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Will STIC exit Big Hit immediately after IPO?

BTS / Courtesy of Big Hit Entertainment
BTS / Courtesy of Big Hit Entertainment

STIC Investments Chairman Do Yong-hwan
STIC Investments Chairman Do Yong-hwan
PEF expected to hit jackpot with BTS agency's listing

By Park Jae-hyuk

STIC Investments has drawn keen attention from capital market observers, who wonder about the next step by the private equity firm (PEF), after the envisioned listing of Big Hit Entertainment, according to industry officials, Tuesday.

Bit Hit has been reportedly preparing for an initial public offering (IPO).

According to sources, the music label that manages K-pop boy band BTS recently sent a request for a proposal to several domestic and foreign brokerages ― NH Investment & Securities, Korea Investment & Securities, Mirae Asset Daewoo, Citigroup Global Markets and J.P. Morgan Chase ― to select an underwriter.

It is unknown whether Big Hit will list on the KOSPI or Kosdaq, but most people expect the entertainment agency will launch an IPO this year.

STIC is expected to make about a 300 percent profit from its Big Hit investment, if it exits the entertainment firm immediately after the IPO.

On October 2018, the domestic PEF acquired a 12.24 percent stake in Big Hit for 104 billion won ($87 million) and became the entertainment firm's third-largest shareholder, following Big Hit CEO Bang Si-hyuk and Netmarble, a Korean game company led by Bang Jun-hyuk, who a relative of the Big Hit chief.

Back then, the Big Hit's enterprise value was estimated at around 870 billion won.

Analyst Kim Hyun-yong at eBest Investment & Securities said the market cap of Big Hit will reach 3 trillion won to 4.5 trillion won after its listing.

"Big Hit will be able to post 500 billion won in sales and 120 billion won to 130 billion won in operating profits in 2020," the analyst said. "It has already announced its plan for 39 global stadium tours that can attract 2.3 million spectators, so it is highly likely that our estimation will come true."

Bit Hit posted a 587.9 billion won sales and a 97.5 billion won operating profit in 2019, up from 301.4 billion won in sales and a 79.8 billion won operating profit a year earlier.

Some analysts, however, were a little more conservative in their outlook.

They mentioned BTS members awaiting enlistment as a risk.

Jin, the oldest member of the boy band, has to join the military within the next two years as he is 27 this year.

Concerns have grown further as the seven members may join the military at the same time.

"As for Big Hit, its reliance on BTS and the forthcoming enlistment of its members can be risks," Eugene Investment & Securities analyst Han Sang-woung said. "The value of Big Hit is estimated at around 2 trillion won from a conservative point of view."

In 2019, Big Hit had its five-member boy band TXT makes a debut and took over girl band GFriend's agency Source Music to diversify its artist portfolio.

However, the singers have yet to win over audiences.

The STIC's fund for investment in Big Hit will expire in 2024.

The PEF did not comment about any exit plan.

The Big Hit CEO said at a presentation Feb. 4 that nothing had been decided regarding public offering.
BTS / Courtesy of Big Hit Entertainment
BTS / Courtesy of Big Hit Entertainment

STIC Investments Chairman Do Yong-hwan
STIC Investments Chairman Do Yong-hwan
PEF expected to hit jackpot with BTS agency's listing

By Park Jae-hyuk

STIC Investments has drawn keen attention from capital market observers, who wonder about the next step by the private equity firm (PEF), after the envisioned listing of Big Hit Entertainment, according to industry officials, Tuesday.

Bit Hit has been reportedly preparing for an initial public offering (IPO).

According to sources, the music label that manages K-pop boy band BTS recently sent a request for a proposal to several domestic and foreign brokerages ― NH Investment & Securities, Korea Investment & Securities, Mirae Asset Daewoo, Citigroup Global Markets and J.P. Morgan Chase ― to select an underwriter.

It is unknown whether Big Hit will list on the KOSPI or Kosdaq, but most people expect the entertainment agency will launch an IPO this year.

STIC is expected to make about a 300 percent profit from its Big Hit investment, if it exits the entertainment firm immediately after the IPO.

On October 2018, the domestic PEF acquired a 12.24 percent stake in Big Hit for 104 billion won ($87 million) and became the entertainment firm's third-largest shareholder, following Big Hit CEO Bang Si-hyuk and Netmarble, a Korean game company led by Bang Jun-hyuk, who a relative of the Big Hit chief.

Back then, the Big Hit's enterprise value was estimated at around 870 billion won.

Analyst Kim Hyun-yong at eBest Investment & Securities said the market cap of Big Hit will reach 3 trillion won to 4.5 trillion won after its listing.

"Big Hit will be able to post 500 billion won in sales and 120 billion won to 130 billion won in operating profits in 2020," the analyst said. "It has already announced its plan for 39 global stadium tours that can attract 2.3 million spectators, so it is highly likely that our estimation will come true."

Bit Hit posted a 587.9 billion won sales and a 97.5 billion won operating profit in 2019, up from 301.4 billion won in sales and a 79.8 billion won operating profit a year earlier.

Some analysts, however, were a little more conservative in their outlook.

They mentioned BTS members awaiting enlistment as a risk.

Jin, the oldest member of the boy band, has to join the military within the next two years as he is 27 this year.

Concerns have grown further as the seven members may join the military at the same time.

"As for Big Hit, its reliance on BTS and the forthcoming enlistment of its members can be risks," Eugene Investment & Securities analyst Han Sang-woung said. "The value of Big Hit is estimated at around 2 trillion won from a conservative point of view."

In 2019, Big Hit had its five-member boy band TXT makes a debut and took over girl band GFriend's agency Source Music to diversify its artist portfolio.

However, the singers have yet to win over audiences.

The STIC's fund for investment in Big Hit will expire in 2024.

The PEF did not comment about any exit plan.

The Big Hit CEO said at a presentation Feb. 4 that nothing had been decided regarding public offering.
Park Jae-hyuk pjh@koreatimes.co.kr


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