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IPOs

Korea’s Simone to spend up to 40% of net profit for dividends

Plans to build a new plant in Southeast Asia in 2023 with part of IPO proceeds

By Oct 19, 2021 (Gmt+09:00)

Simone founder and chairman Park Eun-kwan
Simone founder and chairman Park Eun-kwan

South Korean Simone Acc. Collection Ltd., the world’s No. 1 handbag maker, plans to spend 30-40% of net profit for dividends after a listing next month in a move to attract long-term investors amid weakening interest in domestic initial public offerings (IPOs) due to low profits.

“We will raise the dividend payout ratio to around double of other companies and make quarterly dividends after a listing,” Simone founder and chairman Park Eun-kwan said on Oct. 18 in an online investor relation session.

A South Korean company with a net profit of 50 billion-100 billion won ($42.3 million-$84.7 million) usually pays 14-23% of its net profit for dividends.

“We will help buyers of our stocks make as stable profits as yields from bonds with credit ratings of A+ at least,” Park said, asking to seek long-term earnings rather than short-term margins.

Simone is Asia’s first original development manufacturer (ODM) with a strong client portfolio of around 20 luxury brands globally, including Michael Kors, Marc Jacobs and Coach. The Korean maker controlled about 10% of the global handbag market last year.

Its revenue topped 1 trillion won in 2019, but the COVID-19 almost halved the sales last year. The company, however, improved earnings in the first half of this year with its revenue up 9.1% to 333.5 billion won from a year earlier and an operating profit surging 67% to 43.4 billion won.

OVERWHELMING ORDERS

“Orders are overwhelming due to a lack of items ahead of the Halloween and Christmas seasons. We had to ship goods via passenger planes,” Park said.

“The size of global luxury bag market last year recovered 65% of the level in 2019 and 80% this year. Next year, the market will recover 100% on increasing ‘revenge shopping’ and grow 10-15% by 2025,” he said, referring to a post-lockdown shopping hype to purchase luxury goods and fashion items.

Park was keeping an eye on Chinese demand.

“Premium luxury brands such as Hermes, Chanel and Louis Vuitton are preferred in Korea and Japan, while masstige luxury bags Simone makes are selling well in China, Europe and the US,” Park said. “China’s growth in the masstige luxury markets is growing much faster than others thanks to emerging e-commerce and MZ generation,” he stressed, referring to the Millennials and the Generation Z.
Korea’s Simone to spend up to 40% of net profit for dividends

“NOT OVERVALUED”

Simone plans to sell 8.37 million shares at a price between 39,200 won and 47,900 won apiece. Its bookbuilding with institutional investors is set for Oct. 19, while the subscription from retail investors is scheduled for Oct. 25-26. Samsung Securities, Mire Asset Securities and Korea Investment & Securities Co. are managing its IPO. Its market capitalization is estimated at 1.6 trillion won based on the top end of the proposed price band. Its debut on the Kospi is on Nov. 4.

Park defied some concerns of overvaluation.

“A PER (price-to-earnings ratio) exceeds 20 times based on the IPO prices, but it will fall to 12-13 times next year when we recover from the COVID-19. It’s not that high,” Park said.

“We will raise profitability by attracting new rising star brands.”

Simone aims to raise up to 400.9 billion won through the IPO. US private equity firm Blackstone is set to take 80% of the proceeds since it bought a 30% stake in Simone for 300 billion won. Blackstone is slated to sell some of them to secure up to 320 billion won.

The handbag maker plans to spend 33 billion won out of the rest 80 billion won for a new plant. It considers Indonesia, Cambodia and others as a potential site. It is set to start the construction of the factory in 2023 with a target of bag production from the third quarter of the year.
Simone’s plant in Long An Province, Vietnam
Simone’s plant in Long An Province, Vietnam


Write to Ye-Jin Jun at ace@hankyung.com

Jongwoo Cheon edited this article.

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