LG Energy Solution's overlooked rookie stock with 86% return... No big IPOs in February but still valuable

[Asia Economy Reporters Seon-ae Lee and Myeong-hwan Lee] Although concerns have arisen that the withdrawal of Hyundai Engineering's IPO might dampen the IPO market, it is expected that the debut of 'quality' small and medium-sized enterprises (SMEs) will continue, keeping investor enthusiasm alive even without a 'big fish.' In January, while attention was drawn to the largest IPO, LG Energy Solution, the newly listed quality companies achieved excellent returns despite the sharp market downturn.

According to the Korea Exchange and the financial investment industry on the 11th, a series of SMEs are knocking on the IPO door in February. ▲Sconex (4th) ▲Easytronics (4th) ▲ASEMS (7th) ▲Narae Nanotech (8th) have already entered the KOSDAQ market. Inka Financial Services (16th) and BioFDNC (21st) have completed their public subscription and will soon debut on KOSDAQ. ▲Furontier ▲VC ▲Pungwon Precision are currently conducting demand forecasts among institutional investors. It is expected that 10 companies will newly list in February, with the public offering size reaching between 289 billion and 345 billion KRW.

Pungwon Precision, a manufacturer of metal masks for organic light-emitting diode (OLED) deposition, aims for a successful market entry leveraging its advanced technology. VC, which owns various golf information technology (IT) products such as golf distance measuring devices, is also considered a promising SME, attracting high investor interest. Furontier, an autonomous vehicle equipment developer, confirmed its public offering price at 15,000 KRW, exceeding the upper limit of the expected range (13,700 KRW), with a demand forecast competition rate of 1,535 to 1 on the 10th, raising expectations for its market debut.

The securities industry recommends paying attention to companies entering the market in February. The judgment is that careful selection can yield considerable returns. Na Seung-du, a researcher at SK Securities, said, "February is expected to be dominated by small-scale IPOs overall," adding, "Several IPOs in sectors recently spotlighted, such as eco-friendly materials, metaverse, and semiconductors, are scheduled, and despite recent market sluggishness, IPO stock price returns outperform the index." Park Jong-sun, a researcher at Eugene Investment & Securities, also predicted, "The February IPO market will significantly exceed the average in terms of the number of listed companies and slightly surpass the average in terms of public offering amount and market capitalization."

Last month, the returns of quality SMEs also stood out. In the January IPO market, excluding the large LG Energy Solution's KOSPI listing, three companies?AutoN, K-Auction, and Adbiotech?debuted on KOSDAQ. Comparing the public offering price and the closing price on the last trading day of January for these three newcomers, the average return reached 86.27%. Compared to the closing price on the 9th, it was 74.91%.

AutoN posted the highest return. With a public offering price of 5,300 KRW, AutoN rose to 16,850 KRW on the 28th of last month, showing a remarkable return of 217.92% compared to the offering price. On the 9th, it closed at 15,000 KRW, recording a 183.02% return. K-Auction also showed a solid return. Starting trading at a public offering price of 20,000 KRW, K-Auction rose to 33,350 KRW on the 28th, achieving a 66.75% return. As of the 9th, the return was 67% (33,400 KRW). Among the January listings, only Adbiotech experienced a decline. Adbiotech, which transferred from KONEX to KOSDAQ on the 24th of last month, traded at 5,190 KRW on the 28th, down 25.86% from the public offering price of 7,000 KRW. It closed at 5,230 KRW on the 9th, showing a 25.29% decline and struggling to rebound.

Compared to the stock market during the same period, the returns of these newcomers are remarkable. The domestic stock market in January, when these companies listed, showed a continuous decline due to the U.S. Federal Reserve's (Fed) indication of interest rate hikes and tensions from the Ukraine conflict. The KOSPI index, which was 2,862.68 on the 20th of last month, fell to 2,663.34 on the 28th due to the influence of the U.S. stock market. The KOSPI decline rate during this period was 6.96%. The KOSDAQ index also dropped from 958.70 to 872.87, recording an 8.95% decline. Even compared to the somewhat recovered market on the 9th, the KOSPI and KOSDAQ decline rates were 3.28% and 5.02%, respectively. Despite the continuous market downturn, the newcomers delivered an average return of 70%, demonstrating solid performance.