[Post-IPO]⑥ Linkzenith, Three Years of Stagnation Since Listing

Amid the aftermath of the novel coronavirus infection (COVID-19), the frozen initial public offering (IPO) market is attracting funds from the market. This year's largest IPO, SK Biopharm, drew subscription deposits amounting to 31 trillion won, marking the largest scale ever. Internet-only bank KakaoBank is also preparing for its IPO, aiming for a listing in the second half of this year. As the domestic stock market has shown significant volatility due to COVID-19, the number of individual investors newly starting stock investments has increased. With growing interest in IPO investments, it is necessary to make judgments about the appropriate offering price when investing in public offerings. Asia Economy reviews the investment prospectuses presented by newly listed companies on the domestic stock market and examines the appropriateness of the offering prices.

[Asia Economy Reporter Yoo Hyun-seok] Linkgenesis is a specialized company in production information automation and system verification automation software. At the time of its listing, it was expected to grow alongside the semiconductor and display industries. However, the company's performance remained stagnant after the listing.

Linkgenesis was established in 2013. The production information automation software the company focuses on acts like an intelligent network connecting numerous equipment automation platforms within semiconductor and display production processes. It is also a necessary product for configuring smart factories. Notably, it is the only company in Korea to have obtained GS certification, providing customized verification automation software, and supplies products to major semiconductor and display production facilities of large corporations such as Samsung, LG, and SK.

Linkgenesis also received high interest in the public offering market. This was because it was related to smart factories, which were highly anticipated by the market, and the growing semiconductor and display markets. This was directly reflected in the offering price determination. In the offering price assessment, a total of 821 institutions participated, recording a simple competition rate of 754.60 to 1. Due to explosive expectations, the offering price was fixed at 30,000 won, exceeding the desired price range of 22,000 to 25,000 won. Along with this, the competition rate for the public subscription by general investors was 1,184.37 to 1.

In February 2018, Linkgenesis entered the KOSDAQ market. After listing, the company's stock price nearly doubled the offering price (before the bonus issue), reflecting investors' expectations. However, the performance fell short of expectations.

In 2018, Linkgenesis recorded consolidated sales of 11.6 billion won and operating profit of 2.3 billion won. The expected sales and operating profit at the time of listing were 14.9 billion won and 3.8 billion won, respectively, so the company did not meet the performance estimates. The growth trend also declined. Compared to the previous year, sales decreased by 1.37%, and operating profit decreased by 33.29%. The gap from estimates widened further last year. In 2019, the previously estimated sales and operating profit were 22.7 billion won and 8.1 billion won, respectively, but actual sales were only 11.4 billion won, and operating profit was 1 billion won.

Examining sales by segment over the past three years, there has been no remarkable increase. First, sales related to the development of CIM for production facilities and software development reflecting customer requirements, which can be considered the core, remained at around 7 to 7.5 billion won throughout the past three years. Also, sales of factory automation (FA) solutions such as XComPro did not exceed 3 to 3.5 billion won.

Additionally, other sales such as the AI video inspection solution 'VDL,' a product that allows external inspection of defects by photographing finished products through cameras, have steadily increased but still account for only 5% of the total, indicating a weak state. Ultimately, as the products did not show growth, Linkgenesis recorded similar performance for three consecutive years.

The company explains that this is because the investments made have not yet yielded results. Linkgenesis acquired a 50% stake in Candela Chain, a software development and sales company, in 2018. In November last year, it also secured a 32.2% stake in Linkplex, a company developing glass parts for displays. A company official said, "There have been steady investments over the past three years. Since the invested or funded companies are in the early stages of their businesses, sales have not come out as expected."

Meanwhile, expected overseas expansion was also sluggish. Linkgenesis established SafeSoft through a partnership with the electronic device testing and certification agency DT&C in 2017 for entry into Japan but sold all related shares in December last year. In China, it signed a memorandum of understanding (MOU) with PayGate to exclusively supply production information automation software to clouds operated by Suning, Tencent, and Baidu, but progress has been slow. The official explained, "Decisions in China are made cautiously, so the situation is currently in a lull."

The performance outlook for this year is not bright either. Linkgenesis recorded consolidated sales of 2.2 billion won and an operating loss of 65 million won in the first quarter. Compared to the same period last year, sales increased by 4.43%, but the operating loss widened. The company's overall sales and operating profit forecasts for this year were 29.7 billion won and 11 billion won, respectively. A company official emphasized, "Sales from existing businesses are occurring steadily. Although results have not yet been realized from new investments, we are closely monitoring the related markets and assessing the situation."