Cuckoo Electronics has raised W254 billion ($247.8 million) after pricing its Korean initial public offering at the top of the range.
Korea’s best selling domestic rice cooker manufacturer sold 2.45 million shares at W104,000 each, the top end of the initial W80,000 to W104,000 range, a source close to the deal told FinanceAsia.
Strong domestic institutional uptake allowed the issuer to price shares at the top, which values the company at 13.2 times its 2014 earnings. Woori Investment & Securities led the transaction.
The deal did not have a separate international tranche, with foreign investors charged a 1% participation fee to take part in the domestic institutional tranche. This tranche accounted for 60% of the deal, while retail investors and Cuckoo employees each took up 20%.
The shares totalled 25% of its enlarged share capital through a secondary share sale — Affiliate Entop sold its entire 9.54% holding, while the founder’s brother halved his stake to 15%. Founder and chairman Ja Shin Koo and his son and CEO, Bon Hak Koo, retained their 42.4% stake, and are both subject to a six-month lockup.
The stock was pitched at a discount to smaller competitors, which include LiHOM-CUCHEN, PNPoongnyun and Coway. This is likely the primary reason for the solid demand.
LiHOM-CUCHEN and PNPoongnyun have both registered excellent performances this year. LiHOM-CUCHEN, another maker of rice cookers, is up 160% this year up to July 29 and is trading at 17.61 2014 earnings, while PNPoongnyun is up 232% year-to-date and is trading at 36 times earnings. This strong performance led some to question whether there was much upside remaining, concerns that may have proved prescient after a recent softening.
Both have experienced a slight softening in the past few weeks. Since peaking this year on July 17, PNPoongnyun’s shares are down 23%, while LiHOM-CUCHEN’s shares have retreated 2% in the same time period.
Its other comparable, Coway, a manufacturer of water purifiers, is currently trading at 22.2 times 2014 earnings. Similar to LiHOM-CUCHEN and PNPoongnyun, Coway has had an impressive year performance wise — shares are up 30% year-to-date — but has had a correction recently, with shares dropping 8% since July 17.
Shares in these companies have declined in spite of the Kopsi, Korea’s bellwether index, having risen 2% since July 17. It is up 4% so far this year.
Cuckoo’s future growth prospects resonated well with investors. Consumers continue to upgrade to induction heating (IH) rice cookers, which heat the surfaces of the inner pot, ensuring every grain is cooked thoroughly. The company forecasts IH sales will account for 55% of Korean sales in 2014.
While exports only account for 10% of overall sales, they have risen from 6% in 2011.