Sigitronics, a special semiconductor manufacturing company, has set a market-friendly valuation for its listing. It seems that the public offering structure was designed reasonably considering the recent weak market conditions. In the selection of peer groups (similar companies), we boldly excluded those with a PER of over 30x, and applied a discount rate of 40%.

Acquired BBB , A grade from 2 technology evaluation institutions despite being a ‘materials and parts specialized company’According to the investment banking ( IB ) industry on the 22nd, Cigitronics is about to subscribe to general investors on the 24th. Earlier, on the 18th and 19th, demand forecasts for institutional investors were carried out, and the public offering price has not yet been announced. The company is about to enter the KOSDAQ market in about two years after signing a manager contract with Yuanta Securities in August 2021.

Cigitronics suggested the public offering price range of 18,000 to 20,000 won. The number of shares to be offered is 900,000, which is about 20% of the number of shares scheduled for listing (4,506,250 shares). Its market capitalization is estimated to be between 81.1 and 90.1 billion won.

Founded in 2008 with a capital of 50 million won, Cigitronics is engaged in the business of developing, producing and selling optical and individual devices among non-memory semiconductors. It is a target company for ‘specialized material parts company’ designated by the Ministry of Trade, Industry and Energy. If the company obtains an A grade or higher from only one technology appraisal institution, it is entitled to a special technology appraisal listing.

Nonetheless, Cigitronics was evaluated by two SCI evaluation information and eCredible before listing. The two rating agencies assigned BBB and A grades, respectively. The company has ‘ Epi ‘ process technology that applies a crystal film of a different structure on a semiconductor substrate and its own production line ‘ M-FAB ‘. Through this, it is possible to shorten the development period of new devices by nearly 50% compared to competitors of the same size.

The main cash cow (cash generating source) is an anti-static ( ESD ) device. An ESD device is a protection device used to protect internal circuits of electronic devices when they are exposed to sudden transient voltages such as static electricity. It generates sales of 7 to 9 billion won annually, accounting for about half of the total sales. Power semiconductor devices using

gallium nitride ( GaN ) are also one of the company’s cash cows. Sales are in the range of 3 to 5 billion won, accounting for about 30% of the total.

Profitable next year… Excluding peer groups of companies with 

a PER of 30x or higherHowever, profitability is not good. It is recording an operating loss in the order of 3.4 billion won in 2020, 4.2 billion won in 2021, 4.8 billion won in 2022, and 1.3 billion won in the first quarter of this year. As of last year, sales were 14.5 billion won, which is not enough to cover the cost of sales of 16.5 billion won. As the deficit accumulated, the deficit accumulated to 22.8 billion won.

As the operating profit is in the red,키톤벳 Cigitronics calculated the corporate value based on the future performance in this IPO . Sales are expected to increase from 26.3 billion won this year to 51.5 billion won in 2024 and 75.1 billion won in 2025. Accordingly, the plan is to turn the operating profit into the black to 6 billion won in 2024 and record 14.3 billion won in 2025.

Here, after estimating net profit in 2025 minus non-operating profit and loss at 13.9 billion won, we applied PER (price-to-earnings ratio) as a standard for evaluating corporate value. We boldly excluded companies with excessive PER from our peer group.

Optoelectronics, Dreamtech, RF Materials, and Partron were selected as peer groups. Only RF Materials has a relatively high PER of 27.52x, while the others are in the 12-16% range. During the peer group selection process, RFHIC was excluded because its PER was 82.6 times . Accordingly, the average PER is 18.10x.

Considering the average PER , the pre-discount enterprise value of W152.7bn is derived. However, the company also applied a high discount rate of 46.51 to 40.57%. This is much higher than the average discount rate (37.07-24.71%) of companies listed on the KOSDAQ market after 2022. We believe the move was made in consideration of the recent weakness in the public offering stock market.

However, the large amount of stock available for distribution after listing is a burden for this IPO . When Cigitronics goes public, the number of shares that can be immediately released to the market is 2,565,205 shares, accounting for 56.33% of the total number of shares scheduled for listing.

Instead, Cigitronics set up a voluntary safe deposit period of at least 1 month to 3 years for professional investors and venture capitalists as well as the largest shareholder, CEO Shim Gyu-hwan and other related parties.

“The largest shareholder owns 1,362,600 shares (30.24% after public offering) as of the filing date of the securities report,” said Cigitronics.

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