[Click eStock] "CJ, Will It Decide on 'Subsidiarization' Instead of Olive Young IPO?"

by Hwang Yoonju

Published 15 Mar.2024 08:12(KST)

Focus on Glenwood PE's Exit as the Second Largest Shareholder

CJ Olive Young operating in downtown Seoul. Photo by Jinhyung Kang aymsdream@

DS Investment & Securities evaluated on the 15th that CJ's core affiliate Olive Young's withdrawal of its initial public offering (IPO) is positive in terms of reducing the holding company’s dual listing risk. Along with this, they maintained a 'Buy' investment rating and a target price of 140,000 KRW.

Kim Suhyun, a researcher at DS Investment & Securities, stated, "The withdrawal of Olive Young's IPO aligns with the recent government policy to resolve Korea discount issues by reducing the unique dual listing risk of holding companies."

The market's focus is on the exit strategy of Glenwood PE, the second-largest shareholder of Olive Young. Glenwood purchased new shares and shares from special related parties at a valuation of 1.8 trillion KRW during the pre-IPO in 2020. Generally, fund maturities are five years, and this year marks the fifth year of their investment.

In particular, assuming Olive Young’s IPO is withdrawn, concerns about Glenwood’s exit strategy are bound to deepen. Researcher Kim analyzed, "Olive Young’s estimated distributable dividend resources amount to about 500 billion KRW, and through some of these funds, it is possible to repurchase part of Glenwood’s shares in the form of treasury stock. The March Olive Young shareholders’ meeting is expected to be a very important turning point."

Kim also noted, "We focus on Olive Young’s continued high growth and rising valuation," adding, "The possibility of Olive Young becoming a 100% subsidiary and the premium from transforming into a business holding company are key investment points."

Meanwhile, Olive Young’s sales in 2023 are estimated to have increased by 39% year-on-year to 3.86 trillion KRW. An operating profit margin of around 10.7% is expected, marking the highest performance ever. This year, sales growth of about 38% is anticipated through expanding profitability of existing stores, increasing online sales proportion, and strengthening overseas business.