[At a Crossroads for Listed Companies] 'Neogen' AudinFutures Secures Liquidity Through CB Issuance①

[Asia Economy Reporter Jang Hyowon] Audin Futures, the seller of the cosmetics brand ‘Neogen,’ announced the issuance of convertible bonds (CB) worth 12 billion KRW. This is a large-scale CB that could release one-third of the total shares if converted into stocks in the future. Audin Futures, which has accumulated losses over the past three years, plans to use the funds raised through the CB for operating expenses such as purchasing raw materials.

Neogen Dermalogy Probiotics Relief Cream.

According to the Financial Supervisory Service’s electronic disclosure on the 4th, Audin Futures announced the issuance of the 2nd series CB worth 12 billion KRW. This amount corresponds to 23.7% of the company’s total assets. The coupon and maturity interest rates are both 2%, and the conversion price per share is 1,696 KRW. This comes about 1 year and 10 months after issuing the 1st series CB worth 8.5 billion KRW in June 2020.

The recipients of the issuance are DB W Investment Association No. 3 with 7 billion KRW and Quantum Recycle Solution with 5 billion KRW. DB W Investment Association is a fund in which Withwin Invest holds a 67% stake. Quantum Recycle Solution is a corporation led by CEO Lee Jawon and has 50.05% of its shares owned by Tae Wonjin. As of the end of last year, its asset size was 2 billion KRW.

If the 2nd series CB is converted at the conversion price of 1,696 KRW per share, 7,075,471 new shares will be issued. This corresponds to 32.1% of the current total outstanding shares. If the market price falls and the conversion price per share drops to the minimum limit of 1,188 KRW, 10,101,010 shares could be released, which is about 45.8% of the current outstanding shares. Including the convertible shares, one-third of the total shares would be newly issued due to the CB.

The reason for issuing such a large-scale CB, including the possibility of this share dilution, is to raise operating funds. Audin Futures announced that the 12 billion KRW raised from the 2nd series CB will be used for purchasing raw materials, logistics costs, and global marketing.

Founded in 2000, Audin Futures owns cosmetics brands such as Neogen Dermalogy, re:p, and Sur.medic+. The company operates both its own brand sales and cosmetics original design manufacturing (ODM) business.

Audin Futures’ performance, which recorded sales of 89.4 billion KRW on a consolidated basis in 2018, sharply declined by about 40% to 54.1 billion KRW in 2019. Operating profit also turned from 8.1 billion KRW in 2018 to a loss of 20.7 billion KRW in 2019. This is analyzed to be due to a sharp drop in sales to China.

Audin Futures continued to post operating losses in 2020 and last year as well. As losses accumulated, the financial structure deteriorated. The debt ratio, which was 11.3% in 2018, surged to 59.1% in 2019, 162.2% in 2020, and 189.2% last year. The debt ratio is expected to rise further with this CB issuance.

An Audin Futures official stated, “The purpose of issuing the CB is to raise operating funds as disclosed,” and added, “This year, overseas online sales are expected to stabilize and improve performance.”

Meanwhile, as of 11 a.m. on the same day, Audin Futures’ stock price was trading at around 1,735 KRW, down 5.19% from the previous day.