[Reporter Reading Securities Report] 'NFC Fabless' Specialist Company Three A Logics... Most of the Raised Funds Used to Repay Debt

Expected Sales of 21.6 Billion This Year → 73.7 Billion by 2027 'Outlook'
20 Billion Spent on Debt Repayment... "Expecting Improvement in Debt Ratio and Borrowing Dependence"

Fabless company Three A Logics, specializing in Near Field Communication (NFC) technology, is undergoing the public offering process for listing on the KOSDAQ. Three A Logics is a company applying the technology growth special case system; it had maintained losses until last year but achieved a turnaround to profit in the first half of this year. However, most of the funds raised through the listing will be used to repay debt.

Three A Logics focuses on the design and development of SoC (System on Chip) products such as NFC and RFID (Radio Frequency Identification) reader chips. The company was established in 2004. From its early days, it concentrated on domestic production of NFC-related technology, which had previously relied on overseas products.

In 2006, it developed the first domestically produced 13.56 MHz band RFID reader chip using its own technology. Additionally, it achieved ▲independent development of NFC reader chips and NFC tag chips ▲commercialization of authentication tag chips and vehicle NFC reader chips.

Although Three A Logics is a company listing under the technology special case, it recorded a profit in the first half of this year. As of the first half of this year, it posted sales of KRW 9.80792 billion and an operating profit of KRW 1.1 billion. Sales increased by 17.74% compared to the same period last year, and operating profit turned positive. For reference, in 2023, the company spun off its IoT module business division to establish Three A Solutions. The current performance reflects only Three A Logics as the surviving company after the spin-off.

The total number of shares offered by Three A Logics is 1,857,400 shares. The desired public offering price per share ranges from KRW 15,700 to KRW 18,200. When determining the desired offering price, the lead underwriters Mirae Asset Securities and Shinhan Investment Corp. used the price-to-earnings ratio (PER). They calculated the present value of estimated net income for 2025, 2026, and 2027.

The company expects sales of KRW 21.67734 billion and operating profit of KRW 2.76359 billion this year. For 2027, it forecasts sales of KRW 73.72359 billion and operating profit of KRW 29.12447 billion. The core driver of performance improvement is the NFC chip. After recording sales of KRW 16.3 billion this year, sales are expected to increase to KRW 52.8 billion by 2027. Significant sales growth is anticipated in the smart logistics sector.

In its securities registration statement, the company explained, "Our main products (such as TNR200) are being stably mass-produced and sold, and the period when sales of secured orders from major customers (automobile manufacturers, ESL companies, etc.) will begin in earnest is after 2025," adding, "We considered that substantial profit growth will occur after 2025."

Based on this, the average present value of net income from 2025 to 2027 was calculated at KRW 10.016 billion. Applying the average PER of 23.6 times, derived from comparable companies such as Jeju Semiconductor (26.5x), Dongwoon Anatech (13.1x), Telechips (9.9x), Shenzhen Goodix (42.1x), Shanghai Fudan (31.8x), and Silicon Craft (18.0x), the per-share valuation was determined to be KRW 24,507. An additional discount rate of 25.7% to 35.9% was applied to calculate the desired public offering price.

Through this public offering, Three A Logics plans to raise between KRW 29.1 billion and KRW 33.8 billion. Most of the raised funds will be used to repay borrowings. Based on the lower end of the offering price, KRW 8.5501 billion will be allocated for research and development and hiring.

In particular, KRW 20.07987 billion will be used to repay borrowings. This means that most of the funds raised will be used to pay off debt. The reason for allocating most of the funds to debt repayment is due to the company's less-than-ideal financial condition. The debt ratio, which was 14,492.73% in 2021, decreased to 1,093.83% in 2022, 145.36% in 2023, and 127.60% in the first half of 2024. However, it still remains above 100%.

Similarly, the borrowing dependency ratio decreased from 69.32% in 2021 to 51.94%, but it remains at a high level. The company expects that if debt repayment proceeds as planned, the debt ratio will improve to 44.3%, and the borrowing dependency ratio will improve to 27.96%.