This article was published on Jan. 16, 2025, at 6:12 p.m. on the CHOSUNBIZ MoneyMove site.
Dongbang Medical, a specialty corporation in traditional medicine medical devices, has postponed its entry into the KOSDAQ from the end of the year to early next year for a renewed attempt. The timing appears to be well chosen, as KOSDAQ-listed companies have shown favorable stock price movements since the new year. Dongbang Medical manufactures traditional medical products such as acupuncture needles and cupping cups, as well as beauty medical products including fillers and various special needles.
According to the investment banking (IB) industry on the 16th, Dongbang Medical will conduct demand forecasting for institutional investors for five business days from today until the 22nd to determine the final offering price. The company submitted a securities report again on the 6th of last month, a month after it chose to withdraw its listing due to poor demand forecasting in November 2024. It plans to conduct general subscription on Feb. 3 and 4, aiming for a KOSDAQ listing within the same month. NH Investment & Securities is the lead underwriter.
The newly submitted securities report from Dongbang Medical shows that measures have been observed to consider the prolonged slump in the public offering market since the beginning of this year. In fact, Dongbang Medical's valuation increased from 295.4 billion won to 364 billion won within a month, due to improved third-quarter performance and the expansion of its peer group. However, the hoped-for offering price remains the same as during the previous attempt, set between 9,000 and 10,500 won.
Dongbang Medical primarily utilized the enterprise value before depreciation and amortization (EV/EBITDA), commonly used to determine the value of manufacturing corporations with large-scale facilities, to set its offering price. This time, however, the improved third-quarter performance is reflected, increasing EBITDA from 20.7 billion won to 22.3 billion won.
Additionally, the peer group was adjusted, resulting in an increase in the multiple, raising the pre-discount market capitalization to the 360 billion won range. Medytox, which had previously been excluded from the peer group due to a market capitalization exceeding 1 trillion won, was added back after its stock price dropped in December. Consequently, the multiple was adjusted from 15.56 times to 17.58 times.
Applying this, Dongbang Medical's valuation per share is 17,152 won. However, the company applied a discount rate of 40.63 to 49.11%, resulting in a lower hoped-for offering price. This indicates that the expected stock price is lower than that of the peer group. Previously, the discount rate proposed by the company ranged from 22.97 to 33.97%, but it has been raised by nearly 20 percentage points, thereby reducing the expected market capitalization. Given that the discount rate for newly listed companies on KOSDAQ since 2023 is 23.72 to 31.69%, it is considered a shareholder-friendly discount rate.
Dongbang Medical also reduced the number of new shares to be issued from 3,401,029 to 3 million. As a result, the expected minimum amount of public offering funds decreased from approximately 30.6 billion won to 27 billion won. In its public offering fund usage plan, Dongbang Medical increased the amount for facility expansion at its Yongin plant from 1.8 billion won to 4.7 billion won, while reducing operating funds for procurement of raw materials etc., from 8 billion won to 1.1 billion won.
An industry insider noted, "Due to the public offering market slump in the second half of last year, Dongbang Medical's corporate value was inadequately assessed, and for Meat Box Global, which also postponed its schedule to early this year along with Dongbang Medical, the offering price was ultimately confirmed at the lower end of the hoped range, 19,000 won," adding that "the offering prices of newly listed companies are currently very polarized, so Dongbang Medical will be scrutinized as well."