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Listing in Korea a Guide to Listing on the Korean Exchange

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www.samil.com Listing in Korea A Guide to Listing on the Korean Exchange Table of Contents Introduction 01 01. Status of foreign issuers in Korea 05 02. Listing requirements 07 03. IPO Process tailored for Foreign Entities 14 04. Listing procedures 15 05. Continuing obligation 16 06. What help you should seek 18 07. What we can do 19 08. PricewaterhouseCoopers 20 09. Our Experts 21 Introduction Korea Exchange (KRX) ∙ In 1956, the Korean stock market opened with the start of Korea Stock Exchange. In January 2005, through integration of Korea Stock Exchange and two other domestic markets, the Korea Exchange (KRX) was created. ∙ There are four markets in the KRX; Main Board (KOSPI Market), KOSDAQ (Korea Securities Dealers Automated Quotation), KONEX (Korea new exchange) and the derivatives market. ∙ The KRX is one of the most liquid stock exchanges. Numerous companies from various industries completed their IPOs successfully on KRX. ∙ Since 2007, the KRX has been actively promoting foreign companies’ inbound IPOs to grow as an international stock exchange, be popular among foreign companies and attract international investors (Since IPO of 3Nod - a Chinese company - in 2007, a total of 29 foreign companies have listed on the KRX as of June 30, 2017) ∙ In order to further enhance its credibility on the international platform and be leading global capital market, KRX has also signed MOUs with other global stock exchanges for mutual cooperation in areas such as information sharing, IT consulting, market links, development of new products, and any other mutually beneficial projects. Main Board (KOSPI Market) ∙ The KOSPI market is the main board of KRX and many of the larger domestic and international companies such as Samsung Electronics, LG Electronics, Hyundai Motor, POSCO and KIA Motors are listed on KOSPI. ∙ As of June 30, 2017, 766 companies are listed with total market capitalization amounting to KRW 1,308 trillion and the transaction volume in 2016 amounting to KRW 1,113 trillion. KOSDAQ Market ∙ The KOSDAQ market opened in 1996 to support venture and small and medium-sized companies’ smooth financing. ∙ IPO requirement for the KOSDAQ market is less rigorous than the requirements for the KOSPI market, enabling 1,230 of middle-sized companies with high potential to be listed. As of June 30, 2017, total market capitalization amounts to KRW 222 trillion and the transaction volume in 2016 amounts to KRW 835 trillion. KONEX Market ∙ The KRX opened KONEX market in 2013 to support small and middle-sized start-ups to raise capital. ∙ IPO requirement for the KONEX market is less rigorous than the requirements for the KOSDAQ market, enabling 149 of small and middle-sized or start-up companies with high potential to be listed. As of June 30, 2017, total market capitalization amounts to KRW 4.2 trillion and the transaction volume in 2016 amounts to KRW 607 billion. 1 Comparison with major Asian stock exchanges “The Korea exchange is one of the most liquid markets in the Asia region” Due to stagnant market during the recent past 4~5 years, turnover ratio has decreased compared to being the most liquid market in 2011 in the Asia region. However, KRX is still one of the most liquid markets and introduction of stock market stimulus plan, such as the recent expanded price limits from 15% to 30%, it is expected to further improve its liquidity. (in millions of USD, %) 8,000,000 1.83 2 7,000,000 1.8 1.6 6,000,000 1.33 1.4 1.14 5,000,000 1.2 4,000,000 1 3,000,000 0.61 0.42 0.8 0.6 2,000,000 0.31 0.4 1,000,000 0.2 0 0 Singapore Taiwan Korea Hong Kong Shanghai Tokyo A=annual transaction volume B=market capitalization Performances as at year end 2016 (in millions of USD, %) Hong Singapore Taiwan Korea Shanghai Tokyo Kong A=annual transaction 196,933 511,973 1,664,872 1,349,804 7,510,105 5,625,901 volume B=market 640,428 844,030 1,254,541 3,193,236 4,098,789 4,955,300 capitalization Turnover 0.31 0.61 1.33 0.42 1.83 1.14 ratio(A/B) (Source: The World Federation of Exchanges – www.world-exchanges.org) 2 Number of IPOs on KRX (2011~June 2017) In 2012, there were sharp decrease in the number of IPOs due to the European sovereign debt crisis and global economic slowdown but gradually recovering since 2013 as a result of KRX’s active marketing, high price earnings ratios (PER) for IT company stocks and low listing costs. In 2016, the number of IPOs decreased by 31% compared to the number in 2015, however, the total amount of offering increased by 43% compared to 2015. 