[Asia Economy Reporter Park Hyungsoo] Myeongseong TNS, a manufacturer of secondary battery separator production equipment, has launched a paid-in capital increase through a public offering just over two years after its listing. Sales and profits surged sharply in 2017, the year before its listing on the KOSDAQ market, but sales plummeted from 2018, making fundraising inevitable.
According to the Financial Supervisory Service on the 24th, Myeongseong TNS plans to raise 20.5 billion KRW by issuing 2.2 million new shares. The planned issue price per share is 9,320 KRW. The issue price will be finalized on the 14th of next month, and subscription will take place over two days from the 17th to the 18th of next month.
The raised funds will be used for operating capital and debt repayment. Out of the total short-term borrowings of 19.9 billion KRW from financial institutions, 6 billion KRW will be repaid using the capital increase funds. Among the public offering funds, 8.5 billion KRW will be used as operating capital. 7.1 billion KRW will be allocated to pay for raw material purchases from major equipment suppliers, and 1 billion KRW will be used to provide employee accommodations to attract excellent talent.
The remaining funds are planned to be used for Activa research and development and production costs. The inorganic ion exchanger Activa is known as a material capable of safely processing high-level nuclear waste and hazardous industrial waste.
Myeongseong TNS manufactures separator production equipment and display polarizing film manufacturing equipment. It appears that the company has proceeded with the capital increase due to continued poor performance since its listing.
In 2017, it recorded sales of 64.5 billion KRW and operating profit of 7.3 billion KRW. Exports accounted for 76.2% of total sales. Among export volumes, China accounted for 81.9%, securing a major customer network through its overseas subsidiary in China. At the time of its listing in September 2018, there were high expectations that overseas sales would rapidly increase based on price competitiveness and delivery responsiveness.
However, sales dropped 38% year-on-year to 39.7 billion KRW in 2018. After announcing the 2018 results, the company explained that sales were deferred due to a change in revenue recognition from the percentage-of-completion basis to the delivery basis. Therefore, market experts expected Myeongseong TNS to surpass 100 billion KRW in sales the following year. Myeongseong TNS recorded sales of 35 billion KRW in 2019.
Amid continued poor performance, Myeongseong TNS was unable to use funds as planned at the time of listing. According to the securities registration statement submitted for the initial public offering (IPO), 15 billion KRW was allocated for facility funds and research and development expenses. The company planned to purchase its leased second factory and acquire a new factory of approximately 2,200 pyeong in the Waegwan area to secure factory space for assembly and production. It was expected to cost 6 billion KRW to purchase the second factory, 3 billion KRW to acquire the new factory, and 2 billion KRW for factory reinforcement. Although two years have passed since listing, the actual amount used was only 6.6 billion KRW. Most of the unused funds were consumed as operating capital. While 4.4 billion KRW was planned to be used as operating capital, the actual amount used was 11 billion KRW. The company explained that this was due to converting accounts receivable into operating capital because of uncollected receivables.
Myeongseong TNS’s accounts receivable have been increasing, with book values of 2.826 billion KRW in 2017, 3.705 billion KRW in 2018, and 11.305 billion KRW in 2019. As of the third quarter of this year, accounts receivable increased to 12.398 billion KRW. Among these, uncollected amounts past due reached 15.17 billion KRW as of the 17th. Accounts receivable overdue by more than one year amounted to 6.058 billion KRW.
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