[Post-IPO] TS Trillion Promised 10 Billion Won Profit Before Listing... Faces Large-Scale 'Deficit' ①

[Asia Economy Reporter Jang Hyowon] TS Trillion, a KOSDAQ-listed company that produces the hair loss shampoo ‘TS Shampoo,’ recorded a large-scale deficit in the third quarter of this year. When it went public last year, it projected an operating profit of 10 billion KRW for this year, but it turned to a loss in less than a year. As a result, investors who bought shares believing in TS Trillion’s rosy outlook are experiencing losses.

According to the Financial Supervisory Service’s electronic disclosure on the 30th, TS Trillion recorded cumulative consolidated sales of 38 billion KRW and an operating loss of 4.3 billion KRW in the third quarter of this year. Sales decreased by 15% compared to the same period last year, and operating profit turned from a 3.5 billion KRW surplus to a loss.

The cause of the deficit is analyzed to be due to large-scale advertising expenses. TS Trillion uses soccer player Son Heung-min and singer G-Dragon as advertising models. By the end of the third quarter this year, TS Trillion had spent 8.4 billion KRW cumulatively on advertising expenses, an increase of 38.8% from 6 billion KRW last year. In particular, it spent 5.2 billion KRW in the third quarter alone.

The performance up to the third quarter of this year is significantly different from the forecast presented by TS Trillion at the end of last year. TS Trillion was listed on the KOSDAQ market in December last year. At that time, through an investor relations (IR) presentation, it projected sales of 82.7 billion KRW and operating profit of 10.5 billion KRW for this year. However, at this rate, sales this year are expected to fall short of 60 billion KRW, and losses are likely to continue.

Regarding this, the company explained, “Sales decreased due to the impact of COVID-19, and as large corporations appeared as competitors in the same business sector, marketing and research and development costs were heavily incurred.”

However, the market points out that it is difficult to explain the gap between the forecast and actual performance solely by the impact of COVID-19. This is because the COVID-19 pandemic had already been ongoing since early last year, and even at the time of listing at the end of last year, social distancing measures were still in place, showing no signs of subsiding.

Moreover, the 2020 performance forecast made just over a month before the fiscal year-end also showed a significant difference from the actual results. TS Trillion had projected total sales of 67.9 billion KRW and operating profit of 6.8 billion KRW for last year. However, the actual sales were 61.6 billion KRW, and operating profit was 3.7 billion KRW, showing about a 45% error in operating profit.

An investment banking (IB) industry official explained, “Typically, companies are evaluated based on the present value by predicting future earnings and discounting them. The larger the gap between the company’s forecast and actual performance, the more it means that the corporate value at that time was overestimated.”

As the performance deviated significantly from the company’s forecast, the stock price has also been on a downward trend. TS Trillion started at 1,731 KRW (adjusted price) on its first day of listing on December 30 last year and even soared to 1,957 KRW. However, as of the day before yesterday, about 11 months later, the stock price was 898 KRW. Investors who bought shares on the first day of listing have experienced a 54.1% decline from the peak.

TS Trillion stated, “We acquired a stake in Prana I&C, the domestic distributor of the famous German product ‘Sebamed,’ becoming the largest shareholder,” adding, “We plan to drive sales growth through this.”

However, Prana I&C recorded a net loss of 500 million KRW by the end of the third quarter this year and is currently operating at a deficit. Prana I&C, which generates annual sales in the 2 billion KRW range, turned to an operating loss last year. TS Trillion acquired a 60% stake in Prana I&C for 300 million KRW in the third quarter of this year.