[IPO Preview] Contec, a Space Startup Leading the New Space Era

IPO price range 20,300 to 22,500 KRW
Tech startup from Korea Aerospace Research Institute
Operating 8 ground stations worldwide

Space sector specialized startup Contec is going public on the KOSDAQ market. The funds raised through the initial public offering (IPO) will be used for facility investments to support full-scale growth.

According to the Financial Supervisory Service's electronic disclosure system on the 30th, Contec plans to offer 2.06 million shares, including 2 million newly issued shares and 60,000 existing shares, for its KOSDAQ listing. The expected price range per share is 20,300 to 22,500 KRW, with the total offering size between 41.8 billion and 46.4 billion KRW. The estimated market capitalization after listing is between 292.1 billion and 323.8 billion KRW. The book-building process will be conducted over five business days from the 6th to the 13th of next month, during which the final offering price will be determined.

Contec was spun off from the Korea Aerospace Research Institute in January 2015. The company provides an integrated satellite data solution service capable of satellite image reception, processing, and analysis through the design and construction of ground station systems. It operates eight space ground stations at key locations worldwide, offering services essential to the space industry such as satellite control and satellite image reception, processing, and analysis. Based on over 20 years of research and development experience, Contec has secured foundational technology patents. The company provides ground station system engineering solutions, operates a satellite data reception service called GsaaS (Ground Station as a Service) network solution, and offers processing solutions for received satellite data.

Contec plans to expand its ground stations to a total of 15 locations by next year and aims to provide near real-time standard images for various fields such as national security, disaster management, and autonomous driving by accelerating satellite data preprocessing speeds. The company has secured technology to offer satellite image solutions utilizing artificial intelligence (AI) deep learning technology and plans to provide these solutions as subscription-based services. Having achieved sales of 12.8 billion KRW in 2022, Contec expects its sales to exceed 70 billion KRW by 2025.

Daishin Securities, the lead underwriter, selected Hanwha Aerospace and Genoco as comparable companies to estimate Contec’s corporate value. Applying the average price-to-earnings ratio (PER) of 32.04 times from these two listed companies, Contec’s corporate value was estimated at 463.2 billion KRW. This figure is based on an estimated net profit of 21.9 billion KRW in 2025 and an annual discount rate of 18.15%. The per-share valuation was 29,668 KRW, and the offering price range was proposed by applying a discount rate of 24.0% to 31.5%.

Sales are projected to reach 22.7 billion KRW this year, 50.2 billion KRW next year, and 70.4 billion KRW in 2025. Net profit is expected to turn positive next year and reach 21.9 billion KRW in 2025.

Contec CEO Lee Seong-hee stated, "Contec is ready for full-scale growth in line with the New Space era," adding, "Furthermore, we aim to become a company that contributes to South Korea’s leap as a space technology powerhouse."

The number of satellites worldwide is currently around 3,000 and is predicted to increase more than tenfold over the next decade. As the number of satellites grows, the importance of ground stations required to receive data inevitably increases. Demand for services utilizing the ground stations that Contec has established globally is also expected to surge dramatically. Contec is preparing to launch a satellite image utilization platform that maximizes added value based on satellite imagery. By applying AI deep learning technology, it enables industrial and natural disaster monitoring, as well as port monitoring. In the first quarter of next year, Contec plans to launch its own satellite and further expand its business areas in satellite image sales and utilization analysis.

The funds raised will be used for building radio frequency (RF) ground stations and launching very low Earth orbit (VLEO) satellites. The company plans to launch 30 ultra-small cluster satellites operating at an altitude of 300 km in VLEO. Real-time image analysis will enhance the 'kill chain' during military operations and enable disaster situation assessment.