DigitalOptic Meets NobleBio, Will It Become a Swan from an Ugly Duckling?

[Asia Economy Reporter Hyungsoo Park] Digital Optic, which had been adrift due to successive changes in its largest shareholder, has welcomed a new captain. Noble Bio, which saw a surge in sales last year by producing COVID-19 specimen transport kits, has begun full-scale efforts to normalize Digital Optic's management.

According to the Financial Supervisory Service's electronic disclosure system on the 19th, Digital Optic recently held an extraordinary general meeting of shareholders and appointed Baek Gye-seung, CEO of Noble Bio, and Ahn Tae-soo, Vice President of Noble Bio, as inside directors. Additionally, it added molecular biology, biotechnology, genetic engineering, and protein engineering product manufacturing to its business objectives to enter new business areas.

Noble Bio became the largest shareholder of Digital Optic on the 4th of last month. It participated in a paid-in capital increase of Digital Optic worth 5 billion KRW, securing 7,363,770 new shares (5.83% stake). Separately, Baek Gye-seung, CEO of Noble Bio, acquired 2,176,900 shares (1.72%) of Digital Optic on the market.

Last month, Digital Optic acquired the worldwide exclusive distribution rights for COVID-19 diagnostic transport kits from Noble Bio for 38 billion KRW. Noble Bio purchased convertible bonds (CB) of Digital Optic worth 38 billion KRW, easing Digital Optic's financial burden. The convertible bonds issued by Digital Optic to Noble Bio carry no coupon interest. They can be converted into common shares between January 26, next year, and December 25, 2023. The conversion price is 1,096 KRW, and if Noble Bio exercises all conversion rights, it can secure a 27.36% stake (34,671,532 shares) in Digital Optic. In case of a stock price decline, the conversion price can be adjusted down to the par value.

With the secured distribution rights, Digital Optic is guaranteed sales of 720 billion KRW and gross profit of over 72 billion KRW over three years. Since acquiring the distribution rights, it secured orders worth 8 billion KRW in January alone. Last year, Noble Bio supplied specimen collection kits to over 80 clients in 60 countries worldwide. Its sales last year reached 135 billion KRW, a 27-fold increase compared to the previous year.

As of January, Noble Bio has the capacity to produce 100 million sets per month. Considering the increasing order volume, it is constructing a new factory. It expects to produce 200 million sets per month by the first half of this year.

In estimating the value of the distribution rights, it is projected that Digital Optic will achieve sales of 230 billion KRW through diagnostic transport kit sales this year. The estimated gross profit is 24.2 billion KRW. This scale is achievable if Noble Bio's sales double compared to last year. This figure reflects the rapid sales growth of Noble Bio last year and the ongoing expansion due to orders coming from around the world this year.

However, as COVID-19 vaccination rates increase, new COVID-19 cases worldwide are rapidly decreasing. According to the World Health Organization (WHO), the number of new COVID-19 cases worldwide for the week ending on the 14th decreased by 16% compared to the previous week, totaling 2.7 million. The weekly new case count has declined for five consecutive weeks, falling to about half of the 5 million cases recorded in early last month. The appropriateness of the distribution rights' value is expected to be gauged based on Digital Optic's sales scale this year.

Separately from the distribution rights contract, Noble Bio invested 20 billion KRW to acquire convertible bonds issued by Digital Optic. These bonds carry no interest, and the conversion price is 1,173 KRW. If fully converted, Noble Bio can secure 17.05 million common shares (13.45%). Digital Optic plans to use the raised funds to acquire shares of other companies.

This year, Digital Optic issued convertible bonds worth 58 billion KRW, while the unconverted portion of previously issued convertible bonds amounts to 13.3 billion KRW. The exercise price is below 600 KRW, about 40% lower than the current stock price.

This content was produced with the assistance of AI translation services.