[IPO Spotlight] What Is the Financial Soundness of Jeju Maekju Ahead of Its Listing?

[Asia Economy Reporter Park So-yeon] Jeju Beer, which is scheduled for an initial public offering (IPO) next month, was found to have deferred the payment of liquor tax last year by using land and buildings as collateral.

According to the Financial Supervisory Service's electronic disclosure system on the 13th, Jeju Beer applied for a deferral of approximately 3.77 billion KRW in liquor tax to the Jeju Tax Office last year. To receive the tax payment deferral, Jeju Beer provided land and buildings worth about 4.5 billion KRW as collateral.

A Jeju Beer official explained, "Since last year, we have been managing cash liquidity to secure funds for large-scale investments such as brewery expansion. The liquor tax incurred in the fourth quarter of last year was paid in January this year, and we applied for a six-month deferral for about 3.7 billion KRW in liquor tax combining the second and third quarters of last year."

He added, "Among the deferred liquor tax, 1.9 billion KRW incurred in the second quarter of last year has already been paid, and the remaining 1.8 billion KRW is scheduled to be paid by July this year," adding, "Due to COVID-19, large liquor companies also received tax deferrals last year."

[Analysis and Graphic by Heejin Lim]

As of the end of March 2021, Jeju Beer secured brewing facilities capable of producing 20 million liters of beer annually. Compared to the production scale of 2.85 million liters per year at the brand launch in August 2017, it has increased about sevenfold in three and a half years.

With Jeju Beer's rapid growth, last year's sales (21.5 billion KRW) increased by 199% compared to the previous year (7.2 billion KRW). However, Jeju Beer has yet to escape the red and has recorded operating losses for four consecutive years.

Despite the sharp increase in sales, expenses such as transportation costs, advertising expenses, and sales promotion costs were high. As of last year, the cost of goods sold was 13 billion KRW, accounting for more than half of sales. Selling and administrative expenses reached 12.9 billion KRW. Transportation costs accounted for 2.5 billion KRW, or 19.5% of total selling and administrative expenses.

A Jeju Beer official said, "Due to the brand characteristic of being produced on Jeju Island, transportation costs have a relatively high proportion," and added, "We are trying to promote the brand with minimal costs, and meeting the break-even point (BEP) is a major internal goal."

Jeju Beer is challenging the 'Tesla Special Listing' (listing of companies without profits) under these circumstances. This is a special listing system that allows companies with growth potential to be listed even if they are operating at a loss.

The total number of shares offered by Jeju Beer is 8,362,000 shares. The expected price range per share is 2,600 to 2,900 KRW. The maximum public offering amount is 24.2 billion KRW. The final public offering price will be determined through demand forecasting for institutional investors on April 26-27, and general subscription will take place on May 3-4. The lead underwriter is Daishin Securities. The listing is scheduled for May 13.

[Analysis and Graphic by Lim Hee-jin]

Founded in 2015, Jeju Beer is a company that produces craft beer such as 'Jeju Wit Ale.' It entered the market in August 2017 by launching 'Jeju Wit Ale,' a wheat beer style with added Jeju tangerine peel.

Since then, it has successfully popularized craft beer by consecutively releasing products such as 'Jeju Pelong Ale' and 'Jeju Slice.' It also gained attention with products not seen in the existing Korean beer market, such as the whiskey barrel-aged beer 'Jeju Beer Barrel Series Imperial Stout Edition,' produced in collaboration with Highland Park.

Jeju Beer has grown rapidly over the past four years through a strategic partnership with Brooklyn Brewery, the number one craft beer company in New York, and the introduction of brewing equipment. By establishing a technology research institute corporation, Jeju Beer is focusing on brewery research and development capabilities and plans to diversify its cumulative product lineup to more than 10 types within this year, leading both quantitative and qualitative growth in the Korean beer market.

[Analysis and Graphic by Heejin Lim]