120 120 100 100 80 80 60 54 52 60 35 38 38 40 33 40 26 28 22 21 21 20 12 13 13 20 8 4 7 5 1 2 2 1 0 3 3 2 1 1 2 2 2 1 1 3 - 0 0 2011 2012 2013 2014 2015 2016 June 2017 Manufacturing Services Financial Services Wholesale & Retail Others Total Number of IPOs by industry (2011~June 2017) Financial Wholesale & Year Manufacturing Services Others Total Services Retail 2011 54 12 1 4 2 73 2012 22 2 1 0 3 28 2013 33 3 2 1 1 40 2014 35 7 26 2 2 72 2015 52 21 38 5 2 118 2016 38 28 13 1 1 81 January to 21 8 13 3 - 45 June 2017 (Source: KRX) 3 Overview by market & industry (December 2016) (in millions of KRW) Market Industry Group Market Cap PER Agricultural, fisheries and forestry industry 15,314,059 16.8 Communication 34,404,847 12.3 Construction 23,356,077 19.5 Distribution 63,095,667 16.4 KOSPI Electricity & Gas 40,072,857 14.2 Market Finance 145,203,569 10.8 Manufacturing industry 631,228,303 11.1 Mining industry 28,419,211 4.9 Service 87,042,316 20.4 Transport & Storage 18,997,854 -13.4 Agricultural, fisheries and forestry industry 1,053,823 21.3 Communication 9,127,815 -46.8 Construction 5,357,471 -194.1 Distribution 5,137,137 19.4 KOSDAQ Market Electricity & Gas 735,781 38.7 Finance 2,364,596 2.4 Manufacturing industry 100,912,042 54.7 Mining industry 3,906,387 28.8 Service 40,815,372 62.9 Transport & Storage 720,831 41.8 (Source: Bloomberg) 4 01. Status of foreign issuers in Korea As of June 30, 2017, total of foreign companies listed on KRX (in %, 100 millions of KRW) Offer Price*² of Debt/ Net N Listing Revenue Market Name Country Price*² June ’17 Equity Income o Date *³ (KRW) (KRW) Ratio (%)*³ *³ 1 KOSDAQ China Great China 2009. 05 1,700 1,485 23.13 5,783 549 S&C Engine 2 KOSDAQ China 2009. 12 6,000 1,130 4.93 1,676.3 279.4 Group Ltd 3 KOSDAQ Global SM Tech China 2009. 12 3,200 1,470 57.01 1,095.1 43.7 China Hao Ran 4 KOSDAQ China 2010. 02 4,700 982 56.80 4,124.6 259.1 Recycling CKH Food & 5 KOSDAQ China 2010. 03 3,700 1,340 4.38 2,976.0 524.0 Health Ltd 6 KOSDAQ New Pride Corp USA 2010. 04 7,500 2,280 178.03 616.8 181.4 East Asia 7 KOSDAQ Holdings China 2010. 04 5,000 718 10.40 1,084.2 45.2 Investment Wayport HK Co 8 KOSDAQ China 2010. 07 1,400 3,020 1,392.81 2,068.4 (45.4) Ltd 9 KOSPI Kolao Holdings Laos 2010. 11 4,800 6,360 57.53 3,923.3 416.2 Wanli 10 KOSDAQ International China 2011. 06 4,100 1,210 156.20 1,609.9 188.7 Holdings Ltd SBI AXES Co 11 KOSDAQ Japan 2012. 12 3,600 5,680 264.29 689.8 42.9 Ltd 12 KOSDAQ Access Bio Inc USA 2013. 05 4,500 4,700 58.26 324.9 (11.5) China Crystal 13 KOSDAQ New Material China 2016. 01 3,000 2,795 12.56 644.4 263.5 Holdings Rothwell 14 KOSDAQ International Co China 2016. 06 3,200 2,405 47.47 1,658.7 305.3 Ltd Heng Sheng 15 KOSDAQ Holding Group China 2016. 08 3,600 2,840 65.36 2,013.0 285.7 Ltd Englewood LAB 16 KOSDAQ USA 2016. 10 6,000 7,600 12.90 791.8 (2.8) Inc Cayman Golden Cayman 17 KOSDAQ 2016. 10 3,500 3,940 14.36 262.8 21.0 Century Wheel Islands Great Rich 18 KOSDAQ China 2016. 10 5,000 3,615 56.83 1,644.7 350.5 Technologies Ltd Organic Tea 19 KOSDAQ Cosmetics China 2016. 11 4,000 3,915 372.42 15.2 (5.9) Holdings China Ocean 20 KOSPI Resources Co China 2009. 05 - - - - - Ltd*¹ *¹ China Ocean Resources Co Ltd was delisted in September 2017 *² Price per share *³ Financial information of 2016 (Source: Bloomberg) 5 IPOs of foreign companies on KRX by year 35 29 30 25 22 22 22 21 21 20 15 10 7 5 1 0 0 0 ~ FY2012 FY2013 FY2014 FY2015 FY2016 Newly listed Accumulation June ~ FY2012 FY2013 FY2014 FY2015 FY2016 Total 2017 Newly listed 21 1 0 0 7 0 29 Delisted 4 3 1 1 0 0 9 Note: Four companies delisted voluntarily (3NOD Digital, China Food Packaging Inc, Cowell e holdings, and SBI Mortgage); three companies delisted due to disclaimer audit opinion (United Technology Holdings, Shenglong, China Gaoxian Fibre Fabric); One delisted due to embezzlement (Nepro IT); One delisted due to failing to meet the market capitalization requirement (Huafung).
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