tranche to confirm the IPO price, estimated to be at least 27.16 billion won ($22.35 million). Samsung Securities is a lead underwriter for the IPO on the development bourse Kosdaq.

This comes a month after a severe fluctuation in the financial market due to coronavirus pandemic, which forced many companies to cancel their plans to go public in March, pushing the monthly IPO fundraising to zero.

Sencoretech was one of the companies which put off its flotation attempt in March.

“The stock market in March spiraled down, forcing companies to delay their listing plans. And now the situation has somewhat improved,” Choi Jong-kyung, head analyst at Heungkuk Securities, told The Korea Herald.

Korea’s IPO plans were facing the heat from the novel coronavirus over the past couple of months. Of five companies that pushed for an IPO in February to be listed in March, four were trading at least 20 percent lower than the offered price as of end-March, according to data compiled by SK Securities.

As the offer price -- which determines the volume of IPO -- is normally set within the price band during the institutional tranche, there were views that the price band, determined based on a company’s valuation, will be corrected due to fluctuation.

But in the second attempt, unveiled on March 20, the steel framework maker’s valuation did not change, according to its prospectus.

The resumption of IPO, without changing the valuation, can be seen as Sencoretech’s bold sign, another analyst said.

“(Sencoretech) is betting on its IPO success on the back of the confidence on its growing client base,” Na Seung-doo, an analyst at SK Securities, told The Korea Herald.

Founded in 2010, Sencoretech’s revenue in 2019 came to 220 billion won, rising more than twofold on-year, while the operating profit rose 35 percent to 20.1 billion won. Orders by volume it clinched last year surged threefold in two years.

Of the total 2.2 million Sencoretech shares up for IPO -- taking up some 30 percent of the total -- 1.2 million shares are newly issued, while the rest comes from BlueRun Ventures and CEO Lee Seung-hwan’s relatives.

The IPO proceeds will be used to buy equipment, invest in foreign affiliates and run facilities, according to the company.

Eyes are on how the companies eligible for the listing by getting a nod from the Korea Exchange will be affected following the Sencoretech IPO.

Companies on the deck include SK Biopharmaceuticals, which awaits a listing on main bourse Kospi with a roughly 1 trillion won IPO.

As there are 10 more companies waiting for a debut on the stock market, there are limited chances for such companies to secure fundraising from institutional investors, Na added.

“Other companies seeking to go public are facing a need to correct the IPO price band, given the ongoing market fluctuation and a pause in the market so far,” Na said.

By Son Ji-hyoung (consnow@heraldcorp.com)
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