Spackman (IPO)

Spackman IPO: Voyage Research has issued an IPO preview note on Spackman Entertainment this morning, placing the counter’s fair value at $0.41. Spackman will make its IPO debut on 22 Jul ’14 (tomorrow) at 9.00 am. The South Korean film producer/distributor is raising net proceeds of $10.8m, which will be used for investment in films, M&A’s and JVs, establishment of overseas offices and general working capital. Post-IPO, Spackman will have a free float of 17.6%. In an interview with The Edge Magazine, Spackman’s executive Chairman, Charles Spackman likened the group’s business model to that of the fund management business, whereby the firm earns fixed fees and a performance fee on the films that it invests in. Charles added that even if a movie is not well received by its audience, movie producers and investors could potentially recoup their investments via ancillary revenue, eg. DVD sales, pay-TV subscriptions and movie downloads, thus limiting the downside risk for the group. For 2014, Spackman is targeting to release four movies, namely - For The Emperor, Confession, My Brilliant Life and Big Match - compared to only one movie released last year. Based on its IPO price of $0.26, Spackman will trade at 30.8x FY13 P/E (post-IPO), versus some South Korean and US movie production companies which are trading in excess of 50x. Charles however, believes his company may resemble more closely the bio-tech industry, whereby the market can award a significant valuation premium for companies that possess the right technology and know-how.