[Exclusive] '2 Trillion Giant' Golfzon County to Enter Stock Market... Expected Approval for Listing Review

Golfzon County to Undergo Preliminary Listing Review on 22nd... Expected to Pass Smoothly
Corporate Value Estimated at Minimum 2 Trillion Won... A Warmth in the Sluggish IPO Market

Golfzon County Anseong W

[Asia Economy Reporter Lee Seon-ae] Golfzon County, considered a 'trillion-won giant' in the second half IPO market, is finally expected to enter the domestic KOSPI market. It is anticipated to smoothly pass the Korea Exchange's preliminary listing review, ensuring an uninterrupted debut on the stock market. Given its corporate value reaching into the trillions of won, it is expected to bring warmth to the sharply contracted IPO market.

According to the financial investment industry on the 21st, Golfzon County will undergo the Korea Exchange Listing Disclosure Committee's preliminary listing review on the afternoon of the 22nd. Golfzon County submitted its preliminary review application to the Korea Exchange KOSPI Market Headquarters on April 22. The listing underwriting is handled by Samsung Securities, NH Investment & Securities, and Morgan Stanley Securities. Typically, it takes about two months (45 business days) from the preliminary review application to approval. Considering this, the approval decision was expected by the end of June at the latest. However, the Exchange reportedly postponed the review period to assess the sustainability of operations based on first-half performance. Accordingly, the key issues in this review are the performance and the sustainability of the golf course consignment operations.

An IB industry official said, "Since Golfzon County operates many consigned golf courses, the Exchange will focus on whether the sustainability of operations can be maintained stably, especially examining how much performance was achieved in the first half and the impact received," adding, "Since the performance was good and the listing requirements were well met, the review approval is expected to proceed smoothly."

Golfzon County is the number one golf course operator in Korea. It was established in January 2018 by a spin-off of the golf course division from Golfzon Newdin Group, famous for its screen golf business. Initially, the holding company Golfzon Newdin Holdings owned 100% of the shares, but after receiving investment from the private equity fund (PEF) operator MBK Partners, the shareholding ratio has decreased to 41.6%. The current shareholder structure has Korea Golf Infrastructure Investment, a special purpose company (SPC) established by MBK Partners, as the largest shareholder, with Golfzon Newdin Holdings as the second largest. Korea Golf Infrastructure Investment holds 54.8% of common shares and 3.5% of preferred shares.

The half-year performance is expected to be decent. Due to COVID-19 restricting overseas golf travel, demand for domestic golf courses increased, and with the influx of MZ generation and female golfers, golf course reservations have been so busy that it is difficult to book. Golfzon County operates 18 golf courses nationwide, of which 10 are directly managed and 8 are leased. The total number of holes is 387. It holds an overwhelming number one market share domestically.

According to the consolidated audit report, Golfzon County's operating profit, which was 11.2 billion won in 2018, increased to 38.1 billion won in 2019, 62 billion won in 2020, and 104.8 billion won in 2021. Accordingly, expectations for Golfzon County's listing were high. The corporate value is mentioned to be at least 2 trillion won, drawing attention as the biggest IPO in the second half. An IB industry official said, "Applying approximately 5 billion won per hole to the roughly 400 holes Golfzon County owns nationwide results in a valuation in the 2 trillion won range," adding, "Considering that South Springs CC in Icheon was traded at 10 billion won per hole last year, this can be seen as a rather conservative price."

However, since MBK Partners holds more than half of the shares, there is a strong view that Golfzon County should refrain from 'bomb dividend payments to major shareholders before listing' and 'excessive proportion of old share sales' to successfully complete the final listing. Old share sales refer to existing shareholders selling their shares (old shares) to public offering investors at the time of listing. This differs from issuing new shares and selling them to public offering investors. MBK plans to monetize part of the shares held by Korea Golf Infrastructure Investment through old share sales upon Golfzon County's listing.

Last October, the Exchange issued listing review guidelines stating that unlisted companies with PEF as the largest shareholder should not make excessive dividend payments before applying for preliminary listing review. This is because excessive dividends just before listing can damage the company's growth potential and negatively affect the company's sustainability. Accordingly, for unlisted companies with PEF as the largest shareholder, the Exchange views the payment of excessive dividends to existing shareholders before listing, causing cash outflow, followed by selling existing shareholder shares to investors after listing, as a bad-purpose 'exit' (investment recovery) and intends to regulate it.