[Into the Stocks] 'Not Even Lim Young-woong Works'... TS Shampoo Continues to Post Losses After Listing

Profit Expected at IPO... Actually Two Consecutive Years of Losses
Increased Interest Expenses and Rising Advertising Costs Add Burden↑

TS Trillion, the seller of TS Shampoo, has recorded losses for two consecutive years since its listing on the KOSDAQ market in December 2020. There is a significant gap between the performance forecasts presented at the time of listing and the actual results, causing the stock price to continue its downward trend.

According to the Financial Supervisory Service's electronic disclosure on the 20th, TS Trillion reported consolidated sales of 63 billion KRW, an operating loss of 5.8 billion KRW, and a net loss of 10.2 billion KRW last year. While sales increased compared to the previous year and the operating loss slightly decreased, the net loss significantly widened.

These figures show a large discrepancy from the performance forecasts TS Trillion presented at the time of its listing. When TS Trillion was listed on the KOSDAQ in December 2020, it projected sales of 92.4 billion KRW and an operating profit of 12.7 billion KRW for 2022 during its investor relations (IR) presentation.

However, the company turned to losses immediately after listing in 2021 and continued to incur losses last year. Consequently, TS Trillion’s stock price has steadily declined and currently stands at the 500 KRW level. The company stated, “Sales volume decreased due to the impact of COVID-19, and cost of goods increased due to the Russia-Ukraine war and other factors.”

One reason for the increase in net loss last year was interest expenses. TS Trillion’s interest expenses rose sharply by 53% from 1.4 billion KRW the previous year to 2.2 billion KRW. An increase in interest expenses occurs either due to higher interest rates or increased borrowings. TS Trillion experienced both.

Last year, TS Trillion’s short-term borrowings increased by 23.5% from 20.2 billion KRW to 24.9 billion KRW compared to the previous year. Approximately 10 billion KRW of long-term borrowings were reclassified as current portion of long-term debt, significantly increasing the borrowings that must be repaid within one year.

Looking at the current ratio, which is calculated to assess a company’s liquidity and creditworthiness, it stands at about 26.6%. This is roughly half of the previous year’s 56.7%. Generally, a current ratio above 200% is considered ideal. Currently, TS Trillion owes about four times more in debts due within one year than it can liquidate within the same period.

Interest rates have also risen sharply. TS Trillion’s short-term borrowings carry interest rates of up to 14%. This is a significant increase compared to the maximum of around 5% at the end of last year. The company explained that the rise in interest rates was due to the increase in the base interest rate. Loan interest rates are set by adding a credit risk premium based on the company’s creditworthiness to the base rate.

The continued operating losses are analyzed to be due to large-scale advertising expenses that did not translate into proportional sales growth. TS Trillion’s advertising expenses last year were 11.6 billion KRW, about 7% higher than the previous year. TS Trillion employs a marketing strategy relying on famous models such as Son Heung-min and G-Dragon. Last year, it signed an exclusive contract with trot singer Lim Young-woong.

While expanding advertising expenses, the company significantly reduced bonuses for employees to manage costs. Last year, TS Trillion spent 84 million KRW on bonuses, a reduction of over 85% compared to 570 million KRW the previous year. The company stated, “Last year was a year of maintaining and defending rather than expecting profits due to COVID-19 and the proliferation of dye shampoos. This year, we plan to spend advertising expenses in a way that maximizes conversion into sales and reduce the proportion of advertising costs.”