Passing Preliminary Listing Review Imminent
Lead and Underwriting Syndicate Expanded to 9 Securities Firms
Securities Registration Statement to Be Submitted on 5th of Next Month
Corporate Valuation Estimated at 5~7 Trillion Won
LG Group-affiliated IT service company LG CNS has tentatively finalized its initial public offering (IPO) plan to enter the stock market in February next year. The company's valuation is expected to be around 5 to 7 trillion won.
According to the investment banking (IB) industry on the 29th, LG CNS recently finalized most of the listing schedule and public offering structure, assuming it passes the preliminary listing review by the Korea Exchange (KRX). The plan is to submit the securities registration statement on December 5, conduct demand forecasting and subscription in January, and complete the listing in early February next year. KB Securities, the lead underwriter, has completed the due diligence (DD) on LG CNS and started preparing the securities registration statement.
Additionally, LG CNS added Hana Securities and NH Investment & Securities to the public offering underwriting group. Along with the three lead underwriters?KB Securities, Bank of America (BOA), and Morgan Stanley?and the four joint underwriters selected?Mirae Asset Securities, Shinhan Investment Corp., Daishin Securities, and JP Morgan?a total of nine securities firms will share the underwriting of LG CNS's public offering shares.
There are also talks about the public offering structure. According to a representative from the underwriting group, LG CNS plans to offer a total of 19 million shares, consisting of 9.5 million existing shares and 9.5 million new shares. The 9.5 million existing shares are slightly less than 30% of the approximately 30 million shares (35% stake) held by Macquarie PE. The group holding company LG, which owns 49.95% of the shares, is expected not to sell any existing shares.
An industry insider said, "The background for LG CNS's listing push is to enable Macquarie PE to exit (sell) its stake," adding, "At least about 30% of the held shares should be allowed to be sold at the time of listing." The insider also noted, "Selling too many existing shares could put pressure on the offering price."
The expected price band for demand forecasting is reportedly set at around 60,000 to 70,000 won. Based on this band, the estimated corporate value is about 5 to 7 trillion won. The final offering price will be determined after demand forecasting targeting institutional investors in January next year. Depending on stock market variables, the final offering price may fall below or exceed the expected price band.
The underwriting group believes that considering LG CNS's performance growth trend, the offering price has been set at a reasonable level. LG CNS's consolidated annual sales grew from 3.36 trillion won in 2020 to 5.6 trillion won last year. During the same period, annual operating profit also increased from 258 billion won to 446 billion won. As of the third quarter cumulative this year, LG CNS recorded approximately 4 trillion won in sales and 306 billion won in operating profit, maintaining the performance improvement trend this year as well.
The stock prices of competitors such as Samsung SDS and Lotte Innovate, which appear to have been used as comparable companies in the corporate valuation, are somewhat mixed. Samsung SDS has been on an upward trend recently, while Lotte Innovate has struggled with a declining stock price due to issues within the Lotte Group. Based on the price-to-earnings ratio (PER), Samsung SDS is trading between 16 and 18 times, whereas Lotte Innovate's stock price is formed at less than 7 to 8 times.
An IB industry official said, "Among large conglomerate-affiliated peer companies, LG CNS's performance growth rate is the steepest," and added, "Considering this, it is expected to receive a better corporate valuation than other competitors."
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