[At a Crossroads: Saltwear①] Turning to Deficit 4 Months After Listing... Stock Price Halved

Sales Fell Short by 16 Billion KRW Compared to IPO Forecast
Stock Price Drops from 2,000 KRW to 1,100 KRW Amid Shift to Deficit

Saltware, a KOSDAQ-listed company, recorded losses again in the first quarter of this year following last year. When it was listed in August last year, rosy forecasts predicted annual profits of several billion won, but it turned to losses in less than a year.

Lee Jeong-geun, CEO of Saltware.

According to the Financial Supervisory Service's electronic disclosure system, Saltware posted sales of 8 billion won and an operating loss of 500 million won in the first quarter of this year. While sales increased by 39% compared to the same period last year, the operating loss widened by about 9%.

Saltware's operating profit turned negative starting last year. On a consolidated basis, Saltware recorded an operating loss of 600 million won last year. This marked a turnaround from an operating profit of 1.2 billion won the previous year. Sales also decreased by about 22%, from 40 billion won in 2021 to 31.3 billion won last year. The net loss for the period was 4.9 billion won. Even excluding SPAC merger costs, the company is estimated to have posted a loss.

Saltware is a system integration (SI) specialist company engaged in building cloud systems for public institutions, universities, and enterprises, infrastructure construction and operation services, and providing enterprise portal solutions. As of the end of last year, sales from services such as Amazon Web Services (AWS) sales and construction, and infrastructure maintenance accounted for 75.6%. The proportion of IT hardware, software delivery, and SI construction was in the 15% range. A Saltware official stated, “Our orders have decreased as clients have reduced investments due to the economic downturn.”

However, Saltware’s performance report showed a significant gap compared to the estimated results it presented just four months before the 2022 fiscal year-end listing. Saltware entered the KOSDAQ market last August through a merger with Mirae Asset Daewoo SPAC No. 3.

At that time, Saltware presented optimistic performance forecasts in its securities registration statement and numerous investor relations (IR) sessions. Specifically, it projected sales of 47.1 billion won and operating profit of 2.6 billion won for 2022. From 2023 to 2025, sales were expected to increase by about 10 billion won annually, reaching 56.5 billion won, 67 billion won, and 77.7 billion won respectively. The estimated operating profit for 2025 was also around 10 billion won.

Thanks to these high performance estimates, Saltware’s corporate value was also highly evaluated at the time of listing. Instead of using relative valuation methods such as price-earnings ratio (PER) of peer companies, Saltware’s corporate value was assessed based on future earnings estimates. Accordingly, the merger ratio was set at 1 to 20, allowing existing Saltware shareholders, including CEO Lee Jeong-geun, to secure a large stake. Currently, the shareholding ratio of CEO Lee and others exceeds 66%.

However, Saltware’s forecasts have been off since last year. The gap between actual sales and forecasts reached 33.4%, and both operating profit and net profit turned negative. The net profit showed a difference of about 6.8 billion won compared to estimates. Since losses continued in the first quarter of this year, it is uncertain whether the company can achieve the full-year sales target of 56.5 billion won and operating profit of 4.8 billion won.

As the performance deviated significantly from forecasts, the stock price also plummeted. On August 22, last year, the opening price of Saltware was 2,050 won. About nine months later, the closing price yesterday was 1,129 won, down approximately 44.9%. During the same period, the KOSDAQ index rose by 6.5%. Regarding this, a Saltware official said, “The corporate value calculated when submitting the securities registration statement last year was based on performance estimates as of the end of 2021, so some discrepancy occurred. We believe achieving the targets this year will be reasonable.”