이 기사는 2019년 10월 17일 08:00 thebell 에 표출된 기사입니다.

South Korean credit card company Hyundai Card's initial public offering (IPO) is likely to go through a rough road. The enterprise value (EV) of Hyundai Card hasn't gone higher enough for financial investors (FIs) to cash out on their investments two years ago.

"Investment banks are interested in the deal as the deal size can be as big as 500 billion won. But underwriting won't likely to be easy. As the deal is intended to help financial investors exit the firm, there would be a minimum valuation they expect, but EV hasn't gone up enough compared to the one calculated at the time of financial investors' investment," said one investment banking industry source on October 10.

The industry conservatively estimates the Hyundai Card's valuation at approximately 1.8 trillion won. Hyundai Card's EV will likely to be assessed using price to book-value ratio (PBR) as the company is under the umbrella of financial institutions. PBR compares a company's market capitalization or market value to its net asset. While price-earnings ratio (PER) is the most commonly used tool for assessing a firm's value for general IPO, PBR is used for financial companies because the amount of net asset they own is directly related to their competitiveness. Thus, PBR is mainly used when assessing values of banks, securities firms, card companies, insurance companies in various deals.

Hyundai Card's approximate EV is equal to the sector PBR multiplied by its net asset value as of the end of the first quarter (3.25 trillion won). For the sector PBR, Samsung Card's PBR should be used as a reference, as it is the only listed card company in the country. By applying Samsung Card's PBR of 0.57x, Hyundai Card's EV comes out to be about 1.86 trillion won.

Hyundai Card's EV has increased only 300 billion won over the last two years. In 2017, an Affinity Equity Partners-led consortium purchased a 24 percent stake in Hyundai Card paying 374.7 billion won. Back then, the consortium estimated the value of Hyundai Card at 1.56 trillion won.

The problem is that if IPO discount is applied, which usually ranges from 20~30 percent, Hyundai Card's value can be lower than it was two years ago. A 20 percent discount would drag the value of the card company down to 1.5 trillion won and to 1.3 trillion won with a 30 percent discount. This is the level at which FIs cannot exit from the firm.

It is because the peer group's PBR has been kept low. Net asset of Hyundai Card has increased 500 billion won from 2.75 trillion won over the last two years. On the other hand, PBR of Samsung Card hasn't changed much since 2016 (0.53x) with government measures to curb high household debt.

It is said that FIs invested in the card issuer as a condition of its IPO. Some see the deadline of the IPO January, 2020, but nothing has been officially confirmed.

According to the Hyundai Card's report of audit, FIs hold put options to sell shares to the company. The industry view FIs has built this safeguard in case the value fails to live up to their expectation. That means Hyundai Card may need a huge amount of money to purchase shares if it fails to induce FIs to cash out.

Market watchers expect the card company will aim higher value. Potential underwriters also are putting every effort to come up with practical solutions to up the value.

"The value based on the new net asset will likely to go higher. The net asset will reflect expected net profit of this year and proceeds from an issue of new shares. The most important task to overcome its undervalued PBR would be to prove that the card issuer is more competitive than its only peer, Samsung Card. The fact Hyundai Card has a strong captive market of Hyundai Motor Group would be one of its strong points," said one industry source.

(By reporter Lee Kyung-ju)