[IPO Spotlight] Sandol, First Font Industry Company to Pursue IPO... 57% Profit Margin

Continued Growth as a Font Subscription Platform
Plans to Invest in Image and Audio Content Companies Using Raised Funds
Expanding Business Scope into a Comprehensive Content Creator Platform

[Asia Economy Reporter Hyungsoo Park] Font manufacturer Sandoll is expanding its business area into a creator content platform following its listing on the KOSDAQ market. It plans to pursue mergers and acquisitions (M&A) using funds raised through its initial public offering (IPO).

According to the Financial Supervisory Service's electronic disclosure system on the 30th, Sandoll will issue 1.49 million new shares for its KOSDAQ listing. The expected public offering price per share ranges from 16,000 to 18,800 KRW. The total offering size amounts to 23.8 billion to 28 billion KRW. Demand forecasting for institutional investors will be conducted over two days from the 12th to the 13th of next month, after which the final public offering price will be determined.

Founded in 1984, Sandoll created representative Korean fonts such as 'Malgun Gothic,' the default font for Microsoft, 'Apple Sandoll Gothic Neo,' the system font for Apple iPhone, and Google's 'Noto Sans KR.' As fonts have become an important branding tool, Sandoll has grown by producing exclusive fonts for leading companies such as Hyundai Card, Baedal Minjok, and Samsung Electronics.

Sales grew at an average annual rate of about 29% from 2019 to 2021. The increase in paid members of its cloud font platform drove this growth. The cloud-based font platform 'Sandoll Cloud' offers not only fonts owned by Sandoll but also fonts from external companies to customers on a monthly or annual subscription basis. As of last month, Sandoll Cloud surpassed 1 million cumulative members, with monthly active users (MAU) exceeding 1.7 million. Sandoll developed the platform application 'Gureumdari' to allow customers to install and use desired fonts on their PCs or mobile devices. In the first half of this year, it recorded sales of 11.3 billion KRW, operating profit of 6.4 billion KRW, and net profit of 7.9 billion KRW. The operating profit margin reached 57.2%, while the debt ratio was only 39.3%.

The largest shareholder is Sandoll Communication, holding a 48.6% stake. The combined shareholding of the largest shareholder and related parties is 62.7%. Seok Geum-ho, CEO of Sandoll Communication, also serves as chairman of Sandoll's board. In 2018, Sandoll recruited CEO Yoon Young-ho, who previously served as president of Barun Company and head of planning and coordination at Hancom Group. Since his appointment, CEO Yoon has split the corporation and focused resources on key businesses. By investing intensively in the IT sector, Sandoll has grown into the largest font platform company in Korea.

Yoon Young-ho, CEO of Sandoll, said, "Through the KOSDAQ listing, we will strive to create a font usage environment where anyone can easily access and freely use fonts."

KB Securities, the lead underwriter, selected three comparable companies?Duzon Bizon, Webcash, and BusinessOn?to estimate Sandoll's appropriate corporate value. Among existing listed companies, none operate a cloud-based font subscription platform business like Sandoll's. They comprehensively considered software sales, subscription-related upstream industries, and business model similarities to find comparable companies.

Webcash and BusinessOn provide services linking proprietary software with enterprise resource planning (ERP). Duzon Bizon mainly operates in the ERP business. Based on the average price-to-earnings ratio (PER) of 25.4 times for these three companies, Sandoll's market capitalization was calculated at 211.3 billion KRW, with a per-share value of 27,182 KRW. Applying a discount rate of 30.8% to 41.1% to the valuation, the proposed public offering price range per share was set at 16,000 to 18,800 KRW.

Sandoll plans to use the raised funds to strengthen platform business competitiveness and secure intellectual property (IP) content for new business expansion. It will also invest in acquiring artificial intelligence (AI) and platform solution technologies, research and development to enhance internal technological competitiveness, and securing office space.

It allocated 12.5 billion KRW to acquire stakes in companies or promising digital content IPs that can create synergy with existing business sectors. The company plans to invest in firms holding image or audio content or possessing platform technologies supporting mobile environments.