Color Cosmetics Brand 'Rom&nd' Shows Steep Growth Curve Since Launch
Sales Doubled Last Year Despite COVID-19
[Asia Economy Reporter Park Hyungsoo] iFamilySC, which launched the color cosmetics brand 'Rom&nd', is set to be listed on the KOSDAQ market. Even last year, when the cosmetics market stagnated due to COVID-19, Rom&nd's sales more than doubled compared to the previous year, leading to a surge in subscription enthusiasm. However, since the cosmetics sector has been sluggish in the domestic stock market, it is expected to be difficult to predict the demand forecast results.
According to the Financial Supervisory Service's electronic disclosure system on the 15th, iFamilySC will proceed with a public offering of a total of 978,000 shares, including 819,200 newly issued shares and 158,800 existing shares for sale, for its initial public offering (IPO). The proposed price range for the public offering is set between 39,000 and 48,000 KRW per share.
iFamilySC operates brands in the beauty and lifestyle sectors, centered on the color cosmetics brand 'Rom&nd' and the wedding service brand 'iwedding'. The largest shareholder is CEO Kim Taewook, a singer-turned-entrepreneur and husband of actress Chae Shi-ra, holding 35.76% (1,171,683 shares). Based on pre-IPO shares, the shareholding ratio will decrease to 26.17% after the sale of existing shares and issuance of new shares.
Sales have surged rapidly since the launch of Rom&nd. Sales revenue increased from 17 billion KRW in 2018 to 38.4 billion KRW in 2019, and 79.2 billion KRW in 2020. Operating profit also soared from 37 million KRW to 4.6 billion KRW and then to 11.6 billion KRW during the same period. In the first half of this year, sales reached 39.1 billion KRW, with operating profit of 2.9 billion KRW. Compared to the same period last year, sales decreased by 1.3%, and operating profit dropped by 49.9%.
The decline in profit was largely due to an increase in selling and administrative expenses, which rose from 8.5 billion KRW in the first half of last year to 12.2 billion KRW this year. This included 2 billion KRW in stock compensation costs, as well as increases in commission fees, advertising expenses, and sales promotion costs compared to the same period last year.
Samsung Securities, the lead underwriter for the listing, selected five comparable companies to determine the offering price: LG Household & Health Care, Aekyung Industrial, Japanese comprehensive household goods company Kao, Japanese cosmetics company Pola Orbis Holdings, and Japanese beauty appliance company I-ne. They considered Rom&nd's popularity in Japan, where it generated over 10 billion KRW in sales in the first half of this year alone. The average price-to-earnings ratio (PER) of the five companies was 32.5 times. Applying a discount rate of 22.06% to 36.68% to iFamilySC's per-share valuation of 61,588 KRW resulted in a proposed offering price range of 39,000 to 48,000 KRW.
However, there are differences in sales scale and growth speed between iFamilySC and the five comparable companies. Aekyung Industrial, Kao, and Pola Orbis saw their sales decline compared to the previous year. This was due to the sluggish cosmetics market last year as people spent more time at home because of COVID-19. In contrast, iFamilySC's sales increased by 106% last year.
The sales gap between iFamilySC and the comparable companies is significant. LG Household & Health Care and Aekyung Industrial recorded half-year sales of 4.0581 trillion KRW and 278.3 billion KRW, respectively. Although iFamilySC's single brand Rom&nd is popular domestically and in Japan, there is a difference in sales scale compared to established cosmetics brands.
iFamilySC's debt ratio is high. It decreased from 556.21% in 2018 to 100.37% last year. In the first half of this year, the debt ratio was 71.49%, which is higher than the industry average of 68.23%.
The sluggishness of the cosmetics sector in the domestic stock market is also considered a variable affecting the final offering price. LG Household & Health Care and Aekyung Industrial have not been able to break out of a weak trend after reaching their yearly highs in June and July.
Using the infrastructure and know-how of John's cosmetics and wedding business, they plan to operate a brand accelerator project. The core goal is to discover early-stage beauty, fashion, and wedding brands with excellent content development and branding capabilities in Korea and Asia, collaborate across all management areas including product development, domestic and international sales, marketing, and HR, and achieve financial performance through mutual growth.
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